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FSA assures firms they will not be judged retrospectively

The Financial Services Authority 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.

This policy will not be changed by the regulator’s 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, says: “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 it wants to provide firms with the flexibility to run their businesses efficiently and effectively providing they stay within its rules and follow good business practice.

Often – although not always – better treatment of consumers can be delivered through firms’ own initiatives and actions rather than through rules.

It will consolidate further Londons position as a leading financial centre.

It is a key element of the FSA’s response to the challenges posed by the better regulation agenda.

The FSA will be holding surgeries for small firms at the PIMS conference on Thursday 8 and Friday June 9.

They will last for thirty minutes and give firms the opportunity to discuss any regulatory issues with FSA staff on a one-to-one basis in an informal environment.

The FSA has already introduced targeted information and resources for small firms as part of its ongoing commitment to make it easier to do business with. These include small firms application packs, a single invoice for all fees, payments by instalments, e-learning packages, a more targeted website for small firms


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