FSA Annual Report 2006/07 - Better Regulation Ltd

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Section six – Appendices
Appendix 2
It is also, of course, important that firms and their advisers are able to access
and stay abreast of our statements and publications; as we have previously
announced, we are working to deliver new technological solutions that will
enable them to do this.
We recognise that as we introduce more high-level rules into our Handbook
some industry groups may wish to produce their own supplementary
guidance. In our view it is for the industry to initiate and drive the
production of any such material. In September 2007 we will publish a Policy
Statement setting out our future approach on industry guidance; we believe
this will address many of the Practitioner Panel’s concerns. We agree with the
Panel on many aspects of the use of such guidance; complying with it must
be voluntary, and we acknowledge the resource implications for trade
associations of producing this material. It is of course not the role of trade
associations to monitor compliance with guidance. We agree that we must
explain clearly to firms the status and meaning of our confirmation of
industry guidance.
One of the topics we discussed in some depth at the recent conference, and
which will be discussed in more detail in our proposed Enforcement Guide
on which we have recently consulted, is the role of enforcement in a more
principles-based regime. Concerns have been expressed about the impact that
enforcement actions may have in a less prescriptive, more principles-based
environment. We are not looking to trip firms up; we take account of a firm’s
behaviour and its positive engagement with desired regulatory outcomes
when considering the most appropriate course of action. We cannot use
hindsight or apply later, higher standards retrospectively when deciding
whether to take enforcement action. We acknowledge that when we publish
details of our enforcement decisions in cases based on breach of Principles
only, we must explain clearly the basis on which we took action, and we
must ensure that our application of the Principles is consistent.
We maintain a dialogue with the FOS about principles-based regulation and
about industry guidance in particular, and we will say more about this in our
September Policy Statement. Where a FOS decision has a wider application
we work proactively with the ombudsman service within the framework of
the ‘wider implications’ process.
Costs of regulation
The Deloitte cost of regulation report, published in June 2006, encouragingly
confirmed that much of what regulation requires is good business practice.
As the Panel notes, most of the rules identified as imposing the highest
incremental costs were in the retail investment and pension advice sector, and
related to point of sale disclosure. Alongside the Deloitte report we published
a progress report on our Better Regulation Action Plan. This included our
plans to use the results of the Deloitte study to assess the benefits of the
regulatory requirements that generate the highest incremental costs (and that,
for example, are not required to remain in place as part of the
implementation of a Directive). By the end of 2008 we expect to have
reviewed rules giving rise to over 80% of the administrative regulatory costs
identified in our studies.