The FSA found that between 10 July 2006 and 28 February 2009, SLAL failed to ensure that there were proper systems and controls over the Fund, specifically in relation to the marketing material produced. This resulted in a risk of unexpected capital losses being incurred for those customers invested in the Fund. The FSA also found that there had been a lack of prompt and full investigation of concerns that arose about that marketing material.

The FSA investigation concluded that:

* marketing material regarding the Fund was not 'clear, fair and not misleading';
* despite the majority of the Fund being invested in Floating Rate Notes by July 2007, marketing material issued by SLAL referred to the Fund as being wholly invested in cash;
* there were no adequate systems or controls in place to ensure that marketing material issued accurately reflected the investment strategy for the Fund;
* customers were therefore misled as to the true nature of the investments held by the Fund and as a result, they were given misleading information on the risk of capital losses; and
* as the Fund was intended primarily for the investment of pensions it was considered appropriate for individuals approaching retirement and as such, the capital risk associated with an investment was of great importance.

The risk of unexpected consumer losses was demonstrated by the reduction in value of the Fund by 4.8% (approximately £100m) on 14 January 2009. SLAL proactively paid a total of £102.7m into the Fund to restore the value of the investors' holdings to the position they would have been in prior to the fall in the unit price.

In addition to this capital injection, SLAL has proactively contacted existing customers identified as having received poorer quality marketing material in order to determine whether any further compensation may be required in their individual cases. SLAL also took proactive steps to address the situation, commissioning a report by an independenrt byrt by an independent third party into the systems and controls relating to the marketing material issued in respect of the Fund, and improving these systems and controls in relation to the Fund.

Margaret Cole, FSA director of enforcement and financial crime, said:

"The FSA takes the issue of misleading financial promotions very seriously and the fine announced today demonstrates our commitment to the principle of credible deterrence. It is critical that consumers are given an accurate understanding of the nature of investment products and the risks involved. Without this information, consumers are unable to make informed decisions about whether investments are suitable for their individual investment strategy. Throughout 2010 and beyond, the FSA will continue to take strong action when a firm's financial promotions fall short of the requirement to be 'clear, fair and not misleading' and customers have not been treated fairly.

"The failures at SLAL arose because there were inadequate systems or controls in place to ensure that marketing material issued accurately reflected the investment strategy for the Fund. There were also inadequate processes in place to enable effective communication between business areas and committees resulting in a lack of awareness of any divergence between the marketing material and investments held by the Fund."

Standard Life Assurance Limited cooperated fully with the FSA and agreed to settle at an early stage of the FSA's investigation, therefore qualifying for a 30% reduction in penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £3.5m.