The Financial Conduct Authority has set out how it plans to use new powers to temporarily ban products or limit their sale before consulting with the industry.
The regulator is normally obliged to consult before making any rules. But the FCA will be exempted from this requirement and will have have the power to make temporary product intervention rules if consulting would cause a delay which could harm consumer interests or trigger a significant industry redress bill.
In a consultation paper on temporary product intervention rules, published today, the FCA possible interventions include consumer or industry warnings, requiring certain products to be sold by advisers with additional competence requirements, and preventing non-advised sales to some consumers.
The powers also include banning or mandating particular product features, and in some cases banning products altogether.
Temporary product intervention powers may be used where products are being targeted at the wrong customers; where there are problematic features of the product, or where a product is inherently flawed.
The powers will last for up to 12 months and cannot be renewed. During that time the FCA may consult on a permanent solution or the problem may be resolved in another way.
The FCA says it is unlikely it will be able to contact all affected firms when it publishes product intervention powers, but says providers should be aware when the powers are used as this is likely to generate significant media coverage.
Alternatives to temporary product intervention powers, such as voluntary agreements with providers, will also be considered.
The FCA says it is aware of concerns these powers will hit innovation, but says providers should be able to minimise the risk of poor consumer outcomes when launching products while still being able to generate returns.
FCA chief executive designate Martin Wheatley says: “The creation of the FCA is our opportunity to reset conduct standards. This power, along with our other new powers, helps define how we will regulate going forward.
“We know some in the industry are concerned about us using this power too hastily; I want to be clear we know proportionate judgement is needed, and that is what we will exercise. I do not expect us to use this power frequently, but both industry and consumers need to be clear that we will not hesitate to use these powers where we have serious concerns.”