Industry experts have warned the Financial Conduct Authority must keep an open dialogue with the industry and avoid being “heavy-handed” when using its temporary product intervention powers.
The FSA is consulting on the use of the product intervention powers, which will run until 4 February.
The Financial Services bill specifically includes this power as part of the FCA’s toolkit. The FSA is consulting on its successor body’s behalf so that the FCA’s approach is clear and understood by April 2013 when the new regulator will come into being.
Under current proposals the FCA will have the power to ban a product for up to 12 months without a review, restrict the marketing of a product to certain types of customer, issue warning to consumers about a product and require firms to amend marketing materials.
The rules will apply if a product presents a “serious danger” of being sold to the wrong customers, when non-essential product features are causing problems and when a product is “inherently flawed”.
Lansons Communications director Richard Hobbs says: “The very existence of draconian powers tends to encourage people not to innovate. It is complex and I do not much care for bold assertions when it requires careful thought and analysis before knowing if it is feasible to carve out what you want to.”
The consultation paper rejects the suggestion the rules could stifle innovation, claiming any impact will be “greatly outweighed” by benefits.
Association of Mortgage Intermediaries chief executive Robert Sinclair says: “The FSA is a good policy regulator but its problem has always been supervising the rules.
“If product intervention is used in a way that the industry feels is heavy-handed or outrageous, it will not get the market intelligence it needs from the industry.”