TSC calls for product intervention powers for FCA

The Treasury Select Committee (TSC) has proposed the FCA should have power to order firms immediately withdraw ‘misleading’ financial products.

A 70-page report laid out details that: ‘It is proposed that the FCA have power in product intervention [and] to direct firms to withdraw or amend misleading financial promotions with immediate effect. The FSA has said that the product intervention and financial promotion powers are intended to "enable the FCA to act, and be seen to act, more swiftly to prevent retail consumer detriment”.

However, the TSC - headed by Andrew Tyrie MP (pictured) - concedes the idea has received a mixed response, with AXA warning innovation and competition could be stifled.

‘We are not in favour of the regulator being involved in product design or stipulating mandatory minimum standards. We think this should be reached through industry level agreement and codes of practice,’ said AXA.

‘Regulatory involvement in product design could also stifle innovation and the competitive market place. We are also concerned this power may create an uneven playing field where products are being sold in the UK by an EU entity on a cross border basis.’

Nevertheless, the TSC remained adamant that 'there is a clear need for a greater level of proactive intervention by a consumer focused financial services regulator'.

It added: 'The FSA has been criticised in the past for being too slow to intervene and we welcome the FCA's willingness to respond quickly to issues of consumer detriment. We support the need for judgement-led product intervention by the regulator.'

'We recommend that clear guidance be issued to firms when such powers are used. Their use should be sparing and the merits of each case very carefully considered before intervention.'

An 'early warning notice' could also be made public in cases where intervention is on the cards.

Fidelity came out in defence of the proposal however, stating: ‘We in Fidelity do believe that strong intervention is needed… What they [the regulator] have done up until now is largely looked at how products are sold, how they are advised, and never really got involved in the governance of the product, what the product was aiming to do and was it aimed at the right target market.’