The Financial Conduct Authority (FCA) will have the power to place restrictions on or ban products outright for a year, under new government proposals.
The draft financial services bill proposed giving the FCA the power to ban products for up to 12 months without consultation or a cost benefit analysis. Despite pressure from industry for the power to be scrapped, according to the financial services bill’s explanatory notes, published today, the regulator will keep the power in cases where it considers products pose a risk of mass consumer detriment.
It says: “The power is intended to enable the FCA to impose restrictions in relation to specified products, or to ban them outright, where the FCA considers this is necessary or expedient to advance the consumer protection or the competition objective.
It adds: “Consumers who have entered into agreements concerning “products” that are later “banned” or “restricted” would not be able to rely on new rules (that postdate their contracts) in order for their contracts to be rendered void and to establish their automatic entitlement to a refund or compensation.
“They may also include specifying a class of consumer who may not be exposed to a particular product, or should only be exposed to it if certain conditions are met.”
In September, Guy Sears, director of wholesale at the Investment Management Association, said the product intervention powers, as laid out in the draft bill, were “fantastically wide ranging”. He said: “It puts enormous stress on trusting that the regulator will use those powers sensibly and fairly.”
In November, Maggie Craig, director of life and savings at the Association of British Insurers, said she was not convinced the product intervention powers were necessary and suggested they should be scrapped.
This bill could still change significantly as it goes through parliament and MPs propose amendments.