Evidence of poor practice has been found by the Financial Services Authority (FSA) in recent visits to exchange-traded product (ETP) providers over the past 18 months.
The regulator warns in its latest Retail Risk Conduct Outlook that it has asked a number of UK-authorised firms to address risks where it has found issues.
The FSA says it has visited a number of firms “who account for a significant portion of the EU ETP market”.
It says: “While ETPs may share similar characteristics, the ’ETP’ label describes many products that have a wide range of structures, with some investing in riskier and more exotic markets.
“Investors are exposed to the changes in the market the ETP is trying to track, as well as a number of risks arising from the structure of the ETP itself.
“Consumers or their advisers may not fully understand ETPs and consumers may therefore suffer detriment if they are sold a product unsuitable to their risk appetite.” (article continues below)
The regulator says it is working closely with the Financial Policy Committee and other EU regulators “to mitigate risks where we are not the lead regulator”.
It adds: “We have played an active role in contributing to the various pieces of work at a policy level across EU institutions to ensure a coordinated EU approach. This work is ongoing.”