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FSA should do more to help brokers comply

I understand the debate that goes on in our regulators’ offices about whether regulation should be prescriptive or principles-based.

Supporters of each approach argue passionately about which way brokers and consumers are best served.

The Financial Services Authority seems to be firmly in the principles camp. It argues that a principles-based approach is better for brokers as they can tailor the rules to suit their business requirements.

In doing so, intermediaries can effectively write their own rulebook that focusses on their business and operational needs. But opponents of this approach argue that it moves the cost of creating detailed rules from the FSA to intermediaries.

As with most arguments, there is probably an element of sense on both sides.

The main downside of the principles-based approach is that a broker can happily operate in the belief that they have understood the principles, designed an effective compliance process and are working to the highest standards, only to find at a subsequent FSA visit they are not.

I hope I don’t understate the im-portance of intermediaries finding suitable products for customers. It is where they add value to the customer relationship and what they are paid to do. But it seems to me that a cornerstone of FSA monitoring is ensuring the right consumer documents are issued at the right time.

Coupled with this, regulatory compliance visitors expect to see certain documents such as compliance logs and rule breach logs.

At the same time, we read that the FSA is critical of a large number of the Initial Disclosure Documents it has seen. It seems these often contain errors such as sections being in the wrong order.

I speak to many brokers every week and know that the vast majority see regulation as an element in helping them build good customer relations. The firms I speak to want to have the right documents in place and to issue compliant documents at the right stage in the process so they can live in the knowledge that an FSA visit will not bring any shocks.

So my challenge this week is to the FSA. It’s about time it gave intermediaries some value for the money they spend each year on fees. It’s about time it did something to help them get it right.

My request should not be too challenging. All I want to see is a library on the FSA website with master copies of all the forms it expects firms to issue. These could be in a downloadable format.

In this principles-based world, some firms would be able to adapt these for their own purposes but those wanting to make sure they have not missed anything could use the FSA’s master copies.


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