FSA urges diligence on structured product distribution

Product providers should restrict the distribution of structured products if needed, according to an FSA guidance report.

The regulator published new guidance for structured products yesterday, which requires providers to identify their target market and design products that meet those customers’ needs, pre-test new products to ensure they deliver fair customer outcomes and ensure a robust new product approval process.

 Firms will also be expected to monitor the progress of a product through its life cycle. The FSA says it plans to review distribution practices for structured products next year.

The report says that firms should act on their assessments of distributors, which could include “ceasing to use a particular distribution channel, or limiting distribution to specific channels.”

It adds that firms should be “monitoring their distributors to ensure that products are reaching their target market.”

FSA head of conduct supervision Nausicaa Delfas says: “There is a responsibility for providers to decide whether the product is relevant and where it should end up. It comes down to understanding certain products are not suitable for everyone and therefore it’s relevant from the provider’s perspective whether the distributor is appropriate to sell the product to the correct target market.”

She adds that it is also relevant for the distributor to give full product information to the distributor.