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* HSBC sets aside $149 mln to review investment advice
* Follows regulator's check on advice at major lenders
LONDON, Nov 4 (Reuters) - HSBC has set aside $149million to review how it advised about 200,000 UK customers oninvesting a lump sum of money, the first British bank to do soand signalling another potential costly mishap for lenders.
HSBC Chief Executive Stuart Gulliver said on Monday about$120 million of the money set aside will pay for the cost of itsreview, indicating only a fifth of the provision had beenearmarked for customer compensation.
It follows a "mystery shop" or undercover review byBritain's financial regulator to check on investment advice atsix major lenders released in February. That found unsuitableadvice had been given 11 percent of the time and firms did notgather enough information in a further 15 percent of cases.
One of the companies was put under investigation forpossible investment advice failures, which could result in afine. That firm was Santander UK, four industry sourcestold Reuters at the time.
HSBC is the first bank to specifically set aside money forthe issue, included in third-quarter results.
"The Financial Conduct Authority (FCA) has said thatsuitability failures have been widespread in the industry, so itis unlikely that HSBC are alone," said Rob Moulton, partner atlaw firm Ashurst.
The regulator's study concluded that banks should reviewtheir past business "to identify historic poor advice and putthis right for customers". Banks were told to employ anindependent company to carry out or oversee the work.
HSBC hired Grant Thornton to review its sales.
"The outcome of that is we need to go back to 2008 and checkhow we sold wealth management products to about 200,000clients," Gulliver said.
He said his bank was being "prudent" by stripping out theoperational cost of doing the process. It was not clear if otherbanks faced similar costs and, if so, would strip them out orjust include them in routine operational costs.
Santander UK, Lloyds, Barclays, RBS and Nationwide declined comment. The FCA has not namedthe six banks in its review, and said the scale of poor advicevaried significantly. The FCA declined to comment on its work.
Any compensation or operational costs would add to more than20 billion pounds set aside by Britain's big lenders in recentyears to compensate customers mis-sold payment protectioninsurance (PPI), the costliest scandal to ever hit the industry,and for mis-sold interest rate hedging products.
HSBC's provision was part of $428 million it set aside inthe latest quarter for UK customer redress.
British banks have restructured their wealth managementoperations and most only offer advice to customers with over50,000 pounds to invest, following new rules introduced thisyear aimed at ensuring advisers are better trained and fees forfinancial advice are more transparent.
Lawyers said the FCA, faced with spiralling demands on itsresources, is increasingly using its powers to force firms topay for reviews in a more interventionist approach to protectconsumers.
