The Liverpool Victoria Friendly Society has been fined £0.9m by a City watchdog for 'serious and widespread compliance failings', which lead it offer poor advice to its customers.
Liverpool Victoria has received the largest fine ever handed out by the Personal Investment Authority (PIA) and one of the largest ever received by a financial firm.
The PIA unearthed a catalogue of problems at the mutual financial group following visits in late 1997. The group stands accused of hiring inept staff who offered customers poor financial advice.
In addition to the fine, Liverpool Victoria has been ordered to carry out a full review of certain classes of business and to provide compensation to its customers.
|Company failed to keep proper records|
The total cost of paying compensation is likely to be substantial. A spokesman for the friendly society said there would now be investigations into 50,000 cases to see whether compensation needed to be paid.
Group chief executive Roy Hurley said: "This has been a difficult and painful period for the Liverpool Victoria group."
Liverpool Victoria is the largest friendly society in the UK, with assets of almost £4bn and more than one million members. It provides a range of financial services and products including pensions and insurance. Liverpool Victoria also owns the financial group Frizzell, which it acquired in 1996.
The PIA has identified a long list of problems at Liverpool Victoria.
In particular the mutual had:
- Failed to take account of investors' rights under occupational pension schemes and any earnings-related pensions.
- Failed to use its best endeavours to ensure that it recommended only the contracts most suitable for investors.
- Failed in many instances to ensure that investors received a written explanation as to why a recommendation was appropriate.
- Frequently appointed individuals, or allowed existing advisers to continue to work when not satisfied on reasonable grounds that they were of good character or of the requisite aptitude and otherwise suitable for that appointment.
- Failed to be satisfied on reasonable grounds that certain representatives' personal financial positions would not adversely affect the way in which they sold the firm's products.
- Appointed individuals without obtaining within the specified period, or at all, appropriate references.
- Failed in many instances to provide full and frank references in relation to former members of its staff.
- Failed to have adequate arrangements to ensure that staff who were responsible for the conduct of investment business by others were
suitable, adequately trained and properly supervised.
- Failed to keep proper records.
- Failed to organise and control its internal affairs in a responsible manner.
- Failed to have well-defined compliance procedures.
Liverpool Victoria now plans a radical
overhaul of its business. Many of the staff implicated in the PIA report have already left the group.