HSBC Holdings Plc was fined a record amount by the UK finance regulator for advising elderly people to buy products to fund their nursing-home care costs that matured after some of the customers were expected to be dead.
With the fine and customer-compensation penalty, the UK-based bank must pay about £39.8 million (Dh227.91 million), the Financial Services Authority said in a statement yesterday. The £10.5 million fine is the regulator's largest-ever retail penalty and the bank estimated it would have to pay around £29.3 million to compensate customers, the FSA said.
HSBC unit NHFA Ltd. advised 2,485 customers with an average age of 83 to invest in asset-backed products to fund their long-term care. The investments typically were recommended for a minimum five-year period, which in some cases was longer than the customers' life expectancies, causing them to make withdrawals sooner than recommended, the regulator said.
The HSBC unit made "unsuitable sales" to around 87 per cent of its customers for these types of investments over a five-year period until 2010.
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HSBC chief executive Brian Robertson said in a statement he is "profoundly sorry" that the NHFA "failed to give suitable financial advice to some of their customers."
The bank reported the advice to the FSA and closed the unit to new business on July 1, Robertson said.