The Financial Services Authority (FSA) has fined Coutts & Co £6.3m for AIG bond mis-selling.

The fine serves to reiterate to firms in the financial services industry that the FSA will not hesitate to penalise firms who fail to assess ‘suitability’ during the sales process.

Coutts’ penalty comes just two weeks after the City watchdog – which in 2010 meted out record fines totalling a staggering £89.3m – hit the UK arm of a global financial services firm with a £5.95m fine relating to the sale of complex financial products," says Gabby Stephenson, compliance analyst UK for Wolters Kluwer Financial Services.

"Ten months ago, a high street bank was fined £7.7m for a number of serious failings in relation to the sale of two funds, for which the firm was required to provide substantial redress to its consumers.

The FSA rules stipulate that firms must have robust procedures in place to ensure any advice given to customers is suitable, and when recommending investment products, firms should take account of a customer’s financial circumstances – including the customer’s attitude to risk and their investment objective.

"The Coutts punishment follows the publication, in June of this year, of one of the FSA’s ‘Dear CEO Letters’ which interestingly, are usually the precursor for a hefty fine in the industry," Stephenon adds. "The letter followed a review of the suitability of client portfolios in a sample of firms in the sector, in which the FSA identified significant, widespread failings. Firms would do well to take heed of the regulator’s ‘credible deterrence’ philosophy, as the FSA makes no secret of the fact that it considers suitability a key area of risk in the wealth management industry and firms in this sector remain permanently on the FSA’s radar."

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