The Financial Services Authority should only monitor the outcome and not the process of firms' compliance with principles-based regulation, suggests the Association of IFAs.
Fay Goddard, deputy director general at Aifa, says the move to principles-based regulation should mean firms have the flexibility to reach compliance with principles by their own means.
As one example of how rules could be applied, she says it should not matter in complaints-handling whether firms respond within two days or two weeks but argues it is instead more important they deal with the complaint in a timely manner and give a good response.
At the moment, compliance with regulation is process-driven, so Aifa is calling on the FSA to move away from this approach by ensuring they do not measure firms by their processes or benchmark firms against each other.
Goddard states: “Once the detailed rules are gone, we don’t want FSA staff to develop their own unpublished ways in which firms must comply. They must accept firms have their own processes in place, which may be less prescriptive than at present.”
Although the FSA will still need to have a regard to firms’ processes on issues such as keeping documentary evidence, Goddard says one firm’s processes may be less detailed than another’s.
She warns FSA staff may find it difficult to judge firms once the detailed rules are stripped down and it may open up the possibility of inconsistencies.
Samantha Bennett, press officer at the FSA, states: “Provided firms comply with our rules and principles, they will have the flexibility to arrange their businesses as they see fit. It is senior management’s responsibility to ensure the firm is complying.”
She says the FSA recognises the challenges facing its staff in light of the move to principles-based regulation and the need for appropriate training and supervision.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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