Standard Life Prt Solutions Limited

FCA action

fines

2

in fines

£33.2m

most recent

July 2019

• Fined £30.79m on 23 July 2019

  On 23 July 2019, the FCA fined Standard Life Assurance Limited. Standard Life Assurance Limited breached Principle 3 (Management and Control) and Principle 6 (Customers’ Interests) of the Authority’s Principles for Businesses (the Principles) and COBS 2.1.1R, COBS 4.2.1R and COBS 19.4 between 1 July 2008 and 31 May 2016 (the Relevant Period) in relation to non-advised sales of annuities to existing customers who were approaching retirement and who may have been eligible for an enhanced annuity. As a consequence of this action, Standard Life Assurance Limited has been fined £30,792,500. The FCA’s action took effect on 23 July 2019 and a copy of the Final Notice is displayed on the FCA's web site.

• Fined £2.45m on 20 January 2010

  On 20 January 2010 the FSA imposed a financial penalty of £2,450,000 on Standard Life Assurance Limited (SLAL) in respect of breaches of Principle 3 (management and control) and Principle 7 (communications with clients) of the FSA's Principles for Businesses between 10 July 2006 and 28 February 2009 (the Relevant Period). SLAL agreed to settle at an early stage of the FSA's investigation. It therefore qualified for a 30% (stage 1) reduction in penalty, pursuant to the FSA's executive settlement procedures. Were it not for this discount, the FSA would have imposed a financial penalty of £3,500,000 on SLAL. The breaches relate to SLAL's failure to: 1. ensure that there were proper systems and controls in relation to the Pension Sterling Fund (the Fund), specifically the systems and controls concerning the marketing material produced and in relation to the prompt and full investigation of the concerns arising regarding marketing material (Principle 3); and 2. ensure that the marketing material issued in relation to the Fund was clear, fair and not misleading (Principle 7). SLAL became responsible for the Fund on 10 July 2006, following the demutualisation of the Standard Life Group. The Fund was managed by Standard Life Investments Limited (SLI) for and on behalf of SLAL. The Fund initially primarily invested in bank deposits and other very short dated instruments. The balance of the underlying investments changed over time, and by July 2007 the majority of the Fund was invested in floating rate notes (FRNs). Marketing material issued in relation to the Fund was not clear, fair and not misleading. In particular, despite the majority of the Fund being invested in FRNs: 1. the fact sheet produced by a third party data producer (the data producer) from April 2007 until 16 April 2008 (except for the period 2 to 20 January 2008) contained a pie chart showing that 100% of the Fund was invested in cash; and 2. marketing literature issued by SLAL referred to the Fund being wholly invested in cash. These failures arose because there were no adequate systems or controls in place to ensure that marketing material issued accurately reflected the investment strategy for the Fund. SLAL also failed to ensure that there were adequate systems and controls properly to investigate concerns regarding the marketing material. This resulted in a failure promptly to remedy failings after concerns were raised. In particular, from September 2007 onwards various complaints were made by consumers about the nature of the Fund and the underlying assets, given the description of the Fund in marketing material, and concerns were also raised by employees of SLI and SLAL. Although internal reviews of marketing material were carried out, the reviews were too narrow and failed to identify properly the failings. The failings were only fully identified in February 2009. The failures to have adequate systems to ensure that the marketing material was accurate led to consumers being misled as to the true nature of the investments held by the Fund and, as a result, being given misleading information on the risk of capital losses. This was inconsistent with Treating Customers Fairly. SLAL's breaches are serious for the following reasons: 1. there was a risk of unexpected consumer losses being incurred, as demonstrated by the reduction in the value of the Fund by 4.8% (approximately £100 million) on one day in January 2009; 2. there were a large number of consumers in the Fund, and the value of the Fund was significant (96,752 retail consumers with investments of £1.92 billion as at November 2008); 3. the Fund was intended primarily for the investment of pensions. It was considered appropriate for individuals approaching retirement, and individuals looking for a stable investment when the outlook for bonds and equities was uncertain. The capital security of such an investment was therefore of great importance; an 4. there was a failure to promptly identify and remedy the failings after concerns regarding marketing material were raised from September 2007 onwards. SLAL's failures therefore merit the imposition of a significant financial penalty. In deciding upon the level of disciplinary sanction, the FSA has taken account of a number of factors, including the following proactive steps taken by SLAL to address the situation: 1. following a 4.8% drop in the unit price of the Fund on 14 January 2009, resulting from a re-valuation of certain assets held by the Fund, SLAL paid a total of £102.7 million into the Fund to restore the value of the investors' holdings to the position they would have been in prior to the fall in the unit price. In this way, SLAL compensated consumers for the loss suffered as a result of fall in the unit price; 2.SLAL have reviewed both the current and historic marketing material in relation to the Fund and have contacted existing consumers who were identified as having received poorer quality marketing material to determine whether any further compensation may be required in their cases; 3. SLAL commissioned a report by an independent third party into (i) the issues that had arisen in relation to the Fund, and (ii) improving the systems and controls in relation to the marketing of the Fund; and 4. SLAL brought the issues to the attention of the FSA, and has fully cooperated with the FSA investigation.