FSA encourages the use of Trade Bodies
The Financial Services Authority (FSA) made an interesting press release today encouraging the use of Industry Guidance. By this they mean that the finance industry should look toward trade and professional bodies as a way of supplementing the FSA regulations.
They’ve produced a discussion document that sets out the FSA thinking on the role of industry guidance in a more principles based regulatory structure. To take a snippet from the press release, the paper:
- recognises that industry guidance is not new, but already exists in different parts of the regulatory system
- makes clear that industry guidance will supplement rules not replace them
- sets out a standard process for FSA to recognise industry guidance
- makes clear the standards that will be applied in recognising such guidance and
- confirms that the FSA will not take action against a firm which has complied with recognised guidance covering the issue concerned
FSA General Counsel Andrew Whittaker said “These proposals will contribute towards more principles-based regulation by allowing us to focus on the main principles to be achieved, rather than the detail of how to comply with them. They will give firms guidance on ways of complying with FSA principles and rules, but in a way that should stimulate flexibility and innovation in meeting higher level standards.”
Although I haven’t read all the supporting documents yet I find this quite interesting. Firstly the FSA appear to be saying ‘we will set rules at the macro level and expect trade associations and professional bodies to implement and manage them at the micro level” - of course I could be reading this wrong, but that’s the message I get.
Secondly it’s interesting that the last line of the above snippet says the FSA will not take action against a firm who’s complied with recognised guidance. To me this sort of creates a grey area. For example, in the secured loans sector, albeit unregulated itself by the FSA, one could find an argument whereby a business said…well FISA said I had to do so and so you (the FSA) can’t now tell me this is wrong.
I also find this interesting given that, the FSA’s Sister organisation the OFT recently announced changes in working practices to make them more effective by ultimately reducing their workload, it leads you to believe that there is an underlying message of them both struggling for resource.
