In a document outlining its initial thinking on the scope of the Financial Conduct Authority (FCA), the FSA said that while it currently allows firms to continue to market and sell products alongside programmes to remedy poor practices, the FCA may not.

“The FCA will intervene where the product may be well known and of utility to consumers but the sales and distribution process of a firm does not meet regulatory standards and consumer detriment is occurring,” today’s paper reads.

It said, when the firm is a major supplier of a product which is commonly sold to consumers, the consequences of such action will be weighed against the benefits of preventing further consumer detriment.

It added while this approach is not currently used in the UK, other regulators have adopted it. In 2010, for example, the Japanese Financial Services Agency banned a firm from advertising or selling retail products for a month.

Today’s paper from the FSA – which complements a Treasury consultation document published in February – sets out how the FCA will approach the delivery of its objectives when it comes into force at the end of 2012.

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It says the FCA will focus on root causes and preventative action.

“The traditional focus on firm conduct at the point of sale has limitations,” the paper reads. “In particular, when poor conduct is discovered, detriment has already occurred.”

The document also explains the FCA will report annually to government and parliament on how its actions have accorded with statutory objectives.

It will have to submit a report to the Treasury in the event of a regulatory failure which is due to the FCA’s actions, or failure to act.

The FSA is inviting comments on proposals in the paper by 1 September. Comments can be sent HERE.