Future regulation plans are industry's 'worst nightmare'

The proposed new regulatory structure is the industry’s “worst nightmare”, according to a respected regulation and insurance lawyer.

Malcom Padgett, partner at law firm Coffin Mew, says the FSA's product intervention paper is "quite a worrying statement for a regulator".

Speaking at the Protect Conference, Padgett warned the successor to the FSA, the Financial Conduct Authority (FCA), will effectively take on all the legal powers of competition invested in the Office of Fair Trading and Competition Commission.

Padgett told the conference: "Ladies and gentlemen your worst nightmares lie ahead."

"A you design all your products to meet the future, be very sure that you totally understand all the rules that you're going to be working under.

"Never has a strategic understanding of regulators and their behaviour been more important, and I talk about behaviour as much as the content of the regulatory regime," he said.

Padgett also voiced his concerns about the FSA's product intervention paper in isolation, saying in it the regulator acknowledged its previous approach to regulate the conduct of business had failed.

"The FSA now says that approach has not been effective in preventing waves of consumer detriment," he said.

"So it says it is going to change the whole way we live and operate the regulatory body by intervening early in the product to anticipate consumer detriment where possible and stop it.

"Now that's quite a worrying statement for a regulator before you start, but it could be understandable."

Padgett said there is an argument to make sure the products are the "right sort" before they reach the market because it may prevent problems later.

"But," he added, "the real questions may be, when and why would that early intervention be made (and that intervention may be a product ban) and how would it be justified? And who initiates all this and in what way?

"The FSA starting point really is quite worrying. The discussion paper focus is where undesirable products or practices have the scope to thrive because competition does not work."

Padgett told COVER: "Once you get into competition regulation with product intervention, it becomes intervention regulation."