Lloyds TSB to pay £1.9m in compensation

Lloyds TSB has been fined £1.9m for mis-selling bonds by the Financial
Services Authority (FSA), and must now pay £98m in compensation to 22,500
investors. The FSA fined the bank over the way it sold high-risk ‘Extra Income
and Growth Plans’.

These investment schemes, sometimes known as ‘precipice bonds’ because of
the high risks involved, offer investors high levels of income, but leaves
their capital at risk if stock markets fall.

The FSA found that nearly half of all sales were sold to customers for whom
the product was unsuitable, as they had little or no knowledge of the stock
market and its risks.

Investors lost between 30 and 48 per cent of their capital due to falls in
the stock market.

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