Financial Reform

Category Archives: Investment

Barclays Admits Error In Mis Sold Interest Rate Swaps

Barclays has today, admitted a second serious error in relation to the sale of interest rate swaps. The bank is now fighting claims that it mis-sold hedging products to small and medium-sized business customers.

The bank has now openly stated that it has mistakenly mis sold interest rate hedges to some small business owners, using a presentation that should only have been shown to professional investors due to the complexity of the product.

A spokesman for Barclays is quoted as saying that “The wording was included in some presentations by mistake,” but added that it “did not influence the way we dealt with our customers”.

mis sold interest rate swaps

This recent admission of error by Barclays, is the second serious mistake uncovered, following a month-long investigation by The Daily Telegraph, that Barclays and other UK banks had profiteered by selling complex derivative products inappropriately to small business owners with no investment experience – no surprises there then!

Last month, Barclays was forced to apologise to the Financial Services Authority (FSA) after evidence was uncovered that revealed the bank had demanded that its clients withhold information from the regulator over the sale of hedging products.

After the revelation, the FSA forced Barclays’ investment bank to write to the businesses affected, telling them they were no longer bound by “confidentiality agreements”.

The latest error will add to the pressure on Barclays amid growing concerns at the potential scale of mis-selling claims against British banks as the banks are still dealing with an avalanche of PPI claims from customers who were missold payment protection insurance.

Investment Firm Admits to Charging Hard to Spot Fees

A top British Financial company admitted to have ripped off its customers thousands of pounds through hidden or “hard-to-spot” charges in their investments.

Fidelity International, a large asset management company, and  part-owner of Lloyds, is the first among huge financial firms to openly admit that investors should be on guard of a whole range of “hard to spot fees” when making investments in the stock market.

The firm told a newspaper the yearly fee of one of its famous funds costs only a third of its actual cost, caving in hundreds of pounds from individual savings account and big investments.

The firm surprisingly makes a move not common among financial institutions, calling for them to issue “simple, transparent” fees that illustrate “on the road” cost of different funds instead of facing forward the lower yearly charge, which is often used to lure in customers.

According to the firm, “Fees reduce the value of investments, so everyone should be clear about what they are paying, and the returns they get.”

The confession follows an investigation in 2010 by another known newspaper, which found 7.3 billion being “skimmed off” yearly through hidden charges by bankers and money managers.

The company revealed that their “low, low” 0.1% management charge actually charges depositors 3%. It pointed to its ISA, which collects small amount of fees that significantly builds up overtime… drawing to a conclusion that those who charge far higher could get higher profits from these hidden charges.

Moreover, research data shows 3% of investments could be lost to investors over these hidden charges, which grow bigger overtime.

As a result of the expose, city regulator the Financial Services Authority is increasingly worried about the value of advice offered to investors who plan to put their money in the stock market.

The City watchdog is mulling over screening investment products or “pre-approving” services before it will be offered in the market.