The Chartered Insurance Institute (CII) has called for more consultation on the Financial Conduct Authority's (FCA) proposed powers, citing concerns firms could be wrongly punished and consumer confidence damaged.
The Treasury said the FCA, one of the two successors to the FSA and responsible for the conduct of businesses across the industry, will take a more proactive approach, specifically when dealing with firms with a "lower risk threshold" for potential consumer detriment.
It will also be able to publish warning notices against firms and may ban businesses from dealing with individual products if they are not being sold or distributed correctly.
In its response to the consultation on the FCA, the CII said: "New powers for transparency, disclosure and early publication could, if used hastily, risk unnecessarily damaging consumer confidence in financial services by wrongly punishing firms that have been behaving correctly.
"Whilst we therefore support the approach for more regulatory intervention at both the design and distribution stages of the product lifecycle, more consultation is needed in order to strike the most appropriate balance between protection, trust and consumer choice."
It also warned about the potential increase in costs to consumers as a result of new regulatory powers.
As it has in previous papers, the CII also called for greater recognition of the Chartered status attained by some firms, suggesting the FCA should note it implies a commitment to "embedding and maintaining a firm-wide culture that supports an appropriate degree of protection for consumers".
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