This is the first enforcement action resulting from the FSA’s review of the marketing and distribution of structured products, particularly those backed by Lehman Brothers, concluded in October 2009. The FSA found that, in relation to its sales of Lehman-backed structured products between November 2007 and August 2008, Tenon failed to treat some of its customers fairly. It breached Principle 3 of the FSA’s Principles for Businesses by failing to take reasonable care to organize and control its affairs responsibly and effectively and Principle 9 by failing to take reasonable care to ensure the suitability of its advice to its customers.
Margaret Cole, FSA director of enforcement and financial crime, said:
“Firms giving investment advice must ensure they fully assess clients’ needs and make suitable recommendations – they must also have the necessary systems and controls in place to demonstrate this. We take failure in this area very seriously and the fine and other actions announced today demonstrate our commitment to credible deterrence.
“This is the first action we have taken for advice failings relating to Lehman-backed structured products following our recent review, and we acted swiftly and decisively in order to return money to investors as quickly as possible. We will continue to take tough action where we find evidence that firms are giving unsuitable advice to investors.”
Tenon co-operated fully with the FSA and agreed to settle at an early stage of the FSA’s investigation, therefore qualifying for a 30% reduction in penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £1m.