HSBC subsidiary NHFA advised 2,500 customers between 2005 and 2007 to invest in investment bonds to fund the cost of care.
The Financial Services Authority, however, ruled that the products were “unsuitable” because in many cases the individual’s life expectancy was below the recommended five-year investment period.
It is estimated that the average customer age was 83.
Customers with shorter life expectancy, the FSA continues, had to make withdrawals sooner than recommended, leading to lost interest and charges for withdrawals.
About 87% of customers were given unsuitable advice, the FSA says.
Tracey McDermott, acting director of enforcement and financial crime, says: “NHFA was trusted by its vulnerable and elderly customers. It breached that trust to sell them unsuitable products.
“This type of behaviour undermines confidence in the financial services sector.”
HSBC has, the FSA says, “demonstrated its commitment to making changes to its operations”. HSBC closed NHFA to new business on 1 July 2011.