FCA fines and enforcement actions in 2003

On 9 December 2003 the FSA fined Abbey National Asset Managers Limited (ANAM) £320,000 for failures in senior management arrangements, systems and controls between December 2001 and June 2003. The regulator found ANAM did not have appropriate systems and controls, was slow to address divisional compliance concerns arising from its Risk Mitigation Programme and from two dealing desks, and had insufficient compliance resource and management information. The breaches were of FSA Principle 2 (which requires firms to act with due skill, care and diligence) and SYSC rules on senior management arrangements; ANAM paid about £300,000 in compensation to clients, implemented detailed systems and controls in June 2003, and the FSA said ANAM’s early agreement of facts and settlement were taken into account when deciding the penalty.

In September 2003 the FSA fined Lloyds TSB Bank plc (LTSB) £1.9m for serious failings in how it sold the Extra Income and Growth Plan (EIGP). Around 51,000 EIGP policies were sold in four tranches between October 2000 and July 2001; the FSA found that LTSB’s branch network sold about 22,500 policies (44% of sales) that were unsuitable because customers ended up too concentrated in the product. LTSB agreed not to refer the matter to the tribunal, has paid about £98m in compensation to roughly 22,500 customers, and the FSA said the penalty was reduced because LTSB cooperated, carried out remedial work and settled early.

The Governor and Company of the Bank of Scotland was fined £750,000 by the Financial Services Authority (FSA) in a Final Notice dated 5 February 2003 for failures in its PEP and ISA Department. Between November 1999 and August 2001 the firm’s implementation of its LISA PEP and ISA computer system, and the transfer of PEP customers’ accounts into that system (together with management failings), meant it could not reconcile the cash it held for PEP and ISA customers or state accurately how much customer money it held.