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FSA approved precipice bond brochures by NDF

The FSA had been checking NDF extra-income and growth plan marketing material for five years before thousands of investors lost much of their capital on the plans.

Money Marketing has seen an FSA note of a meeting between NDF and the FSA in December 1999 in which the regulator questioned NDF marketing material. The note says the FSA is “not criticising the product itself, which we accep- ted was not as risky as some other products but we were concerned about the balance of the brochure”.

The note then outlines conditions under which NDF would ensure that all future brochures would be amended. It adds: “We are not inclined to ask to write to investors regarding this product but would like them [NDF] in the future to take on board the comments made and to let FSA have an opportunity to comment on any future advertising promotion prior to going to press.”

The firm agreed to do this.

The note then goes on to say: “We agreed that NDF would write regarding the content of this meeting and agreeing to a future pre-review of adv- ertising material.”

Versions of the plans then lost investors millions. They were later dubbed precipice bonds by the FSA. The Financial Ombudsman Service is now adjudicating that some of the plans have been missold.

IFAs are concerned that they are losing cases with the FOS on material not only reviewed by the FSA but also placed on recommended panels by their networks and on which they say they did not give advice.

Fox Financial Management principal Michael Fox says: “I am fed up with advisers taking all the heat for what is obvio- usly misleading product information fed down to us.

“This was the first time that I had ever used a DBS/Ses- ame research panel product and definitely the last. I would like to see Sesame take res- ponsibility for inaccurate product provider sales material. If the FSA has been involved in approving these brochures, then it should accept some responsibility.”

Sesame spokesman Jared Aitken says: “We operate a robust regulatory complaint process and each case is investigated on its own individual circumstances.”

The FSA says it works with firms to ensure that marketing material is clear, fair and not misleading but would not comment on NDF.

FOS spokeswoman Emma Parker says: “Even in cases of direct sales, where meetings take place, it must be made absolutely clear whether advice is or is not given. The marketing material is not the only factor that we consider.”

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