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N&P to compensate Keydata customers

N&P to compensate Keydata customers

Category: Investments

Updated: 18/04/2011
First Published: 18/04/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

All customers who invested in Keydata products as a result of unsuitable advice from Norwich & Peterborough Building Society are to be paid out in full.

The payout is the result of a ruling from the Financial Services Authority (FSA) which also saw the regulator slap N&P with a fine of £1.4 million for its failings.

In total, customers will receive a combined payout totalling approximately £51 million.

The hope will be that a line can now be drawn under the Keydata saga.

N&P's chairman, Gordon Horsfield, said the society remained committed to its members and has been deeply concerned for those customers who bought these products and who lost out following Keydata's administration in 2009.

"Our aim in making ex gratia payments is to put that right and we are very sorry for the hardship and anxiety that they have suffered," he added.

An investigation by the FSA found that during a period of over three years N&P advised 3,200 clients to invest in Keydata's life settlement products.

N&P failed to properly assess the financial circumstances of many of its customers, designating them as having a higher tolerance of risk than was appropriate.

This led to unsuitable sales. Some customers were moved out of low risk products such as deposit accounts into Keydata investments, putting their income and capital at risk.

Many of these customers were approaching or already in retirement, and could not afford to lose their money.

And despite an internal review by N&P in June 2007 – prompted by the realisation that Keydata products formed 30% of all investment products sold during the first three months of that year – no effective action was taken and Keydata sales remained high.

"N&P failed in its basic duty to provide suitable advice to its customers, despite an internal compliance report pointing out that there were problems as early as 2007," Tracey McDermott, FSA acting director, enforcement and financial crime, said.

"Firms cannot treat customers fairly unless they pay attention to their financial circumstances and attitude to risk when they make recommendations. This is the only way to prevent widespread mis-selling like this."

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