FCA slaps Lloyds with largest ever fine for retail failings - Credit Today
The Financial Conduct Authority (FCA) has handed out the £28,038,844 fine to Lloyds TSB Bank and Bank of Scotland after it found incentive schemes led to a “serious risk” that sales staff were under pressure to hit targets and get a bonus to avoid being demoted.
According to the regulator, in one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted.
The failings are said to have affected branches of Lloyds TSB, Bank of Scotland and Halifax.
It is the largest fine ever imposed by the FCA, or its predecessor the Financial Services Authority, for retail conduct failings.
Tracey McDermott, director of enforcement and financial crime at the FCA, said the findings did not make “pleasant reading”.
She added: “Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first – but firms will never be able to do this if they incentivise their staff to do the opposite.
“Because there have been numerous warnings to the industry about the importance of managing incentives schemes, and because Lloyds TSB had been fined in 2003 for unsuitable sales of bonds, we have increased the fine by 10%.”
The FCA’s investigation spanned the period between 1 January 2010 and 31 March 2012 and focused on advised sales of investment products and protection products.
During this time, Lloyds TSB advisers alone sold more than 630,000 products to over 399,000 customers, who invested around £1.2 billion and paid £71m in protection premiums.
The FCA identified that the systems and controls used by the firms to manage the incentive schemes were “inadequate” and the competency standards advisers were required to meet were “seriously flawed”.
Seven out of 10 advisers at Lloyds TSB and three out of 10 at Halifax still received a monthly bonus despite the fact a high proportion of sales were discovered by the firms themselves to be unsuitable or potentially unsuitable.
The banking group agreed to settle at an early period and so qualified for a 20% discount, without which the total fine would have been £35,048,556.
The FCA confirmed both Lloyds TSB and Bank of Scotland have agreed to conduct a review of higher risk advisers’ sales and pay redress. Customers will be contacted by the firm and do not need to take any action.
Article by Credit Action