The Investment Management Association has warned there is a lack of accountability in the European Commission’s proposals to give the European Securities and Markets Authority powers to ban products.
Last October, the EC published proposals for the markets in financial instruments regulation. It would give local regulators and Esma powers to ban marketing or distribution of products or activities which pose a threat to investors or the orderly functioning of markets.
Esma would be able to intervene only if existing regulation could not deal with the problem, national regulators have not taken action or Esma is not satisfied that the action regulators have taken addresses the threat.
Under the Financial Services Bill, the Financial Conduct Authority will be able to ban products for up to a year but the EC’s proposals would give Esma the ability to overrule the FCA’s decision.
IMA senior adviser on retail distribution Andy Maysey says: “What is not in the EC’s proposals is the criteria for intervening, how decisions will be made, whether that process is transparent, whether there will be a right to appeal and whether the industry will be consulted. There are a lot of questions and the answers are particularly important as ESMA will be able to overrule the FCA.”
Provisio managing director Andrew Whitely says: “If the two regulators have different views on products, it could make things very complicated for providers.”