FSA confirms structured product report due end of March

The Financial Services Authority has revealed it is reviewing responses to its structured products consultation and that it will publish feedback on the guidance by the end of March.

Responses to the regulator’s guidance on structured products, which encourages firms to test products before launch, were due by 11 January. The regulator said it expects to release the results at the end of the first quarter of 2012.

Under the new guidelines proposed by the FSA, firms would be encouraged to design products based on an identified target audience; stress-test them for their capability to deliver fair outcomes; and monitor the products throughout their lifetimes.

The regulator published its guidance concerning structured products out of concern that the increasing popularity and complexity of such products could strain firms’ systems and controls.

The guidance followed research conducted between November 2010 and May 2011, in which the FSA reviewed the methods of seven structured product providers in terms of product design, target market identification and post-sale responsibilities.

The FSA said the study, which covered structured product providers covering half of the UK market, found that “weaknesses remain” in the design and approval processes for structured products.

It said specifically that firms “tended to focus on their own commercial interests rather than consumer needs”.

Nausicaa Delfas, the FSA’s head of conduct supervision, said: “Structured products are rising in popularity in today’s low interest rate environment, and we are concerned that the growing number of structured products, as well as increasing product complexity, is placing a strain on firms’ systems and controls.”

On 25 October 2011, the FSA fined Credit Suisse £5.95m for systems and controls failings in relation to sales by its private bank of “structured capital at risk products”.