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New regulator to tighten financial promotion rules


New regulatory powers will force financial services firms to make public instances where the regulator has intervened to stop a misleading promotion.

The Treasury published its Financial Services Bill guidance last week which sets out the powers of the Prudential Regulation Authority and the Financial Conduct Authority.

The FCA will be able to tell a firm to withdraw a financial promotion that has breached or is likely to breach promotion rules and to disclose that it has done so.

Currently, the FSA writes to firms where it has concerns about adverts and promotions but the firm is not required to make this public.

The Treasury says: “This provision is intended to enable the FCA to take swift action to minimise consumer detriment. The FCA can direct the firms to refrain from making a promotion, to withdraw a promotion, to publish details of it, or to do anything else the FCA directs it to do in relation to the promotion.”

Compliance consultant Adam Samuel says: “By making the process more official, the idea is to take away this whisper, behind-the-scenes approach to financial promotions which has been a feature for a long time.”

Samuel believes the requirement for a firm to publicly admit it has had to withdraw a promotion will make the regulatory process more transparent and consistent. He adds: “At the moment, we do not know who is in the FSA’s black books and who is not.”

Financial Services Bill key points

  • The FCA will be required to consult firms and individuals involved in ongoing enforcement investigations before publicising details.
  • The FCA will have to power to ban products for up to a year or impose restrictions on products, such as the types of customer a product can be sold to, where it sees risk of mass consumer detriment.
  • The FCA will not be legally required to publish its board minutes. It will be up to the FCA board to decide whether to publish minutes or not.
  • The Chancellor will have the power to direct the Bank of England during future financial crises.
  • Firms will have to disclose where the FCA intervenes to stop a misleading promotion.
  • An international committee will be set up with representatives from the FCA, the PRA and the Bank of England, chaired by the Treasury. The aim is to ensure the UK presents a unified view when it lobbies on European and international policy.
  • The FCA’s strategic objective has been amended from a duty to “protect and enhance confidence in the UK financial system” to ensuring financial markets and markets for regulated financial services “function well”.
  • The FCA and the PRA will operate under a single complaints system, with complaints assessed by an independent investigator. The draft bill proposed complaints against the FCA would be heard by an independent investigator but complaints against the PRA would be investigated by someone appointed by the Bank of England.
  • Consumer groups and the Financial Ombudsman Service will be able to lodge super-complaints with the Financial Conduct Authority, which will have to respond within 90 days.
  • Regulation of consumer credit will be transferred from the Office of Fair Trading to the FCA, subject to further consultation.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. How about some enforceable rules to stop the FSA making false claims on its website ( such as being “an open and transparent regulator” or claiming to undertake Cost:Benefit Analyses (like the one it did as the basis for launching its RDR?) or “consultation” (a complete sham) prior to steaming ahead with new regulatory initiatives?

  2. I hope that these new rules apply to the Money Advice Services as I think there adverts are very misleading!

    Free and impartial advice shouldn’t this be free impartial information!

  3. Innocent Bystander 3rd February 2012 at 4:33 pm

    to ‘Peter Heard’

    According to the FSA research people can’t distinguish between information and advce and believe they get advice whenever they have interaction so of course the MAS gives advice.

    See the MMR research which is consistent with other FSA research on consumer beliefs about when they do and don’t get advice.

  4. Let’s hope one of the first areas to be reviewed will be Structured Products that promote “100% principal protection on maturity” and subsequently fail, due to factors such as undisclosed counterparty risk – with investors left struggling to obtain redress….

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