The mis-selling of interest rate derivatives by banks to SME customers is well known due to the widespread publicity and Review scheme that followed.
However the mis-selling of Foreign Exchange derivatives has received far less scrutiny.
The weakening pound following the UK referendum in 2016 saw complex FX derivatives turn against SME customers. The very products which were supposedly implemented to hedge their FX risk resulted in life-changing consequences for small business owners.
Vedanta Hedging, who initially instigated the IRHP Review scheme implored the FCA to conduct a similar scheme for the mis-selling of FX derivatives. Unfortunately the FCA’s conclusion was that the issue was not large enough to conduct a full-scale review.
Vedanta quote from the Financial Times article:
Abhishek Sachdev, chief executive of derivatives consultancy Vedanta Hedging, said it was hard to get a handle on how much damage such contracts were causing. He noted that clients often felt embarrassed by losing money so they either stayed silent or settled out of court.
For the full article, please see below:Zig-zagging pound sharpens concerns over mis-sold forex hedges _ Financial Times