Barclays lands record fine for fund mis-selling

18th Jan 2011 10:53

Barclays Bank has been fined £7.7m and will have to make redress of £60m to customers after "very serious" mis-selling of two investment funds.The Financial Services Authority says it is the largest fine it has ever imposed for retail failings. "The fine reflects Barclays' position as one of the UK's major retail banks", Margaret Cole, the FSA's managing director of enforcement and financial crime, said."We view these breaches as particularly serious and fully deserving of what is a very substantial fine," Cole added.Barclays sold nearly £700m of investments in the two funds, Aviva's Global Balanced Income Fund and Global Cautious Income Fund, to 12,331 people between 2006 and 2008.The regulator says the bank failed to ensure the funds were suitable for customers; did not train staff adequately; did not produce clear enough literature about the funds and had inadequate procedures for monitoring sales processes.Barclays became aware of the problem in 2008, but took inadequate action to deal with it, the FSA says. It received complaints from 1,730 of the people who bought the funds or roughly one in seven investors. Many of these were nearing retirement. In its own evaluation to assess the suitability of the sales, Barclays found that 51%, or some 3,099, of sales of the Cautious Fund and 3,378, or some 74%, of sales of the Balanced Fund could have been mis-sold.The bank has already paid out £17m in compensation and the FSA estimates up to a further £42m could be required. "When recommending investment products, firms should take account of a customer's financial circumstances, their attitude to risk and what they hope to achieve by investing," Cole commented."On this occasion however, Barclays failed to do this and thousands of investors, many of whom were seeking to invest their retirement savings, have suffered. To compound matters, Barclays failed to take effective action when it detected the failings at an early stage," she added.