The UK’s Financial Conduct Authority (FCA) has proposed a ban or cap on exit fees charged by investment platforms in a bid to boost competition in the £500bn sector.

The proposal was based on the regulator’s findings, which revealed that consumers find it tough to switch mainly owing to the exit charges and difficulties switching between unit classes.

Through new rules, the regulator aims to enable customers switch platforms and remain in the same fund without the requirement of offloading their investments.

The exit fee restriction could also be applicable to firms offering comparable services to retail clients.

The watchdog has not yet zeroed in on final rules.

At present, it is seeking views from the market to assess the feasibility of such a restriction.

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The regulator will review progress made in this regard later in 2019 and next year, if required.

Further regulatory action will be considered if the system still remains inefficient.

FCA executive director of strategy and competition Christopher Woolard said: “While the market is working well for most of its consumers, the package we’ve announced today should make it less expensive and time-consuming for investors to shop around and move to the platform that best meets their needs.

“As part of that, we believe it is right that we restrict exit fees, so people can move their money freely.”