FCA fines and enforcement actions in 2011

On 25 May 2011 the FSA fined Bank of Scotland plc £3.5m for breaches of Principle 3 (management and control) and Principle 6 (customers' interests) arising from failings in its complaint‑handling arrangements between 30 July 2007 and 31 October 2009. The firm agreed an early settlement and received a 30% stage‑1 discount (the headline sanction would otherwise have been £5m). The FSA found a significant number of complaints about BOS’s investment advice were wrongly decided: BOS reviewed a sample of 275 rejected complaints and overturned 45% (of those it will now uphold, 77% were by inexperienced customers and 55% were aged over 60), and the FSA’s own review reached consistent findings. During the Relevant Period BOS received 2,592 complaints; it has paid £2.4m in compensation to date, the FSA expected further compensation of around £15m, and BOS agreed to review all rejected complaints from 1 Feb 2004 to 31 Dec 2009 and to target a review of sales to 8,000 customers classed as ‘cautious’, proactively paying compensation where due and improving its sales and complaints processes.

On 20 January 2011 the Financial Services Authority (the FSA) fined City Index Limited £490,000 for failures in transaction reporting between 5 November 2007 and 21 September 2009. The firm breached SUP 17 (transaction reporting requirements) and Principles 2 and 3 (Principle 2 requires firms to conduct business with due skill, care and diligence; Principle 3 requires firms to take reasonable care to organise and control their affairs). The FSA found City Index failed to report about 55,000 transactions and submitted roughly 1,970,000 reports with one or more data fields completed incorrectly (nearly 60% of its reportable transactions), primarily because it did not identify fundamental errors after implementing a new trading platform and had inadequate reporting processes and controls; the FCA register entry records the financial penalty and does not record other consequences such as redress, a settlement discount or an appeal.

On 14 January 2011 the FSA fined Barclays Bank plc £7.7m for failings between July 2006 and November 2008 in the sale of Aviva’s Global Balanced Income Fund and Global Cautious Income Fund. The bank qualified for a 30% early‑settlement discount (Stage 1) so the penalty was reduced from £11.0m to £7.7m; the FSA found breaches of Principle 9 (firms must take reasonable care to ensure advice is suitable) and breaches of COB/COBS rules. The regulator said Barclays gave advisers inadequate training and product literature, sent sales briefs that emphasised benefits but not risks, and failed to monitor sales properly; 12,331 customers invested about £692m, 1,676 customers had complained by December 2010 and about £17m compensation had been paid with a further £20m–£42m expected (total customer redress could be up to about £60m), and Barclays agreed a third‑party past business review to identify unsuitable sales and pay redress where required.

On 11 January 2011 the FSA fined Royal Bank of Scotland Plc and National Westminster Bank Plc £2,800,000 for failings in complaint handling by their RBS UK Retail branch network between 1 December 2008 and 25 March 2010. The firms breached Principle 3 (management and control — firms must organise and control their affairs responsibly) and Principle 6 (customers' interests — firms must pay due regard to customers' interests) and qualified for a 30% early‑settlement discount (the undiscounted penalty would have been £4,000,000). The FSA found monitoring focused on process not customer outcomes, poor quality investigations and guidance for complaint handlers, weak use of Financial Ombudsman Service decisions, delays in responses and correspondence that did not fully address customers' concerns. The notice records that the firms cooperated, engaged a skilled person review, increased use of specialist handlers and reassessed complaint files; no further remedies or appeals are specified in the text provided.