CASE STUDY: Standard Life– ticking boxes cause trouble…

This was related to the payment of £102 million by Standard Life into its Pension Sterling Fund in February 2009.

There are some breathtaking failures described by FSA, and one or two issues which aren’t explored in the Final Notice, which – considering the history of this issue – is interesting for what it doesn’t address as much as what it does.

For at least the period between July 2006 and February 2009, most Standard Life marketing materials described the fund, both in graphic and text forms, as “..invested wholly in cash – the most stable investment.”

On 23rd December 2008 Standard Life apparently became aware of valuation problems with some of the fund’s holdings. On 14th January 2009 the eruption came when Standard Life revalued the PSF, marking down net asset value by approximately 5% – about £100mn – overnight.

Naturally, 97,000 investors were unable to understand how a conservatively-invested, unexciting money market fund could lose 5% of its £2 billion value (and of their invested money) overnight.

Now, a year after the events, FSA has levied a very significant fine on Standard Life and published a detailed Final Notice containing a number of uncomplicated lessons for the industry.

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