There is a consideration of general consensus across the makers of policy that better protection of consumers and customer, in accordance with better education of finance, has been considered as a significant base for well performance of functions in the markets of finance. Education of finance, while considered important, solely cannot be identified as sufficient for protection of consumers and their empowerment (Williams 2007). The mis-sale of financial products involves the provision of misleading information to customers or false recommendations for the purchases of unsuitable products, causing major harm. It has been taking place across a number of different areas of product that include insurance, consumer loans and bank accounts (Signoretta 2004). Institutions of financial services have been paying more than 18 billion Euros in compensating the purchasers of insurance in payment protection followed by regulatory action and hence, the Authority of Financial Services stated that stronger actions could have resulted in limiting the growth of issues (Ferran 2012).

1. ANALYSING THE ISSUE OF MIS-
SELLING OF FINANCIAL
PRODUCTS IN THE UK

2. Table of Contents
Introduction................................................................................................................................2
Overview of the Issue ................................................................................................................2
Legacy of the Issue in UK .........................................................................................................4
Recommendation .......................................................................................................................6
Conclusion .................................................................................................................................8
References..................................................................................................................................9

3. Introduction
There is a consideration of general consensus across the makers of policy that better
protection of consumers and customer, in accordance with better education of finance, has
been considered as a significant base for well performance of functions in the markets of
finance. Education of finance, while considered important, solely cannot be identified as
sufficient for protection of consumers and their empowerment (Williams 2007). The mis-sale
of financial products involves the provision of misleading information to customers or false
recommendations for the purchases of unsuitable products, causing major harm. It has been
taking place across a number of different areas of product that include insurance, consumer
loans and bank accounts (Signoretta 2004). Institutions of financial services have been paying
more than 18 billion Euros in compensating the purchasers of insurance in payment
protection followed by regulatory action and hence, the Authority of Financial Services stated
that stronger actions could have resulted in limiting the growth of issues (Ferran 2012).
On completing a briefing session with the Compliance Team of Ako banking services, certain
concerns have been raised regarding regulatory reports in concern with the mis-selling of
financial products to the retail consumers across the United Kingdom. Focusing on the issue
of mis-selling of financial products in UK, the aim of this report is draw upon the legacy
related to mis-selling to date in the UK, for providing recommended actions for minimizing
the possibility and chance of regulatory complaint. Advice will be provided regarding what
should be done by Ako for minimizing the risks related to regulatory intervention. Specific
concern have been depicted regarding several bundled products being offered by Ako and the
potential for complaints of the customer.
Overview of the Issue
In the case of Ako banking services, Management Information did not seem to be taking into
consideration the specific features in the incentive scheme of firm, and there has been no
identification of spikes or trends in the patterns of sales over individual members of staff that
may depict mis-sale of financial products (Ferran 2012).
Inadequate protection of consumer, specifically in the mortgage market of UK not only
resulted in considerable detriment of consumer but contributed majorly in the global financial
crisis. In the European Union, mis-sale of financial products has lead towards significant
harm of consumer. In consideration with the significant potential detriment being caused by

4. financial services to the single market and individual consumer, there is a need for policy of
consumer protection properly focusing on this particular areas (Klumpes 2004). Transactions
that are better informed and improved transparency as a result of such policy will result in
better solutions for the customer and greater efficiency of market. In the more general sense,
the financial crisis depicted clearly that protection of consumer in certain financial market
had been extremely depicted that protection of customer in some market involved major
deficiency in running up the crisis of finance for 2007 to 2008. There is an involvement of
general consensus across the makers of policy that stronger protection of consumer, in
alignment with better education of finance, has been identified as a significant pillar for well
functions performed in the markets of finance (Byrne 2005). Education of finance, while
significant, alone cannot be considered sufficient for protecting the consumers and
empowering them (Signoretta 2004).
A detailed description of this issue will be provided as faced in UK in this section of the
report.
How financial organizations have been approaching the selling of financial services and
products is the core of confidence among customers in the markets of finance and in a
subsequent manner, there is an involvement of several implications for the financial
soundness of firms and stability of financial system along with the protection of investor
(Decker 2004). Different authorities of supervision have various responsibilities for, and
hence, different approaches are adopted for selling the retail products, while any evidences
are addressed as per mis-sale. The last decade has changed imperatives of economic and
social factors coinciding with the establishments in markets and organizations for creation of
environment with heightened investment and interest in innovative products of finance
(Ferran 2012). There are a number of factors increasing the potential for mis-sale of financial
interest, services and products. Two most significant factors are economic and social
imperatives, and changing conditions of the market. Considering the factor of economic and
social imperatives, individual across a number of jurisdiction are forced for taking major
personal responsibility of finance, relying upon the state, and the employers for decreasing
benefits of pension or retirement (Williams 2007).
Aligning the risk investment along with its compliance with other strategy related outcomes,
and greater transparency and clarity over the expense of control will assist the management in

5. making decisions that inform more regarding which business organization have been
delivering with the right balance of reward and risk (Gabriel 2001).
Considering the factor of changing conditions of market, the following key points can be
drafted (Klumpes 2004):
 Considerably low rates of nominal interest has been identified as factors that
contribute to extremely complicated financial products and increased value of
personal debt for savers while searching greater yield. The increased complication of
financial products end up making the associated risks of investment less apparent to
the investors of retail, specifically the investors reach higher yields. This results in
heightening the potential for transactions that are unsuitable.
 Innovation in finance has also resulted in broadening the scope of offered financial
products by the sectors of banking, insurance and securities. There may be a sale of
similar products to the public of retail in all of these sectors.
 Even though the producer of a complicated financial service or product cannot be
considered as the final agent of sale, the branding of producers may remain in
association with the product. In these types of case, the producer may consider
retaining some risk of reputation, and hence, there is an interest to ensure proper sale
of product.
 There has been an increase in the intensity of competition between retailers of
finance.
 There has been a growth substantially in sale of financial services and products cross-
border since the past 20 years.
 Lawful risks for organization has increased as the market has ended up becoming
more litigious. Since recent time, an increased number of official actions of
enforcement and collective actions have been introduced against financial companies.
Legacy of the Issue in UK
By having a holistic view of the information controls and flows in place already with respect
to the wider assessment of enterprise risk, there is a possibility of lowering the cost involved
in new controls, eliminating the duplication and increasing the automation, while making
delivery more for less (Kempson 2007). Alignment of risk investment and compliance with
other strategy related outcomes, and greater transparency and clarity over the expense of

6. control will assist the management in making decisions that inform more regarding which
business organization have been delivering with the right balance of reward and risk
(Williams 2007). Spending on regulatory control and compliance has ended up taking away
crucial investment with the growth of business. These challenges being addressed offer
opportunities for creating further the efficiencies of operations, required by banks for freeing
up focus such as colleagues, cash and capital, while focusing to build the business with
sustainability. Unpicking complex legacy systems and understanding how new and often
unstated requirements can be delivered with limited resources may demand IT and even
business leadership to have a much deeper and broader understanding for the raw engineering
that will be necessary to get new IT architectures designed and working effectively (Gabriel
2001).
The regulatory position of this issue in UK has been identified as highly complex. There is an
entitlement of professional investors to some level of protection, even if the scope of
regulatory duty has been identified as highest with respect to the retail investors (Ferran
2012). There is an involvement of certain obligation focusing on the process of sale, such as
clear, fair and not misleading communications. There has also been identification of broader
regulatory duties having a reliability for enforcing the cases of mis-sale (Klumpes 2004).
There is a duty for acting with care reasonably, treatment of customers fairly and many
others.
Further ahead, it is important to state that in any claim of mis-selling, the disappointed party
has the authority of asserting other argument on the basis of lack of contractual certainty and
capacity, and more frequently, there are disputes of jurisdiction, with investors putting in
efforts for bring the litigation in forum that is most favourable (Signoretta 2004). However, as
a result of restrictive approach imposed in English law regarding misrepresentation staying
silent and the respect in accordance with the contractual obligations of liability, there can be
tempting of claimants where there will be allowing of facts for alleging the fraud.
Under the English law, in any claim of mis-sale, the defendants will be facing the possibility
related to both, regulatory action and litigation, the two moving in parallel terms. The relative
significance of both the methods for determination and enforcement of liabilities has a
principal dependability on the nature of investment and the level of sophistication (Ferran
2012). The distinction is if the seller tends to be owing the investor with the duty of advising
it over the suitable specific product. If there can be establishment of an advisory relationship,

7. the investor will be having a better chance to succeed in a claim of mis-sale on the basis of
failure faced in recommendation of suitable products, explaining the risks and ensuing that
these are in alignment with the objectives and expectations of investor (Gabriel 2001).
The claims of misrepresentation present four practical difficulties for the investors. Firstly,
the claimant will have to consider showing that a materially inaccurate statement has been
mentioned, often hard with respect to lengthy descriptions related to the risks in attachment
with specific products being provided generally. Secondly, the English law tends to be
allowing the claims of misrepresentations on the basis of failure in providing information
regarding restricted circumstances. So a claim on the basis of misrepresentation through
incomplete information or silence is difficult (Kempson 2007). Thirdly, often there is an
involvement of real difficulties in the establishment of reliability over the alleged
misrepresentation and hence, causation. Finally, generally, the courts have respected the
ability of parties for regulation of dealings by contract. As a significant example, there can be
exclusion of liability in context with misrepresentations. The principle related to caveat
emptor still appears to be alive and sufficient in context with the English courts (Williams
2007).
Recommendation
Based on the above theories and facts, this section will point out key recommendations for
Ako banking services in minimizing the risk related to regulatory intervention. Following are
the effective governance and controls that Ako can include (Klumpes 2004):
 Robust adequate and monitoring controls with business quality set on the basis of risk
for mitigation of risks related to inaccurate behaviour during the conversations of
sales.
 Management Information (MI) for identifying and acting upon patterns or trends in
individual activity of sales staff indicating the increased risk for mis-sale due to the
features in the scheme of incentive. Using this MI for informing the approach to
monitor incentive risks of sale staff
 Accurate management of conflicts of interest among sales manager
 Effective oversight related to incentive schemes by accurate senior management that
include to approve the schemes of incentive

8.  An effective process of mitigation and identification of risk that include regularly
reviewing the schemes of incentive and the effectiveness related to controls, taking
into consideration the interests of customers.
The company must consider collecting sufficient information for having the ability of
properly managing the risks with their schemes of incentive. The company should consider
ensuring that there is right information provided for supporting to monitor the sales and
identifying individual members of sales staff involving higher risk. This information must be
inclusive of the following (Signoretta 2004):
 Which members of sales staff are responsible for the achievement of high volumes of
sales and what products are being sold
 Patterns of the sales activity performed by individual across the features of incentive
scheme indicating the increased level of risk
 The impact of sales campaigns and promotions of product
The company must then act in accordance with these results that include taking areas related
to increased risk in accounting the monitoring of business quality. The company must
consider using different types of information for monitoring the patterns of sales over
individual members of sales staff, analysing the causes and trends, while paying specific
attention to the staff members where there is a sale of major of the products and other staff
members who may have been identified as being at higher risk to mis-sale the financial
products (Williams 2007). The managers of sale seem to be having conflicts of interests
where there is a responsibility to supervise the staff and also earning the payments of
incentive on the basis of sales volume presented by the staff members, specifically if a
significant role is played in the quality monitoring of business over the individual members of
sales staff (Kempson 2007). The company can consider reducing or managing these conflicts
related to interest. There can be an independent checking of quality over the assessments of
supervision and the quality monitoring of business undertaken by the managers of sales
(Klumpes 2004). Inappropriate behaviour of staff during conversations on sales, in
motivation by gain of finance, is less within the scope of being identified by the organization
as reviews of written records of sales are undertaken or from the schemes of competence and
training.

9. Conclusion
Key points of conclusion will be drafted in this section. The claims of misrepresentation
present four practical difficulties for the investors as identified in this report. Ako banking
service should consider dealing with these four practical difficulties. Financial organizations
have been seen approaching the sale of financial services and products as the core element of
confidence across consumers in the markets of finance and in the subsequent sense, there is
an involvement of a number of implications for the stability of financial system and financial
soundness of firms along with the protection of investor (Signoretta 2004).
Ako banking service must be acting with respect to these results that include taking areas
related to increased risk in accounting the monitoring of business quality (Taylor 2003). Ako
banking service must consider the use of different categories of information in order to
monitor the patterns of sales over individual members of sales staff, while paying specific
attention to the staff members, and analysing the causes and trends where majority of the
products are sold and other staff members who may have been recognized as being at higher
risk for mis-selling of financial products.
In addition to this, Ako banking service must consider the collection of sufficient information
for having the ability for proper and accurate management of risks with their schemes of
incentive. The company should be considering to ensure that there is a provision of right
information for supporting in monitoring the sales and identification of individual members
of sales staff involving higher risk (Williams 2007). The above mentioned recommendation
will help Ako banking service to eliminate the risks related to mis-selling of financial
products and services.

10. References
Byrne, K. 2005. “How do consumers evaluate risk in financial products?” Journal of
Financial Services Marketing, 10(1), 21-36.
Decker, O. 2004. “Corporate social responsibility and structural change in financial
services.” Managerial Auditing Journal, 19(6), 712-728.
Ferran, E. 2012. “Regulatory lessons from the payment protection insurance mis-selling
scandal in the UK.” European Business Organization Law Review,13(02), 247-270.
Gabriel, H. 2001. “Corporate reputation, trait covariation and the averaging principle-The
case of the UK pensions mis-selling scandal.” European Journal of Marketing, 35(3/4), 387-
413.
Kempson, E. 2007. “Levels of Financial Capability in the UK.” Public Money and
Management, 27(1), 29-36.
Klumpes, P. J. 2004. “Performance Benchmarking in Financial Services: Evidence from the
UK Life Insurance Industry.” The Journal of Business, 77(2), 257-273.
Signoretta, P. 2004. “Making a market: the UK retail financial services industry and the rise
of the complex sub-prime credit market.” Competition and Change, 8(1), 3-25.
Taylor, M. 2003. “United Kingdom and United States Reponses to the Regulatory Challenges
of Modern Financial Markets.” Tex. Int'l LJ, 38, 317.

11. Williams, K. 2007. “The democratization of finance? Promises, outcomes and
conditions.” Review of International Political Economy, 14(4), 553-575.