In a speech given at the Financial Services Forum last week, Callum McCarthy, chairman of the FSA, said: “I am clear here, as elsewhere, that we should require information about a product to be clear, fair and not misleading, and that the general principles of Treating Customers Fairly and Know Your Customer should apply. But I am uneasy about the FSA, or any other regulator, decreeing that a particular product should not be sold to the retail market. The FSA is not and cannot be in the game of assessing, ex-ante, all products for risk, return and suitability, and I have reservations about those occasions when we do so.”
He added: “I do see more of a case for our helping firms identify the particular risks they should consider when assessing suitability or should describe to prospective customers. For example, equity release products can be of value in a society of wide homeownership, but they involve risks that consumers need to understand and consider very carefully. But this is very different from prohibition of the product.
Even here, there is an argument as to whether specific rules are justified or whether we should rely, as elsewhere, on general principles.”
Mike Fitzgerald, sales director of Brentchase Financial Services, said the FSA is right not to interfere in this area. “The FSA is here to regulate people, not products. If it dared, and the government gave it permission to prohibit certain products, we would be getting into a totalitarian state. It might turn around and say equity release is dangerous but, for thousands, it is a viable deal to take.”
