The sponsors of the Cycle Highways & the London Cycle Hire Scheme, Barclays, have been forced to pay customers millions after being investigated for financial crime.
“Barclays has been ordered to pay compensation of up to £60m to customers sold unsuitable investments. It has also been fined a record £7.7m.
The Financial Services Authority imposed the penalties after finding “serious failings” in the way the bank had sold two investment funds to customers, many of whom were retired or nearing retirement.
Barclays sold the two funds, Aviva (LSE: AV.L – news) ‘s Global Balanced Income fund and Global (news) Cautious Income fund, to 12,331 people between July 2006 and November (But the FSA found that the banks failed to ensure the funds were suitable for customers in view of their investment objectives, financial circumstances, investment knowledge and experience and to ensure sales staff had adequate training given to explain the risks associated with the funds.
It also censured Barclays for “failing to ensure product brochures and other documents given to customers clearly explained the risks involved and could not mislead customers” and for “failing to have adequate procedures for monitoring sales processes and responding promptly when issues were identified”.
The FSA’s investigation revealed that even though Barclays had itself identified potentially unsuitable sales as early as June 2008, it did not take appropriate and timely action.
Barclays’ own investigation found that 74pc of sales of the Global Balanced Income fund required further consideration.
Margaret Cole, the FSA’s managing director of enforcement and financial crime, said: “The FSA requires firms to have robust procedures in place to ensure any advice given to customers is suitable. Therefore, when recommending investment products, firms should take account of a customer’s financial circumstances, their attitude to risk and what they hope to achieve by investing.
“On this occasion however, Barclays failed to do this and thousands of investors, many of whom were seeking to invest their retirement savings, have suffered. To compound matters, Barclays failed to take effective action when it detected the failings at an early stage.
“Because of this, and given Barclays’ position as one of the UK’s major retail banks, we view these breaches as particularly serious and fully deserving of what is a very substantial fine.”
The fine is the highest fine imposed by the FSA for retail failings.
Paul McNamara, Barclays’ managing director of insurance and investments, said: “We know that on this occasion we let our customers down and did not do all that we could have done to meet the high standards that our customers expect from us and for this we are sorry.
“We stopped selling these investment products two years ago and, since discovering the issue, we have been working hard to ensure this does not happen again. We have reviewed and made improvements to our sales and advice processes, our level of training and supervision of advisers and the documentation provided to customers.
“Over 12,000 of our customers invested in these two funds and we are working with a firm of accountants as part of an independent review to determine how many have been affected. Separately, wherever we find any discrepancies as part of our comprehensive internal audit of the investment process, we will of course contact customers directly.”
• Anyone who invested in the Global Balanced Income fund and Global Cautious Income fund and has a question relating to advice they received in connection with that investment should contact Barclays on 0800 587 7495 or online at http://www.barclays.co.uk/investmentfundinformation/P1242581580258″