Structured products will prove to be a far greater problem to consumers and the industry than split-capital products, according to Liberal Democrat MP Norman Lamb.
Lamb was part of a Treasury select committee meeting last week which questioned FSA chairman Callum McCarthy and FSA chief executive John Tiner as part of its inquiry into restoring confidence in long-term savings.
MPs revealed their concerns about structured products, with Lamb asking the FSA what action it is taking to secure settlements for the elderly and vulnerable groups of consumers affected by structured product misselling.
Tiner said the FSA's enf-orcement division is investigating two firms which bet-ween them have distributed £190m of precipice bonds. It is also doing supervisory work with a number of firms and has particular concerns over advice given by a further four firms. Another company has put in place a voluntary programme of redress which could amount to £5m.
Lamb voiced concern over the use of respected product provider names on marketing literature for precipice bonds to give it credibility, giving Abbey National as an example.
Tiner said the interaction between providers and intermediaries is an area he is worried about, warning pro-viders that they have a commercial imperative to make sure their name is not misused in this way.
Lamb said: “What action is being taken to see an overall settlement for investors in precipice bonds, a highly vulnerable sector? We are going to see a much bigger loss here than with splits.”
Tiner said: “The Financial Ombudsman Service handles a large number of cases such as those we have seen with endowments but the nature of structured products cases is different. We need to have conversations with individual firms. This is what we are doing.”