The UK's Financial Services Authority (FSA) has issued recommendations for reforming its rules on conduct of business (CoB) in anticipation of the introduction of the EU's Markets in Financial Instruments Directive (MiFID) next year.
The CoB rules cover, among other things, financial promotions, the provision of information and advice to clients, non-advised services and dealing in and managing investments.
The reform of these rules is part of a move towards more principles-based regulation, says the FSA, which is aiming to remove around half the content of the old rulebook covering conduct of business.
The FSA's rulebook has been widely criticised by the industry for imposing unnecessary burdens on the businesses it regulates. Last year the watchdog was attacked by the Centre for Policy Studies which accused the regulator of being "an increasingly defensive and risk-averse organisation", which had contributed to a culture of prescriptive and increasingly complex regulation.
Commenting on the reforms, Dan Waters, FSA director of retail policy, says: "The move toward principles-based regulation means focusing on the outcomes that really matter rather than on procedural box-ticking. It also gives firms the flexibility to achieve those outcomes in the context of their particular business models. It is an approach that fits with the emphasis we place on senior management responsibility."
The new rules will come into force in November 2007 - the same time that MiFID comes into effect in the UK and EU, although the new rules will apply to all regulated firms and business and not just those covered by MiFID.
But the regulator says there may be benefits to consumers and the industry in having a consistent regime and so it is consulting on extending some MiFID standards to non-MiFID firms and businesses.
Earlier this year a group of 11 UK trade associations banded together to influence the way MiFID is implemented following fears that City regulators could take an "overly stringent approach" to the new measures.
The FSA's consultation on MiFID is due to close today, with feedback to be published in January. The FSA is expected to give its final estimate of the cost of implementing MiFID to the firms it regulates by the end of the year.