HSBC fined £10.5million, which is nice
HSBC has been kicked square in the nuts with a fine of £10.5m fine by the Financial Services Authority for selling unsuitable products to almost 2,500 elderly people.
That's the largest penalty EVER doled out by the FSA for this type of breach.
Reports say that HSBC's NHFA subsidiary will also have to fork out £29.3m in compensation for the way it advised elderly customers to buy investment bonds. In many cases, instead of being something that was to be something of a nest-egg for their care, the five-year investment period for the bonds was longer than the individual customer's life expectancy. The average age of the conned customer was 83.
The scale of the problem prompted Brian Robertson, chief executive of the UK arm of HSBC, to say he was "profoundly sorry". He added: "I can guarantee that every customer who is found to have not been treated fairly will not be disadvantaged."
The FSA said that "customers with shorter life expectancies had to make withdrawals from these investments sooner than is recommended" and reduced the capital faster than might have been the case if proper advice had been given. A review of a sample of customer files found unsuitable sales had been made to 87% of customers.
Tracey McDermott said of the NHFA: "It breached that trust to sell them unsuitable products. This type of behaviour undermines confidence in the financial services sector. HSBC, who owned NHFA, has now recognised the issues and taken steps to do the right thing. They have been given credit for that – but for some customers it will be too late.
"This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost."