* Record UK fine for flawed financial advice at retail bank
* Advice included statements that investment "will likely
* Redress likely to be minimal as stock markets have risen
By Steve Slater
LONDON, March 26 Britain's financial watchdog
has fined Santander UK 12.4 million pounds ($20.5
million) for serious failings in the way it offered financial
advice, the biggest ever punishment for poor investment advice
to UK retail banking customers.
The Financial Conduct Authority (FCA) said on Wednesday
there was a "significant risk" the British arm of Spanish bank
Santander gave unsuitable advice to customers two years ago and
its approach to investors' risk appetites was inadequate.
The advice included making statements to investors that an
investment "will likely double" and factual errors such as
stating the FTSE 100 share index was 8,000-9,000 points
in 2008, when it traded between 3,665 and 6,535.
Advisers also told customers that commission was irrelevant
and they would not be paying any, when in fact commission was
7.75 percent for one of the products, the FCA said.
The watchdog said Santander UK needed to offer redress to
affected customers, although it said any payments were likely to
be minimal as stock markets had risen since most investments
were taken out.
The flaws were uncovered in 2012 in a so-called mystery
shopping review involving spot checks on the industry, and
involved advice given between 2010 and 2012.
Santander said on Wednesday it had fully co-operated with
the investigation - which reduced its fine by 30 percent - and
that after getting the regulator's mystery shopping results it
had closed its old bancassurance business and overhauled its
branch-based investment advice service.
All the major banks have restructured how they provide
financial advice to retail customers following the introduction
of the retail distribution review at the start of 2013, which
aims to ensure advisers are better trained and that fees for
financial advice are more transparent.
Santander UK now only gives advice to customers with at
least 50,000 pounds to invest, compared with no lower limit
before the distribution review, and has about 100 advisers
spread across its branch network, against about 800 previously.
The FCA said its investigation had found that Santander UK's
advisers were not fully on top of customers' personal
circumstances before making a recommendation, including
understanding how much risk they were willing to take.
Santander's retail investment customers had "very low" to
"medium" risk appetites, according to the bank's own assessment.
The customers had an average age of 60, and 30 percent were over
The FCA said the bank failed to make sure new advisers were
properly trained before being allowed to give investment advice
and did not properly monitor the quality of advice.
($1 = 0.6059 British Pounds)
(Editing by Pravin Char)