The UK Financial Services Authority's (FSA) new framework for recognising Industry Guidance came into effect on Tuesday - an important step in the move towards Principles-Based Regulation.
Trade associations, professional bodies, and firms will now be able to seek formal confirmation for the guidance they generate to help their members understand and meet the FSA's regulatory requirements.
FSA Director of Strategy and Risk Verena Ross explained that:
"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 published on Tuesday described the role of Industry Guidance and the standards that will be applied by the FSA in recognising this.
It set out the process for bodies to follow in seeking FSA confirmation for particular sets of Industry Guidance, and described the confirmation criteria that the FSA has set up to ensure that confirmation requests are dealt with consistently, efficiently and effectively.
The paper clarified that the 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 contiue to produce guidance where required.
The paper also explained that the FSA will not take action against a firm which has complied with recognised guidance covering the issue concerned.
The financial services regulator concluded by announcing that it will review the Industry Guidance process in the first quarter of 2010 as part of a post-implementation review.
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