FSA guidance framework in force from today

Principles-based regulations gets a boost from FSA authorised industry guidance

The UK Financial Services Authority’s (FSA's) new framework for recognising industry guidance comes into effect today. This is viewed as a critical factor in the move towards principles-based regulation.

Trade associations, professional bodies and firms will now be able to seek formal confirmation from the FSA for guidance they give to members to help them better understand and comply with the FSA’s regulatory requirements.

FSA director of strategy and risk Verena Ross says: “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.”

A policy statement describes the role of industry guidance and the FSA’s expectations. It also 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 confirmation requests are dealt with consistently, efficiently and effectively.

The paper makes clear, however, that industry guidance will supplement FSA rules and not replace them, and that the FSA will continue to produce guidance where required. The paper also clarifies that the FSA will not take action against a firm that has complied with recognised guidance covering the issue concerned.