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FSA consults on temporary product intervention rules

FSA consults on temporary product intervention rules

The Financial Services Authority (FSA) has launched a consultation on the approach the Financial Conduct Authority (FCA) will take to exercise product intervention powers without consultation.

The Financial Services Bill, which is currently being discussed by the House of Lords, includes giving the FCA the power to make temporary rule changes without consultation.

The regulator said that rules made before a consultation would last no longer than 12 months and could not be renewed without a consultation.

The consultation outlines some instances where the FCA could intervene on a product.

  • Where a product is in serious danger of being sold to the wrong customers, for instance where complex or niche products are sold to the mass market
  • Where a non-essential feature of a product seems to be causing serious problems for consumers
  • Where a product is inherently flawed

The FSA said product intervention rules may address a wide range of issues.

It could, for instance, restrict the marketing of a product to only certain types of customer or require a product feature to be removed or changed, it said.

It said that it would have the power to ban a product but it would only do so in very serious circumstances.

Other possible interventions include issuing warnings, or using supervisory powers to require firms to amend professional materials.

Martin Wheatley (pictured), chief executive-designate of the FCA, said: ‘Making temporary product intervention rules is not something that we expect to do often but having this power means we can act quickly and decisively.

‘The use of the power will be a judgement based on the need to protect all market users, consumers and industry innovators alike, from the type of products which will cause harm and might generate compensation costs.’

The consultation will run until 4 February 2013.

The regulator dismissed concerns from provider about product intervention rules raising barriers and hindering innovation.

It said that the rules did not exempt either providers or distributors of their responsibilities to treat customers fairly or to undertake adequate product governance.

It added that where a product provider was based overseas, the regulator’s rules would not apply to their development of potentially harmful products but it could restrict the marketing of such products by UK-based intermediaries.

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