Norwich & Peterborough (N&P)'s chairman has claimed a damning internal review of the building society's Keydata sales practices was not brought to his attention until after the investment firm collapsed.
N&P, which was this month fined £1.4m by the FSA and forced to pay redress of £51m for unsuitable advice on Keydata products, carried out an internal compliance review of Keydata recommendations in June 2007.
The probe raised concerns about Keydata advice, but an FSA investigation found N&P failed to act on the report, exposing customers to unsuitable advice for three more years.
Last night, at N&P's AGM, chairman Gordon Horsfield told members he had no knowledge of the contents of the report when it was issued in 2007.
When directly asked if he had seen the report, members present said he replied: "The report was issued on a limited publication. It wasn't brought to my attention."
Tony Hunt, an N&P Keydata investor in attendance at the AGM, said it was "extraordinary" the building society continued to advise customers to invest in the products despite the issues raised in its own compliance report.
He said: "It is quite extraordinary why N&P continued to hammer these things until 2009, and that the board didn't seem to be aware of the problems raised in the report."
During a period of over three years, N&P advised 3,200 clients to invest in Keydata's life settlement products backed by Lifemark.
But the FSA found N&P failed to assess the financial circumstances of many of its customers properly, designating them as having a higher tolerance of risk than was appropriate, which led to unsuitable sales.
Some customers were moved out of low risk products such as deposit accounts into Keydata investments, putting their income and capital at risk.
Many of these customers were approaching or already in retirement, and could not afford to lose their money, the FSA said.
Gareth Fatchett, partner at law firm Regulatory Legal which acted on behalf of 500 N&P customers who brought FOS claims against the building society over Keydata, said Horsfield appears to have been "totally ineffective" in his role in steering the society away from Keydata in 2007.
He said: "From the meeting last night it appears the chairman did not become aware of the internal report until very recently. You have to ask what the rest of the board was doing sitting on the report from 2007 to 2010."
N&P declined to comment further on statements made at the AGM.
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Slow and steady growth
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Denies any wrongdoing