The FSA sees the financial incentives paid to direct sales forces of banks and providers as an “emerging risk”, and says it plans to take action against firms involved.
The regulator has published its retail conduct risk outlook today, which highlights the areas of concern and troublespots the FSA foresees emerging over the next year.
It published its first retail conduct risk outlook last year. The FSA says since then it has carried out thematic work on financial incentives of in-house sales forces across a sample of firms and sectors, to assess whether financial incentives increased the risk of inappropriate selling.
The FSA says: “At an individual firm level we have found a number of incentive schemes that significantly increased the level of risk, which was not being adequately mitigated.
“We are now working on the next steps, including taking action against firms where appropriate.”
The FSA is also considering publishing guidance or changing its rules on “high risk reward arrangements where the risks may be difficult to control”.
The regulator defines “emerging risk” as risks where it has evidence of poor conduct in firms but little or no evidence yet of widespread consumer detrient, but where it believes the risks could grow.