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The Financial Services Authority's (FSA) new framework for recognising guidance from trade associations and professional bodies came into effect on Tuesday. In future trade associations and professional bodies will be able to get formal confirmation from the FSA for the guidance they generate to help their members understand and meet regulatory requirements. This step is an essential one in the FSA’s move towards Principles-Based Regulation.
The FSA Policy Statement published on Tuesday describes the role of Industry Guidance - "Information created, developed and freely issued by a person or body, other than the FSA, which is intended to provide guidance from the body concerned to the industry about the provisions of our Handbook". It sets out the process for bodies to follow in seeking FSA confirmation for particular sets of Industry Guidance and describes the confirmation criteria the FSA has set up to ensure that confirmation requests are dealt with consistently, efficiently and effectively.
FSA Director of Strategy and Risk, Verena Ross, said: "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. 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."
The paper makes it clear that Industry Guidance will supplement FSA rules and not replace them and that, although the use of Industry Guidance is encouraged, it is entirely up to industry bodies whether to take forward initiatives of this kind. Furthermore, it is not a move to strip the Handbook of necessary guidance. The FSA will continue to produce guidance where required. The paper also clarifies that the FSA will not take action against a firm which has complied with recognised guidance covering the issue concerned.
The FSA recently confirmed three sets of Industry Guidance on Outsourcing, Suitability and Appropriateness issues, and Investment Research prepared by MiFID Connect – a grouping of trade associations formed to prepare guidance on aspects of the implementation of the Markets in Financial Instruments Directive.
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