Thursday 17 January 2008

Clamp down by FSA

The Financial Services Authority (FSA) is setting an example by clamping down on financial institutions found in breach of their regulatory requirements. FSA has started the year by issuing huge fines to two financial institutions; £1.085 million to HFC Bank (part of HSBC Group) for PPI failings and £250,000 to Square Mile Securities Limited (a stock brokerage company) for high pressure sales tactics.

The big question is, is FSA setting the tone for 2008? Are we going to see more fines issued for negligence or lack of having customer due diligence policies in place?

What puzzles me is that the average John is so naive enough to buy into the pressure sales tactics used by companies like Square Mile. We are not really talking about a door to door sales man trying to con innocent housewives. Surely, the customer also needs to take some responsibility, step back, educate oneself and then take a calculated risk. As they say, ignorance of law is no excuse. I feel, while FSA is clamping down on financial institutions to comply with its regulations, efforts ought to be made to educate the customer on making sound financial decisions based on calculated risk.

Note:
PPI covers repayments on loans, mortgages and credit cards if the borrower is unable to make them because of loss of earnings as a result of accident, sickness, unemployment or death.

News Links:
http://www.fsa.gov.uk/Pages/Library/Communication/PR/index.shtml
http://news.bbc.co.uk/1/hi/business/7191506.stm