Santander UK has agreed to pay redress to affected customers after the Financial Conduct Authority (FCA) fined the bank £12.4m for what it said were "widespread" investment advice failings.
It follows a 13-month probe by the regulator which began after concerns about the bank's investment advice emerged during a mystery shopping exercise.
Among its findings were that Santander's advisers were not "fully getting to grips" with customers' personal circumstances, or their attitudes to risk, before making a recommendation. New advisers were also not adequately trained, the FCA said.
According to the regulator, Santander failed to ensure that customers investing were given clear and not misleading information about its products and services.
For Santander's Premium Investments, a specialist investment service no longer offered by the bank, it failed to carry out regular ongoing checks to ensure the investment was still meeting customer needs.
The FCA said that, when it first put its concerns to Santander UK in late 2012, the firm immediately decided to stop giving financial advice in branches to prevent further problems occurring.
It added that positive market movements in the period since most affected products and services were sold meant redress was likley to be minimal.
A report on Sky News, citing sources familiar with the bank, claimed Santander believes few customers suffered detriment as a result of its advice, and also disputed many of the regulator's conclusions.
FCA director of enforcement and financial crime Tracey McDermott said: "Customers trusted Santander to help them manage their money wisely, but it failed to live up to that responsibility.
"If trust in financial services is going to be restored, which it must be, then customers need to be confident that those advising them understand, and are driven by, what they need. Santander let its customers down badly."
As part of its mystery shopping exercise, the results of which were revealed in February last year, the regulator, then the Financial Service Authority (FSA), carried out a total of 231 visits to six major retail banks.
While about three-quarters of customers received good advice, the FSA said, there was evidence of mis-selling.
In particular, in 11% of its mystery shops, the evidence suggested the adviser gave the customer unsuitable advice. In 15% of visits, the FSA said it found examples of advisers failing to gather enough information from the customer to ensure the advice was suitable.
In 15% of mystery shops, the adviser had not properly ascertained the level of risk customers were willing and able to take while, in 13%, the advisers had failed to offer even basic financial recommendations, such as repaying unsecured debt.
The findings prompted the Financial Services Consumer Panel to call for the regulator to reveal the guilty parties, though Santander's involvement was reported early on.
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