Standard Life fined £2.45m after Sterling fund debacle

Standard Life has been fined £2.45m by the FSA for serious failures relating to its Pension Sterling fund.

The FSA says the penalty, the first major fine of 2010, signals its intentions to crack down on regulatory breaches.

The fund became controversial in January 2009, when Standard Life made a shock 5% decrease in its valuation.

Regulators says the firm misled customers, as the product was originally sold as a ‘safe' cash fund, despite being linked to risky mortgage-backed securities (MBS).

The FSA believes systems and controls failings were responsible for the production of the misleading marketing material.

Standard Life also failed to perform a prompt and full investigation of its marketing material when concerns were raised.

The FSA acknowledged Standard Life's pro-active attempts to compensate investors, including paying £102.7m into the fund to restore its original unit price values, and its use of a third party to advice on the necessary changes to its systems and controls.

Margaret Cole, director of enforcement and financial crime at the FSA, says: "The FSA takes the issue of misleading financial promotions very seriously and the fine announced today demonstrates our commitment to the principle of credible deterrence.

"It is critical that consumers are given an accurate understanding of the nature of investment products and the risks involved. Without this information, consumers are unable to make informed decisions about whether investments are suitable for their individual investment strategy."

A Standard Life spokesman adds: "We have learned important lessons from this mistake and have made significant improvements to our marketing literature processes to prevent the same thing happening again."

The FSA says it will be taking a tough stance on financial promotions and marketing material in 2010.