In a discussion document, the Financial Services Authority (FSA) suggested intervening in areas such as pre-approving some products, mandating product features, preventing non-advised sales, issuing consumer and industry warnings and setting advisers further competence requirements.
The FSA singled out areas such as the traded life settlement market, which has been hit by the Keydata scandal, some of the more complex structured products and leveraged exchange-traded funds as areas that might be deemed "generally unsuitable" for the mainstream retail market.
The FSA's chairman Adair Turner has repeatedly said he wants to break the cycle in Britain of a mis-selling scandal in financial products every few years, such as in pensions, as regulators across the world play catch-up in consumer protection.
The United States has already put in place a new consumer watchdog, while the European Union is also looking to beef up safeguards. So far, however, regulators have stopped short of introducing direct product regulation for fear, in part, of stunting innovation.
"We still want to see innovation, but only where it is in the interests of consumers," the FSA said.
"It is not our intention to create a 'zero failure' regime where consumer detriment is impossible –this is likely to be unattainable in practice and would require a huge increase in our resources – but we aim to reduce the frequency with which large-scale market problems occur and, if possible, to stop them from happening at all."