The FCA has been given powers over product intervention, financial promotions, publicising enforcement action and promoting effective competition.
This suite of new powers enable it to ban misleading financial promotions immediately from the market, or prevent them from being used in the first place, without going through the enforcement process, notes Rebecca Prestage, head of policy at the Consulting Consortium.
On product intervention, the FCA can restrict or ban products or product features, without consultation.
A consultation paper indicated when the regulator would use its powers of intervention, outlining cases of products offered to the mass market which contain “non-essential” features, or that are “inherently flawed”.
Strong decisive enforcement is also the intention of the regulator, with “credible deterrence” central to its enforcement approach. It plans to bring more enforcement cases and will press for tougher penalties, naming and shaming offenders too.
Mr Morris says that although the FCA states it will be judgemental and interventionist, “it’s more likely to go for the larger firms as they will get the headlines. Intervention of big firms is most likely to be around business models.”
A new business model threshold condition allows the FCA to assess a firm’s entire business model - at authorisation and ongoing - to ensure that consumer outcomes are at the heart of a firm’s business model.
The regulator says this assessment “will not be to stifle innovation or reduce competition, but to allow us to form a view of the sustainability of the business from a conduct perspective and where future risks might lie”.
Ms Ganatra agrees that smaller firms are less likely to be in the spotlight as their oversight is more impractical.
“For the FCA to be able to use such powers effectively in practice, it will need to have a clear ‘line of sight’ over how all regulated businesses develop and launch new products.
“Whether this proves to be practical going forward, particularly in relation to smaller firms which are no longer relationship managed, remains to be seen.”
On the new powers generally, Ms Prestage says the regulator is “being more open and transparent about their process and will help consumers better understand the action they are taking.”
Simon Morris, financial services partner at CMS Cameron McKenna, says the new powers are “largely irrelevant” for financial advisers.
“In practice the powers have always been there, they’re simply being formalised to showcase existing powers.”