The Association of Professional Financial Advisers has warned the Financial Conduct Authority must keep an open dialogue with the industry and avoid being “heavy-handed” when using its temporary product intervention powers.
The FSA is consulting on the use of the FCA’s temporary product intervention powers. Under current proposals, the FCA will have the power to ban a product for up to 12 months without a review, during which time it will consult on a permanent remedy or aim to resolve the problem another way.
The rules will apply if a product is in “serious danger” of being sold to the wrong customers, when non-essential product features are causing problems and when a product is “inherently flawed”.
Apfa policy director Chris Hannant says: “It is a tricky business to set rules without a formal consulation so we need re-assurance that there will be some dialogue with respective sectors and affected firms.
“As a minimum, the FCA should talk to those who are causing concern so there can be a discussion about how things work in order to avoid unforseen consequences.”
The consultation paper rejects suggestions that the new rules could stifle product innovation, claiming any impact would be “greatly outweighed” by benefits.
Lansons Communications director Richard Hobbs says: “The very existence of draconian powers tends to encourage people not to innovate. It is complex and I do not much care for bold assertions when it requires careful thought and analysis before knowing if it is feasible to carve out what you want to.”
Association of Mortgage Intermediaries chief executive Robert Sinclair says: “The FSA is a very good policy regulator but its problem has always been supervising those rules. If product intervention is used in a way that the industry feels is heavy-handed or outrageous, then it will not get the market intelligence it needs from the industry.”