Legal & General's fine for mis-selling endowments has been cut from £1.1m to £575,000 by an independent tribunal.
L&G's fine for mis-selling has been nearly halved
In January, the Financial Services and Markets Tribunal reviewed L&G's case and said the insurer was guilty.
However, the tribunal disagreed with the Financial Services Authority (FSA) about the extent of the firm's mis-selling and lowered the fine.
The tribunal then took four months to set a new fine to better reflect the gravity of L&G's offence.
The original FSA fine related to L&G's sale of endowments between 1997 and 1999.
The FSA found that L&G had failed to fully inform some customers of the full risks of investing in endowments.
In response, L&G said it had "proper and reasonable sales and compliance procedures in place," and appealed to the tribunal, which has the power to overturn the FSA's decision.
It was the first time a major bank or insurer had taken the City regulator to the tribunal.
The insurer alleged during its submission to the tribunal that the FSA investigation had been unfair.
The tribunal concluded that mis-selling had taken place but in far fewer cases than had been presumed by the FSA investigators.
As a result, the tribunal said that the fine imposed on Legal & General should be reduced.
The tribunal has spent four months deciding on the new level of fine and on L&G's claim that the FSA should pay its legal bill, estimated at around £2m.
But the tribunal, while cutting the fine roughly in half, decided that the FSA's decision to impose a fine had not been unreasonable and that L&G should pay its own legal costs.
However, the tribunal reiterated its view that the FSA's approach to the case had been opaque and subjective.
Since the tribunal's decision the FSA has put its enforcement procedures under review.
David Prosser L&G's chief executive, has welcomed the FSA's review of procedures.
"The review set up by the FSA is a serious and thorough attempt at establishing a fair process of adjudication and judgement... we fully support a firm regulatory environment operating in a fair and even-handed manner."