Stephen Bland has called on compliance professionals to embrace the FSA's principles-based approach to regulation.
Stephen Bland, retail intermediaries sector leader and director of small firms at the FSA, was speaking at the Compliance Institute conference yesterday.
He outlined the FSA's approach to principles-based regulation.
Bland said: “We still see too many firms with a 'tick box' mentality to compliance, something for which we, the regulator, have also faced criticism. All too often we see firms engrossed in the detail of the rules without truly understanding what the rule is trying to achieve. We believe that withdrawing from prescription and allowing firms the ability to align good regulatory outcomes with good business practice, together with the development of market-based solutions, will be good for firms and consumers. We also believe this approach best offers an opportunity for constructive partnership between us and the regulated community going forward.”
But he emphasised that the regulator would still use detailed rules where appropriate: “For instance, some will be necessary to address problems such as how to ensure that consumers continue to receive clear, simple and understandable information from firms about products and services which is easily comparable with that from other firms. Familiarity of format has proven to help consumer understanding and has been instrumental in helping consumers shop around. Detailed rules will also remain because we have to implement EU Directives such as the MiFID which are heavily prescriptive rather than principles-based.”
Bland also discussed Treating Customers Fairly (TCF). He praised the industry for its approach to improving customer service but added: “There remain too many instances where senior management have yet to deliver improvements further down the organisation, and are therefore yet to deliver benefits to consumers in areas such as disclosure and product design.”
Bland said the regulator's risk-based approach to enforcement would continue under the ARROW 2 banner: “Under ARROW 2 methodology, the output we give to relationship-managed firms is much more focussed on where they stand relative to their peers and on what outcomes their senior management need to undertake to improve their standing. On behaviours, we are trying to move more towards all our supervisors having persuasive conversations with the industry sector they regulate, to apply their judgment to particular situations and to persuade a firm's management that our market oversight perspective and the risk management insights that ARROW gives us will help that firm run its business better, thus winning hearts and minds to meeting our regulatory requirements.”
Bland concluded by emphasising the “responsibility of senior management of firms to deliver where necessary a significant change in the way their businesses are run”.
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