Santander fined over limited cover

Santander has been fined £1.5 million for failing to make clear to customers that some of its products had only limited cover under a compensation scheme.

The bank did not update literature for more than a year after customers started asking for clarification about whether two products were covered by the Financial Services Compensation Scheme (FSCS), which gives money back to investors when firms go under.

City watchdog the Financial Services Authority (FSA) said customers began asking for clarification at the end of 2008 but it did not update its literature and training materials until January 2010.

By this time, Santander had sold £2.7 billion under its Guaranteed Capital Plus and the Guaranteed Growth Plan investment schemes. And £1.2 billion of these sales came after it had concluded that cover was limited in June 2009.

Imposing a £1.5 million fine, Tracey McDermott, the FSA's 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.

"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."

The material about the two products said that the guaranteed investments depended on the continued solvency of Santander and its subsidiaries, but did not specifically state that they were not always covered by the FSCS.

The cover offered by the FSCS was more limited than would be typically given to deposit accounts, which sees investors refunded losses of up to £85,000 per person per bank.

This was because they were held by subsidiaries of Santander. The FSCS scheme would have only paid out in certain circumstances, such as if Santander was insolvent and investors had a claim against it and for negligent advice or for mis-selling.

A spokesman for Santander said: "Santander is disappointed with the outcome and has registered its opposition to the FSA's findings. The FSA's final notice acknowledges that there is no evidence that the products were sold to customers for whom they were not suitable; and that no customers have suffered a financial loss." He added that Santander will not further challenge the decision, or the fine "in order to conclude a lengthy investigation process".