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.