FSA to abandon principles-based regulation
The Association of Independent Financial Advisers (AIFA) asked the Financial Services Authority (FSA) to be "careful" in response to the regulator's abandonment of 'principles-based' regulation in favour of an 'outcomes-based' approach.
Speaking to COVER, Chris Cummings, chairman of the representative body, said: "The speech was aimed mostly at the banking community and Hector Sants said the principles didn't work for those with no principles. That doesn't apply to advisers. We are talking to the FSA about what this means for us as harsher regulations for the community would be unfair. So I think the FSA needs to be more careful with its speeches."
Cummings was responding to Hector Sants' recent speech in which the chairman of the FSA said the concept of working on principles alone was 'illusionary'. Sants added: "The FSA, when it supervises, needs to supervise to a philosophy that says 'It will judge firms on the outcomes and consequences of their actions not on the compliance with any given individual rule'. Given this philosophy, a better strapline is 'outcomes-focused regulation'."
Cummings added: "I'm not a fan of regulation speech - we need a dialogue and the regulator needs to talk to us, not in terms of regulation by press release which is what Lord Turner did. We will be letting our members know what, if anything, they need to do. We need to ask questions about the cost of this, the consequences and the benefits. It's long been an AIFA view that any changes must have cost benefits."
