HSBC Bank has been fined a record £10.5 million for mis-selling investments to customers in their later years to fund long-term care.
Almost 2,500 customers will pick up £30 million in compensation, said the Financial Services Authority announcing the fine.
The penalty is the largest penalty imposed on a retail financial services business.
The fine arises from advice given to customers between 2005 and 2010 about funding long term care costs with investment bonds. The advice was from an HSBC subsidiary NHFA – the Nursing Homes Fees Agency.
An investigation revealed 90% of NHFA customers were mis-sold – the average age of customers was 83 years old. In some cases. Customers were sold investments that would mature in five years, even though their life expectancy was shorter.
The FSA ruled that this advice was unsuitable and a combination of capital withdrawal and high charges reduced investments quicker than alternative investments that the NHFA could have recommended, like a high-interest fixed-rate account or ISA.
Tracey McDermott, acting director of enforcement and financial crime said: “NHFA was trusted by vulnerable and elderly customers, It breached that trust to sell the unsuitable products. This type of behaviour undermines confidence in the financial services sector.
“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.”
Brian Robertson, HSBC’s chief executive, 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 have high values here at HSBC and this runs contrary to everything that we stand for. That is why when we suspected something was not right at NHFA, we took action. We advised the FSA of our findings and closed NHFA to new business in July.
“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.”
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