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FSA consults on FCA product intervention powers

FSA Letters 480

The FSA is consulting on how the Financial Conduct Authority will use its product intervention powers to make temporary rule changes before conducting a formal consultation.

The Financial Services bill specifically includes this power as part of the FCA’s toolkit. The FSA is consulting on its successor body’s behalf so that the FCA’s approach is clear and understood by April 2013 when the new regulator will come into being.  

The FSA is proposing any rules made before consultation will last for no longer than twelve months and cannot be renewed. During this time, the FCA will either consult on a permanent remedy or aim to resolve the problem another way.

The consultation outlines some instances which may trigger temporary rules being made, including:

  • Where a product is in serious danger of being sold to the wrong customers, for instance where complex or niche products are sold to the mass market;

  • Where a non-essential feature of a product seems to be causing serious problems for consumers;

  •  Where a product is inherently flawed.

Product intervention rules, whether temporary or not, may address a wide range of product-related issues.

The regulator will be able to restrict the marketing of a product to certain types of customers or require a product feature to be removed or changed in some way.

Where there is high risk to consumers, the FCA might make a rule change to ban a product but it would only do so in very serious circumstances.

Other possible interventions, which would not necessarily require changes to rules, would include issuing warnings or using supervisory powers to require firms to amend promotional materials.

FSA managing director and FCA chief executive designate Martin Wheatley says: “Making temporary product intervention rules is not something that we expect to do often but having this power means we can act quickly and decisively.

“The use of the power will be a judgement based on the need to protect all market users, consumers and industry innovators alike, from the type of products which will cause harm and might generate compensation costs.”

The consultation runs until 4 February.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Intetesting! What if the PRA. I hear that experienced senior staff at the BOE have been leaving over the past 2 years. Who exactly will be left with the experience or knowledge to run or administer the PRA?
    I have no doubt that a bunch of Ill qualified civil servants will be parachuted in. Am I exaggerating?

  2. I actually support this and the approach taken seems proportionate, particularly from Mr “shoot first and ask questions later” Wheatley.

    However, what safeguards are in place should the FCA get it wrong and put a legitimate company out of business and its staff out of work?

    Does this power mean that the FCA can be held to account if they don’t use it and consumers consequently suffer (think how long the PPI warnings were about).

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