The Financial Conduct Authority is set to issue an "open invitation" to the industry in a bid to shape future regulation, as the watchdog admits some of its principles can be confusing for smaller firms.
Speaking at a City of London and Cicero event in London today (October 21) Christopher Woolard, executive director of strategy and competition at the FCA, said the regulator would be asking for input from the public and financial services industry over the coming months in order to shape its future regulation of the financial services market.
Mr Woolard said the FCA would publish detailed papers on the future of its regulation, including an analysis of future market dynamics, a discussion paper about its principles, and a consultation paper on duty of care.
The FCA director said the review would be a movement away from narrower compliance with its rules towards a focus on "delivering the outcomes we want for the users of financial services".
The announcement came as Mr Woolard admitted the FCA's current archive of principles, its handbook and "hundreds of pages" of binding technical standards onshored as part of its Brexit preparations posed an issue for smaller businesses in the industry.
He said: "We know this affects small business – those lacking compliance departments – most. While they see the benefits that regulation brings to their firms, many struggle to understand how FCA regulation applies to them.
"They find the handbook difficult to navigate and rely on external compliance advisors to interpret new rules. Often these advisers have a disincentive to make things simple."
Mr Woolard said the regulator was working to "simplify and streamline" its rules through a handbook review and was currently exploring changes to its principles which could make its expectations clearer to firms.
He said: "This does not mean a light-touch approach, nor does it imply that market participants will have a free hand. Rules remain important. But hopefully clearer and easier to understand."
Mr Woolard added: "For example, one of our principles for business requires firms to communicate in a way which is fair, clear and not misleading, and pays due regard to the information needs of its clients.
"Reading this in 2019 is quite difficult – a mouthful actually. And with our knowledge of behavioural economics, it seems like too low a bar. Its focus is the firm’s processes, rather than the outcome we want to see – consumers understanding their options."
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