The Financial Services Authority (FSA) has published its final guidance on how structured products should be designed and monitored, following continuing concerns over the sale of these complex investments to consumers.

Its advice to investment providers, published on Friday, reiterated the recommendations it made last November, requiring providers to ensure products met consumer’s needs and were pretested before going on sale.

These proposals were drawn up after a review of the seven major structured product providers found “weaknesses” in the way companies set up these controversial investments.

Structured products – which offer exposure to stock market growth along with capital protection from a counterparty bank – have come under the spotlight in recent years as many investors failed to understand the risks involved.

Last week, the FSA highlighted structured products as one of its main areas of concern in the Retail Conduct Risk Outlook.

It noted that, in the current environment of low interest rates and poor returns on investments, consumers are “increasingly attracted” to products that claim to offer a degree of security plus returns that outperform cash.

However, the FSA warned that, in many cases, the benefits and risks of structured products are “opaque”, with the potential for mis-selling or mis-buying high.

Last month, Santander was fined £1.5m by the regulator for failing to explain the compensation arrangements if its structured products failed. In October, Credit Suisse’s UK arm was fined £5.95m for selling £1bn-worth of complex structured products to private banking clients, without making sure the sales were suitable and properly explained.

In spite of these sanctions, structured products have increased in popularity with retail investors this year.

According to recent figures from, sales of these products soared in the first two months of 2012. Consumers invested more than £1.3bn in January and February, compared with less than £900m in the same period last year.

In its final guidance, the FSA sets out a number of requirements of providers, including the monitoring of structured products through their life cycle, and the adoption of a “robust” product approval process for new offerings.

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