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Mis-sold Investment News Round-up: September 2017

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As banks reported their results for the first half of 2017, further details emerged of the millions they are still setting aside to settle claims for compensation for mis-selling structured investment products and pensions. Plus, investors in a collapsed overseas property scheme start to get compensation.

Collapsed Property Scheme Investors Get FSCS Pay-outs

The Financial Service Compensation Scheme has paid over £750,000 in compensation to at least 11 complainants who invested in an overseas property scheme which collapsed. The investors were advised to invest in the Harlequin scheme in the Dominican Republic with some being asked to re-mortgage to increase their investment.

The Financial Ombudsman Service has cleared at least one IFA firm over complaints about its advice in relation to the scheme. Nonetheless, the FSCS has started paying out on some claims.

Barclays Sets Aside Additional £700 Million for Mis-Selling Claims

Barclays is setting aside more money to settle claims for financial mis-selling. It made the announcement in a statement that also included details of its results for the first six months of 2017 – the bank lost £1.21 billion. This is largely due to a charge of £2.2 billion, however, for losses in relation to the sale of its African business.

When this is excluded, Barclays made a profit of £2.34 billion despite the additional reserves for mis-selling claims.

Barclay Announces Board for New Ring-Fenced Investment Bank

Staying with Barclays, it has announced the board of its new investment bank. The announcement is part of the bank's moves to ring-fence the investment banking arm of its business. The Government has set a deadline of the start of 2019 for all banks with £25 billion or more in deposits to separate their retail and investment banking operations.

As Barclays has a very large investment bank, the cost of making the structural change to its business is expected to be in the region of £1 billion.

7,000 Customers Could Be Compensated by Lloyds for Mis-Sold Structured Investment Products

Lloyds is writing to over 7,000 customers to offer them compensation as a result of mis-sold structured investment products. The total amount of compensation could be as much as £80 million according to the Lloyds Trade Union. A lot of the structured products this refers to were sold to investors with a promise that their capital was guaranteed. They were also promised returns linked to the FTSE 100 and other indexes.

Many of these complicated investment products, however, did not deliver on what was promised.

Compensation Payments and Investigations – the Story of First Half Results

Results from the first half of the year from Lloyds, RBS, and Barclays show banks continue to struggle with compensation claims for mis-selling and other investigations. Barclays sets aside an additional £700 million for mis-selling claims, and details emerge of Lloyds structured products mis-selling woes. In addition, the company has set aside another £1 billion for further mis-selling claims.

RBS still has issues too. It reported "litigation and conduct" charges of £396 million in its first half results.

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