One personal and business bank account provider has recently been fined £1.5 million by the Financial Services Authority for neglecting to inform its customers that a range of its investment products were not protected by the Financial Services Compensation Scheme, industry experts recently reported.
High Street bank Santander, who provides retail banking services such as savings accounts, sold £2.7 billion worth of investment products between 2008 and 2010 that lacked full cover under the FSCS, a scheme designed to provide compensation to customers of any financial services providers who cease trading through a bank failure or other similar catastrophe. However, Santander neglected to inform its customers purchasing the investment products that they had only limited cover under the FSCS.
Luckily for investors, there were no financial losses that came about from Santander withholding the information. However, the FSA still decided to fine the bank, as it did not respond quickly enough to confirm whether or not the products in question were covered.
The FSCS, which covers investment business, also offers protection for home finance, insurance broking, insurance policies, and deposits in savings and current accounts. Santander customers began to question whether their investments were protected by the scheme as early as 2008, yet the bank did not choose to update its literature on its Guaranteed Growth And Guaranteed Capital Plus plans until 2010, even though it knew in June of 2009 that they were only partially covered by the FSCS.
According to the FSA, the products in question did not receive full cover under the FSCS because Santander subsidiaries held them.