FCA power to ban products will lead to pre-approval
The Financial Conduct Authority’s powers to ban products and limit sales volumes will effectively introduce product pre-approval despite the Treasury’s denials, according to law firm Dundas & Wilson.
The Treasury published a consultation paper on the new regulatory framework last week. As well as changing the name of the new conduct regulator from the Consumer Protection and Markets Authority to the FCA, the paper reveals plans to enable the FCA to make temporary product intervention rules for up to a year. These rules include the ability to block imminent product launches and stop existing products from achieving volume sales.
The Treasury says these powers do not represent a move towards widespread product pre-approval.
But Dundas & Wilson financial services team partner Patrick Brandt says: “The practical effect of the proposals will be to bring in informal product pre-approval because firms will be forced to take a more cautious app-roach to product development.”
Paladin Financial Services managing director Tim Purdon says he believes it would be logical for providers to approach the regulator before developing a product. He says: “For some time, I have desired the regulator to at least risk-rate products. It seems sensible that providers should sit down with the regulator before launching a product.”