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FSA and Treasury were warned in 2001 of structured dangers

At least one major IFA urged the FSA to launch an immediate review of structured products and the way they were marketed as early as October 2001.

Kerry Nelson, who was at the time an adviser with IFA Deep Blue, wrote to Ruth Kelly, then Treasury Economic Secretary, the DTI and the OFT, warning of the dangers of some products&#39 design and inadequate marketing literature. It urged action for clearer risk warnings about the dangers of indices, downside gearing and the averaging practices of some providers.

Deep Blue was referred to the FSA, which, in a letter from then chairman Howard Davies, intimated its measures were adequate, pointing to consumer alerts and press notices warning of the risks. Davies also drew attention to the FSA&#39s monitoring of financial promotions.

However, the FSA last year made a U-turn on director of investment firms David Kenmir&#39s pledge, given in a letter to Liberal Democrat MP Norman Lamb last April, to vet structured product ads before they were released.

It has fined Lloyds TSB £1.9m and recently fined Chase de Vere £165,000 for misleading marketing. More firms are expected to be fined this year.

The FSA&#39s concern was made apparent last December when it sent IFAs a questionnaire – which they had 24 hours to return – asking them to detail their ability to meet potential misselling claims.

IFAs believe that the FSA was trying to establish the possible impact of misselling claims on the Financial Services Compensation Scheme.

Nelson says: “I flagged this some time ago. The industry, including the FSA, saw the problem and did not react. It needs to be more proactive.”

FSA spokeswoman Louise Buckley says: “We issued several alerts and a factsheet urging consumers to think about the risk they were prepared to take when buying such a product.”

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