The UK Financial Services Authority (FSA) has restated its approach (in the context of regulation and enforcement) to the various types of informal guidance it employs.
The FSA uses informal guidance and supporting material to supplement its rules and formal guidance and to assist firms’ understanding of what the FSA expects of them. This includes case studies, examples of good and bad practice, speeches made by FSA personnel, “Dear CEO” letters and industry guidance which has been confirmed by FSA.
The FSA stated that informal guidance and other supporting material that the FSA issues is not binding on regulated firms. The FSA intends that material illustrate ways (but not the only ways) in which regulated firms can comply with the relevant rules.
The FSA will not take action against a person for behavior that it considers to be in line with FSA guidance, supporting material or FSA-confirmed industry guidance that was current at the time of the behavior in question. The FSA’s view is that guidance and supporting material do not set out minimum standards of conduct needed to comply with rules, nor is there any presumption that departing from FSA guidance indicates a breach of a rule. If a regulated person or firm has complied with the FSA’s Principles and rules, then it does not matter whether it has also complied with other material that the FSA has issued.
The FSA took care to point out that rights conferred on clients of regulated firms and other third parties are not directly affected by FSA guidance or its supporting material since it does not bind the courts (e.g., in relation to an action for damages for breach of an FSA rule). Nonetheless, it is at the very least rebuttable evidence of the construction of any relevant provision.