The FSA says the industry is failing to learn the lessons of previous misselling scandals and claims it only has itself to blame for low consumer confidence in the financial services sector.
Speaking at a City and Financial conference in London earlier this week, FSA acting director of enforcement and financial crime Tracey McDermott said confidence in financial services was at an all-time low.
She claimed its reputation will not recover unless the public feels it will be dealt with fairly and professionally by financial services firms.
McDermott said: “The past few years have seen ever-increasing penalties for retail failings. Redress to customers from enforcement cases in 2011 alone exceeded £200m. And that is not to mention the significant sums which are being paid out in relation to the misselling of PPI.
“Yet, despite this, we continue to see failings which indicate the industry is not learning the lessons. It is not properly fulfilling its mandate of giving good advice to those who need it, ensuring markets are fair and that, where risks are being taken, they are understood.”
She cited the inappropriate investment advice given by HSBC subsidiary Nursing Homes Fees Agency to elderly investors, and advice to invest much of a client’s retirement fund into unregulated collective investment schemes as examples of the industry’s continued failings.
She added: “It is really no wonder that confidence is low and the industry, frankly has no-one but itself to blame.”
McDermott also discussed the new powers the Financial Conduct Authority will have to intervene at an earlier stage where it sees risk of consumer detriment.
She said the FCA will act where products seem useful but where a firm’s sales processes look likely to lead to significant misselling.
The FCA will also look to take action, including enforcement action, where aspects of a firm’s business model, such as product selection, remuneration, training or recruitment, risks poor consumer outcomes.
She added: “Obviously early intervention comes with risks, and with potential downsides for the regulator, the industry, and most importantly, for consumers.
“So the FCA will need to be targeted and proportionate in when, how, and why we intervene. We will also need to be prepared to be much more transparent, within the bounds of statute, about what we are concerned about and why.”