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Lehman product marketing under FSA investigation

The FSA is to investigate how Lehman-backed structured products were marketed to consumers under the “wider implications” process.

The regulator has been actively looking at wider issues in the structured product market following Lehman’s collapse and will now investigate how products backed by the failed US bank were marketed and sold to consumers following 80 related investor complaints to the Financial Ombudsman Service.

The FSA and ombudsman say the regulatory options available to the FSA would help reduce “consumer detriment” and potentially deal with more consumer concerns than those who have complained to the FOS.

The FSA’s remit for “wider implication” could include taking supervisory action and regulatory action under the unfair terms in consumer contacts regulations, securing redress and publishing rules or guidance.

The FSA says it is up to the ombudsman to decide whether to progress or suspend individual cases while the FSA or Office of Fair Trading considers the issue. But it says the FOS will take account of any information provided by the FSA or OFT.

Conservative MP Ed Vaizey tabled an early day motion on May 6, calling for an FSA investigation on behalf of investors who lost money after buying structured products backed by Lehman Brothers.

The EDM, which has got 19 cross-party signatures, noted that more than 6,000 people invested over £200m worth of savings in Lehman-backed structured products.

It said: “Such products were marketed as 100 per cent secure by the companies that sold them, such as NDFA.”

CMS Cameron McKenna partner Simon Morris says: “It is clear that the FSA considers there may be systemic issues of widespread consumer detriment. Provider and adviser firms with significant exposure to Lehman-backed products should prepare for an FSA review.”

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