Under the Financial Services Bill, the incoming Financial
Conduct Authority will have the power to make temporary product intervention
The FSA has published a draft statement of detailing how the
FCA will exercise this power, the factors to which it will have regard and
examples of when the use of this power may be appropriate.
The FCA will adopt a much more proactive and intrusive
approach to financial services regulation; an approach far removed from the
light touch regulation associated with the FSA. Following numerous scandals and
considerable consumer detriment over recent years, intervention at the point of
sale is no longer considered sufficient. The FCA will advocate much earlier
regulatory intervention in the life cycle of retail financial products. The
proposed product intervention rules will allow the FCA to assess products much
earlier in the design process.
Temporary' product intervention rules can be put in place without
consultation for up to 12 months. This means the FCA will be able to block the
launch of certain products or prohibit any existing products or services.
When making temporary product intervention rules the FCA
must consider a number of very vague factors and it must be:
- Proportionate in relation to the potential detriment it is
intending to prevent
- Effective as a means of addressing the identified consumer
- Transparent in its operation, and
- Beneficial for consumers
Popular products with a large customer base are the most
likely to get swift product intervention.
Having identified a need for immediate action to protect
consumers, the FCA can proceed virtually unchallenged with the creation and
enforcement of temporary product intervention rules.
There are concerns that the FCA has too much freedom to use this power.
The FCA could intervene to the extent that new products do not make it to
market, and in so doing stifle innovation and product development.