The UK Financial Services Authority (FSA) has fined Scottish Equitable Plc £2.8 million for failures related to the management of its customer data that the regulator says caused “significant consumer detriment”. In the vein of other fines meted out by the FSA over the course of this year, the action against Scottish Equitable, which will also require the firm paying consumer redress of around £60 million, yet again highlights the intense focus on data quality within the regulatory community at the moment.
In 2009, Scottish Equitable informed the FSA that it had identified around 300 issues relating to problems in administering its policies with regards to customer documentation. These included: not issuing around 238,000 policyholder documents; incorrectly calculating guaranteed minimum pension payments and future benefits of 774 customers; failing to identify errors in calculating rebates to charges on pension policies for 25,000 policies; not matching Department of Work and Pensions contributions to personal pensions for around 2,500 customers; and failing to trace around 200,000 policyholders who had moved without informing Scottish Equitable of their new address.
Although this instance of a regulatory infraction is from the world of consumer finance and hence not securities industry territory, it does illustrate the continued importance the FSA is placing on keeping reference data items such as address details of customers up to date. To prove the point, Margaret Cole, FSA managing director of enforcement and financial crime, says: “This case shows the importance of getting customer administrative procedures right and fixing them quickly when they go wrong. This is a key part of treating customers fairly.”
Next year will likely see more fines being handed out for similar failures across all financial services verticals. Moreover, if comments made by Dario Crispini, manager of the Transaction Reporting Unit of the FSA, earlier this year are to be believed, firms may see a mandate for the appointment of a data governance officer and the introduction of a data assurance programme to ensure that standards of data quality are being maintained. This could further raise the profile of the data issue under the auspices of transaction reporting under MiFID.
In the meantime and in the retail world, Scottish Equitable is now undertaking a redress programme to compensate customers who missed out on payments or benefits that they were entitled to or who were disadvantaged by its actions. The firm indicates it has already started to compensate consumers and will have paid £30 million in redress by the end of this year.