Changing the Handbook
Related information
The Principles
See the FSA Handbook for the 11 Principles.
We are committed to simplifying and shortening the Handbook. We are focusing on those areas of the Handbook where the benefits of removing detailed rules seem to be greatest, and where other changes, such as the need to implement EU directives, give us an opportunity to introduce change.
We have for example already consulted on, and in some cases implemented, changes to the conduct of business rules for investment business and training and competence requirements. In changing the Handbook, we have aimed to discontinue detailed rules and have relied on high-level, outcome-focused principles and rules.
The Principles
The Principles set overarching requirements for all firms and are themselves rules. They focus on what our regulations are trying to achieve and so are expressed in terms of outcomes and behaviours rather than processes or procedures. We do not intend to change the Principles or add to them.
Being ready, willing, and organised to follow the Principles is a critical factor in our assessment of your firm. We believe proper compliance with the 11 Principles is necessary, and in many cases will also be enough, to ensure the ultimate outcomes we seek to achieve will be realised.
High-level, outcome-focused rules
Whilst the Principles set out the highest level of outcomes we are seeking to achieve, they still need to be underpinned with further rules. We intend to have fewer rules underneath the Principles and, where we decide further rules are necessary, to express them in an as outcome-focused a way as possible.
Like the Principles, these rules will not focus on a specific process that a firm should undertake, but an end point that should be achieved.
Detailed rules will nonetheless remain. They will be required to implement detailed requirements in European directives over which we have no discretion. There will also be a range of scenarios in which the detailed rules will be the most appropriate way for us to secure the regulatory outcome we require. Equally we may find that a prescriptive approach is justified by the need to ensure consistency across the industry. For the purposes of consumer protection, for instance, we may continue to define the format and content you must use to provide certain kinds of information to consumers, allowing easy comparability between different products.
Our new conduct of business sourcebook for investment business comes into force on 1 November - make sure you are aware of how this might affect you.
FSA guidance and supporting material
If a firm has complied with the Principles and high-level rules, then it is irrelevant whether they have complied with any other material we have issued.
But firms can rely on all the material we publish regardless of what form we publish it. This is fundamental to our approach. So if you take a reasonable course of action which we have indicated, as being in compliance with a rule, then we will not take action against you for not having complied with the rule.
The Handbook sets out the minimum acceptable standards of firm behaviour. We do not require you to go beyond this level of compliance, although many of you do for commercial reasons.
Discussion of good practice can and does come up about firms' behaviour and we will continue to engage with and foster dialogue where we can add value. But in our discussions with, and communications to, you about our requirements we will continue to focus on indicating where the minimum threshold of compliance lies (sometimes by pointing out good and poor practice) and to make clear that going beyond the minimum standard is for you to decide.
We will continue to exercise judgement on a case-by-case basis when it comes to deciding what status we want published material to have, i.e. formal guidance or less formal supporting material. Our overall objective is to help you make the right decisions about what processes and controls you should have in place to meet our requirements.
Industry Guidance
To help you work out how to meet our expectations under principles-based regulation, we can see a greater role for industry guidance.
