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Monday, December 05, 2011

HSBC Fined £10M

The UK financial services industry has yet again blotted its copybook. This time HSBC's name has been added to the "wall of shame".

The Financial Services Authority (FSA) have fined HSBC £10.5M, and ordered it to pay £30M in compensation, for mis-selling investment products to elderly customers needing long term care.

The FSA said that between 2005 and 2010, a subsidiary of HSBC, NHFA (previously known as the Nursing Home Fees Agency) advised 2,485 customers to invest in investment bonds, and other asset-based products, to fund long-term care costs.

The average age of these customers was 83, a sample review suggested that almost 90% of these cases were mis-sold.

The average amount invested per customer was about £115K.

The FSA ruled that this advice was unsuitable, because these products were designed to be held for a minimum of five years. However, many of these customers were not expected to live this long!

Coupled with the disgraceful mis-sale of this unsuitable product was the fact that the product had charges.

The Telegraph quotes Tracey McDermott, acting director of enforcement and financial crime said:

"NHFA was trusted by its vulnerable and elderly customers, It breached that trust to sell the unsuitable products. This type of behaviour undermines confidence in the financial services sector.

This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost."

Well done HSBC for "enhancing" the reputation of Britain's financial services industry!

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