Risky financial policies could be banned under proposed FSA powers

Posted on January 26th, 2011 | Categories - News

Exploitative investment products may be prohibited by the FSA before they reach the market.

More powers may be granted to the FSA to prevent consumers from being taken advantage of by poorly constructed financial policies.

The Financial Services Authority may be able to ban the sale of risky financial policies to the public in order to protect consumers from toxic products under a new consultation paper.

The proposals would add to the FSA’s existing powers allowing it to prevent high-risk damaging investments from reaching the public before they have a detrimental effect on people’s finances. It is hoped this new “intrusive approach” would put a stop to “exploitative” investment policies.

The regulator said it plans to “reduce consumer detriment by dealing with problems earlier, scrutinising the whole of the product lifecycle from start to finish rather than just focusing on the point-of-sale. [This] might include interventions such as banning products or prohibiting the sale of certain products to specific groups of customers”.

The FSA may also cap excessive fees or charges and issue warnings to the financial services industry as well as the public regarding any products it deems unsafe.

Chief executive of consumer watchdog Which? Peter Vicary-Smith said his organisation “has been campaigning for years for the FSA to tackle the problems at the heart of the industry – that many [products] are fundamentally useless or, even worse, toxic to consumers”.

He continued: “If left to its own devices, the industry will spend its energy inventing products and sales practices that fill the balance sheets but don’t deliver for their customers”.