Release Date: 8th February 2013
To access the original FSA document, click here.
Summary
The Financial Services Authority (FSA) imposed a financial penalty of £9.45 million on UBS AG (UBS) due to failures related to the sale of the AIG Life Premier Access Bond, Enhanced Variable Rate Fund (the Fund), and the handling of related complaints. The penalty reflects a 30% reduction for UBS’s early-stage settlement during the FSA’s investigation. Without this reduction, the penalty would have been £13.5 million.
Between 1 December 2003 and 15 September 2008, UBS sold the Fund without adequately understanding its assets and associated risks, resulting in a failure to ensure the suitability of their advice under Principle 9 of the FSA Handbook. Moreover, UBS did not conduct sufficient due diligence on the Fund, inadequately trained advisors on its risks, and misclassified it as a low-risk cash fund, misleading customers about its security and liquidity. UBS’s inadequate handling of customer complaints about the Fund between 15 September 2008 and 20 September 2011 also constituted a failure to treat customers fairly, breaching Principle 6.
UBS’s failure to accurately assess the complaints and the poor advice given to customers meant that many were not fully aware of the risks involved with their investments in the Fund. This led to significant potential losses, particularly highlighted when the Fund was suspended on 15 September 2008 due to liquidity issues, affecting 565 customers with £816 million invested.
Key lessons for other firms include:
- The necessity of thorough due diligence before selling financial products.
- Continuous monitoring of asset composition.
- Proper training for advisors on product risks.
- Accurate classification of investment products in communications with customers.
Furthermore, firms must ensure robust processes for handling complaints to adequately address customer grievances and concerns about the suitability of products sold. These measures are crucial to maintaining compliance with regulatory standards and safeguarding consumer interests.
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