Financial agony goes on for beleaguered N&P

The FSA has fined Norwich and Peterborough Building Society £1.4m over the Keydata mis-selling affair.

It says that N&P failed to give its customers suitable advice.

The fine is on top of ex gratia payments to all customers, amounting to some £51m in total. And the financial pain might not yet be over, with N&P having to look at other possible mis-sales.

During a period of more than three years, N&P advised 3,200 clients to invest in Keydata’s life settlement products.
 
The FSA says that 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.

Some were even moved out of low-risk products such as deposit accounts into Keydata investments. Many 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. Its own compliance team produced a report setting out concerns about the suitability of advice given to customers. But 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 and will pay redress where appropriate.

Yorkshire Building Society is currently looking to purchase the beleaguered N&P.