FSA fines Standard Life £2.45m
Standard Life has been fined £2.45 million for misleading customers over a fund sold as a cash product despite being more than 50% invested in risky mortgage-backed securities.
The Financial Services Authority (FSA) penalty - its first significant fine of 2010 - came after the regulator found "serious systems and controls failings" that led to misleading marketing material for the Standard Life Pension Sterling Fund.
The fund, which at one stage had £2.2 billion in assets under management and 98,000 customers, was launched in 1996 and marketed to customers approaching retirement as a low risk investment that was wholly invested in cash.
But by July 2007, the majority of funds under management were invested in mortgage-backed securities, which were the risky investments at the heart of the credit crunch and financial crisis.
The credit squeeze saw the bottom fall out of the mortgage-backed security market and the fund was found last January to have suffered a 4.8% decline in value, with losses of around £100 million.
The group's subsidiary Standard Life Assurance compensated £102.7 million into the fund and alerted the FSA to the issue - a move that saw its fine reduced from a potential £3.5 million.
But the FSA said customers were exposed to a "risk of unexpected capital losses" after Standard Life Assurance failed to communicate how the fund's investment strategy had changed in marketing material to new and existing customers.
It had also not acted soon enough on concerns raised over the fund's marketing, according to the FSA.