The FSA's "note" sent to AIFA and other trade bodies and consumer groups last Thursday on the issue ...
The FSA's "note" sent to AIFA and other trade bodies and consumer groups last Thursday on the issue of mis-selling has received cautious welcome for at least attempting to address the issue.
But as the FSA's own cautious stance has proved, mis-selling remains a serious pitfall for the entire financial services industry.
Faye Goddard, AIFA technical director, says the FSA has provided a "long and legalistic" letter that "restates the obvious" and that "does not provide a punchy definition" of mis-selling.
However, AIFA is also of the opinion that there are positive aspects to the note, and is also pleased that the FSA is inviting further discussion involving trade associations and consumer bodies
"It recognises the turmoil of mis-selling and recognises the need for context, such as when it says that just because an investment is not performing does not mean it was mis-sold," Goddard says.
"It provides guidance on the application of the rules, and the paragraphs on retrospecivity mean that retrospective action is out of the question."
Goddard says one of the big fears among AIFA's members is that the FSA may seek a repeat of the style of investigation surrounding the pensions review, when past actions were judged by present rules.
The note on mis-selling will make any such action harder, she adds, because AIFA and others will always come back to paragraphs on retrospective action.
The note says in its conclusion that: "In relation to 'mis-selling' we will not act with hindsight or inverting the burden of proof that would otherwise apply."
"The FSA will have to stand by this on the question of retrospection," Goddard adds.
"What was suitable five or 10 years ago is not the case today; people change, the economic climate has changed and business is done in a different way."
Looking forward, the FSA's attempt to mollify the mis-selling issue may in fact have raised other demons, Goddard says.
If, as suggested by the note, mis-selling boils down to suitability rules, then what of the Sandler suite?
Record keeping and other business practices can be used as evidence that suitability requirements were met.
However, the proposals to make Sandler products a reality include abolishing such practices, which leaves the question of just who will bear responsibility if there are future allegations of mis-selling relating to such products.
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