The FSA said it is consulting on its successor body’s behalf so that in April 2013, when it comes into being, the FCA’s approach will be clear and understood.
According to the City Watchdog the Financial Services Bill specifically includes the ability to make temporary rule changes before consultation as part of the FCA’s toolkit.
Rules made outside a consultation would last for no longer than 12 months and could not be renewed, but in extreme cases could include the banning of a product or product type.
While the temporary rule changes were in place the FCA would either consult on a permanent remedy or aim to resolve the problem another way.
In its current consultation on this subject the FSA outlines some instances which may trigger temporary rules being made, including:
- 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;
- Where a product is inherently flawed.
The FSA said only in cases where there is a high risk to consumers might its successor body make a rule change to ban a product and this would be only in very serious circumstances.
Other possible interventions could include issuing warnings, or using supervisory powers to require firms to amend promotional materials.
Martin Wheatley, managing director of the FSA and CEO-designate of the FCA, said: "Making temporary product intervention rules is not something that we expect to do often but having this power means we can act quickly and decisively.
"The use of the power will be a judgement based on the need to protect all market users, consumers and industry innovators alike, from the type of products which will cause harm and might generate compensation costs."
