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Lehman Brothers – FSA to take action

Review of Lehman products finds serious issues

The Financial Services Authority (FSA) has announced that it will take action against firms following a review into structured products that were back by the failed investment bank Lehman Brothers.

FSA logo

Dan Waters, retail policy director at the FSA, said: ‘This is a hugely complex area and during our review we have looked at promotional literature, clarity of information, quality of advice, sales systems and controls, involving plan managers, providers and advisers.’

The FSA will provide details of some of its findings in October but it has already said that it has found serious issues and that it will be taking action against firms.

Structured products are a type of lump-sum investment product offering returns based on the performance of underlying investments. They come with ‘guarantees’ that your capital will be either fully or partially protected. But if the company providing the guarantees, Lehman Brothers in this case, goes bust, then you face losing some or all of your money. The Lehman Brothers’ plans were not protected by the Financial Services Compensation Scheme (FSCS).

According to the FSA there were 20 different types of Lehman-backed structured products and 5,620 people had invested their money in these products.  

Only 160 people have lodged a complaint with the Financial Ombudsman Service (FOS) to date. Those complaints have been on hold while the FSA carried out its investigations. But the FSA has now given the FOS the go-ahead to deal with the complaints. A spokesperson at the FSA told us: ‘We will be sharing information that we’ve uncovered as part of our review into these products with the FOS, although of course it will still carry out its own independent assessment of the complaints.’

For more on structured products, read our guide.

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