FSA: "We will not be a product gatekeeper"
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The FSA is ruling out acting as a “product gatekeeper” as it sets out plans to shift to a more interventionist approach and get involved earlier in the product cycle.
The regulator has published a discussion paper on product intervention today which heralds “the beginning of an extensive public discussion” on how the FSA, and later the Consumer Protection and Markets Authority, will regulate the design of retail financial services products and how they are distributed.
Products under the spotlight include deposits, insurance policies, investment products and mortgages.
The FSA is also considering whether similar forms of intervention should apply to services such as platforms and discretionary management services.
But the regulator says a move towards having to authorise all products is unjustified.
The FSA says: “It could be implied, as an extreme, that we adopt the most interventionist approach and act as a gatekeeper for all products entering the market, seeking to eradicate the risks of consumer detriment.
“At present we do not believe this extreme approach is justified and do not intend to propose an authorisation approach for all products.
“It risks stifling innovation, is resource intensive and creates the potential for misperception of a ‘regulator endorsement’ of products. “
The regulator says it recognises that firms need to have a “degree of freedom” to come up with new products.
The FSA adds: “Giving firms a degree of freedom to innovate allows for the possibility that they will occasionally get things wrong and that we, the Financial Ombudsman Service and/or the Financial Services Compensation Scheme may need to intervene after consumer detriment has occurred to put things right.”
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Readers' comments (18)
Anonymous | 25 Jan 2011 10:54 am
They should be acting as a gate keeper as they are the most suitably qualified to check if a product meets the criteria needed to be sold on the market. An initial get out clause if you ask me! Come on FSA do something to help the industry instead of constricting it!!!!!!!
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Anonymous | 25 Jan 2011 11:00 am
Our regulator is a feckless, pompous one with many rights but few responsibilities.
Why would it burden itself with real consumer protection, when it can retrospectively burden the financial services sector as a whole with the transgressions of rogue traders it has authorised?
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Tim Harvey | 25 Jan 2011 11:07 am
We could have a levy on the product too. this way Consumers will see an explicit cost for regulation when they undertake a transaction. I supect that they will be surprised as to the cost......and perhaps question the value for money of regulation.
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Benno the Blue | 25 Jan 2011 11:13 am
@ Anonymous:
"...they are the most suitably qualified to check if a product meets the criteria needed to be sold on the market."
My apologies for being rude but have you missed problems such as KeyData, Integrity etc where the FSA checked and approved toxic products.
They hardly have an unblemished track record in this arena.
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Anonymous | 25 Jan 2011 11:13 am
I am 100% in agreement with the above comment. In respect of investment products its time FSA gave clear & concise guidelines to Intermediaries & their clients. For instance all bricks & mortar property funds should come with the simple risk warning "In the past when UK has begun heading into a recession investors have all rushed to redeem their monies. The outcome has been that no investor has been given their monies for at least 12 months. This is because properties can't be sold immediatly."
The IFA should not be paying for the PI cover, it should be the providers. The caveat emptor responsibility would rest with them and together with FSA they can nip the potential problems in the bud.
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Michael Fallas | 25 Jan 2011 11:17 am
Sadly the FSA are taking the easy way out by not acting as Gatekeeper on products. It is the Product consumers want the most confidence in.
One can't help but wonder if this is more to do with maintaining the status quo than doing what is better for consumers.
The argument that doing so will stifle competition and innovation just does not stack up for me.
How they can say it is resource intensive staggers me given the huge £400 Million pounds a year the FSA costs already. They should look at their own costs and spending £16,000 a year renting art for their offices is hardly a necessary requirement to do their job, nor is holding £163,000 of art that they own.
Whose priorities are they looking after I wonder, consumers or their own?
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Dominic Thomas | 25 Jan 2011 11:30 am
some but not all? hmm. Here's an idea - how about defining a few things? such as... risk and for that matter... expensive.
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Michael Fallas | 25 Jan 2011 12:00 pm
No one is asking the FSA to regulate or approve "all" products but there is no reason why they cannot do so for most everyday products. Higher risk products (not FSA approved) would require additional qualifications and protection for consumers.
This does not eliminate risk or innovation but distinguishes different criteria for "higher risk" products and leaves the everyday products with a "regulator" approval to give consumers more confidence in the products they buy and also puts the "regulator" in an "accountable" position so they cannot just ignore their own mistakes as they currently do and are protected by Statute under FSMA 2000.
That is the real reason in my view why they don't want to be a "gatekeeper of products" they are frightened they will actually be "accountable" and be "responsible" for their own mistakes like they expect the rest of us to be.
Time they were made to smell and clear up the mess they help create and the sooner the better.
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Zorro | 25 Jan 2011 12:10 pm
Much better to us what not to do after the event.
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Christopher | 25 Jan 2011 12:14 pm
Interestingly, the BBC website reports the same story under the headline "FSA seeks power to ban sale of risky financial policies" with some soundbites that include Lord Turner stating that
"... We may have to put what is expected into rules to make it easier for us to say what is not acceptable..."
along with my current favourite
"The way we do things now is not good,"
http://www.bbc.co.uk/news/business-12274837
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