FSA fines HSBC £10.5 million for mis-selling
The Financial Services Authority has issued a record retail fine to HSBC for a subsidary's mis-selling of investment products to elderly customers.
The Financial Services Authority (FSA) has hit HSBC with a fine of £10.5 million, the largest-ever retail fine. It’s taken action over what it calls “inappropriate investment advice” provided by HSBC subsidiary NHFA Limited to elderly customers.
The FSA says that between 2005 and 2010 NHFA advised nearly 2,500 elderly customers to invest in asset-backed investments to fund long-term care costs. These investments were mainly investment bonds.
The products typically had a five-year investment term but many of the customers had a life expectancy of less than that period. The average age of the people buying these products was 83. In one case, a 94-year-old customer was sold a five-year investment, despite having a life expectancy of three years and three months.
As a result, people with shorter life expectancies had to make withdrawals. This, coupled with product charges, led to many people’s investment pot shrinking far more quickly than if they had received the right advice. The FSA argued that fixed-rate savings accounts and ISAs would have been more suitable investment vehicles.
An independent review of 22 customer files found that only one customer had received suitable advice. The FSA also found that there was no suitable risk profiling for customers and advisers failed to highlight the disadvantages of the investments alongside the possible benefits.
It said the fine was a reflection of the vulnerability of the customers, the length of the mis-selling period, the amount invested - which averages around £115,000 per customer - and the 60% market share NHFA enjoyed.
Compensation
In addition to the fine, the FSA has ordered HSBC to pay compensation, which the bank estimates will be in the region of £29.3 million. As HSBC agreed to settle at an early stage, it received a 30% discount on its fine.
In response to the fine, HSBC Chief Executive Brian Robertson said: "I fully accept that NHFA failed to give suitable financial advice to some of their customers. This should not have happened and I am profoundly sorry that it did.
"We are undertaking a full review of the advice given to impacted customers and I can guarantee that every customer who is found to have not been treated fairly will not be disadvantaged.
"At this stage NHFA customers do not need to contact us. We will be contacting them directly during the coming weeks with the aim of putting things right as quickly as possible."
NHFA was closed to new business in July.
You can read the full FSA report here
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Help Stop Bankers Cheating Chairman of HSBC PLC (Mr. Flint) is it true that the FSA is investigating you for giving false and misleading information to shareholders at this year’s AGM about complaints in India? This fine is an obscene joke? If the FSA wanted to make an example of HSBC, START THE FINE AT £100 MILLION (they can afford to pay this amount). FSA acting director of enforcement and financial crime Tracey McDermott says: This type of behaviour undermines confidence in the financial services sector. Yet in the next breath: HSBC, who owned NHFA, has now recognised the issues and taken steps to do the right thing. They have been given credit for that (IS THIS ANOTER OBSCENE JOKE?). The fine is £ 10.5 million yet the FSA give HSBC a discount of 30%, HSBC HAS TO PAY £ 7.4 million? IS THIS THE REAL JOKE? Is a fine from the FSA like a parking ticket, pay up fast and we will give you a discount? Why not say if you do not pay in ten days, we will charge you INTEREST per day. The Chairman (Mr. Flint) states “maintaining our reputation and our integrity” “Everything we do is governed by the imperative of upholding HSBC’s corporate reputation and character at the highest level” (IS THIS ANOTER OBSCENE JOKE?). HSBC chief executive Brian Robertson says: This should not have happened and I am profoundly sorry that it did. We have high values here at HSBC and this runs contrary to everything that we stand for (IS THIS ANOTER OBSCENE JOKE?). What about the USA and INDIA (ask them of your HIGH Values) What about the last time the FSA fined HSBC? What will HSBC HAVE TO PAY IN THE USA, for what they have been doing there? The Chairman (Mr. Flint) calls it a number of weaknesses. What a CHAIRMAN you are Mr Flint? What about HSBC PLC’s REPUTATION and INTEGRITY? Should not the CHAIRMAN of HSBC PLC MAKE THE APOLOGY? Mr. Flint will you call THIS an INVIDIOUS IRRATATION? REMEMBER THE AGM Mr. Flint.
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They are all at it. Swontin Insurance rang up my elderly mother and told her that her home contents insurance was not sufficient and that she should opt for a top up policy to cover the difference. The young lady, who professed to be the manager of the Wizz Beach office, actually demanded my mother's bank details, even though she repeatedly told the young lady that I deal with all insurances for the family. The irony is that I hold the contents cover, and it is more than ample to cover any losses. More to the point, the young lady did not have access to the policy to be able to make a sound suggestion. I am actually quite concerned, because as far as I know you can only claim on one policy for any incident, and to claim on two separate policies for the same thing is fraud. Badgering the elderly should be punishable to a more serious degree, because we can argue that taking advantage of those who may not have their full faculties is outside of common decency. So, it is not just dodgy builders and doorstep conmen you have to watch out for. Financial institutions, big and small, are after easy pickings, and they are more likely to get away with it because they can argue they were selling a viable product, even though those targeted probably didn't need, or want, that product. Basically, if you are young and get conned, tough luck. Treat it as a learning curve. If you are elderly and get conned, the conning gits should face the music, as it is obvious that they targeted someone who was not able to defend themselves from the vultures of the financial world.
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Wouldn't get out of bed for £12 million. :) You're right, I messed up.
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06 December 2011