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FSA says thousands face losses on bonds

The FSA has admitted that tens of thousands of investors could be facing losses to their capital when dozens of index-linked structured products mature this year.

Managing director Michael Foot, speaking to bankers at The Retail Banking Conference sponsored by The Economist in London last week, said that thousands of investors with bonds maturing in the coming months were likely to be disappointed.

He said many investors had assumed that using terms such as guaranteed in product literature assured the safety of their investment. He said consumer education still has a long way to go.

Foot&#39s comments – the first time the FSA has indicated the scale of the problem – come after the regulator last month called on companies to inform investors about the risks associated with high-income bonds.

Income bond providers must now regularly update investors on the performance of the products.

Foot said: “People saw the word guaranteed and stopped reading. There are going to be tens of thousands of unhappy people as these bonds mature.”

Bates Investment Services senior investment adviser Kerry Nelson says: “It is disappointing that the FSA only now puts emphasis on this when it is too late.”

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