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Santander fined £1.5m for misleading investment customers

Fine follows Which? structured product campaign

FSA issue fine

Which? had urged the FSA to act on structured products

Santander has been fined £1.5 million by the Financial Services Authority (FSA) for failing to communicate the risks attached to a range of structured investment products sold on the high street.

Which? has been complaining about structured products for a number of years and in 2010 called on the FSA to address the misleading advice and financial promotions being given to consumers.

Following the collapse of Lehman Brothers in 2008, concerns grew that money invested in structured products might not be protected in the event of a bank’s insolvency but Santander failed to clarify the position to customers until January 2010.

Santander breached principles on structured products

During that time, the bank sold approximately £2.7bn of structured products in what the FSA called a breach of ‘skill, care and diligence’ and ‘communications with clients’.

Investors in Santander’s two structured products, Guaranteed Capital Plus and Guaranteed Growth Plan may have had little or no appetite for risk or investment experience.

Despite concluding in June 2009 that the extent to which the products were covered by the Financial Services Compensation Scheme (FSCS) was limited, Santander sold another £1.2 billion worth before finally starting to notify new customers seven months later.

Which? found misleading structured product advice

Following a mystery shopping exercise in 2009, Which? has been campaigning against the potentially misleading marketing material attached to structured products, which have often represented poor value.

We wrote to Santander in September 2010, arguing that terms suggesting capital was ‘guaranteed’ and that structured products were a ‘very low risk’ investment, were misleading.

Santander did not take up our appeal for it to change the name of the products and contact all customers who had bought them within the last four years, so we called on the FSA to take action.

Consumers unaware of structured product risk

Santander’s website still uses the phrase ‘rest assured that your capital will be safe’ despite the fact that FSCS cover would not apply if Santander or the counter party providing the capital protection, a Santander subsidiary, went bust.

If you are worried about your investment in one of these products or the advice provided by Santander then complain to the firm and if you are not satisfied with its response then take your complaint to the Financial Ombudsman.

More on this…

  • The Which? Money Helpline – we’ll help you with any queries about financial products and services  
  • The problem with structured products – be aware of the risks 
  • Six money wasters – products you should avoid
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