Morgan Stanley and Investec have agreed to change the terms and conditions used across a number of structured products after the Financial Services Authority demanded action to tackle what it claimed were “unfair” clauses.
The regulator stated that two terms in Morgan Stanley’s FTSE Gilt Backed Growth Plan 9 contract and a number of the firms other products including those white labelled by Skandia, as well as Investec’s FTSE 100 Enhanced Kick-Out Plan 21, may be unfair to investors.
The regulator said that one term gave both Morgan Stanley and Investec the broad discretion to cancel a customer’s contract if the customer had breached the contract in any way.
The FSA was concerned that customers would not know when Morgan Stanley could cancel the contract or have the opportunity to rectify the breach.
The FSA also believed that the variation term in the contract provided Morgan Stanley with the discretion to make any changes to the contract and that the circumstances in which a change could be made were not clear to consumers.
The regulator stated that a second term in Investec’s FTSE 100 Enhanced Kick-Out Plan 21 did not clearly explain the process for cancellations outside the 14-day cooling-off period or how much capital a customer would lose as a result of withdrawing from the plan outside of this period.
Both Morgan Stanley and Investec have now agreed to change terms in their contracts.
New Morgan Stanley customers will be sent contracts containing the new wording from 1 March 2013 and new Investec customers were sent contracts containing the new wording from 18 February 2013.