The current approach to regulation is a hybrid of high level principles and detailed rules. But the FSA says better outcomes will be produced by encouraging a focus on the best action to take in a particular situation rather than a mechanistic process.In the FSA’s Better Regulation Action Plan, the regulator summarises more than 30 recent or proposed improvements to the way it regulates. The aim is that regulation will only be considered if market failures remain uncorrected. It would lift audit requirements for smaller regulated firms, saving around 9,000 companies from having to have annual accounts independently audited, make application packs shorter, reduce the average time from application to authorisation by 25% and cut bureaucracy for approved persons. The FSA argues this will not result in any loss of predictability in the regulatory approach. But a spokeswoman for Savills Private Finance argues: “While it’s important to review the regulation process regularly, too much chopping and changing is confusing.” James Rodea, commercial director of Cluttons Private Finance, agrees: “It’s like football refereeing – there has to be an offside rule so players and fans know where they stand.”
Brokers have expressed concern that Financial Services Authority plans for a principle-based approach to regulation could leave firms and consumers confused.