LONDON, Oct 10 (Reuters) - Britain’s financial watchdog said it was pressing ahead with a reform of how consumers are sold investment products from January, dashing industry hopes for last minute changes.
The Financial Services Authority (FSA) has faced a barrage of criticisms that its planned overhaul, known as the Retail Distribution Review (RDR), will put unfair burdens and curbs on advisory firms.
The reform will end commission-based selling in a bid to draw a line under two decades of mis-selling scandals.
“It has been five years in the making, RDR, and I can’t promise it’s perfect in every respect. We have said we will do a two-year review,” FSA managing director Martin Wheatley said.
“Given how close we are to this, I don’t think we are going to be making further changes from here,” he told a conference for private client investment managers.
He will head Britain’s new Financial Conduct Authority (FCA) after the FSA is scrapped in early in 2013.
The FCA will continue with a “credible deterrence” policy of cracking down harder on market abuses, he said, giving a taste of the new policy paper he will release next Tuesday detailing how the new watchdog will operate on the ground.
In a move that has alarmed banks and investment funds, the FCA will have powers to ban products.
In the past any concerns over a product triggered lengthy consultations before action was taken, often too late.
Lawyers have already accused Wheatley of ushering in a “shoot first, ask questions later” strategy, but he stressed there will be no going back.
“We will make the intervention first and then we will carry out the consultation and the cost/benefit analysis,” Wheatley said.
The FCA will publish fewer consultations in general and instead focus on a narrower set of cross-industry issues.
“We will be much more straight in terms of directing you in terms of what we think works and does not work,” Wheatley said.
He is already worried that consumers, faced with paltry interest rates on their savings, are turning to unsuited, complex products in search of higher returns.
“It is essential you start to make sure you are delivering and demonstrating suitability,” he told the audience of brokers and investment advisors.