Use power carefully
EDITOR’S COMMENT OF THE WEEK
Martin Wheatley, the designated head of the new Financial Conduct Authority, has signalled that the body will take a much more interventionist stance when it comes to consumer protection to ensure that the public are not sold inappropriate products.
This is a fine pronouncement but we are going to need evidence of how it will work in practice. He cites the recent scandal of the misselling of payment protection insurance by the banks, referred to by him as a fiasco, which indeed it was, the inference being that it was a fiasco engineered by the banks but neatly dodging the responsibility the FSA had in preventing it which they manifestly failed to do.
Wheatley’s explanation is that the FSA did not have the necessary powers to prevent it. How interesting. If the FSA lacks such powers currently, can he please tell me how it came about that in November 2011, Margaret Cole made an ill-thought-out, intemperate and wholly inaccurate pronouncement on traded life settlement funds that has resulted in the suspension of trading of perfectly reputable funds, placing investors’ assets at risk and, in one particular case, depriving investors of an income of about 8 per cent a year at a time when interests rates are 0.5 per cent.
The FSA have yet to explain how such a move has protected investors’ interests, especially against a background of failing utterly to justify or provide any evidence whatsoever that such funds are toxic and ponzi schemes. A ponzi scheme by its nature is fraudulent and if such a serious charge is to be levied, it is usually a good idea to have sound evidence to substantiate it. Yes, investors can behave irrationally and they do deserve protection against unscrupulous selling of inappropriate products but the unelected FCA must be very careful with its new sweeping powers or they will be in grave danger of disadvantaging the very people they are supposed to protect.
SG Wealth Management