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Treasury reveals remit of Financial Conduct Authority
by Iain Martin on Feb 17, 2011 at 13:40
The Financial Conduct Authority (FCA) will be charged with protecting confidence in the UK financial system but will need to consider the impact of regulation on market efficiency and consumer choice, the Treasury has announced.
The Treasury has announced the four objectives of the FCA, which will be one of the replacements for the Financial Services Authority when it is disbanded, in its consultation into the shake-up of financial services regulation in the UK. They are:
- facilitating efficiency and choice in the market for financial services
- securing an appropriate degree of protection for consumers;
- protecting and enhancing the integrity of the UK financial system
- The FCA must, so far as is compatible with its strategic and operational objectives, discharge its general functions in a way which promotes competition.
The FCA will also be bound by the principle that consumers of financial services are ultimately responsible for their own decisions. ‘The degree and type of regulatory protection afforded to them should be tailored to their needs and expertise. The FCA will take these differences into account in determining what sort of regulatory action to take in each sector, on a case-by-case basis,’ stated the Treasury, which emphasised the role of the Consumer Financial Education Body in empowering to take decision confidently.
The Treasury also decided against charging the FCA with promoting financial inclusion and widening consumers access to advice and financial services, but concluded this was social rather than regulatory policy.
The FCA will be compelled to make a report to the Treasury in the event of a regulatory failure under new legislation proposed in the consultation paper.
The Treasury added FCA would have a ‘lower risk appetite’ for product problems but will not pursue a zero-failure regime. It said the FCA would be more willing to order the use of consumer redress schemes and past business reviews to secure better outcomes for consumers.
New proposed powers for the Financial Conduct Authority include:
- 12-month product bans
- Cancelling contracts that breach its product rules
- Publishing more information on firms under investigation
- Banning misleading financial adverts
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