Alleged widespread mis-selling of an investment product by a large firm
last updated June 2005
In 2002, the ombudsman service started receiving a growing stream of complaints against a large firm concerning the alleged mis-selling of an investment product suitable for investors with a reasonably high appetite for risk. Many of the sales were to existing customers who had not been looking to invest but were approached directly by the firm. The customers concerned complained to the firm, but it did not resolve the complaints in their favour.
The complaints to the ombudsman service came from across the country, suggesting that the sales methods used might have been part of a firm-wide approach. In view of the potential wider implications, the ombudsman service notified the regulator. The FSA was already investigating concerns that had arisen from issues discovered during routine visits to the firm by its supervisors.
The FSA carried out an investigation into the firm’s sales and found that it did not not have sufficiently rigorous procedures and controls for considering all the issues surrounding the selling of the product. During the investigation, the firm continued rejecting individual complaints. So, in conjunction with the FSA’s action, the ombudsman service had to resume dealing with individual cases for a time.
After further discussions, an agreement was reached under which:
- the firm paid a significant penalty;
- some customers who fitted particular criteria were to be automatically compensated by the firm, along the lines of the compensation previously awarded by the ombudsman service in individual cases; and
- other customers were entitled to refer their cases to ombudsman service for individual consideration.