The Financial Conduct Authority will have the power to ban products for up to one year to prevent consumer detriment.
In a consultation paper on the new regulatory framework, published today, the Government says where the FCA has identified an issue with a new product, it will be able to take action, using existing regulatory powers.
This includes setting requirements around products and product features, setting minimum product standards and restricting the sale of a product to certain consumers.
But the Government adds the FCA also needs more tools at its disposal to take “timely and decisive action” on flawed products.It will legislate to enable the FCA to make temporary product intervention rules for a period of up to 12 months.
It says: “Where the FCA identifies a serious problem with a product or product feature, it should be able to take timely and decisive action to ban it, if necessary. For example, the FCA should be able to intervene to block an imminent product launch or to stop an existing product from achieving volume sales to prevent retail customers from being harmed, rather than waiting to intervene until there is clear evidence of widespread consumer detriment.”
The FCA will publish and consult on a set of principles concerning when product bans can be used.
The Treasury says the FCA will also have the power to deem any contract, made in breach of a specific product ban, void and allow consumers to recoup any money paid under these contracts.
But the Government maintains that these new powers do not mark a shift towards product pre-approval.
The Government says: “While representing an important new regulatory tool, it is important to note that neither the product banning power, nor the FCA’s more proactive and interventionist approach to regulation more generally, represents a move towards widespread product pre-approval.
“This would be very resource intensive, increasing the cost of regulation, and therefore potentially restricting access to more innovative or risky products. It would also represent an unacceptable transfer of responsibility for appropriate conduct of business from firms’ senior management to the regulator.”