A law firm has warned the FSA’s plans for product intervention risk making the regulator “a hostage to fortune”.
Speaking at a regulatory briefing last week, Barlow Lyde & Gilbert partner Chris Brennan suggested that under its new product intervention regime, there will be an expectation that the FSA will intervene to stop every unsuitable product.
Brennan said this is likely to be an unreasonable expectation and could lead to people making claims against the FSA for failing to stop a product that caused consumer detriment from reaching the market.
He said: “Effectively, the FSA will become a hostage to fortune because it is saying. ’we will intervene to stop bad products’. But it is setting itself up for a fall because if we have another situation like we did with payment protection insurance, people will say, ’well, you were supposed to stop this before’.”
Brennan also raised concerns about the FSA’s move to a more intrusive form of regulation .
He said: “We have gone from light- touch regulation, which was one end of the spectrum, to what we are seeing now. The pendulum has swung very rapidly back past any sort of balanced regulation to the extreme.
“I think it is very important that the industry does start to point out why this is going to be extremely difficult for the FSA to deliver and why it will not necessarily get it to where it wants to be.”
Brennan said reading between the lines of speeches by FSA chairman Lord Adair Turner, there is a suggestion that the industry should push back where it believes the regulator is being too heavy handed.
He said: “Even Turner seems to be saying to the industry, ’come on, you need to push back now because we are going to take this further than you want us to, and a lot further than we may want to go’.”
In his Mansion House speech last September, Turner said markets cannot be given free rein but cautioned against “swinging to the other extreme to ensure nobody ever exercises free choice”.