AIFA has today called on the FSA to provide clarity to intermediary firms on the greater use of guidance in place of rules-based regulation.
The trade body has also advised the regulator not to extend the Markets in Financial Instruments Directive (MiFID) beyond its current scope without rigorous analysis of the impact.
The trade body’s comments come in response to the FSA proposals in Consultation Paper 07/23 to extend certain regulatory controls to firms not subject to the MiFID or the Capital Requirements Directive. The CP clearly demonstrates the extra emphasis being placed on guidance, AIFA says.
In its response, AIFA says it fully supports the FSA’s move toward a more principles based regulatory regime.
However, it says firms need help and support from the regulator during this transition – especially when the transition affects such matters as a “down grading” of rules into guidance.
“Part of the regulator’s duties during this period is to effectively sign-post where changes are proposed and what the impact of those changes will be. We are deeply concerned that CP 07/23 fails this test,” AIFA says.
Chris Cummings, director general of AIFA, adds: "The FSA should improve its communication with intermediary firms about the role and regulatory status of the different types of guidance. Firms that have enjoyed the certainty of rules in the past, and who now find those rules expressed as guidance, will also need a period of transition.”
AIFA also expressed its concern about the standard of compliance firms which it believes will be more widely used as IFAs struggle to respond to the new regime.
Cummings says: "The FSA will be aware that one result of the move towards more principled based regulation is the greater use of compliance consultancies. At present these vary considerably in quality and more should be done to drive up standards.”
It suggests more could be done in co-operation with, for instance, the Compliance Institute, to drive up standards. Another alternative may be for the FSA to publish its list of organisations regularly used to undertake “skilled persons reports”.
AIFA also believes that to try and introduce the proposals in October this year is unrealistic. Given the current market turmoil, it recommends extending the transition period until October 2009 at the earliest.
The full response is available here: http://www.aifa.net/your-industry/Response-to-CP0723.pdfIFAonline
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