FSA fines Lincoln Financial Group

A leading financial company has been stung with a £485,000 fine for mis-selling by the Financial Services Authority (FSA).

Lincoln Financial Group has been fined for the actions of its direct sales arm, City Financial Partners (CFPL), between 1998 and 2000.

Lincoln Financial's direct sales team were found to have recommended inappropriate financial products to clients, thereby boosting their own commission.

City Financial no longer deals with Lincoln's business, and Lincoln says it is compensating all clients that have missed out.

'Gung-ho'

The failings arose because Lincoln did not adequately monitor CFPL.

Clients were sold a special 10-year endowment savings policy that has high charges and will have to be kept going to maturity to achieve the best value.

But buyers were not offered alternatives such as Peps and Isas, which have lower charges and are more tax efficient.

One former employee told BBC News Online that a "gung-ho" attitude was ever present at CFPL, with sales commission often taking priority over the clients best interests.

Lincoln has taken full responsibility for City Financials failings and I regret that some of our customers were disadvantaged

Michael Tallett-Williams, MD of Lincoln Financial Group

Over 28,000 customers who were sold savings plans between November 1993 and October 2000 have been offered a review of their policy.

£8.8 million has been set aside in compensation for approximately 5,000 customers who requested a review and are due redress.

Serious failings

Carol Sergeant, Managing Director at the FSA, said that the firm's failings were "particularly serious" and if Lincoln had failed to co-operate with the FSA the fine would have been "materially higher".

By the end of April the FSA says that all respondents will either have received compensation or been advised that their sale was compliant.

Michael Tallett-Williams, Managing Director of Lincoln Financial Group since November 2000, said: "Lincoln has taken full responsibility for CFPL's failings and I regret that some of our customers were disadvantaged.

"We have completed the review of all CFPL sales of these savings plans and offered redress to the affected customers," Mr Tallett-Williams added.

Lincoln added that its structure and culture had changed significantly since 2000, with different people, processes and procedures in place.

Lincoln terminated its contract with CFP on 1 October 2000 and no longer has a direct sales force.