FSA publishes new mis-selling rules

The FSA has published final guidelines to stop financial firms from running incentive schemes that encourage mis-selling.

The regulator said it wanted all firms to check they complied with the guidelines, and warned it could bring in stiffer regulation if needed.

The new guidelines, Risks to customers from financial incentives, will apply to all firms that deal with consumers and have incentive schemes for their staff.

The FSA’s original review on the issue was published in September 2012. It applied to insurers, banks, building societies and investment firms.

The guidelines focus on areas such as how incentive schemes might encourage people to mis-sell, how easy to understand these schemes are, whether firms monitor their sales staff closely enough, and whether sales managers have a conflict of interest between earning a bonus and making sure their staff are acting properly.

FSA managing director and incoming Financial Conduct Authority chief executive Martin Wheatley (pictured) said: “Finalising this guidance is important because it gives financial firms a clear idea of what we expect from them and how they should manage their incentive schemes. It also marks a key step in changing the culture of viewing consumers as a sales target to somebody to serve.

“I have been encouraged by a number of firms that have already overhauled their reward structures, but I want to see others following suit. When I speak to the bosses of the banks they tell me they want to change, and this is good, but real cultural change will only happen if attitudes shift throughout an organisation from the CEO to the frontline sales personnel.”

The regulator said it would widen its ongoing review of sales incentive and check how firms are acting on its new guidance.

Wheatley added: “We remain open-minded about whether or not new rules are needed to ensure consumers get a fair deal, but the answer to that question will ultimately come from the industry’s response to this piece of work.”