In its consultation paper, reforming remuneration practices in financial services, published today, the regulator proposes to incorporate the Code into the FSA Handbook.
The Code, which was published in February, requires firms to “establish, implement and maintain remuneration policies, procedures and practices that are consistent with and promote effective risk management”.
It currently applies to FSA-regulated banks and building societies.
But the FSA says it is considering extending it to other FSA authorised firms, including retail investment intermediaries.
The regulator says: “The fundamental objective of our current project is to consider the extent to which inappropriate remuneration practices may have led banks, building societies and the larger broker dealers to take excessive risks and in doing so to contribute to the present financial crisis. We do not think that there is a strong case to suggest that inappropriate remuneration practices in other firms in the financial sector played a significant role in the present crisis.”
But it adds that the general requirement of the Code should be universally applicable to all financial firms.
It says: “If their remuneration practices are not consistent with effective risk management they are likely to pose risks to the financial health of the company and so to consumers.”
The FSA will consult on the implications for advisers as part of its RDR consultation paper to be published in June.