The Financial Services Authority (FSA) has
launched a second round of investigations into how UK wealth
management firms’ are dealing with the risk and suitability of
investment product sales to clients.
The new review will involve a series of
interviews with key individuals from firms where it identified
failings in the sale of these products, followed by potential
further regulatory action.
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“The failings may point to deficiencies in the
management and control architecture of firms, so wealth management
businesses can expect to see continuing and increasing supervisory
focus,” the FSA said in a statement.
The statement said the FSA would also be
conducting a direct assessment of firms’ systems and controls.
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By GlobalDataIn June 2011 the FSA wrote a letter to the
CEOs of hundreds of firms offering wealth management services to
retail clients, following a review of a sample of these firms.
The Dear CEO letter pointed out widespread
failings which the FSA feared were endemic across and outside of
the sample.
These perceived failings included a series of
mis-selling and management errors, putting clients into
inappropriate or high-risk investments.
The regulator also handed down a series of
heavy fines to these groups at the time.
Continued failings
The FSA has launched the new round of reviews
as it is concerned that firms have failed to heed their warning
since last year, continuing to mis-sell products and expose clients
to high levels of risk.
In its 2012 Retail Conduct Risk
Outlook, the FSA said that the current low interest rate
environment was a strong incentive for firms to sell products that
offer higher returns without adequately disclosing the risks.
In November last year, Coutts was fined £6.3m
($10.2m) for failing to provide adequate advice to clients about
the risks associated with AIG Life bonds.
