The Financial Services Authority (FSA) published a paper, Principles-based Regulation - Focusing on the Outcomes that Matter on April 23 setting out its approach to a more-principles-based regulatory regime. The paper was published in conjunction with a conference held on that date at which the FSA and the financial services industry discussed the challenges and opportunities presented by a move towards a more principles-based regulation.
Under the FSA’s new approach, its FSA Handbook will rely increasingly on principles and outcome-focused high level rules rather than detailed prescriptive rules focussing on how outcomes must be achieved. As part of their move to a more-principles-based regulatory regime, the FSA has committed to provide, either directly or through confirmation of industry guidance, a greater range of information to help firms plan their business processes and controls. This recognizes the difficulty of regulated firms attaining confidence that they understand the regulatory environment represented by a less rules-based system. It appears that greater dependence on professional advisors is another likely outcome of the change to more principles based regulation.