PROD 2.2 General rule making and product intervention rules

The Act empowers the FCA to make general rules as appear necessary or expedient for the purpose of advancing one or more of its operational objectives.

[Note: see section 137A of the Act]

The Act also provides that the FCA may use its general rule-making power to make product intervention rules prohibiting authorised persons from, among other things, entering into specified agreements (section 137D of the Act). These rules may be made to advance:

1. (1)

   the consumer protection objective; or

2. (2)

   the competition objective; or

3. (3)

   the market integrity objective.

Section 137D(2) of the Act sets out that the FCA may prohibit authorised persons from:

1. (1)

   entering into specified agreements with any person or specified person (specified person means a person who meets the description specified by FCA rules);

2. (2)

   entering into specified agreements with any person or specified person unless requirements specified in the rules have been satisfied;

3. (3)

   doing anything that would or might result in the entering into of specified agreements by persons or specified persons, or the holding by them of a beneficial or other kind of economic interest in specified agreements; and

4. (4)

   doing anything within paragraph (3) unless requirements specified in the rules have been satisfied.

Section 137D of the Act makes it clear that a range of options would be available to us in making rules prohibiting authorised persons from entering into specified agreements.

The extent of the rules which are made will generally depend on the type of intervention deemed necessary to address the issues identified, having regard to whether the intervention would be a proportionate response to the perceived risk to consumers, competition issues or market integrity issues.

Rules may include:

1. (1)

   requiring certain product features to be included, excluded or changed; or

2. (2)

   requiring amendments to promotional materials; or

3. (3)

   the imposition of restrictions on sales or marketing of the product; or

4. (4)

   in more serious cases, a ban on sales or marketing of a product in relation to all or some types of client.

Where the product is provided by a business outside of the UK, rules may be made targeting regulated activities by authorised persons in the UK that would lead to a specified agreement being formed.

[Note: see sections 137D(2)(c) and (d) of the Act]