However, it states that this is an opportunity to streamline the more than 10,000-page FCA handbook to support a more competitive and growing financial services sector.
It is tempting for the initial reaction to this to be overwhelmingly positive, making complying with the FCA handbook easier for firms. However, it is a case of being careful what you wish for.
Slimming down the regulatory handbook could mean that advisers will need to adapt to a new regulatory landscape, with potentially less prescriptive rules but a greater emphasis on consumer outcomes.
Whether a firm has complied with the rules could be more difficult to identify and require more work to evidence sufficiently. Advisers will need to navigate the less prescriptive rules while ensuring they are acting in the best interest of their clients or delivering good outcomes.
As a general rule, where rules are less prescriptive, they require a deeper understanding of the new regulations and a commitment to continuous learning and adaptation.
Additionally, rules may be deleted but may, in effect, still be in place as a way of demonstrating compliance with the consumer duty and other less prescriptive rules.
This could increase the need for obtaining advice on complying with the streamlined handbook.
Advisers can use the recent implementation of the consumer duty as an example of how this approach to regulation works.
Although the consumer duty included less prescriptive rules and a more outcomes-focussed approach, this required firms to put significant resources into evidencing and monitoring outcomes.
At a recent conference I attended, which included a number of overseas regulators in attendance, it was mentioned that although the consumer duty represented a noble aim, it also had aspects that reduce the UK’s international competitiveness as a regulatory regime due to the high bar it sets and the additional compliance and recording burdens that it places on firms.
As ever, the impact will depend on the detail of how a slimmed down regulatory handbook is implemented.
Enhanced consumer protection
Labour’s plan references the need for consumer protection and financial inclusion. This is one aspect that could come into conflict with the ambitions of growth, international competitiveness and innovation and requires a balancing act.
Labour’s plan includes adopting a co-ordinated cross-sectoral approach to fraud prevention.
Fraud and financial crime are areas that have been moving up in priority for regulators and therefore need to also be moving up in firms’ own agendas.
Although not all financial services firms are subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, all firms need systems and controls to prevent financial crime. This area of focus will continue under the new Labour government.
