From the UK’s Financial Ombudsman and the FSA:
At the time of the Lehman Brothers collapse in September 2008, it transpired that a considerable number of UK investors had taken out [structured product] plans where either a full or partial guarantee had been provided by Lehman’s.
The FSA’s response has been to conduct a review of the marketing literature for Lehman-backed structured products. This is now complete and the FSA is in the process of evaluating the findings. A further priority, which it aims to conclude as quickly as possible, is to prepare for an assessment of the quality of advice for these products. Thirdly, it is conducting an analysis of the wider market for structured products in the UK which will feed into the overall review.
In the aftermath of the Lehman’s default, the Financial Ombudsman Service has received a number of complaints from investors and other parties involved in the sale of linked products. It has been investigating some cases, but the number of these is comparatively small in relation to the total numbers affected.
In the course of the regular liaison between the FSA and the ombudsman service, we agreed that implementing the Wider Implications process may have greater potential to remedy any consumer detriment, as well as potentially being able to deal with the concerns of more consumers than those who have referred cases to the ombudsman service.
Accordingly, the FSA wrote to the ombudsman service on 6 May 2009 asking it to consider deferring issuing any adjudicator views or ombudsman decisions in these cases. The FSA said it believed that this would allow it to explore all options to achieve the best outcome for consumers even though this might give rise to some delays in individual cases.
The ombudsman service responded on 7 May 2009, welcoming the prospect of a regulatory solution to these issues. It agreed to defer issuing any adjudicator views or ombudsman decisions in these cases for the time being, and to notify affected complainants and financial firms accordingly. The ombudsman service said that it would review the position in three months – in the light of progress by the FSA towards a regulatory solution.
On 13 August 2009 the FSA asked the ombudsman service to consider a further deferral, to give the FSA more time to progress its work with the aim of reaching the best possible outcome for all affected consumers. On the basis of the information available to it, the FSA believed that it would not be in the interests of affected consumers for the ombudsman service to press ahead with individual decisions. The ombudsman service responded that, in the light of this, it would defer issuing decisions – and would review the position in three months.”
Got that?
The FSA has extended its review of Lehman-guaranteed structured products by another three months — shifting the expected completion date to October/November from July/August.
It’s a good thing too, since you wouldn’t want a comprehensive review of the sector to be finished or publicised before it got a chance to get back on its (very shaky and confused) feet, would you?
Of course not.
Related links:
Cautious welcome for protected investments – FT
Lehman legal challenge may have varying impact on global structured finance – Fitch