FSA publishes policy statement on guidance and waivers

The FSA aims to develop and sustain an open and responsive two-way relationship with regulated firms and its approach to guidance and waivers is being developed within this context. The overall approach is to be responsive, helpful and forthcoming while providing firms with the means to stand on their own feet when working out how to meet regulatory standards and requirements.

The Statement makes the following points on the three principal areas covered - General Guidance, Individual Guidance and Waivers:

General Guidance

All the FSA''s rules and general guidance to firms will be put into the single Handbook of Rules and Guidance due to be published next year.

So it will not be necessary to search through past bulletins and updates in order to trace regulatory guidance still in force.

Supervisors will not operate on the basis of unwritten rules or unpublished standards.

If a firm acts in accordance with general guidance, in the circumstances contemplated by that guidance, the FSA will proceed on the basis that the firm has complied with the aspect of the rule to which the guidance refers.

The FSA will work closely with trade associations and consumer organisations to identify the high priority issues appropriate for general guidance.

Individual Guidance

The FSA will aim to respond quickly and substantively to reasonable requests for guidance on regulatory requirements.

Individual guidance will continue to be given on a relatively informal basis and without charge.

The FSA will not take regulatory action against a firm for behaviour in line with current written guidance to it in the circumstances contemplated by the guidance.

Waivers

The FSA will apply its general requirements in a way that allows them to be tailored to fit the circumstances of particular firms, in accordance with its commitment to a flexible and differentiated risk-based approach.

As waivers can affect the legal rights of third parties, including private consumers, it is important that both the fact of a waiver and its effect should be fully transparent.

So the FSA will publish waivers promptly and in a way that enables users of the Handbook of Rules and Guidance to readily see what waivers have been given in relation to particular rules.

Next Steps

The FSA''s policy on guidance and waivers will be reflected in the Supervision Manual, which will form part of the FSA Handbook. The FSA would like to receive comments - by 1 December 1999 - on today''s Policy Statement and will take account of these in preparing the consultative draft of the relevant part of the Supervision Manual. It is planned to publish a consultation draft of the Supervision Manual in the first quarter of next year.

Notes for editors

General Guidance: This is published material containing guidance for any person in a particular category or undertaking a particular activity. General guidance will be used to explain regulatory processes and arrangements and to clarify the application of the new legislation. The process of developing general guidance will operate according to disciplines and safeguards set out in the Financial Services and Markets Bill, including formal and informal consultation and cost-benefit analysis.

Individual Guidance: This is guidance given to a particular firm or person in relation to their own circumstances or plans. The giving of guidance on an individualised basis is an established feature of regulatory practice by the FSA and its predecessor bodies. The flow of individual guidance enhances the predictability of the regulatory environment from the viewpoint of individual firms and is a valuable source of intelligence for supervisors and policymakers.

Waivers: These are dispensations which can be given to individual firms in special circumstances. The effect of a waiver is to change or disapply a rule applicable to the firm concerned. The Bill empowers the FSA to modify or disapply its own rules in relation to a particular firm and requires such waivers normally to be published. The FSA can give a waiver a) if it is satisfied that compliance by the authorised person with the relevant rules would be unduly burdensome or would not achieve the purpose for which the rules were made and b) if the waiver would not result in undue risks to persons whose interests the rules are intended to protect.

The Financial Services and Markets Bill received its Second Reading in the House of Commons on 28 June and is expected to become law during the first half of 2000.

Copies of "The FSA''s approach to giving guidance and waivers to firms" are available from the FSA''s publications department.