As part of its move toward more principles-based regulation, the UK’s Financial Services Authority is adopting a new framework for recognizing industry guidance.

Under the new framework, trade associations, professional bodies and firms will be able to seek formal confirmation for the guidance they generate to help their members understand and meet the FSA’s regulatory requirements. The FSA indicates that it will not take action against a firm that has complied with recognized guidance.

A policy statement published today by the FSA describes the role of industry guidance and the standards that will be applied by the FSA in recognizing it. It sets out the process for bodies to follow in seeking FSA confirmation for particular sets of guidance, and describes the confirmation criteria the FSA has set up to ensure that confirmation requests are dealt with consistently, efficiently and effectively.

Industry guidance is supposed to supplement FSA rules, not replace them. The FSA notes that although the use of guidance is encouraged, it is entirely up to industry bodies whether to take forward initiatives of this kind. The FSA will also continue to produce guidance where required.

“Trade associations and others have for many years provided guidance on regulatory matters for their members. This new formalised system involving FSA confirmation will contribute towards the move to Principles-Based Regulation, allowing us to focus on the main principles to be achieved,” said FSA director of Strategy and Risk, Verena Ross. “Industry guidance will give firms help and advice on ways of complying with FSA principles and high-level rules, in a way that should not only stimulate flexibility and innovation but also tailor the advice to different sectors.”