Guidance
In Chapter 2 of the FSA's Enforcement Guide, we make clear that our approach to regulation and enforcement involves a combination of high-level principles, detailed rules, guidance and supporting material, with an increasing emphasis on the FSA's Principles for Businesses ('the Principles').
This is because we believe that an approach that is based less on detailed rules and that focuses more on outcomes will allow us to achieve our regulatory objectives in a more efficient and effective way.
When does the FSA issue guidance or supporting material?
Our outcomes-focused approach includes encouraging firms to exercise judgement about, and take responsibility for, what the Principles mean for them in terms of how they conduct their business. To assist firms in this, we recognise that it is important that they can understand what we expect of them. So, in some areas, we aim to provide greater clarity about our expectations of firms by using guidance and supporting material (such as case studies, examples of good and bad practice, and FSA speeches) to supplement the Principles and support the rules and guidance in the Handbook. The emerging regulatory architecture provides practical examples and other material to support firms. Some of this material comes through industry solutions.
Can firms rely on the FSA’s guidance and supporting material?
The FSA will not take action against a person for behaviour that it considers to be in line with FSA guidance, supporting material or FSA-confirmed industry guidance which were current at the time of the behaviour in question.
Rights conferred on third parties (such as a firm's clients) are not affected by FSA guidance or supporting material, and it does not bind the courts (e.g. in relation to an action for damages for breach of a rule).
Are guidance and supporting material binding on firms?
Guidance and supporting material are not binding on those to whom the FSA's rules apply. Rather, such materials are intended to illustrate ways (but not the only ways) in which a person can comply with the relevant rules.
Guidance and supporting material do not set out the minimum standard of conduct needed to comply with a rule, nor is there any presumption that departing from guidance indicates a breach of a rule. If a firm has complied with the Principles and other rules, then it does not matter whether it has also complied with other material the FSA has issued.
FSA guidance and supporting material are potentially relevant to an enforcement case, for example 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 or rules. The extent to which we may take guidance and supporting material into account when considering a matter will depend on all the circumstances of the case.
Firms should refer to Chapter 2 of the FSA's Enforcement Guide for further information about the status of Handbook guidance and supporting material.
What about "level 3" material produced by the European committees of regulators?
The FSA is a member of the "level 3" European committees of regulators (CESR, CEBS and CEIOPS). These committees issue "level 3" material relevant to applicable EU regulatory standards. "Level 3" material is not binding on firms or the FSA, but may be relied on by firms and may be relevant in an enforcement case in a similar way to the FSA's own guidance. The FSA Handbook will often include a reference to relevant "level 3" material.