FCA's new product intervention powers
11 January 2013
As part of the UK Government’s planned reform of the financial services regulatory structure, the Financial Services Authority (FSA) will cease to exist and its responsibility for conduct regulation will be taken up by a new regulator, the Financial Conduct Authority (FCA). The new regulatory structure will be in place from 1 April 2013.
The FCA will have a suite of new powers including the power to make temporary product intervention rules without consultation where it considers it is necessary or expedient to advance: (i) its consumer protection objective; (ii) its competition objective; or (iii) if the Treasury makes such an order, its market integrity objective. The rules will last no more than 12 months and may not be renewed.
On 3 December 2012, the FSA (on the FCA’s behalf ) published a consultation paper on the FCA’s use of this new product intervention power and set out a draft statement of policy on its use. There are a number of matters worthy of note including:
- First, the FCA makes no commitment to notify affected product providers and manufacturers of such rules. Temporary product intervention rules will be published on the FCA website and will be included in the FCA Handbook for their duration. Reasonable endeavours will be made to ensure that information about the rule is communicated as widely as possible, but it is not expected that the FCA will contact all affected firms directly. Firms therefore will need to ensure systems are in place to keep track of and make sure they are in compliance with any such rules.
- Secondly, the FCA will only incorporate unenforceability and automatic compensation provisions into its product intervention rules in relation to agreements entered into after the product intervention rules are introduced and in contravention of those rules (although, of course, the FCA could achieve the same effect through other means eg a redress scheme). Consumers seeking redress in relation to arrangements entered into before the introduction of the rules would need to establish their claims in the usual way.
This article is part of the Allen & Overy LLP Legal & Regulatory Risk Note, a quarterly risk management briefing putting the key issues at the top of the agenda. For more information please contact Sarah Garvey , or tel +44 (0)20 3088 3710.