Product power will bring big changes
Share
Granting the Financial Conduct Authority the power to ban or limit the distribution of products for up to a year will dramatically change the way products are sold, says PricewaterhouseCoopers.
Last month, the FSA published a discussion paper on product intervention, looking at how the regulator could intervene to stop flawed or risky products causing consumer detriment.
In a consultation paper on the new regulatory framework published last week, the Treasury provided more detail on the new product intervention powers of the regulator. The Treasury argues the new regulatory body - the Financial Conduct Authority - previously known as the Consumer Protection and Markets Authority, needs more tools to take action on flawed products. It will enable the FCA to make temporary product intervention rules for a period of up to 12 months, including blocking imminent launches and limiting distribution.
The FCA is to publish and consult on a set of principles on when product bans can be used. It will have the power to void contracts where specific product bans have been breached and allow consumers to recoup money paid under these contracts.
PwC regulatory practice director David Kenmir, who is a former FSA director, says: “The proposal to hand the FCA powers to ban products, or limit their distribution for up to 12 months, will fundamentally change how financial services companies create and sell their products and is likely to make life a lot more difficult.”
Thameside director Tom Kean says: “There have always been sub-standard products and it is about time the regulator had the power to ban them. I am amazed the FSA did not have that power before. The only fear would be, given the regulator’s enthusiasm for red tape, it could lead to product innovation being stifled.”
Investment Management Association chief executive Richard Saunders says: “We shall consider with interest the provisions on product bans and the withdrawal of financial promotions, especially given the £420m of compensation required from investment intermediaries in the last two years.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
