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By Huw Jones
LONDON, Sept 15 (Reuters) - There have been too many scams
and scandals in Britain's financial services market and a
fundamental review is needed, the Financial Conduct Authority
(FCA) said on Tuesday.
Consumers have suffered from a string of financial scandals
going back decades, from endowment mortgages to pensions and the
sale of payment protection insurance, costing banks billions of
pounds in compensation and raising questions about the
competence of regulators.
The FCA has issued a "call for input" to help it decide how
existing rules can address such "harms" and identify where other
authorities could help, or if the government should consider
extra powers for the watchdog.
"The consumer investment market is not working as well as it
should," said Christopher Woolard, the FCA's interim chief
executive.
"There have been too many scams and scandals and too often
consumers are offered unsuitable products or advice. As a
result, many consumers lack confidence in the investment
market."
Feedback will be used to shape the FCA's work over the next
three years.
The FCA said consumers only start to sense that a financial
product is "too good to be true" when the promised return is
around 30% or more, and there is a need to reduce the amount of
unsuitable advice being given.
"This is challenging in a market with more than 5,000 advice
firms and over 27,000 advisers, where the majority of advisers
are meeting our standards," the FCA said.
The watchdog said it wanted to look into a "polluter pays"
model whereby a firm giving bad advice foots the compensation
bill, rather than the current system of every firm paying
towards the industry-wide Financial Services Compensation Scheme
(FSCS).
Firms could hold more capital based on the risks they pose,
or riskier firms pay more towards the FSCS, the FCA said.
More safeguards may be needed for the increasing numbers of
consumers using platforms to buy financial products, which can
tempt them into investments that may not be right for them, the
watchdog said.
(Reporting by Huw Jones, editing by Sinead Cruise and Mark
Potter)
