Standard Life Pension Fund Customers misled about investment risks
Misleading marketing material for the Standard Life Pension Sterling Fund attracted a £2.45m fine from the FSA. The 98,000 retail pension customers invested in the Fund risked unexpected capital losses as a result of the material.
The “serious systems and control failings” allowed for the misleading claim that the pension fund was wholly invested in cash when the majority of the Fund was actually invested in Floating Rate Notes. The FSA concluded that customers were misled as to the true nature of the investments held by the Fund and therefore given misleading information on the risk of capital losses. Since the Fund was a pension investment, capital risk was especially important since customers were likely to be approaching retirement.
The risk of unexpected losses was revealed when the value of the Fund fell by 4.8 per cent which forced Standard Life to inject £102.7m into the Pension Fund to restore the value of customers investments. The Company contacted customers in receipt of the dodgy marketing material to see if further individual compensation may be required.
The FSA also found that in addition to a lack of control in ensuring the marketing accurately reflected the Funds investment strategy, there was a lack of “prompt and full investigation over concerns about the material”.
FSA’s Director of enforcement and financial crime said it was critical that consumers were aware of the risks of investment products if they were to make an informed choice about suitability. She promised the FSA would take strong action when promotions “fall short of the requirement to be clear, fair and not misleading and customers have not been treated fairly.”
