Customers began to query the extent of FSCS cover towards the end of 2008 but it was January 2010 before Santander clarified the position.
During this time Santander sold approximately £2.7bn of structured products, including £1.2bn after June 2009 when it concluded that the circumstances in which its two products, Guaranteed Capital Plus and the Guaranteed Growth Plan, would be covered by the FSCS were limited.
However new customers were not informed of the limitations in FSCS cover until January 2010.
Santander acknowledged that it could have changed its product literature and training materials more quickly to reflect the FSCS position accurately. The fact that it allowed sales to continue with unclear Key Facts literature contributed to the seriousness of the breaches.
Tracey McDermott, acting director of enforcement and financial crime, said: “When firms provide customers with literature about products, the information has to be correct and unambiguous. After all it is there to help people make informed decisions about whether to invest.
“The extent of FSCS cover is important to customers, and firms must be clear about this in their Key Facts documents.
“Considering that sales of these products took place between 2008 and 2009, a time of financial uncertainty, Santander should have moved more quickly to confirm under which circumstances FSCS cover would be available.”
A penalty of £1.5m has been imposed for breaches of Principle 2, skill, care and diligence in business, and Principle 7, communication with clients.
The FSA has not made any findings that these products were sold to customers for whom they were not suitable, and notes that investors in these products have not suffered a financial loss as a result of Santander’s failings.
Santander has conducted a customer contact exercise relating to all its structured product sales between 1 October 2008 and 6 January 2010, the period during which the breaches occurred.
