Although spreadsheets were allowed as a development tool under an investment company’s governance protocols, pressure to bring innovative investment products to market fast had resulted in a rogue product being launched built on spreadsheets of which the company’s compliance department had not been made aware. This resulted in the mandatory compliance safeguards being overlooked. The product had been produced by a small group of people new to the organisation who were not aware that strict procedures had to be followed before a product could be launched. The incentives for this group, had the product been successful were immense.
The investment product was sold to thousand of customers but did not have the requisite product documentation, compliance controls and supporting training to make sales people and potential customers aware that this was a high risk product. It was sold as a low risk product which promised high returns. It was launched during a period when the stock market was rising and it achieved significant gains during that period, but a downturn on the FTSE produced a commensurately large loss. This resulted in losses of over 50% for many customers, many of whom had been advised to invest significant proportions of their wealth in the product due to its allegedly low risk profile.
The firm was heavily fined, suffered severe reputational damage and had to make significant reparations to customers costing several million pounds.
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