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Can&#39t see scandal for the trees

The FSA&#39s inaction over structured products may be a case of the regulator being unable to see the misselling scandal for the consultation papers.

It was warned in 2001 by IFA Kerry Nelson that there were serious problems with structured products.

The responding letter from chairman and chief executive Howard Davies discussed consumer alerts and press notices warning of the risks and drew attention to the FSA&#39s monitoring of financial promotions.

Today, the FSA is embarking almost blithely on a round of fining. The first broker to be clobbered for £165,000 was Chase de Vere. More will follow, while the demise of RJ Temple and perhaps others will see either PI run-off picking up the tab, spooking the PI insurers further, or it fall to hit the Financial Services Compensation Scheme. It will hit everyone&#39s pockets eventually.

Clearly, providers and brokers are at fault but for the regulator to be warned and to leave it for the most part unheeded smacks of complacency.

The FSA may defend itself by saying that consumers must understand risks and that it cannot guarantee a zero failure regime or one which prevents stockmarket losses.

But, given the warning, its programme of fines is tantamount to an admission of failure to do its job. If these plans were being sold with the appropriate warnings of risk and correct marketing, the FSA would be not be fining anyone now.

The FSA has looked over the precipice of supervising and approving literature from providers but then changed its mind. At least it should have made urgent contact with providers and IFAs at the time rather than in the last few months.

The FSA is a great fan of the colour grey and heaven forbid it define what a missale is before the missale happens.

It has the remit of ensuring financial stability in the retail and institutional markets. It has to educate consumers. It is having to continue the failed decision tree experiment for Sandler products. It is creating a new depolarised environment while taking on the regulation of mortgages, mortgage advisers and general insurance.

But somewhere in this mess, the McCarthy/Tiner dream team should look at split-capital investment trusts and structured products, consider what went wrong with regulation and how it should change systems and if necessary demand that legislation is changed so it can do something about it.

And if it must, issue another consumer alert and hope the national newspapers have the space that week.

John Lappin is editor of Money Marketing

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