Writing in the Financial Times, the Shadow culture secretary said the FSA has “dithered and obfuscated” the issue and has delayed compensation by forbidding investigation by the Financial Ombudsman Service while the FSA continues to review the situation.
More than 5,500 investors lost money in Lehman-backed structured products when the bank collapsed last September. Many of these products were marketed as 100 per cent protected.
Vaizey said: “There is no evidence that the FSA understands the bigger picture of what has happened, nor of senior leadership from the FSA on this issue.
“References by Dan Waters, the director of retail policy and conduct risk, to ‘purported regulatory blockages’ that had hindered consumer protection are still unexplained and go unmentioned in the FSA’s update.
“Investors might be forgiven for wondering what the FSA is hiding. The issues are very simple and we require answers. Why did the FSA allow the sale of these potentially toxic products? Why were they allowed to be sold as protected or secure when they were not? And, most importantly, when will investors receive compensation from those who sold them?
“These questions, and the lack of timely answers, fuel the bigger question: is the FSA fit for purpose? I believe the answer is a resounding No.
“If it cannot handle prudential regulation or consumer protection, it is not only unfit, but long past saving.”
Vaizey has been an outspoken critic of structured products and recently led a private members’ debate on the subject.