The FSA is consulting on the approach the future Financial Conduct Authority (FCA) would take if it needed to exercise powers to make temporary rule changes, before consultation, relating to financial services products.
The Financial Services Bill specifically includes this power as part of the FCA’s toolkit. The FSA is consulting on its successor body’s behalf so that the FCA’s approach is clear and understood by April 2013 when the new regulator comes into being.
Rules made before consultation would last for no longer than 12 months and could not be renewed. During this time, the FCA will either consult on a permanent remedy or aim to resolve the problem another way.
The consultation outlines some instances which may trigger temporary rules being made, including:
- 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.
Product intervention rules (temporary or not) may address a wide range of product-related issues, for instance by restricting the marketing of a product to only certain types of customer or by requiring a product feature to be removed or changed in some way. Where there is high risk to consumers, FCA might make a rule change to ban a product but it would only do so in very serious circumstances. Other possible interventions, which would not necessarily require changes to rules, would include issuing warnings, or using supervisory powers to require firms to amend promotional materials.
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 consultation runs until 4 February 2013.