With the ongoing Coutts redress reviews on structured product mis-selling, the FCA’s recent thematic review raising concerns about structured product sales and the new pension rules coming into force, the area of negligent financial investment advice remains
very much a live concern.
Coutts admitted last year that it may have sold unsuitable and risky investment products to thousands of customers. It promised a review of its investment advice to high net worth clients who held investments products on 26 November 2012 and going back as far
back as 1957.
Earlier this year Coutts began the process of writing to all customers who are potentially affected to offer redress where appropriate. Coutts has set aside a £110 million provision to compensate these customers pending its historical review of the sale of
these investment products.
How thorough and satisfactory the redress review will ultimately prove to be is yet to be determined. However, from some cases on which this firm is already acting, Berg have concerns as to the level of explanation provided by Coutts where redress is offered
and, indeed, whether Coutts are indeed identifying all relevant historical investment products in a client’s portfolio.
On 5th March 2015 the FCA outlined findings in respect of a general thematic review of structured deposit products (a type of structured investment) and identified that there were weaknesses in the way the products were designed and sold to customers, such
as being too complex and assessing returns based on simulated models that may provide an overly optimistic estimate of potential product return.
To what extent the Coutts redress review scheme may identify how prolific historical mis-sold investments products were remain to be seen. Coutts had previously been fined £6.3million in 2011 by regulators for mis-selling investments backed by failed US insurance
With regard to the FCA’s general thematic review on structured deposits, while the FCA’s comments are currently to be taken as a warning to Banks, continued failure on the part of Banks to ensure such products are suitable and properly explained could lead
to further FCA involvement.
(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice
should be obtained before taking, or refraining from taking, any action as a result of this article.)