FSA considers FCA temporary rule change

FSA considers FCA temporary rule change


A consultation carried out by the Financial Services Authority (FSA) intends to examine the approach which the incumbent Financial Conduct Authority (FCA) might take if it needed to exercise powers to make temporary rule changes without consultation. 

The ability to enact such changes is already outlined as part of the FCA’s powers in The Financial Services Bill. 

The FSA is consulting, however, on its successor’s behalf so that the FCA’s approach is both clear and understood by April 2013, when the new regulator comes into being.  

Rules made before consultation would last for no longer than 12 months and will not be able to be renewed. 

During the intervening time, the FCA will either launch a consultation to find a permanent remedy or aim to resolve the problem another way. 

The consultation also described some situations which may trigger temporary rules being made, including: 

Where a product is in serious danger of being sold to the wrong customers - for instance where complex or niche products are sold to the mass market;   

Where a non-essential feature of a product seems to be causing serious problems for consumers; 

Where a product is inherently flawed. 

Product intervention rules, whether temporary or not, may address a wide range of product-related issues by, for instance, restricting marketing for a product to only certain types of customer or by requiring a product feature to be removed or amended.  

Where there is high risk to consumers, the FCA might make efforts to ban a product, but would only do so in sufficiently dangerous circumstances. 

Other possible interventions, which would not necessarily require changes to rules, might include issuing warnings, or using supervisory powers to require firms to amend promotional materials. 

Martin Wheatley, Managing Director of the FSA and CEO-designate of the FCA, said: “Making temporary product intervention rules is not something that we expect to do often, but having this power means we can act quickly and decisively. 

“The use of the power will be a judgement based on the need to protect all market users, consumers and industry innovators alike, from the type of products which will cause harm and might generate compensation costs.” 

The FSA’s consultation will run until 4th February 2013.

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