Santander plays down potential payout on £118m mis-selling

Santander has played down the potential total redress payout related to investment advice mis-selling for which it was today (26 March) slapped with a substantial fine by the regulator and which covered £118m in revenue over a two-year period.

In a final notice published today (26 March), Santander was ordered by the FCA to pay a £12.4m fine for providing unsuitable investment advice to customers who had investments in ‘portfolio investments’, structured investments and investment bonds.

The bulk of the fine, which would have been £17.6m were it not for a 30 per cent early-settlement discount, relates to mis-selling totalling £118.2m in revenue in the period January 2010 to December 2012.

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Of this:

• £107.8m of revenue relates to investment process failings between January 2010 and December 2012; and

• £10.4m relates to income from ‘premium investments’ promotions between March 2010 and December 2012.

Further failings were identified in relation to financial promotions for these ‘premium’ investments over the six-year period between April 2004 and March 2010, but the FCA was not able to put a revenue figure on these sales.

Santander’s ‘premium’ investments were a range of eight risk-rated portfolios typically offered to customers with funds in excess of £50,000.

The bank has agreed to contact all customers affected and offer them the opportunity to withdraw from their investment or have a review of their sale, and has agreed to conduct a redress exercise for both past and current ‘premium investments’ customers.

It will also have to design and implement a new annual review process for customers who remain invested in ‘premium investments’ following the customer contact exercise.

Santander’s head of UK banking, Steve Pateman, issued an apology to customers and said the bank ‘regrets’ that some of its branch-based investment sales processes “did not meet the required regulatory standards”.

However, he said that detriment - and therefore any likely payout - would be “low” based on “underlying investment performance”.

He said: “We regret that elements of Santander UK’s historic branch-based investment sales processes did not meet the required regulatory standards and apologise to any customers who have concerns.

“We expect customer detriment to be low given the performance of the underlying investments and, as the FCA acknowledges, Santander has seen very few complaints from customers.”

The FCA agreed that for customers invested from January 2010 detriment may “be low” due to increases in the value of most stock markets since the start of 2010, but “there is potential for this to change”.

The customer contact and redress exercises will be overseen by an independent third party, the FCA said.

Santander closed its investment advice arm in February 2013, at around the same time as the FCA published its initial findings from its mystery shopping exercise into six banks. Santander was the only one of the bank banks reviewed to be referred for enforcement.