The Joint Forum, a group of senior financial sector supervisors from the Basel Committee on Banking Supervision, the International Organization of Securities Commissions, and the International Association of Insurance Supervisors (IAIS), has released the final version of its paper titled Customer Suitability in the Retail Sale of Financial Products and Services (paper). The paper considers how supervisors and regulated firms across the banking, securities and insurance sectors deal with risks posed by the sale of unsuitable retail financial products.

The paper found that while regulators and firms are increasingly mindful of suitability and the risks posed by mis-selling, there remains wide disparity in what is required of firms and in firms’ internal policies and practices. Survey results in the paper indicated that firms take their suitability and disclosure obligations seriously. Firms seem to prioritise compliance, supervision and training of employees highly. In the insurance sector, however, the paper noted gaps in disclosure of conflicts, and suggested that regulators and firms across all sectors could improve rules and practices regarding how sales agents are remunerated. Particularly, firms should consider the implementation of a remuneration system that rewards those who seek to comply with the highest suitability and disclosure standards, and manage to do so.