The UK regulator, the Financial Services Authority (FSA), is moving from relying on detailed rules to a more principles-based system of regulation.

Why is this?

Quite simply, it’s because it wants to focus on what really matters – better outcomes for consumers, investors and markets. And it believes a more principles-based approach is best way to achieve this.

What does this mean for the industry and its customers?

It’s important to realise that this change of emphasis isn’t about lowering standards. In fact, the FSA has been working harder than ever to make sure standards are kept high. Recent major projects which have affected regulation have included:

• the implementation of the Markets in Financial Instruments Directive (MiFID), which triggered a major overhaul of the FSA’s Conduct of Business (COB) rulebook, leaving it considerably smaller. Read more about the FSA’s approach to MiFID and about its proposals for the COB rulebook.
• new European rules on the management of risk (Solvency II), designed to improve consumer protection, modernise supervision and improve international competitiveness of European insurers. You can read more about Solvency II here.
• reviews of the information supplied to customers when they buy financial products, particularly projections of future returns. You can read about the FSA’s consultations here