Santander fined £1.5m over investment cover uncertainty

The Financial Services Authority (FSA) says between October 2008 and January 2010, the bank made it appear its 'structured product' investments were covered by the government's Financial Services Compensation Scheme (FSCS) for up to £48,000 if it went bust.

But the products were extremely complicated, which meant there were various scenarios in which investors would actually not be covered. The FSA says this was not properly explained to customers.

Santander sold approximately £2.7 billion of structured products in that time.

A structured product promises returns linked to any rise in the FTSE 100 share index. However, if the stock market falls, the original investment is not at risk.

'Info must be clear' Tracey McDermott, FSA acting director of enforcement and financial crime, says: "When firms provide customers with literature about products, the information has to be correct and unambiguous.

"The extent of FSCS cover is important to customers, and firms must be clear about this.

"Considering that sales of these products took place between 2008 and 2009, a time of financial uncertainty, Santander should have moved more quickly to confirm under which circumstances FSCS cover would be available."

Santander has contacted customers who were sold a structured product during the problem period to clarify the cover.

A Santander spokesman says: "Santander is disappointed with the outcome and has registered its opposition to the FSA's findings.

"The FSA's final notice acknowledges that there is no evidence that the products were sold to customers for whom they were not suitable; and that no customers have suffered a financial loss.

"In order to conclude a lengthy investigation process, Santander has decided, in the circumstances, that we will not challenge further the decision, nor the fine."