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Sants points finger at IFAs over offshore bond sales

FSA chief executive Hector Sants has urged consumers to pursue cases of suspected offshore bond cash deposit misselling against IFAs while suggesting that product provider marketing literature was clear.

Speaking at a Treasury select committee hearing this week, Sants was asked whether he thought the regulator had done enough to warn consumers of offshore risks.

He said it was not within the FSA’s remit to supervise companies outside the UK’s borders but only to regulate advice given by UK IFAs and product literature circulated in the UK.

Sants said: “We certainly have an obligation to make sure that where those firms are marketing into the UK and fall within our remit in that respect, that the information is clear as to their regulatory status and the status of their consumer protection offering. I do believe that that was clear to consumers.”

When asked whether UK IFAs warned of the risks on the investments, he added: “Clearly, if consumers feel they have been missold to by a UK-regulated entity, then they have a case that they should pursue and that would be right for them to do. We are always interested in hearing from consumers who feel they have been missold to and we would take action in those cases.”

Money Marketing research of offshore bond marketing material in November revealed widespread variations in the warnings on lack of consumer protection for cash deposits held via offshore bonds if the underlying bank goes bust.

Scottish Life International, Aegon Scottish Equitable International, Axa Isle of Man, Friends Provident, Legal & General International, Canada Life, Skandia and Clerical Medical all did not make it clear that there may be no depositor protection in the event that the underlying bank used to deposit cash within an offshore bond went bust.

Aifa director general Chris Cummings says: “It is disappointing that the FSA should make a statement like this. Some of the offshore structures were really quite opaque and consumers were left vulnerable. A question needs to be asked about the role the FSA plays in the governance of the organisations that were putting out these products.”

What they said at the select committee hearing

  • FSA chief executive Hector Sants said the former chairman of the FSCP Lord Lipsey did not make a formal request to extend the panel’s remit or increase its resources before he resigned last month.

  • Financial Services Practitioner Panel chairman Nick Prettejohn warned that advice could become “ghettoised”, with only high-net-worth individuals able to access IFAs as advisers leave the industry rather than have to meet the new qualification standards.

  • FSA director of retail policy Dan Waters said the regulator is looking at making degree level the minimum standard for IFAs in the long term.

  • FSA sector leader for retail intermediaries Lesley Titcomb warned on intermediaries advising on new product areas where they lack expertise as they diversify due to current market conditions.

  • Waters said the FSA still had concerns regarding PPI while the “writing was on the wall” for single-premium PPI.

  • Sants said that banks may need to raise further capital from the Government.
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