FSA Info Part 3
FSA UK Background & Information part 3
Regulatory principles
The four statutory objectives listed on page 2 are supported by a set of principles of good regulation which the Financial Services Authority must have regard to when discharging its functions under law and carrying out its roles and responsibilities in the financial sector.
These are:
• efficiency and economy: the need to use its resources in the most efficient and economic way.
• role of management: a firm’s senior management is responsible for its activities and for ensuring that its business complies with regulatory requirements. This principle is designed to guard against unnecessary intrusion by the FSA into firms’ business and requires it to hold senior management responsible for risk management and controls within firms. Accordingly, firms must take reasonable care to make it clear who has what responsibility and to ensure that the affairs of the firm can be adequately monitored and controlled.
• proportionality: The restrictions the FSA imposes on the industry must be proportionate to the benefits that are expected to result from those restrictions. In making judgements in this area, the FSA takes into account the costs to firms and consumers. One of the main techniques they use is cost benefit analysis of proposed regulatory requirements. This approach is shown, in particular, in the different regulatory requirements applied to wholesale and retail markets.
• innovation: The desirability of facilitating innovation in connection with regulated activities. For example, allowing scope for different means of compliance so as not to unduly restrict market participants from launching new financial products and services.
• international character: Including the desirability of maintaining the competitive position of the UK. The FSA takes into account the international aspects of much financial business and the competitive position of the UK. This involves co-operating with overseas regulators, both to agree international standards and to monitor global firms and markets effectively.
• competition: The need to minimise the adverse effects on competition that may arise from the FSA’s activities and the desirability of facilitating competition between the firms it regulates. This covers avoiding unnecessary regulatory barriers to entry or business expansion. Competition and innovation considerations play a key role in the FSA’s cost-benefit analysis work. Under the Financial Services and Markets Act, the Treasury, the Office of Fair Trading and the Competition Commission all have a role to play in reviewing the impact of the FSA’s rules and practices on competition.
To continue reading about the FSA please go to Page 4
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