Financial Mis-selling Timeline
Financial mis-selling has been a recurring issue in the UK, with countless individuals misled into purchasing products unsuitable for their goals and needs. From personal pensions to investment schemes, firms often prioritised their profits over customer protection, leaving many people with significant financial losses. Companies like Prudential, HSBC, Barclays, and Royal & Sun Alliance have faced millions in fines, but the problem remains deeply ingrained in the country’s financial sector.
We have created a timeline to highlight some of the key mis-selling scandals over the last 40 years, offering the facts and figures behind these events so you can stay informed and vigilant.
Late 1980s – Personal pension miss-selling
Commission-driven advisers convinced people to switch from safer final-salary pensions to personal pensions tied to stock market risks. This led to heavy losses for consumers.
- Prudential: Fined £650,000 for mis-selling pensions.
- Royal & Sun Alliance: Fined over £1.35 million after failing to compensate 13,500 victims.
These actions triggered compensation claims totalling £32 million.
Source: https://www.theguardian.com/money/2009/jun/21/financial-advisers-scandals
Late 1990s – Pension payouts cut
Equitable Life reduced guaranteed payouts, affecting over 1.5 million policyholders. In 2000, the House of Lords ruled that the company had no right to do so.
- Compensation: In 2010, the UK government launched a £1.5 billion compensation scheme for affected policyholders.
Source: https://www.theguardian.com/money/2009/jun/21/financial-advisers-scandals
1997 – Mis-sold complex swap derivatives
The mis-selling occurred between 1997 and 2007, and legal actions peaked in 2009. Several UK-based banks, like Nomura, UBS, Deutsche Bank and JP Morgan, were accused of mis-selling derivative products, specifically swaps, to Italian cities. Settlements continued into 2012.
- Compensation: Milan reached a settlement with the banks in 2012, receiving €500 million as compensation after lawsuits.
Source: https://www.bbc.co.uk/news/business-19545849
Early 2000s – Split-capital investment trust scandal
Split-capital investment trusts, marketed as low-risk products, misled 50,000 investors, leading to significant losses. These funds, structured to cross-invest in each other, collapsed during market downturns, exposing their true risks.
- Aberdeen Asset Management – Heavily involved, with investors facing £144 million in losses.
- The compensation fund setup by Financial Services Authority eventually reached £194 million.
- The firm faced sever reputation damage, was scrutinised by the Treasury Select Committee.
- It caused a collapse of certain cross-invested investment trusts.
Sources: https://www.theguardian.com/money/2009/jun/21/financial-advisers-scandals
https://www.standard.co.uk/hp/front/claim-now-for-splitcaps-compensation-7218409.html
Early 2000s – Precipice bonds scandal
Banks sold high-risk precipice bonds promising high returns yet lacking capital protection, to vulnerable savers, leading to significant losses for investors and one of the biggest fines to date. 10% returns were promised as long as stocks don’t fall by 33% over a year, but, unfortunately they did.
- Lloyds TSB: Fined £100 million for mis-selling bonds that collapsed when stock markets fell.
- Bradford & Bingley: Fined £650,000 for similar misconduct.
Source: https://www.theguardian.com/money/2009/jun/21/financial-advisers-scandals
Early 2000s Payment Protection Insurance (PPI) Mis-selling
Large firms mis-sold PPI alongside loans, often failing to inform customers about key exclusions. Many people ended up paying for insurance they couldn’t use. The insurance did not cover situations like self-employed, jobless or illness drawbacks, yet it was marketed as ‘fully protected insurance’.
- Alliance & Leicester: Fined £7 million for high-risk sales.
- HFC Bank: Fined over £1 million.
- Liverpool Victoria: Fined £840,000 for unsuitable sales.
Source: https://www.theguardian.com/money/2009/jun/21/financial-advisers-scandals
2003 Lloyds TSB Mis-selling of High-Income Bonds
Lloyds TSB faced a £100 million mis-selling scandal involving the Extra Income and Growth Plan (EIGP), a high-risk bond sold through Scottish Widows. The bank failed to ensure the product’s suitability for customers, leading to large losses during a stock market slump.
- Fine and compensation: Fined £1.9 million by the FSA and ordered to pay £98 million in compensation.
- Product issues: 22,500 unsuitable sales out of 51,000 policies due to lack of customer suitability checks.
- Customer impact: First-time investors with more than 20% of their financial assets in the bond suffered significant losses.
- Bank response: Lloyds revamped training procedures and set aside £300 million for the compensation bill.
Source: https://www.theguardian.com/business/2003/sep/25/lloydstsbgroup1
2009 Investment Complaints Surge
The Financial Ombudsman Service recorded 22,265 investment-related complaints in 2009, reflecting an increase of over 9,000 compared to the previous year. This rise highlighted growing dissatisfaction with financial products during the economic downturn. Many cases involved disputes over poor investment advice.
Source: http://financial-ombudsman.org.uk/publications/ar10/ar10.pdf
2009 Structured Bond Mis-selling
More than £23 billion worth of structured bonds may have been mis-sold. Banks and building societies promoted these products as offering higher income, yet many investors did not understand the risks. A Financial Services Authority review found that advice was unsuitable in almost 70% of cases.
2009 Complaints Surge at RBS and NatWest:
From July to December 2009, RBS and NatWest received over 1,600 complaints daily, totalling around 300,000 complaints. Many complaints involved unfair bank charges and issues with current accounts, as the banks faced rising dissatisfaction
- RBS: Registered 80,212 complaints.
- NatWest: Accounted for 222,159 complaints.
2009 Fraudulent Life Settlement Bonds
Keydata collapsed in 2009 after £280 million was misappropriated through fraudulent life settlement bonds, impacting 85,000 investors.
- Keydata Investment Services: Sold high-income bonds, with £105 million misappropriated.
- SLS Capital: Stole £175 million through life settlement investments.
- David Elias: A key figure who allegedly controlled the funds and engaged in fraud
Source: https://www.theguardian.com/money/2009/oct/10/keydata-missing-savings
2009 RBS Autopilot Bond Mis-selling
Between 2009 and 2013, RBS and NatWest sold the complex ‘Autopilot Bond’ to 24,000 customers. The bond, marketed as low risk, promised returns based on stock, commodity, and property markets, but customers struggled to understand it as it was in fact, very complex.
- Both NatWest and RBS admitted it failed to explain the product fully, and took responsibility to compensate with a total refund value of £70m.
Source: https://www.which.co.uk/news/article/rbs-embroiled-in-70m-mis-selling-scandal-404135-aQ2C60R5W0UK
2010 Standard Life Mis-selling Fine
Standard Life Assurance Ltd was fined £2.45 million by the Financial Services Authority (FSA) for misleading marketing of its Pension Sterling Fund. The firm incorrectly advertised the fund as fully invested in cash, misleading 98,000 investors about the risks. This failure led to inappropriate investment decisions by thousands of customers.
- 98,000 investors were affected, with an average loss of £900 each.
- Standard Life compensated investors, costing the company £103m.
- The fine could have been £3.5m, but the company cooperated and took corrective action.
Source: http://news.bbc.co.uk/1/hi/business/8469853.stm
2010 FSA Suspends Wills & Co
The FSA suspends private stockbroker Wills & Co. over claims that they did not warn their clients adequately about the risks of their investments.
- The firm didn’t give proper risk warnings on 19 calls.
- Around 19,000 clients were passed to Pritchards.
- Wills & Co hired a big accounting firm to handle over 100 complaints.
Source: http://citywire.co.uk/money/fsa-suspends-wills-and-co-after-mis-selling-investigation/a378823
2010 The Financial Services Claim Scheme (FSCS)
Banks have mis-sold risky investments to elderly, vulnerable customers, leading to significant losses. The Financial Services Claim Scheme (FSCS) pays out £204 million to over 21,000 claimants.
- HSBC was fined £10.5 million and ordered to pay £29.3 million in compensation for mis-selling investment bonds.
- Barclays, Norwich & Peterborough, Bank of Scotland and others have also been fined for similar scandals, targeting elderly savers.
2011 Brewin Dolphin Faces £6 Million Compensation Bill
Brewin Dolphin received a £6 million invoice from the Financial Services Compensation Scheme (FSCS) to cover losses for investors in failed firms. This is part of a £326 million industry-wide burden impacting wealth management firms. The costs could reduce bonuses and threaten smaller brokers.
- Keydata Investment Services collapsed, owing £247 million to over 5,000 investors.
- Wills & Co ceased trading after a £1.5 million fine for mis-selling.
- Other firms like Charles Stanley and Rathbone Brothers also received significant invoices.
Source: https://www.cityam.com/brewin-dolphin-fury-6m-bill-bust-firms-victims/
2011 – Mis-selling complex Keydata products
In April 2011, Norwich and Peterborough Building Society (N&P) was fined for widespread mis-selling complex investment products. N&P also faced a huge compensation bill for misleading older investors into purchasing unsuitable products linked to the now-collapsed Keydata Investment Services.
- Was fined £1.4 million by the Financial Services Authority (FSA)
- Mandated to compensate £51 million to affected customers.
- An undercover probe by consumer group ‘Which?’ reveals that just 5 out of 37 main bank advisers actually gave a suitable advice.
2011 Barclays Targets Vulnerable Customers
Banks targeted vulnerable customers with little investment knowledge offering risky products to elderly customers.
- Barclays are fined £7.7 million and ordered to pay £60 million in compensation to thousands of elderly customers.
2011 Bank of Scotland Mishandling Complaints
Bank of Scotland was fined by FSA for wrongly rejecting investment complaints. The bank mishandled complaints from elderly customers who were sold unsuitable, risky investments.
- Bank of Scotland fine £3.5 million and ordered to pay £17 million in compensation for about 45% of rejected complaints.
2011 HSBC Bond Scandal
In 2011, HSBC was fined £10.5 million for mis-selling five-year bonds to 2,485 elderly customers through its NHFA subsidiary. The bank also faced £29.3 million in compensation. Many of the elderly customers, with an average age of 83, were sold products unsuitable for their life expectancy.
Source: http://www.theguardian.com/business/2011/dec/05/hsbc-fined-selling-bonds-to-elderly
2012 – Worthless ‘rare earth’ metal investment
The Denver Trading Ltd scam, which involved selling worthless “rare earth metals” to unsuspecting investors, began in 2012 when victims were first lured into the scheme. The Mirror exposed the scam in December 2012, and the fraudsters were convicted in 2017.
- In May 2017, fraudsters were jailed for a total of 29 years for a £7.7 million investment scam involving rare earth metals.
- Victims were cold-called and misled into investing in worthless metals.
- Half of the funds were lost to commissions, leaving over 600 victims financially devastated.
Source: https://www.mirror.co.uk/news/uk-news/mirror-exposed-77million-investment-fraud-10402841
2012 Santander Fine
Santander is fined by the FSA for misleading customers about the safety of an investment product with limited coverage under the Financial Services Compensation Scheme FSCS.
- In February 2012, Santander was fined £1.5 million by the FSA.
- Between 2008 and 2010, Santander sold £2.7 billion in structured products without clarifying coverage limits.
Source: https://www.strategic-risk-global.com/operational-risk/fsa-fines-santander-15m/1395039.article
2012 Barclays Complaints Rise
Barclays reported a 77% increase in investment complaints to the FSA in 2011 after being fined £7.7 million for mis-selling two Aviva funds. Complaints regarding life and pension products also rose. The bank identified serious advice failings affecting over 12,000 investors.
- Investment complaints increased to 7,194 from 4,067 in 2010.
- Life and pension product complaints rose by 33% to 4,511 in 2011.
2012 FCA Cracks Down on Staff Bonuses
In September 2012, the Financial Services Authority (FSA) ordered banks to eliminate sales incentive schemes encouraging mis-selling of financial products. A review revealed alarming practices that compromised customer trust and led to unsuitable sales, often targeting vulnerable consumers.
- The FSA identified a “first past the post” system rewarding the first 21 sales staff to hit targets.
- Incentives allowed staff to earn bonuses up to 100% of their salary for selling payment protection insurance (PPI).
- Misleading practices included falsely stating product prices to meet sales targets.
- Banks were warned that cultural changes are needed to prioritize customer welfare.
2013 FCA Fines Lloyds Banking Group
The Financial Conduct Authority (FCA) fined Lloyds Banking Group £28,038,800 for failings in their sales incentive schemes. These schemes pressured staff to prioritize sales over customer needs, leading to unsuitable product sales. The fine is the largest for retail conduct failings in FCA history.
- The FCA found serious control issues over sales incentives.
- Sales staff were incentivized to sell unsuitable products to meet targets.
- Lloyds had previously been fined for similar issues in 2003.
- The FCA ordered a review and redress for affected customers.
2013 – UBS Fined for Mis-Selling AIG Fund
In 2013, UBS was fined £9.45 million by the FSA for failures in selling the AIG Enhanced Variable Rate Fund. The bank sold the fund to nearly 2,000 high net worth customers, exposing them to significant risks without proper disclosures or due diligence.
- UBS’s sales led to an estimated £10 million in compensation.
- 19 out of 33 sampled customers were found to have been mis-sold the fund.
- Customers were misled about the fund’s risks, believing it to be a cash equivalent.
Source: https://www.fca.org.uk/news/press-releases/ubs-fined-%C2%A3945m-failings-its-sale-aig-fund
2014 First Direct Mis-selling Complex Products
In October 2014, First Direct (part of HSBC) faced scrutiny for mis-selling complex investment products through its self-service platform. The bank admitted it lacked proper procedures to assess the suitability of these products for its customers. They are now compensating affected investors for any losses incurred.
- First Direct sold complex products like warrants and exchange-traded commodities.
- The bank has since removed these products from its platform.
- Compensation will include losses plus interest for affected customers.
Source: https://www.moneymarketing.co.uk/news/first-direct-to-pay-redress-for-misselling-complex-products/
2014 Coutts and Investment Advice Flaws
In August 2014, Coutts, part of the Royal Bank of Scotland (RBS), set aside £110 million for compensating customers due to unsuitable investment advice. This decision followed a review by the financial regulator into the wealth management sector.
- Thousands of customers may receive compensation.
- RBS is under pressure to improve conduct after past financial issues.
2014 – Santander UK Fined for Investment Advice Failings
In 2014, Santander UK was fined £12.4 million by the Financial Conduct Authority (FCA) for serious failings in its investment advice practices. The bank provided unsuitable advice and failed to assess customers’ risk appetites adequately, impacting the quality of service provided to clients.
- Santander did not ensure advisers understood customers’ personal situations before making recommendations.
- Customers received unclear and misleading information about investment products.
- The bank failed to conduct regular checks on Premium Investments to ensure they met customer needs.
- New advisers were not properly trained before giving investment advice.
- The FCA found these issues despite previous warnings to the industry about the importance of suitable advice.
2015 FCA Warns of Mis-Selling Risks from Performance Incentives
The Financial Conduct Authority (FCA) issued a report on March 16, highlighting the risks of mis-selling due to sales incentives in retail firms. It noted that misaligned incentives could create pressure on staff, leading to inappropriate selling practices.
- Poor performance management can drive mis-selling.
- The FCA found instances of undue pressure in sales environments.
- Whistleblower reports indicated ongoing issues despite regulatory changes.
- Firms are expected to manage mis-selling risks effectively.
2015 DeVere Mis-selling Case
In 2015, deVere UK was ordered to pay £190,000 to clients after mis-selling high-risk investment products. The Financial Ombudsman Service found that deVere’s advice was unsuitable for clients with a cautious risk profile, leading to significant capital losses.
- DeVere advised clients to invest 65% of their £290,000 in unregulated collective investment schemes (UCIS).
- Four out of five funds were suspended in 2012, resulting in financial losses for the clients.
- The firm was also asked to pay £400 for the distress caused.
Source: https://international-adviser.com/devere-pays-190k-misselling/
2015 Financial Ombudsman Annual Review
The FCA publish a review identifying the sales culture among high street banks as a key aspect contributing to the problem of mis-sold investments in the UK. The Financial Ombudsman Service (FOS) resolved numerous consumer complaints in the financial year 2014/2015, focusing on fairness and accessibility.
- Complaints Volume: The FOS handled 1,786,973 consumer inquiries, with 329,509 becoming formal complaints.
- Payment Protection Insurance (PPI): 63% of new complaints were related to PPI, totaling 204,943 cases.
- Resolution Success: 448,387 complaints were resolved, with over 90% settled informally.
Source: https://www.financial-ombudsman.org.uk/files/2020/ar15.pdf
2015 Financial Advice Market Review (Last Updated in 2017)
The government and FCA launched a Financial Advice Market Review before the 2016 budget. It aims to address the advice gap for consumers lacking significant wealth, ensuring UK customers have access to investment advice regardless of economic or social background and to ensure “regulatory clarity” for banks and firms. It sought to identify barriers firms face in providing advice and how to create a regulatory environment that encourages innovation and demand for financial services.
- Examined the regulatory framework for consumer financial advice.
- Aimed to empower consumers to make informed financial decisions.
- Proposed reforms to improve access to advice across various markets.
- Included an expert advisory panel to guide recommendations.
2015 88% of Brokers Call for FSCS Reform
In August 2015, a survey revealed that 88% of mortgage professionals believe the FSCS requires reform. Brokers feel burdened by levies that cover issues in the life and pensions sector, despite not providing advice in those areas.
- The FSCS levy tripled from £33 million to £100 million due to rising claims for mis-sold Sipps.
- Brokers argue they are unfairly subsidizing problems in another sector, impacting client fees.
Source: https://www.mortgagestrategy.co.uk/news/9-in-10-brokers-say-fscs-is-in-need-of-reform/
2015 Lloyds PPI Charges Increase
In October 2015, Lloyds Banking Group faced pressure on its share price due to disappointing profits. The bank reported a quarterly profit of £2 billion, below the expected £2.3 billion. Additionally, Lloyds set aside £500 million for payment protection insurance (PPI) claims.
- PPI charges exceeded £13.9 billion since the scandal began.
- UK banks have allocated over £28 billion for PPI compensation claims.
- Lloyds’ share sale aimed to return to the private sector at a 5% discount.
2016 Santander’s Return to Investment Advice
In April 2014, Santander was fined £12 million by the Financial Services Authority (FSA) for providing unsuitable investment advice. The bank had serious failings in assessing customers’ risk appetite and ensuring advisers were properly trained. In response, Santander has recently re-entered the investment advice market.
- The bank aims to employ 225 advisers across the UK by March.
- Santander has set aside £43 million for compensation related to past advice claims.
2020 Quilter and Friends Provident Mis-selling Claim
Expats have filed a £100 million claim against Quilter International and Friends Provident, alleging mis-selling of high-risk funds disguised as insurance products. The claimants argue these funds were unsuitable for ordinary investors due to their high-risk nature.
- The funds were sold through Isle of Man subsidiaries.
- Most invested money has been lost.
- Claims allege misrepresentation and lack of due diligence.
2020 – Basset & Gold Investigation to Mis-sold pensions
In 2020, Basset & Gold PLC went into administration after an FCA investigation into mis-sold pensions. Over £35 millions of client funds were lost due to investments in the bankrupt payday lender Uncle Buck. Three years later, customers are still seeking compensation for their losses.
- Former directors have started a new company targeting elderly clients.
- AgeGroup offers online services for older adults, despite past controversies.
2022 FCA Announced New Consumer Duty Standards
The FCA first announced the new Consumer Duty rules in July 2022 through its Policy Statement PS22/9. This marked the beginning of a major regulatory shift aimed at setting higher standards for consumer protection across the financial services sector. The Consumer Duty introduces a new Consumer Principle, requiring firms to act in a way that ensures good outcomes for customers. It also includes specific outcomes related to products and services, price and value, consumer understanding, and consumer support. The FCA provided firms with time to adjust and review their processes, particularly focusing on ensuring fairness in pricing, improving transparency, and safeguarding vulnerable customers.
Source: https://www.fca.org.uk/publications/policy-statements/ps22-9-new-consumer-duty
2023 Consumer Duty Standards took effect
On July 31, 2023, the FCA’s Consumer Duty rules came into effect for open products, requiring firms to prioritise consumer outcomes, ensure fair value, and avoid foreseeable harm. This regulation focuses on improving customer service, transparency, and communication to help consumers make informed decisions.
Source: https://www.fca.org.uk/publications/multi-firm-reviews/consumer-duty-implementation-plans
2023 St James’s Place Fee Revamp
In October 2023, St. James’s Place (SJP) announced a revision of its fee structure amid regulatory pressure from the FCA. The changes aim to reduce ongoing charges for existing investments and eliminate early withdrawal fees. This move comes after a history of retail mis-selling scandals.
- New fee structure will have an initial charge and ongoing charges.
- No early withdrawal fees or gestation periods for most investment products.
- Changes expected to be effective in the second half of 2025.
2024 St James’s Place Faces Significant Financial Impact
In February 2024, St James’s Place Plc reported a £9.9 million loss after tax, a sharp decline from a £407.2 million profit the previous year. The firm set aside £426 million for expected compensation following a rise in customer complaints over inadequate service.
- A skilled person review found clients paid for services not delivered.
- The Financial Conduct Authority (FCA) mandated fee structure changes under new consumer duty regulations.
- SJP anticipates the changes could cost up to £160 million this year, straining profit margins.
- Law firms are actively seeking clients for potential compensation claims.
2024 A New Consumer Duty
In July 2022, the Financial Services Authority (FSA) introduced a new Consumer Duty to enhance consumer protection in financial services. This duty requires firms to prioritize customer needs and deliver positive outcomes throughout the customer journey.
- Firms must consider customers’ characteristics, including vulnerability.
- Key outcomes focus on product quality, pricing, consumer understanding, and support.
- New rules for open products take effect on July 31, 2023, and for closed products on July 31, 2024.
Source: https://www.fca.org.uk/publications/policy-statements/ps22-9-new-consumer-duty
Food for Thought
Financial mis-selling has led to significant distress and financial loss for countless individuals in the UK. As regulations evolve, the emphasis on consumer protection becomes crucial. It is vital for consumers to remain vigilant and informed about their financial products, ensuring that their needs and circumstances are prioritized.
Awareness and education are key to preventing future mis-selling scandals and fostering trust in the financial sector.
If you feel that you’ve been mis-sold financial products contact our support team immediately and let’s discuss your situation. We’re here to help you every step of the way.
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