HSBC fined £10.5m for mis-selling to elderly in care

The investment bonds were often sold to those already in care or just going into care

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HSBC has been fined £10.5m by the City watchdog for mis-selling investment bonds to elderly people in care.

Some 2,485 customers of the bank's subsidiary NHFA were advised to invest, in order to fund care costs.
Unsuitable sales of this product were made to 87% of NHFA customers, prompting the largest retail fine to date from the Financial Services Authority (FSA).
The bank said it was "profoundly sorry" for what occurred.
It estimates that an additional £29.3m in compensation will be paid.
Recommendation
The investments were sold by NHFA advisers, between 2005 and 2010, to people with an average age of 83 who were already in care, or entering long-term care.
They each invested an average of £115,000, and many were reliant on these investments to pay for their care.
Typically, it is recommended that people invest in these products for five years. However, because many had a life-expectancy of less than five years, they started to withdraw from the investments sooner than expected.
The combination of withdrawals and charges meant their capital was eaten away quicker than should have been the case if the products were sold properly.
'Failure'
NHFA was the leading supplier of independent financial advice on products to help pay for long-term care, with a market share of nearly 60%.
HSBC said it identified problems at NHFA, closed the subsidiary to new business in July, and alerted the FSA.
The bank said the problem was with a small number of NHFA advisers who were not employees of HSBC and did not advise on HSBC products.
"I fully accept that NHFA failed to give suitable financial advice to some of their customers," said Brian Robertson, chief executive of HSBC Bank.
"This should not have happened and I am profoundly sorry that it did. We have high values here at HSBC and this runs contrary to everything that we stand for. That is why when we suspected something was not right at NHFA, we took action."
The bank said it would contact those affected in the coming weeks to offer compensation.