The FSA looked at seven providers of structured products between November 2010 and May 2011 and found  weaknesses in the way they were designing and approving products.

The seven providers make up half of the structured product market by volume and value.

Although firms had made improvements, the weaknesses were putting consumers at increased risk of mis-selling and poorly-deisgned products.

It said firms should identify the target audience and design products for those needs, pre-test new products to ensure they are capable of delivering fair outcomes, ensure a robust product approval process for new products and monitor the progress of products.

Nausicaa Delfas, FSA head of conduct supervision, said firms were too focused on their own commercial interests.

“Many of the problems we found with the product design process were rooted in the fact that firms are focusing too much on their own commercial interest rather than the outcomes they are delivering to consumers.

“We want firms to consider the issues we raise in this publication, compare their product governance to the guidance we set out and address any areas for improvement.”

Details of this guidance have been published in the FSA document ‘Retail Product Development and Governance- Structured Product Review’.

The consultation period for the proposed guidance will end on 11 January.