The Financial Conduct Authority (FCA) must adopt greater transparency and a more market oriented approach to regulation, the Association for Professional Financial Advisers (APFA) has said.
The comments were made in a response to the Financial Services Authority's (FSA) consultation paper, Journey to the FCA.
Chris Hannant, policy director at APFA, said: "The consultation paper contains a number of proposals that will lead to better regulation if applied in the right way.
"APFA believes the competition objective for the FCA should lead to it taking a more market oriented approach. In the past too little regard has been paid to the cumulative effect of regulation on both consumer outcomes and the profession as a whole.
"It is incumbent upon the FCA to ensure that we have a regulatory regime that, whilst protecting the consumer, leaves room for one of the UK's most successful industries to grow and prosper.
"Improved transparency should mean a presumption of openess unless there is a pressing need for confidentiality. The FSA failed to achieve the right balance between confidentiality and transparency."
He added the Arch Cru settlement with Capita and others was a "prime example of the regulator making decisions that have a significant impact on the market but with little transparency".
Hannant said the FCA must "do better" and be more willing to disclose details of these decisions.
"The FCA must also adopt a far more balanced approach to its publishing of enforcement action and early warnings. In two-thirds of cases potential enforcement is not publically concluded, which can result in firms bearing an inaccurate on-going slur against them. The FCA should introduce a clear process that will make it explicit that firms are exonerated when it is concluded that no wrongdoing has taken place following a warning notice," he added.
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