The U.K. finance regulator’s recent review of sales practices at six retail banks’ wealth-management divisions is “worrying,” said Martin Wheatley, a managing director at the agency.
The Financial Services Authority has “concerns both over the suitability of investment portfolios, as well as banks’ ability to demonstrate suitability, in a significant number of customer files,” Wheatley said in prepared remarks for a London speech. “We are even more worried that the firms’ own compliance departments identified a much smaller number.”
The FSA will be replaced on April 1 by the Financial Conduct Authority, which will have an increased focus on protecting British consumers, and the Prudential Regulation Authority, which will become a unit of the Bank of England, keeping watch on systemic financial issues.
Wheatley, who will lead the FCA, said he will set up a wealth-management supervision department to increase oversight.
The FSA said in August that its push to ensure wealth- management services were responsibly sold to retail clients has resulted in enforcement probes. The regulator had said it became concerned with the “unacceptable risk” for clients and wrote letters in 2011 to chief executive officers at firms that provide retail wealth-management advice after identifying “widespread failings” in the sector.
The agency is also taking on regulation of consumer credit, increasing its focus on corporate governance structures, and strengthening client-asset rules, he said.
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