FSA MD Martin Wheatley
The FSA has confirmed its approach to temporary product intervention in a move that sets out the circumstances when its successor, the Financial Conduct Authority, will use emergency rules to protect consumers.
The FSA says that temporary product intervention rules (TPIRs) will be rules made before consultation, where the FCA identifies a significant risk to consumers which requires prompt action. In practice, they will allow the FCA to take action such as restricting the use of certain product features, requiring that a product not be promoted to some or all types of customers, or – in the most serious cases – requiring that a product not be sold altogether.
Some of the instances in which the FCA might consider making temporary rules include:
· 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; and
· Where a product is inherently flawed.
Rules made before consultation would last for no longer than 12 months and could not be renewed. During this time, the FCA will either consult on a permanent remedy or will work to resolve the problem another way.
The Financial Services Act 2012 introduced this rule-making power as part of the FCA's regulatory toolkit. The FSA consulted on behalf of its successor body, the FCA, so that the approach is clear before the new regulator comes into being in April 2013.
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Martin Wheatley, CEO designate of the FCA, said: "The creation of the FCA is our opportunity to reset conduct standards. This power, along with our other new powers, helps define how we will regulate going forward.
"We know that some in the industry are concerned about us using this power too hastily; I want to be clear that we know proportionate judgement is needed, and that is what we will exercise. I do not expect us to use this power frequently, but both industry and consumers need to be clear that we will not hesitate to use these powers where we have serious concerns."
The Policy Statement follows a Consultation Paper published in December 2012. The policy statement can be found on the FSA website.
