Structured product providers must consider the needs of the retail consumer at the end of the supply chain and not just regard distributors as the ‘end customer', the FSA has said.
The FSA has criticsed structured product providers for accepting only limited responsibility for product distribution and relying wholly on distributors to identify the appropriate target market, creating an increased risk of mis-selling.
The regulator wants structured product providers to review whether distribution in practice corresponds to what was originally planned
or envisaged for distributing their products, given the target market.
Providers should also carry out initial and ongoing due diligence on distributors, the FSA said, to ensure that products are reaching their target market.
Structured product providers should act on their assessments of distributors, for example by amending consumer or adviser literature for future product tranches, providing enhanced training for distributors, ceasing to use a particular distribution channel, or limiting distribution to specific channels.
The FSA also wants providers to consider whether they should take any remedial action if there are serious problems, for example reviewing sales of other products within the distribution channel or investigating a particular
Firms with wholly intermediated distribution strategies had a "significantly higher risk profile", it said.
Providers should collect and analyse appropriate information so the firm can detect patterns in distribution compared with the planned
target market, and can assess the performance of the channels through which its products are being distributed, the FSA said.
Tracking real performance
Diversified return team
The equivalent of £1.7m every day
Janus Henderson Global Dividend index