The watchdog has also ordered the bank to compensate up to £60m to customers of two investment funds.
Barclays raised £692m by selling Aviva’s Global Balanced Income Fund and Global Cautious Income Fund to 12,331 people, mostly to the investors who were retired or nearing retirement.
More than 1,730 people complained to the FSA, prompting it to investigate the bank. An internal investigation by Barclays has since found more than half of sales of each fund to be questionable.
FSA said in its investigation it found failure in trained staff, product brochures and related documents in explaining the risks involved and the suitability of the funds for investors as well as with adequate measure to monitor the sales processes and to respond quickly when issues were identified.
The watchdog said during investigation it found Barclays itself failed to respond with appropriate measures, as early as June 2008, to handle the unsuitable sales it identified.
During the investigation Barclays continued to carry out a past business review to evaluate the suitability of the sales of both funds: 3,099 sales of the Cautious Fund (51% of all sold) and 3,378 of the Balanced Fund (74% of all sold) have been identified as requiring further consideration.
As a result Barclays has already paid approximately £17m in compensation and the FSA estimates up to £42m further could be paid to customers who received unsuitable advice.
FSA managing director of enforcement and financial crime Margaret Cole said given Barclays’ position as one of the UK’s major retail banks, we view these breaches as particularly serious and fully deserving of what is a very substantial fine.
