The UK’s Financial Services Authority today published a policy statement that it says will mark significant move to principles-based regulation with a radical simplification of the rules firms need to follow in carrying out investment business with their customers.
The reform of the Conduct of Business rules is a flagship project for the FSA in the move towards principles-based regulation and away from detailed prescriptive rules. The FSA reports that it is removing much of the detail of the old rule book to create a new book, which will be about half the length of the old one.
The policy statement confirms the approach set out in papers published in October 2006 to operate on the basis of principles and high-level rules, except where detailed provisions are either required by European Union directives, or are the only practicable way to achieve a desired consumer protection or other regulatory outcome. This new rulebook incorporates the relevant provisions of the EU’s Markets in Financial Instruments Directive (MiFID).
“The move toward principles-based regulation means focusing on the outcomes that really matter rather than on procedure or process. It gives firms the flexibility to achieve the needed outcomes in line with their particular business models. The approach also fits with the emphasis we place on senior management responsibility,” said FSA Director of Retail Policy, Dan Waters, in a release. “The new rules will be simpler and easier to understand and so easier to comply with, thereby helping firms to deliver better outcomes for their customers,” he added.
The policy statement also explains the FSA’s decisions on the small number of FSA rules that were notified to the European Commission in January as potentially going beyond MiFID provisions. As a result, it is withdrawing certain proposals, and continuing research into possible alternatives that would achieve its objectives of reducing commission levels, increasing the proportion of advice paid for by fees, and reducing bias in sales.
New investment business rules mark significant move to principles-based regulation in UK
FSA releases policy statement on Conduct of Business rules
- By: James Langton
- May 31, 2007 May 31, 2007
- 08:50