Frequently asked questions

The FSA is committed to making a decisive shift towards more principles-based regulation, including making the regulatory architecture more principles-based, with greater emphasis on high-level and outcome-focused rules.

We recognise in making this shift the industry may wish to create its own guidance to assist firms that want more information on our principles and high-level rules. We also recognise that some firms may feel more comfortable in following guidance which they know the FSA has reviewed and confirmed. Updating our approach to the confirmation of Industry Guidance enhances the availability and usefulness of a tool firms and sectors can use in deciding how to meet our requirements consistently aligned with good business practice.

We define Industry Guidance as 'information created, developed and freely issued by a person or body, other than the FSA, which is intended to provide guidance from the body concerned to the industry about the provision of our Handbook'. It could for example include case studies, providing examples of good, bad or minimum practice and points for consideration in meeting a particular area of our requirements.

The producers of Industry Guidance may wish to seek confirmation from the FSA that their guidance meets our minimum regulatory requirements. Where we grant confirmation, the guidance will become 'FSA confirmed Industry Guidance'.

When a piece of Industry Guidance has been confirmed, it means the FSA has agreed that the guidance is a useful tool in helping a firm meet their regulatory requirements in a specific area. Where confirmation has been granted on guidance which relates to a principle, it may be the guidance goes some way to a firm meeting its obligations. Where this occurs, the guidance will be clear that it only meets part of that particular requirement.

Should a firm follow a piece of FSA confirmed Industry Guidance and it is appropriate for them to do so, the FSA will take this into account when exercising its regulatory functions.

We anticipate trade associations, professional bodies and other representative organisations are most likely to develop Industry Guidance. However, this should not limit firms and networks from producing guidance. We expect the demands and the needs of the industry and consumers will drive take-up.

One of the main points of Industry Guidance is that it is developed by the industry for the industry. On this basis, we do not think it appropriate for professional advisory firms to develop Industry Guidance alone, but we accept that they may work with other industry bodies or others in developing Industry Guidance.

We have been asked whether organisations outside of the UK can seek confirmation on Industry Guidance. Providing the guidance meets our confirmation criteria, is a product of the industry and written in English, we see no problem in granting confirmation.

The use of Industry Guidance by a firm is optional. A firm's senior management need to determine whether a piece of Industry Guidance assists them in meeting their regulatory obligations.

We will not strip the Handbook of necessary or valuable guidance. However we will in future look more carefully at whether including guidance is required. Where we provide guidance we will aim to make it less detailed and more outcome focused than has sometimes been the case in the past. We see industry guidance as supplementing rules, not replacing them.

Supervisors will not monitor a firm's use of Industry Guidance. Our supervisors will continue to focus on whether a firm is meeting our regulatory requirements. We will still continue to conduct thematic work, and this may involve looking at a firms' compliance with our rules in areas which Industry Guidance covers.

As our confirmation wording states, the FSA will take into account the use of Industry Guidance when exercising its regulatory functions. This means, where a firm has followed a piece of Industry Guidance correctly, and it was appropriate for them to do so, the FSA will not take action against that firm.

However, when a breach has been established, the use Industry Guidance may be used in enforcement cases. Examples of the ways in which the FSA may seek to use Industry Guidance in an enforcement context are similar to those in which it may use FSA Guidance or supporting materials. As set out in Chapter 2 of the new Enforcement Guide, these include:

1. to help assess whether it could reasonably have been understood or predicted at the time that the conduct in question fell below the standards required by the Principles.
2. to explain the regulatory context.
3. to inform a view of the overall seriousness of the breaches e.g. we could decide that the breach warranted a higher penalty in circumstances where the FSA had written to chief executives in the sector in question to reiterate the importance of ensuring a particular aspect of its business complied with relevant regulatory standards.
4. to inform the consideration of a firm's defence that the FSA was judging the firm on the basis of retrospective standards; and
5. to be considered as part of expert or supervisory statements in relation to the relevant standards at the time.

For more information on how the use of Industry Guidance may be used in enforcement cases please use the following link to our Decisions Procedure and Penalties manual (DEPP 6.2.1(4)G). Additional guidance can also be viewed in our Enforcement Guidance (EG).

FOS decisions are not about enforcing FSA rules: they are about the rights of consumers. Industry Guidance cannot affect the rights of third parties, such as consumers, when they seek to enforce their rights through the courts or the FOS.

There is no explicit requirement for then FOS to consider Industry Guidance, but relevant Industry Guidance may help the ombudsman to establish what was thought to be good industry practice at a particular time or to explain to a consumer that a firms approach is not unique.

The FSCS has said that if our rules continue to provide the same levels of consumer protection it does not anticipate our proposals will cause any major problems. The FSCS is limited to determining claims based on civil liability and most claims are not determined on the finer points of compliance with our rules.