The FSA has earmarked Keydata-style traded life policies as a product "generally unsuitable for the mainstream retail market".
Traded life policy investments, the underlying assets of the funds marketed by failed investment firm Keydata, are only suitable for "sophisticated customers capable of fully understanding the way in which the product works and the likelihood of it failing," the FSA states today.
The asset class features on an initial list of products, published this morning in an FSA discussion paper, which the watchdog says have already caused problems for consumers, and would likely be deemed unsuitable for mainstream investors in the future.
An new FSA-rated list of non-mainstream products is one of the suggestions raised in the discussion paper, as a way of increasing consumer protection
Some of the more complicated structured products and leveraged Exchange Traded Funds also feature on the initial list.
The list would not ban the products, but would make clear these products are unsuitable for most retail customers, the regulator states.
"We would not expect the product to reach the mass market, would not expect it to be marketed widely and would expect extensive research and justification when making it available," the paper says.
Advisers could be forced to take specialist exams before they are allowed to sell products on such a list.
CFEB's Moneymadeclear pages already highlight high-risk and complex products that should not generally be sold in the retail market.
"We could look to follow this approach and publish a list of products that we regard as being generally unsuitable for the mainstream, retail market," the FSA says.
The regulator could also consider further disclosure-based solutions focused on particular products.
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