View more on these topics

Leading Tory attacks FSA for failure over structured products

Conservative MP for Wantage & Didcot Ed Vaizey says the FSA’s failure to properly investigate and compensate investors who lost money in Lehman Brothers structured products proves it is not fit for purpose.

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.



A blurry projection

The FSA has gone to great lengths to ensure advisers are taking heed of its pension switching review findings and changing their suitability processes accordingly.


News and expert analysis straight to your inbox

Sign up


There are 6 comments at the moment, we would love to hear your opinion too.

  1. The Mystery Shopper for IFAs 17th August 2009 at 1:07 pm

    FSA not fit for anything apart from the bin
    Why did we have to wait so long for senior MPs to recognise something that IFAs have been reporting for years. Labour used the FSA as a politcal shield to defelect all their mistakes as they still sand out the old mnatra why the FSA is so great. Well the good news is that at least it’s now said in the open the FSA is no good. But there should be an air of caution as MPs are not trusted for the reasons we all now know. So sack all F-pack staff, ask them to also pay back bonuses which should not have been awarded for their failures. Make their life hell just as they made life for IFAs hell for 8 years. FSA staff should be sued under ‘acting in bad faith’ FSMA 2000 rules. As they have been obstructing the truth to save their own jobs.

  2. Leading Tory attacks FSA for failure over structured products
    Whilst I am hardly a fan of the FSA, structured products have not, or at least certainly should not have been, for quite a few years now marketed as 100% protected or secure. Anyone who has done so may well now find themselves in very hot water. Any guarantees are and always were strictly dependent on the financial strength of the counterparty underwriting the conditional guarantees that form a critical element of these types of product. That doesn’t make them toxic products per se, but the worst case scenario goes beyond the risk of getting back at maturity only the sum originally invested. It should also not be forgotten that Lehman Bros had for very many years been a respected and financially sound institution, like many of our own banks. Almost as soon as the US Fed allowed Lehman’s to go to the wall, it regretted having done so. The problem now appears to be that the FSA is dithering like a rabbit caught in the headlights of an oncoming lorry. I would also be very interested to know just what the FSA means by “purported regulatory blockages that have hindered consumer protection”. Is this another way of saying that the FSA suffers from regulatory constipation? If so, the affliction is extremely selective, as many IFA’s feel that the FSA’s actions in other areas amount to somewhat the opposite.

  3. Always blame someone else!

    I wonder who sold & continues to sell all these ‘toxic’ products….. was it the tooth fairy, the easter bunny??

    These products are sold by financial salesmen as ‘can’t fail’ type products. Of course, a few damn fine IFAs I know make sure that clients are in no doubt of the risks involved if they buy them. However, the target driven, commission hungry type ‘adviser’ probably don’t know/care about the risks involved….although as SP’s generally only pay 3% commission then the greedier salesmen won’t touch them!

    If ‘Protected’ products are ‘bad’, then ban them, today!

  4. Caveat emptor
    What about the purchaser of these products? Why did they think they were safer than any other investment? If the banks hadn’t been bailed out quite a few people with a deposit account would have been left short. There is no such thing as a safe investment, particularly the structured product variety. This MP is fanning the flames of the burning edifice that was the one-stop regulator.

  5. Another nail
    The FSA tries to pretend it is there to regulate the banks and markets to promote financial stability and also to be the champion looking after consumer interests.
    What utter rubbish. The only time it comes down in the consumers favour is when it is dealing with the ‘small firms’ it regulates, just to show how strong and macho it is!

    The serious point is that it is patently clear that the FSA has a conflict of interest at it’s core.

    Unlike Vince Cable I believe that looking after consumers interests must be kept separate from from ‘Regulation’ and as the Civil Servants in the FSA bureaucracy haven’t had the faintest idea what the Banks et al.. have been doing for the past ten years this function needs to go back to the BoE. Let the FSA be wound up and put in a SMALL organisation as a Consumer Protection Agency, perhaps in conjunction with the FOB, but with the administration funded by the Treasury. Lets drop the pretense that the FSA is not an arm of the Treasury/Govt.

  6. Mis Selling of NDFA Lehman backed Structured Products
    Evan Owen asks “Why did they think they were safer than any other investment?” Answer because investors were convinced that the investments were SAFE by IFA’s with no scruples. One of these IFA’s has since made blatent attempts to deceive the FOS. Fortuneatly the FOS an FSA is wise to this but still no action has been taken against the IFA I wonder why?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm