21st April 2011
The regulator requires all sort of information to be disclosed to investors, there are standards for advisers on commission and payments and the FSA can even withdraw permissions to trade from firms. But all these rules didn't stop a few high profile failures.
So at the moment, the financial services industry is having a big debate about this and whether the replacement for the FSA, the Financial Conduct Authority (FCA), should have such powers and indeed whether those powers would be effective anyway.
The reason regulators and policymakers are considering the move, i.e. allowing the FCA to at least delay products from being sold to retail investors for a year, to restrict sales and to force the withdrawal of marketing promotions, is that many firms products have gone wrong quite spectacularly in the last few years.
The two most high profile recent cases involved structured product provider Keydata and fund firm Arch Cru where investments, the firm or both failed.
In both cases, investors were confronted with having lost a lot of cash and though compensation is becoming available, it is quite a tortuous process and many people think it would have been better if the financial watchdog had been able to step in long before anyone was counting the cost of investing.
The failure of products from these firms has led to a great deal of anguish for consumers, while also provoking arguments within the financial industry about who should foot the bill.