Bradford & Bingley fined GBP650,000 for bonds mis-selling

The Financial Services Authority has fined Bradford & Bingley GBP650,000 for the widespread mis-selling of precipice and with-profit bonds. Bradford & Bingley has also agreed to pay GBP6 million in compensation to the 6,800 customers affected.

The Financial Services Authority found that Bradford & Bingley did not make suitable recommendations to customers, did not maintain adequate records of sales, and did not have in place adequate systems and controls to prevent and ultimately address these failures.

The mis-sales, which occurred between January 2001 and December 2002, were made more serious because Bradford & Bingley had been warned that there were significant issues with the quality of its customer records on a number of occasions from 1998 onwards. The firm failed to appreciate the significance of those warnings and the failings exposed 6,800 customers to a higher risk of financial loss than they were willing to accept.

Andrew Procter, the FSA’s director of Enforcement, said: This is a very serious case of mis-selling which was made worse by the fact that Bradford and Bingley had prior warning of the specific concerns about its record keeping.

During the period in question, Bradford & Bingley was the largest independent financial advisor (IFA) in the UK and its brand had widespread public recognition which raised amongst its customers the expectation that the service it provided to them would be of a high standard. Customers therefore went to the firm with the expectation that it would provide a competent and professional financial advisory service.

In fixing the fine, the FSA recognised that Bradford & Bingley had co-operated fully with it since its senior management became aware of the issues in August 2002, and has made appropriate arrangements for compensation where a customer’s attitude to risk was inappropriate for a precipice or with-profit bond.

Bradford & Bingley has also conducted a thorough investigation into the circumstances surrounding the issues concerned, and fully reviewed its selling practices.