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Chris Hannant: Why the FCA needs to review its rule book


A common question I get asked is whether the FCA is different to the FSA.

Transforming itself into a new, different regulator is a big task and there are signs of progress. However, in one notable respect there is little difference to its predecessor – the FCA Handbook.

Obviously, not all firms need to engage with the full 6ft 3ins (its reported height when printed), but its length presents a significant challenge. Its scale and complexity is a barrier to new entrants and an impediment to running a business efficiently.

It is not just the Handbook that firms have to refer to. For example, to understand the difference between independent and restricted advice, you need to read the relevant bits of the Handbook, guidance published in 2012 and the most recent findings following the FCA’s thematic review. It is a challenge even for compliance professionals.

The FCA’s Chris Woolard tells me that his previous industry, broadcasting and telecommunications, is governed by a rule book that fits in a single file. I believe the FCA should take a leaf from Ofcom’s book. This would help customers and businesses alike, and may even benefit the FCA itself.

We need a serious pruning of the regulations. The Government’s policy is to reduce the volume of regulation and make it easier for business to operate. The red tape challenge is designed to reduce bureaucracy and improve effectiveness of regulation. To date, it has not reached the FCA, but financial regulation should not be the exception to the rule. 

The FCA should set up a dedicated group to review the Handbook in its entirety. It should draw on its own experts and include practitioners drawn from the business panels. The review should have a simple remit – to half the length of the Handbook over three years.

The regulator often points to EU regulation and says this drives much of what it does, but colleagues in other member states do not face a rulebook that is as long and complex as ours. This simple goal should lead to better and leaner regulation.    

Chris Hannant is Director General at the Association of Professional Financial Advisers.



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. The regulator often points to EU regulation and says this drives much of what it does whilst conveniently omitting to mention that mention that it also often gold plates the bits it likes (e.g. requiring 35 hours of annual CPD compared with the EU’s requirement for only 15 hours) and that under EU regulation commission on pensions and investments is still permitted and isn’t systematically abused in the way in which the FCA has convinced itself as justification for its irrational and implacable hatred.

    Then again, on the strength of experience to date, is there any evidence that the FCA is likely to take the slightest bit of notice of APFA’s views on this or any other issue? It doesn’t have to so it simply doesn’t. Your efforts, Chris, are well-meaning but misdirected. APFA should be lobbying not the FCA but the TSC and other Parliamentary bodies for the creation of a truly independent body with the unassailable authority to impose directives on the regulator which it won’t be able casually to ignore or brush aside.

  2. I would argue that the rule book is incomplete. Adviser charging disclosure is a case in point. You can comply with COBS but you still need to read their publications like best practices to understand exactly what they want. So the situation is even worse. You are not damned by the rule book but by the FCA interpretation of it!
    It does appear that the FCA is more accountable to the EU than Parliament. A cosy little relationship which does not reflect market forces or the real world. To ignore advice because EU rules prevent it is asinine. The rules are there to regulate market forces and not to determine market forces.

  3. I still look back on the old FIMBRA & LAUTRO rulebooks with regret…….not that they would be sufficient for today, but at least they were in English!

  4. The size and complexity of the rules are insane and do need a serious trim down. A case in point is the chancellors announcement for ‘financial guidance’ and the new flexibility rules. Hands up anyone who can give any advice to a smaller fund of £50k and make a profit let alone cover the FCA costs, FSCS, PI, etc? Thee are people who need advice more than most. Therefore the new rules are useless unless all smaller pots are treated as non-advised or execution only. Effectively it is death by regulation for these new rules.

    I am dealing with one now and my network are terrified of the FCA and the rules + the future interpretation of the rules – the great unknown. Even as an insistent client who knows what he wants to do even though I have said it is not in your interests, are trying their hardest to turn the case down. They would rather bury their head in the sands and turn all clients like this away.

    How on earth are we as IFAs going to give good quality effective advice with a rule book written so badly?

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