Regulator’s crackdown proves costly for bankers

Barclays has been named as the worst offender in a year in which compensation was nearly treble the £62m in 2010, according to research by law firm Freshfields which has now been released.

The bank was ordered to shell out £59m to retail customers and was also fined £7.7m for failings in the way it sold funds labelled “cautious” and “balanced”.

More than 12,000 clients invested a total of about £692m in more than two years in funds being sold by Barclays.

However that resulted in 1,730 complaints, or about one in seven of those who invested.

According to the Financial Services Authority (FSA), although Barclays managers had themselves identified potentially unsuitable sales, they had not taken timely action to address the situation.

The crackdown by the FSA also saw HSBC landed with the largest ever retail fine of £10.5m for mis-selling investment bonds to elderly customers.

Large financial groups paid £55.7m in fines during the year down from £79m in FSA fines the previous year.

Banks were ordered to pay more than £1m in compensation in at least five different cases.

Acting FSA enforcement director Tracey McDermott said: “We have had some significant retail fines against big firms that should know better.

“The big players have the potential to damage larger swathes of the community than the small firms,” he said.

However, when penalties against individual sales people were included, the FSA imposed fines totalling just over £66m last year.

That created the second highest total in its history, although it was still substantially behind 2010’s £89m.

Some of the largest penalties were the result of a crackdown on wealth management firms and companies that failed to segregate client assets from company money.