FSA Finalized Guidance in Relation to Risks to Customers from Financial Incentives


On January 16, the FSA published finalized guidance in relation to risks to customers from financial incentives (FG13/01). FG13/01 follows a review of sales incentives conducted by the FSA from September 2010 to September 2011 that found that most firms have in place incentive schemes likely to cause mis-selling, and that firms did not have in place effective systems and controls to manage these risks. FG13/01 gives examples of these findings, and provides guidance on the action it expects firms to take, including:

    • proper consideration of whether their incentive schemes increase the risk of mis-selling and, if so, how;
    • effective review of whether their governance and controls are adequate; and
    • action to address any inadequacies – for example changing their governance and/or controls, and/or changing their schemes.

FG13/01 applies to all firms in retail financial services with staff who are part of an incentive scheme and deal directly with retail customer transactions. It should also be considered by wholesale firms with staff in sales roles. The FSA expects firms to be compliant with FG13/01 from the date of its publication.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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