FSA/PN/053/2007
19 April 2007

The Financial Services Authority (FSA) has fined Sesame Limited (Sesame) £330,000 for failing to treat its customers fairly by not handling complaints concerning Structured Capital At Risk Products (SCARPs) adequately.

The problems with Sesame's complaints handling were identified as part of the FSA's thematic review of SCARPs during March and August 2004. The FSA found that Sesame incorrectly rejected complaints from approximately 350 customers between March 2003 and October 2004. These customers had lost nearly £5.9 million. The complaints related to sales made by Sesame's legacy networks.

William Amos , Head of Retail Enforcement at the FSA, said:

"Sesame has no excuse for complaints handling failures of this kind, not least because the FSA had already issued a number of publications concerning both SCARPs and complaints handling. The failings we found highlight the need for firms to implement and maintain robust complaints handling procedures and to train staff adequately ."

After the FSA identified the problems, Sesame took prompt action to ensure all affected customers were compensated and engaged external advisers to review its SCARPs complaint handling procedures and train its staff. Without the firm's co-operation and commitment to mitigation and remedial action, the penalty would have been substantially higher.

Notes for editors

  1. The Final Notice is available on the FSA's website.
  2. A SCARP or Precipice bond is a product which provides a fixed level of income (which can be drawn down or accumulated) over a fixed investment period. They offer limited protection against the loss of the capital invested in the first place and whether or not customers get their original capital back depends on the performance of an index, or more than one index, or a selection of stocks. If the indices or stocks fall, so will the value of the capital. Some of these products are geared, e.g. on a 2:1 basis, whereby capital is reduced by 2% for every 1% fall in the index over the investment period.
  3. Sesame Limited was formed by the merging of Kestrel Financial Management Limited, Financial Options Limited, IFA Network Limited and Countrywide Independent Advisers Limited initially, and then of DBS Financial Management plc (DBS) (the legacy networks). Prior to the merger, each network was run as a separate business.
  4. Regulatory publications issued by the FSA and Financial Ombudsman Service (FOS) concerning both SCARPs and complaints handling are listed below:
  5. FSA Dear CEO letter from 4 April 2002
  6. FSA Traded Endowment Policies
  7. FSA Guidance Note No.7
  8. FOS High-income ('precipice') bonds
  9. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  10. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.