N&P will make available ex gratia payments to all customers to ensure they do not lose out as a result of their investment, amounting to approximately £51 million in total.
During a period of over three years N&P advised 3,200 clients to invest in Keydata’s life settlement products. According to the FSA, N&P failed properly to assess the financial circumstances of many of its customers, designating them as having a higher tolerance of risk than was appropriate. This led to unsuitable sales. Some customers were moved out of low risk products such as deposit accounts into Keydata investments, putting their income and capital at risk. Many of these customers were approaching or already in retirement, and could not afford to lose their money.
In June 2007 N&P carried out a review prompted by the realisation that Keydata products formed 30% of all investment products sold during the first three months of that year. Their compliance team produced a report setting out concerns about the suitability of advice given to customers. No effective action was taken and Keydata sales remained consistently high.
Tracey McDermott, FSA acting director, enforcement and financial crime, said: “N&P failed in its basic duty to provide suitable advice to its customers, despite an internal compliance report pointing out that there were problems as early as 2007.
“Firms cannot treat customers fairly unless they pay attention to their financial circumstances and attitude to risk when they make recommendations. This is the only way to prevent widespread mis-selling like this.”
N&P has also agreed to commission an independent review of sales of other financial products sold by its Financial Advice Service, and will pay redress where appropriate.
N&P worked in an open and co-operative way with the FSA before and during the investigation through to the settlement of this matter. It has also, together with the FSA, maintained a full dialogue with the Financial Ombudsman Service (FOS) regarding the ex gratia payments for its Keydata investors.
Commenting, Gordon Horsfield, chairman of N&P, said: "The Society is committed to its members and has been deeply concerned for those customers who bought these products and who lost out following Keydata's administration in 2009. Our aim in making ex gratia payments is to put that right and we are very sorry for the hardship and anxiety that they have suffered."
N&P announced on 22 March 2011 that it would voluntarily make ex gratia payments to all customers who purchased Keydata products through N&P, in return for transfer of the investors' rights in and relating to the investments. The basis of calculation of the payments has been agreed with the FSA and Financial Services Compensation Scheme (FSCS). This calculation is based on a FOS formula, but without the £100,000 cap applied to FOS awards.
N&P has worked extensively for many months with members of the regulatory community and others to resolve this matter in the interests of its members and customers.
Uniquely among IFAs, in June 2010, N&P made available interest free loans to customers in income difficulties following suspension of income payments by Keydata.
Additionally, in October 2010, N&P made a loan (since repaid) to the provisional administrator of Lifemark to seek to help him preserve any recoverable value in the underlying portfolio of life insurance policy assets.
On 22 March 2011, N&P announced results demonstrating a performing underlying business, despite an exceptional non-recurring provision of £57m in relation to its advice to customers who bought Keydata investments.
During 2010, N&P also ceased providing financial advice as an independent financial adviser and has now concluded negotiations to act as an introducer to an independent third party, Aviva.
N&P has also agreed with the FSA to commission a third-party review of advised sales of non-Keydata products.
