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Investec and Morgan Stanley change ‘unfair’ structured product terms

FSA 450

Two structured product providers have agreed to change the terms on some of their investment plans after the FSA deemed them to be “unfair”.

Investec Bank has amended the terms on its Investec FTSE 100 Enhanced Kick-Out Plan 21 while Morgan Stanley & Co International has changed the Morgan Stanley FTSE Gilt Backed Growth Plan 9 and about 45 other investment plans on the regulator’s guidance.

The FSA says: “In our view, one term gave [the providers] a broad discretion to cancel a customer’s contract if the customer breached the contract in any way. We were therefore concerned that customers would not know when [the providers] could cancel the contract or have the opportunity to rectify a breach.”

In the case of Investec, the regulator also believed that another term did not clearly explain the process for cancellations outside the 14-day cooling-off period or how much capital a client could lose if they withdrew from the plan outside of the cooling-off period.

Meanwhile, a term in Morgan Stanley plan may have offered the provider the discretion to make any changes to the contract while the circumstances in which a change could be made were not clear to customers.

Morgan Stanley and Investec have agreed to change terms in their contracts. The FSA says existing customers in the plan “do not need to do anything” following the changes to the terms.


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. This looks like quite a vindication for the SP providers, if the only issues in the literature, after what looks like a pretty close inspection, were what looks like pretty standard terms from any contract, MS and Investec are doing a great job in treating clients fairly. I wonder how contracts for non-structured investments would fare under this level of scrutiny.

  2. Well that seems a reasonable move. But bear in mind that in order to remain independent we have to (at least) consider these products. Most of us are able to explain a particular unit trust in a few sentences. Try doing this with a structured product. I have just read through the latest offering from one of those mentioned and had to go and lie down in a dark room with a cold towel and a double scotch. How on earth can even the brightest of our clients take this in? And even then the investment is hardly flexible – with a six year term. Let alone the due diligence expected – what with counterparties and all the rocket science.
    I know these products have their acolytes, but by every manual and past experience one word screams out – avoid! Even (or especially) Warren Buffet advocates investing in plain and easy to understand assets.

  3. Harry, I challenge you in that case to explain a unit trust in a few sentences..?? I’ll even make it simple, try a tracker…

    Oh..and don’t forget to include events beyond reasonable control, conflicts of interest, unclaimed assets…etc…etc…

    Realistically, you can no more do that for a unit trust than you can any other investment, because, you don’t explain the T’s & C’s.

    Have you read the T’s & C’s of your bank current account? I would imagine they were about 14 pages long.

    Realistically, if you are suggesting that you need to resort to drink, or your clients cannot understand a retail offering, then the issue is either a) appalling literature or simply b) an excuse on your part.

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