Santander UK Fined £12.5m Over Advice Flaws

The City watchdog is to impose one of its biggest-ever retail fines on Santander UK over flawed investment advice that it will say was given to large numbers of customers.

Sky News has learnt that the Financial Conduct Authority (FCA) plans to announce a penalty of approximately £12.5m following a 13-month long investigation by its enforcement division.

The announcement could come as soon as Wednesday morning.

The fine will be the largest suffered to date by Santander UK, which has expanded through acquisition into Britain's fifth-biggest high street bank following takeover deals involving Abbey, Alliance & Leicester and Bradford & Bingley.

Insiders said the settlement would be in the region of £12.5m, significantly below the FCA's biggest-ever fine of £28m, which was imposed on Lloyds Banking Group in December for incentivising staff to sell billions of pounds of unnecessary products.

The City regulator's probe into Santander UK followed a mystery shopping exercise across the banking sector, which exposed failings in the investment advice given to consumers.

As a consequence of the FCA enforcement action, Santander UK announced barely a month later that it was closing its investment advice arm to new customers.

Other high street lenders, such as Barclays, had already withdrawn from the market altogether, while Lloyds has closed its mass market advisory service and now provides financial guidance to customers with at least £100,000 to invest.

The exodus of major banks from the investment advice market has provoked fears that millions of British consumers are being left financially disenfranchised.

People close to Santander UK say it had disputed many of the regulator's judgements about the quality of its investment advice during the 13-month investigation.

It is also understood to have argued that consumers suffered no detriment as a consequence of the failings identified by the FCA, an assertion that the regulator is not understood to have contested.

The flawed advice at the centre of the probe pre-dated the arrival of Santander UK's current management team, led by Ana Botin, the chief executive who is also a Business Ambassador for the Government.

The bank is expected to receive a discount under the FCA's programme for rewarding co-operation with enforcement probes.

At the time that the results of the mystery shopping exercise were published, Clive Adamson, director of supervision at the Financial Services Authority, the FCA's predecessor, said: "This review shows that customers are not consistently getting the quality of advice on their investments that they should expect when visiting an adviser in a bank or building society.

"Whilst we are disappointed by the results of this review, we are encouraged by the action that the firms involved have taken to rectify the situation for their customers.

"Since this review took place, we have introduced new rules on investment advice which have increased the professional standard of the advisers operating in the market and have removed the potential for advisers to recommend products that pay the largest commission but may not be right for the customer."

Compared to some of its rivals, Santander UK has been less affected by the litany of regulatory probes into the UK banking sector, although it too has had to set aside hundreds of millions of pounds to compensate customers who were mis-sold payment protection insurance..

The FCA and Santander UK declined to comment on Tuesday.

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