FSA chairman Callum McCarthy says the approach to regulation will be based increasingly on broad principles rather than strict definitions.
Speaking at last week's Aifa dinner in London, McCarthy said while there are those in the industry who favour the heavy-handed approach, the FSA is not interested in dotting every i or crossing every t.
His remarks have been interpreted by IFAs as a strong indication that the FSA will not pursue a firm definition of misselling despite the negative response by the industry to its first effort in April.
In September, Money Marketing, with the support of many IFAs and providers, lobbied the FSA to improve on its initial guidance note, which most viewed as simply reiterating the current state of play.
It was at last year's Aifa dinner that then FSA chairman Howard Davies pledged to work towards defining misselling, a move which was widely welcomed by IFAs. Advisers have expressed disappointment at McCarthy's comments, saying while broad principles work in most spheres of regulation, a firm definition is needed of what constitutes misselling.
McCarthy said: “Our strong preference is not to pursue an ever more precise definition – the attempt to dot every i, cross every t, identify every alpha and omega, let alone whatever other alphabets might arise – but to place increasing emphasis on principles.”
Aifa director of policy Fay Goddard says: “The difficulty in trying to define misselling is that it is almost impossible to do. I would be surprised if the FSA went much further than it already has.”
Emery Associates principal Peter Emery says: “We pay a hell of a lot for regulation and I think the FSA should come up with a definition to which IFAs can adhere. We need to know that when we have written business, it is compliant and will remain so in the future, otherwise we will continue to get retrospective reviews.”