WIREDGOV

The Financial Services Authority's (FSA) new framework for recognising Industry Guidance came into effect yesterday - an important step in the move towards Principles-Based Regulation.

Trade associations, professional bodies and firms will 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 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."

A Policy Statement published today describes the role of Industry Guidance and the standards that will be applied by the FSA in recognising this. 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.

The paper makes 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 indsutry 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 clarifies that the FSA will not take action against a firm which has complied with recognised guidance covering the issue concerned.

The Policy Statement provides feedback to the FSA Discussion Paper on this issue published last November. Most of the 65 responses supported the FSA's approach to Industry Guidance.

The FSA will review the Industry Guidance process in the first quarter of 2010 as part of a post-implementation review.

Notes for editors

1. Policy Statement 07/16 'FSA confirmation of Industry Guidance' is available on the FSA Website. DP 06/5 'FSA confirmation of Industry Guidance' is also available on the FSA website.
2. Industry Guidance is defined in the DP 06/05 as: "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." The FSA considers Industry Guidance to be information that is developed by the industry, not the FSA, and is to assist firms, their staff and their advisors in understanding how they can meet FSA requirements.
3. The standardised wording the FSA proposes to accompany Industry Guidance is: "The FSA has reviewed this Industry Guidance and has confirmed that it will take it into account when exercising its regulatory functions. This Industry Guidance is not mandatory and is not FSA Guidance. This FSA view cannot affect the rights of third parties."
4. 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. Although these Industry Guidances, which are available on the MiFID Connect Website, were published before today's Policy Statement they are in substantive compliance with it and will now be confirmed as Industry Guidance under the new arrangements. The FSA will not retrospectively confirm any other existing guidance
5. The FSA has set up a dedicated Industry Guidance section on its Website which will include all current confirmed Industry Guidances.
6. The FSA regulates the financial services industry and has four objectives under FSMA: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
7. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.