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FSA: “We will not be a product gatekeeper”

The FSA is ruling out acting as a “product gatekeeper” as it sets out plans to shift to a more interventionist approach and get involved earlier in the product cycle.

The regulator has published a discussion paper on product intervention today which heralds “the beginning of an extensive public discussion” on how the FSA, and later the Consumer Protection and Markets Authority, will regulate the design of retail financial services products and how they are distributed.

Products under the spotlight include deposits, insurance policies, investment products and mortgages.

The FSA is also considering whether similar forms of intervention should apply to services such as platforms and discretionary management services.

But the regulator says a move towards having to authorise all products is unjustified.

The FSA says: “It could be implied, as an extreme, that we adopt the most interventionist approach and act as a gatekeeper for all products entering the market, seeking to eradicate the risks of consumer detriment.

“At present we do not believe this extreme approach is justified and do not intend to propose an authorisation approach for all products.

“It risks stifling innovation, is resource intensive and creates the potential for misperception of a ‘regulator endorsement’ of products. “

The regulator says it recognises that firms need to have a “degree of freedom” to come up with new products.

The FSA adds: “Giving firms a degree of freedom to innovate allows for the possibility that they will occasionally get things wrong and that we, the Financial Ombudsman Service and/or the Financial Services Compensation Scheme may need to intervene after consumer detriment has occurred to put things right.”


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There are 20 comments at the moment, we would love to hear your opinion too.

  1. They should be acting as a gate keeper as they are the most suitably qualified to check if a product meets the criteria needed to be sold on the market. An initial get out clause if you ask me! Come on FSA do something to help the industry instead of constricting it!!!!!!!

  2. Our regulator is a feckless, pompous one with many rights but few responsibilities.

    Why would it burden itself with real consumer protection, when it can retrospectively burden the financial services sector as a whole with the transgressions of rogue traders it has authorised?

  3. We could have a levy on the product too. this way Consumers will see an explicit cost for regulation when they undertake a transaction. I supect that they will be surprised as to the cost……and perhaps question the value for money of regulation.

  4. @ Anonymous:

    “…they are the most suitably qualified to check if a product meets the criteria needed to be sold on the market.”

    My apologies for being rude but have you missed problems such as KeyData, Integrity etc where the FSA checked and approved toxic products.

    They hardly have an unblemished track record in this arena.

  5. I am 100% in agreement with the above comment. In respect of investment products its time FSA gave clear & concise guidelines to Intermediaries & their clients. For instance all bricks & mortar property funds should come with the simple risk warning “In the past when UK has begun heading into a recession investors have all rushed to redeem their monies. The outcome has been that no investor has been given their monies for at least 12 months. This is because properties can’t be sold immediatly.”

    The IFA should not be paying for the PI cover, it should be the providers. The caveat emptor responsibility would rest with them and together with FSA they can nip the potential problems in the bud.

  6. Sadly the FSA are taking the easy way out by not acting as Gatekeeper on products. It is the Product consumers want the most confidence in.

    One can’t help but wonder if this is more to do with maintaining the status quo than doing what is better for consumers.

    The argument that doing so will stifle competition and innovation just does not stack up for me.

    How they can say it is resource intensive staggers me given the huge £400 Million pounds a year the FSA costs already. They should look at their own costs and spending £16,000 a year renting art for their offices is hardly a necessary requirement to do their job, nor is holding £163,000 of art that they own.

    Whose priorities are they looking after I wonder, consumers or their own?

  7. The FSA should have stepped in long ago, and brought in a cap on Initial commission across the board at say 3% for all products, and trail set at 1% pa maximum. the majority of firms I read about who have been treating customers fairly have been using that model for years anyway.

    A cap on the commission effectively removes commission bias, for any ‘Intermediary’ that might be swayed bit it, rather than whats best for their clients.

    Unless the FSA step-in (surely they are the logical Gate-Keeper, if they are the regulator ?) and stop the Product Providers from allowing Rip Off advisers – AND BANKS, from continuing to take ridiculous sums in Initial commission of upto 7%, the RDR will be so diluted it’s bordering on futile.

    They should also be banning providers and the industry from using terms such as ‘Customer Agreed Remuneration’ & Adviser ‘Fee’ . If they don’t, the banks in particular will continue to baffle clients with such jargon, when disclosure should be made simpler to follow for clients.

    I’d bet my family’s life, that all the mis-selling by Barclays (sorry alleged-mis-selling) and the debacles of KEYDATA products for example were transacted on a maximum initial commisison basis, with no focus whatsover on servicing trail.

    And we the honest people have to pay increaed levies, and suffer the insult of remarks coming out of the ivory tower that there is a question over whether we carry out effective risk-profiling for our clients.

    Enough Said

  8. some but not all? hmm. Here’s an idea – how about defining a few things? such as… risk and for that matter… expensive.

  9. Why do they pay such high slalries to get the best people and then duck out of doing what they should. If the “best people” at the FSA cannot judge if a product is inheritantly too risky for sale how can they expect poorly qualified meagre IFA’s to do so or the un-eduacted public who need protecting from themselves. A huge disappointment on principle and strategy as always. Im sure if you asked a fireman, doctor or any genuine protector of peoples interests would they appreciate the oppertunity to intervene before a disaster occurs they would catagorically say yes, as many pre-emptive measeures are already in place.
    It is possible to have authorised and un-authorised products for sophisticated investors, as the FSA well know.
    This cop out is frankly pathetic and the idea that it may portray the FSA in the wrong light as a concern, don’t let it worry you as most people think you are a rip off joke anyway so are unlikey to value what you say.
    Only the actual FSA seem to think you are god like and know what your doing, majority of the public either dont care or dont beleive in you.

  10. No one is asking the FSA to regulate or approve “all” products but there is no reason why they cannot do so for most everyday products. Higher risk products (not FSA approved) would require additional qualifications and protection for consumers.

    This does not eliminate risk or innovation but distinguishes different criteria for “higher risk” products and leaves the everyday products with a “regulator” approval to give consumers more confidence in the products they buy and also puts the “regulator” in an “accountable” position so they cannot just ignore their own mistakes as they currently do and are protected by Statute under FSMA 2000.

    That is the real reason in my view why they don’t want to be a “gatekeeper of products” they are frightened they will actually be “accountable” and be “responsible” for their own mistakes like they expect the rest of us to be.

    Time they were made to smell and clear up the mess they help create and the sooner the better.

  11. Much better to us what not to do after the event.

  12. Interestingly, the BBC website reports the same story under the headline “FSA seeks power to ban sale of risky financial policies” with some soundbites that include Lord Turner stating that

    “… We may have to put what is expected into rules to make it easier for us to say what is not acceptable…”
    along with my current favourite
    “The way we do things now is not good,”

  13. I would like to see Regulated Products where the FSA do act as Gate Keeper and Unregulated Products for those who want to buy Off piste – but at their own risk.

    Reducing the vast amounts of money wasted on regulating the advice sales process would be good for all – especially clients who end up paying
    the massive increase in costs over the last 25 years.

    will it happen ? I doubt it. I just can not see the FSA ever wanting to be responsible for any mistake in product regulation. far easier to waste time and money regulating the advice process.

  14. Dereliction of duty ?

  15. “It risks stifling innovation, is resource intensive and creates the potential for misperception of a ‘regulator endorsement’ of products. “

    Which would mean the fsa could be held accountable and shown up for the useless moron it really is. We cannot have that now can we?

  16. At last the FSA is getting involved where it should have been years ago but then to duck the issue by not wanting to be seen as the gatekeeper, appears to me as not wanting to be seen as being accountable if things go wrong. Financial Advisers have had that to bear that cross for years and have often been blamed as the messenger when things have gone wrong haven’t they FSA!

  17. All the rules and regulations in the world will never be a substitute for effective supervision.

    So why bother?

  18. Communist FSA?
    Are the government going to allow them (whatever the name is) to dictate what the industry can and cannot do?
    RDR is dead and so are the FSA.

  19. So if FSA ‘approves’ a product which later turns out to be a dud, who pays??? Not FSA – they don’t have any money, they only have our money. They are yet again asking us to bankroll their reckless incompetence. I do not believe they are up to approving products, Keydata etc proves that they do no understand them. No doubt they would buy in the expertise needed – sorry, we would have to buy it in for them (under threat of de-authorisation if we don’t). And then pay up again when it goes belly up.

  20. What would be really interesting is to find out exactly how effective the FSA has been since inception in protecting the general public. It seems to me that even with full regulation disisters still occur and yet costs are still added to adviser firms without any real benefit to retail clients or adviser firms. It just seems to be pay, pay, pay!

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