FCA’s Approach To Temporary Product Intervention

Question 1

Briefly explain FCA’s approach to temporary product intervention

Answer 1

1. Product intervention rules are listed on the section 137D of the FSMA.
2. Aim to tackle issues relating to:
   A. specific products
   B. types of products
   C. product features
   D. marketing practices relating to specific products
3. The rules give FCA the powers to intervene.
4. Interventions can range from requiring certain product features to be included, excluded or changed. Also includes imposing restrictions on sales and marketing of products.
5. In serious cases, the FCA can also ban the sales or marketing of a product

Question 2

What are TPIRs?

Answer 2

1. The Financial Conduct Authority (FCA) has rules to protect consumers from harmful financial products.
2. If a product is risky or being mis-sold, the FCA can intervene temporarily without waiting for a long public consultation.
3. These temporary rules are called Temporary Product Intervention Rules (TPIRs) and can last up to 12 months
4. They target BOTH UK-based businesses and regulated UK firms involved in agreements with businesses outside the UK.

Question 3

Why use TPIRs instead of regular rule making? What’s the benefit there?

Answer 3

1. Regular rule-making takes time because it requires public consultation.
2. TPIRs allow the FCA to act fast when a product poses a serious risk to consumers.
3. TPIRs are faster but, temporary, while standard rules involve consultation and can become permanent.

Question 4

What happens if a product is sold in violation of TPIRs?

Answer 4

1. Make the agreement unenforceable (so the consumer is not bound by it)
2. Order a refund of any money or property transferred
3. Require the seller to compensate/ transfer money or property to affected consumers

Question 5

What can TPIRs do to a financial product if it’s inn “serious danger” of being mis-sold?

Answer 5

1. Restrict certain product features
2. Limit sales/ promotions to some or all types of customers
3. Completely ban sales if necessary (I.e when complex or niche products are being sold to the mass market)

Note: TPIRs last for a maximum of 12 months

Question 6

The regulator has published a non-exhaustive list of scenarios under which TPIRs could be applied.

What products are included in this list?

Answer 6

1. Products with Problematic Features
   A. These products could be acceptable if certain features were added or removed.
   B. E.g. : A loan product that lacks an essential cooling-off period, making it riskier for consumers.
2. Products Encouraging Mis-Selling
   A. If a product offers large financial incentives, firms may push it aggressively to the wrong consumers.
   B. E.g.: High-commission investment schemes leading to mis-selling.
3. Products Designed to Reduce Consumer Choice & Competition
   A. Firms manipulate the market by intentionally limiting access to their products or reduce competition to increase their own profits.
   B. Instead of letting consumers choose freely from a range of options, they create barriers that make it harder for them to compare, switch, or access better deals.
   B. This can happen through:
   I. Limited product availability
   II. Blocking competition
   III. Making switching or comparisons difficult
   C. E.g. : A bank offering loyalty-only savings accounts with better rates but making it difficult for new customers to access them.
4. Products Targeting the Wrong Consumers
   A. A product that is unsuitable for a certain group but is still aggressively marketed to them.
5. Inherently Flawed Products (Serious Cases)
   A. Some products are so problematic that most consumers will not benefit from them.