The FSA has issued a consultation paper "Reforming remuneration practices in financial services". The FSA Code of Practice contains a general requirement that "a firm must establish, implement and maintain remuneration policies, procedures and practices that are consistent with and promote effective risk management". The consultation proposes that this would become an FSA Handbook rule. Firms breaching FSA rules can be subject to disciplinary action. Initially, it is proposed that the requirements of the Code will apply to about 45 of the largest banks, building societies and broker dealers operating in the UK. However the consultation also invites discussion on the idea that the Code should be applied to all other FSA-authorised firms.
The consulting period on implementation of the Code for larger banks and broker dealers closes on 18 May. The period for discussion and feedback on the idea of extending the Code to other firms regulated by the FSA will run until 18 June.