FSA consults on plans for product intervention rules

The Financial Services Authority is consulting on the approach the future Financial Conduct Authority (FCA) could take if it needed to make temporary rule changes relating to financial services products.

The Financial Services Bill includes this power as part of the new FCA’s range of tools, but the watchdog is consulting on its successor’s behalf so the FCA’s approach is clear by April 2013, when it comes into being.

Any temporary rules made before consultation would last no longer than 12 months and could not be renewed.

The watchdog said during this time, the FCA will either consult on a permanent solution or seek to resolve the problem in another way.

Instances where temporary rules could be made include when a product is in ‘serious danger’ of being sold to the wrong customers, such as where complex or niche products are sold to the mass market.

It could also include where a non-essential feature of a product is seemingly causing serious problems for consumers.

Temporary rules can also be imposed when a product is inherently flawed.

Martin Wheatley, managing director of the FSA and CEO-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 FSA said product intervention rules can relate to a wide range of product-related issues, such as, for example, restricting the marketing of a product to only certain types of customer or requiring a product feature to be changed.