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FSA sets out plans for principles-based regulation

The FSA has put out a paper setting out its current thinking on its move towards principles-based regulation.

The paper coincides with a conference held today at which FSA senior management, financial services industry leaders and other interested parties will debate the challenges and opportunities in switching from a rules-based approach.

Chairman Callum McCarthy says: “We have set ourselves and the industry on a course towards more-principles based regulation. We are pursuing this with determination, but recognise there are difficult issues as well as excellent opportunities for us as a regulator, the industry and consumers. Today’s paper and conference are designed to explore those issues as we attempt to move further towards delivering a more outcome-focused regime.”

Chief executive John Tiner says: “More principles based regulation is the natural next step in the evolution of our regulatory system. It will give firms more choice over how they meet our requirements bringing for many a closer fit with their business processes and more clearly placing the responsibility for key regulatory decisions at more senior levels in firms.

“We have already embarked on this journey. During the past two years, the FSA has increasingly taken a principles-based approach to resolving issues in both retail and wholesale markets such as the proposed new regime for the conduct of business, our Treating Customers Fairly Initiative and the work on contract certainty within the wholesale market.”

But Deloitte is warning advisers that action will speak louder than just words.

Deloitte financial services advisory group representative Clifford Smout says: “The paper says a lot about outcomes, but if it is results rather than processes that matter, there needs to be clarity about the results that firms should be aiming to deliver.

“Implementing these changes effectively will be a real challenge and, in some cases, will require a transformation of the compliance function. Companies need to be careful that they don’t just read the words, think they sound good and then continue as before.”


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