The FSA has confirmed it will continue to judge firms' standards of product sales and financial advice by the standards and rules at the time of sale and not retrospectively.
The regulator said this policy will not be changed by its move towards more principles-based regulation.
The framework the FSA operates under dictates that it will not take action against firms after the event for mis-selling, provided they meet its requirements under its high level principles and the rules set out in its handbook.
Stephen Bland, director of small firms at the FSA, speaking at the PIMS conference said: "The FSA believes that firms should be assessed against the assumptions that were reasonably made under the regulatory context of the time and there should be no retrospective application of later, more exacting standards.
"This has always been, and will continue, to be our view on retrospective regulation as we move towards more principles-based regulation. Firms can also help themselves by keeping an adequate record of any advice given to consumers and the reason for it.
"Principles-based regulation focuses on the outcomes, and less on the route to achieving them. We believe this will allow firms to react swiftly and flexibly in a fast-changing world."
The FSA believes a move to a more principles-based approach is important because:
