Barclays fined £8m for mis-selling investments

Posted on January 19, 2011

The Financial Services Authority (FSA) has fined Barclays £7.7m for investment advice failures relating to the sale of two Aviva funds, saying it failed to properly highlight the risks involved.

The bank sold Aviva's Global Balanced Income Fund and Global Cautious Income Fund between July 2006 and November 2008 worth nearly £700m in investments. The funds then plunged loosing 12,331 customers, most of whom were retired or nearing retirement, half or more of their initial investment value.

Independent Financial Adviser, Richard Eastwood, of Pearson Hinchliffe Solicitors LLP commented: “We have all heard the warning that ‘the value of investments can go down as well as up’ but in this case Barclays failed to fully explain to its customers the risks involved in these two funds. The FSA said the bank didn’t check that the funds were appropriate for these particular customers, staff were not properly trained to explain the risks in these complex funds and customers did not have access to brochures that explained the risks involved with these funds.”

Mr Eastwood added: “All financial advisers, banks and IFAs included, have a duty to their customers to ensure the funds they recommend are suitable for each individual’s needs and reflect their particular financial circumstances and what they wish to get out of investing. The adviser should take the time to understand the level of knowledge and investment experience the customer has and then tailor any advice based on what he or she learns – providing financial advice is a serious matter which takes patience and knowledge.”

The FSA have taken a very serious line by imposing the highest ever fine for failings by a financial services retailer. The city watchdog identified other serious problems including inadequate communications when responding to customer complaints and poor quality investigations when customers complained. Barclays will also face paying £60m in compensation to victims.

The regulator added that Barclays carried on selling the products in the same way until November 2008 despite having been aware of issues to do with mis-selling for six months. It said the bank did not “take appropriate and timely action".

FSA head of financial crime Margaret Cole said: "The FSA requires firms to have robust procedures in place to ensure any advice given to customers is suitable. Therefore, 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.

"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.

"Because of this, and given Barclays' position as one of the UK's major retail banks, we view these breaches as particularly serious and fully deserving of what is a very substantial fine."

Investors in the Global Balanced Income Fund and Global Cautious Income Fund should initially contact Barclays or call 0800 587 7495.

Independent Financial Adviser Richard Eastwood may also be contacted for further advice, particularly concerning possible compensation for those mis-sold financial products, using the details provided below.

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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