THE FINANCIAL Conduct Authority (FCA) yesterday unveiled its plan to regulate behaviour in the City, pledging to force companies to “put consumers at the heart of their business”.
Martin Wheatley, who will be chief executive of the FCA when it is spawned from the disbanding Financial Services Authority (FSA) next year, outlined its approach.
New powers will allow the FCA to take pre-emptive action when it believes a firm’s policies are set to be detrimental to consumers.
The Financial Services Bill 2012, currently progressing through parliament, contains many of the powers outlined by the FCA yesterday.
“These include the ability to ban financial products, publish details of misleading financial promotions, and let people know when we are proposing to take disciplinary action against a firm,” the report said.
Financial services groups warned that the FCA, along with the incoming Prudential Regulation Authority, will need to ensure that firms know where they stand.
“The FCA will have an armoury of new consumer powers at its disposal, some of which – like product intervention – are untried and untested,” said Paul Smee, director general of the Council of Mortgage Lenders (CML).
“Firms will be looking for as much information and help as possible from the FCA, to ensure that they do not inadvertently fall foul of the regulator’s expectations,” Smee added.
The scandal over the mis-selling of payment protection insurance (PPI) has convinced the FCA of the need to “intervene early; to pre-empt and prevent widespread harm to consumers from happening in the first place, rather than clear up after the event.”
Wheatley said the tough approach would not prevent innovation or act as a barrier to entry for new firms. “We will allow firms to try new ideas and develop their business,” he said. “We will set high expectations for those firms that want to enter financial services, while still allowing innovation and good ideas to flourish.”
THE FINANCIAL CONDUCT AUTHORITY’S PLANS
The new regulator will be able to “step in and ban the sale of products that pose unacceptable risks to consumers for up to 12 months, without consulting first.”
Wheatley’s FCA will also have the power to “ban misleading advertising.”
New entrants to financial industries will face more stringent tests. “When we consider authorising a firm, we will look at its business model to ensure it meets the needs of consumers.”
Wheatley wants to continue the FSA’s clamp down on financial malpractice. “We will keep up our policy of credible deterrence, pursuing enforcement cases to punish wrongdoing.”
“We will carry on the fight against insider dealing, which has secured 20 criminal convictions since 2009,” it adds.
The FCA says it also wants to boost competition in financial services. “Promoting competition will play an important part in this. We are not here to stand in the way of progress that will be of benefit to consumers,” Wheatley said.
A closer eye will be kept on specific sectors in a bid to control how markets develop. “A new department will act as the radar of our new organisation – combining better research into what is happening in the market, and analysis of the risks to our objectives.”