FSA denies secret code plot

The Financial Services Authority has denied it is trying to use trade bodies’ guidance to cover up regulatory gaps after concerns were raised by the Association of Mortgage Intermediaries.

The FSA’s latest discussion paper on industry guidance addresses the role of codes of practice generated by trade associations to help their members, and suggests these should be made free of charge.

But Chris Cummings, director- general of AMI, says: “Although we see the FSA’s shift from detailed rules to principles as a positive step, we have made public some of the concerns we have about industry guidance being used to plug regulatory gaps and have identified a further issue which makes us uneasy.

“In its latest discussion paper, the FSA is proposing that trade bodies should make approved guidance available free of charge. We are fundamentally opposed to this.”

He adds: “Why should firms that are members of trade bodies and involved in drawing up guidance subsidise those that are not? We are also concerned about the status of guidance produced by trade bodies which has not been approved by the regulator.”

A spokesman for the FSA says he welcomes AMI’s views but adds: “The FSA is not trying to outsource regulation and there is no compulsion on trade bodies to generate their own codes of practice. Codes of practice are not a substitute for rules.”

Cummings adds: “We support the FSA’s intention that it wishes to work more closely with the industry to find solutions to market failures. It is in the interests of mortgage intermediaries to have a trade body that brings members together.”