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Aifa also called on the FSA not to extend the Markets in Financial Instruments Directive beyond its current scope without rigorous analysis of the impact.

The call came in response to FSA proposals contained in a consultation paper that would extend certain regulatory controls to firms not currently subject to the Mifid or the Capital Requirements Directive.

Mifid, which took effect last November, was aimed at stimulating competition among Europe’s stock exchanges and promoting greater investor protection and flexibility for those who use them. The Capital Requirements Directive is a UK requirement for firms to have a minimum amount of capital reserved for any liabilities they may incur.

Chris Cummings, director general of Aifa, said: "We fully supports the FSA's move toward a more principles-based regulatory regime. However, the drive for simplicity can result in significant unintended consequences.

"The FSA should improve its communication with intermediary firms about the role and regulatory status of the different types of guidance.

"Firms that have enjoyed the certainty of rules in the past, and who now find those rules expressed as guidance, will also need a period of transition.

"We also feel that to try and introduce these proposals in October this year is unrealistic and does not allow firms sufficient time. Given the current market turmoil we would recommend October 2009 at the earliest,” Mr Cummings added.