Treasury proposal could lead to mis-selling, warns panel

A Treasury proposal which could see consumers make investment decisions without receiving any advice could up the risk of future mis-selling claims, warns the Financial Services Consumer Panel.

The Panel's warning comes in a response to a Treasury consultation, which suggests consumers who see themselves as high-net-worth or sophisticated investors should be able to invest in unlisted companies without any regulated advice.

While there will be investors who are competent to make their own investment decisions without the backing of any advice, the Panel is concerned there will be many who are classified as either 'high net worth' or 'sophisticated' without being able to do so.

For example, the Panel says, many Britons could today be defined as high net worth clients - having net assets worth at least £250,000 - without having acquired any financial or investment expertise.

The Panel deems the proposal opens up huge possibilities of mis-selling as the investors not only risk losing their money but also would not be able to receive any compensation through the Financial Ombudsman Service or Financial Services Compensation Scheme.

With this in mind, it does not believe there is any scope for relaxing the current rules for certification of sophisticated investors.

Ann Foster, chairman of the Panel, says: "The consumer protection in the current financial promotion regime for investment in unlisted securities should not be watered down in this way for the benefit of the few, but to the likely detriment of many."