At the City & Financial Conference, Andrew Sykes (Head of Retail Investment Policy), discussed the structure and content of the FSA’s new Conduct of Business sourcebook (NEWCOB). He did so in the broader context of more principles-based regulation and the practical implications for firms.
In his speech Mr Sykes referred to the paper that the FSA published in April 2006, Principles-based regulation - Focusing on the outcomes that matter. According to Mr Sykes this paper set the tone and direction of the FSA’s approach to more principles-based regulation. More principles-based regulation is about the FSA focusing on what the FSA wants the firms to deliver, instead of the firms following specific rules and processes. The challenge for firms is to make a cultural change from looking for a safe harbour within the rules, to a mind-set where they are comfortable with disclosing to the FSA how they have chosen to apply a principle. Part of this will involve firms making changes to their systems and ensuring that they receive the right type of management information.
In addition, Mr Sykes said that the FSA will have to make changes of its own. The FSA will need to make more guidance available to firms although such guidance will not always be in the form of formal guidance but in the form of case studies, Dear CEO letters and industry guidance.
View NEWCOB: The practical implications