Coutts is to pay the Financial Services
Authority (FSA) £6.3m ($10.2m) after failing to provide adequate
advice to clients about the risks associated with AIG Life
bonds.

An FSA investigation found that between
December 2003 and September 2008 Coutts failed to adequately
communicate the risks to clients associated with the Enhanced
Variable Rate Fund (EVRF), the single premium life assurance bond
issued by US-based insurer AIG Life.

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Estimated 250 customers
affected

Coutts is the second major UK bank to be fined
by the FSA for giving inadequate advice to private banking
clients.

In October, Credit Suisse UK agreed to pay
£5.95m ($9.5m) to UK regulators for failures related to the sale of
structured capital at risk products (SCARPs) to private banking
clients.

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In
January, PBI reported as many as 250 of Coutts
customers may be affected holders of the AIG products.

 

Internal investigation
launched

Coutts said the FSA did not make any findings
on the suitability of the advice given in any individual cases.

However, Coutts will undertake a past business
review of its sales of the product to address “the possibility
identified by the FSA that unsuitable advice may have been
given”.

This will be overseen by an independent third
party and will consider the advice given to customers invested in
the EVRF as at the date of its suspension on 15 September 2008.

Coutts has agreed to reimburse clients if they
are found to have been advised to purchase unsuitable products.

The bank said it is in the process of writing
to all affected customers with further details and an indication of
when the review will be complete.