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ETFs, Sipps and debt waiver plans labelled as emerging risks

Exchange traded funds, Sipps and debt waiver products have been earmarked as areas of emerging risk by a joint committee made up of the FSA, the Financial Ombudsman Service and the Office of Fair Trading.

The coordination committee was first proposed in an FSA discussion paper on consumer complaints published in March last year.

The FSA published its feedback statement this week, which details the set-up of the new committee. The committee has held three meetings, the last one in February.

Minutes from the February meeting show the regulatory bodies were concerned about exchange traded funds and exchange traded products. This echoes issues highlighted in the FSA’s Retail Conduct Risk Outlook, which warned of the rapid growth of the ETF market without investors necessarily understanding the underlying risks.

The committee also questions whether consumers are being made aware of the costs of Sipps compared with alternative products.

It is also anxious about debt freeze or debt waiver products, particularly unclear product terms, with the committee concerned that these products could act as “payment protection insurance replacements”.

The FSA says: “We recognise the difficulties for individual firms and consumers in iden- tifying emerging risks.”

The regulator says it will engage with consumer and trade bodies about the bigger role they can play in providing intelligence to the FSA and the OFT on emerging risks.

The FSA adds: “We believe that the coordination committee will provide a vehicle for promoting alignment more effectively between the regulators and the ombudsman service where there are emerging risks and in the handling of mass claims.”

The committee will publish an annual account and the next meeting is in May.

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