The Financial Services Authority is understood to be taking action against Santander after a mystery shopping exercise revealed that many bank customers were given poor advice on Isas, pensions and investment plans.
The regulator conducted a mystery shopping exercise between March and September last year and found that in one in 10 cases customers received poor advice. In a further 15pc of cases banks failed to gather enough information to ensure the product sold was suitable.
The FSA said it was "disappointed" by the results and said further action would be taken again one bank. It is understood that this is Santander.
The bank is currently not selling investment products, while its staff undergo retraining.
The FSA said that where problems had been identified, banks would also review previous sales to identify if customers have been sold an unsuitable product.
The regulator said this is the first time it has published the results of a mystery shopping exercise since it conducted a similar investigation into the sales of payment protection insurance (PPI) in 2008.
This subsequently triggered one of the biggest consumer mis-selling scandals in UK banking history.
In total there were more than 230 visits made to the six main high street banks and building societies. The main problems identified were that advisers failed to identify the level of risk customers were willing to take, did not take into consideration the length of time customers want to hold the investment and did not always take a customers' financial circumstances into account.
For example, some advisers recommended that customers invest in a saving plan, rather than using this capital to repay credit card debt or loans.
Clive Adamson, director of supervision at the FSA, said: "Mystery shopping allows us to understand what customers experience when they purchase financial products. This review shows that customers are not consistently getting the quality of advice on their investments that they should expect when visiting an adviser in a bank or building society.
"While we are disappointed by the results of this review, we are encouraged by the action that the firms involved have taken to rectify the situation for their customers. Since this review took place, we have introduced new rules on investment advice which have increased the professional standard of the advisers operating in the market and have removed the potential for advisers to recommend products that pay the largest commission but may not be right for the customer."