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.”