FSA fines Standard Life £2.45m for systems and controls failures relating to financial promotions – On 20 January 2010, the FSA published the Final Notice it has issued to Standard Life Assurance Limited (SLAL), fining it £2.45m for systems and controls failures which resulted in the production of misleading marketing material for its Pension Sterling Fund (Fund). The FSA found that between July 2006 and February 2009 SLAL did not have proper systems and controls for the marketing material for the Fund, which meant that investors risked incurring unexpected capital losses.

The FSA ruled that SLAL breached Principles 3 (management and control) and 7 (communication with clients) of the FSA’s Principles for Businesses:

1. The marketing material described the Fund’s investments inaccurately and so was not clear, fair and not misleading.
2. Information about the Fund, provided by a third party, which SLAL published on its website was not clear, fair and not misleading.
3. Responsibility for the marketing material had not been clearly apportioned between business areas.
4. There was no adequate system to ensure that the marketing material reflected the Fund’s investment strategy accurately and was clear, fair and not misleading.
5. There were no proper systems and controls to investigate concerns about the marketing material. Concerns were not escalated to senior management and existing customers who were unaware of the problems were not notified.

The fine was discounted from £3.5m, as SLAL proactively took a number of steps to address the situation:

1. It paid £102.7m into the Fund to restore the value of the Fund following a drop in the Fund’s unit price.
2. It contacted existing customers who had received poorer quality marketing material.
3. It commissioned a report by an independent third party to improve systems and controls issues affecting the marketing of the Fund.
4. It brought the issues to the FSA’s attention and fully cooperated with the FSA investigation.

Commenting on this Final Notice, Margaret Cole, FSA Director of Enforcement and Financial Crime, said:

• “The FSA takes the issue of misleading financial promotions very seriously and the fine announced today demonstrates our commitment to the principle of credible deterrence… Throughout 2010 and beyond, the FSA will continue to take strong action when a firm’s financial promotions fall short of the requirement to be ‘clear, fair and not misleading’ and customers have not been treated fairly.”

Read more

http://www.fsa.gov.uk/pubs/final/slal.pdf

http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/010.shtml