In its quarterly consultation paper, the FSA said that recent years had seen a “growing and innovative market for products, including structured products, which are often described as ‘guaranteed’, ‘protected’ or ‘secure’.”
“We have reviewed this market and concluded that some firms promote these products without any clear and adequate justification for the descriptions used. We believe that this could be implicitly misleading and could lead to consumers misunderstanding what is actually offered to them”.
The FSA is proposing to amend its Conduct of Business sourcebook and Banking Conduct of Business sourcebook to include guidance that the terms ‘guaranteed’, ‘protected’ or ‘secure’ or similar terms should not be used to describe product features unless:
- That term is capable of being a fair, clear and not misleading description
- The firm communicates all of the information necessary, and presents that information with sufficient clarity and prominence, to make the use of that term fair, clear and not misleading.
Firms would have six months to implement the proposals were they to go ahead.
Responding to the proposals, the UK Structured Product Association (UK SPA) said: "the paper suggests measures that can be taken to further improve investors understanding of structured products and further aid transparency. These are objectives that the UK SPA wholeheartedly supports and members of the association will continue to engage with the FSA during the consultation period."
