CISI Forum Urges FSA to Reduce Volume of Compliance Instructions

A Chartered Institute for Securities and Investment (CISI) survey to its compliance sector members highlights that the Financial Services Authority’s (FSA) high volume and wide variety of written material sent to firms is weakening rather than helping good compliance. Of respondents, 88% said that “the volume of FSA material with which I have to keep up to date is a serious drain on the compliance resource within my firm.”

Additionally, eight out of 10 CISI compliance sector members said a cut in FSA output would actually improve compliance at their firm.

The CISI is urging the FSA to reduce what has clearly become a counterproductive burden. The CISI Compliance Professional Interest Forum (PIF) will make a presentation to the Financial Services Practitioner Panel (FSPP), the body that provides industry input to the FSA.

The CISI Compliance PIF found that between 1 January and 16 March 2011 the FSA issued 111 documents, comprising 1,929 pages. This output included 15 different types of document, ranging from formal discussion papers, consultation papers and policy statements, through enforcement final notices to ‘informal guidance’ including newsletters and speeches.

The CISI Compliance PIF chairman, Julian Sampson, chartered Fellow of the Chartered Institute for Securities (FCSI), said: “Part of the problem is that firms feel compelled to read almost everything produced by the FSA – 69% of those surveyed said so. This is because the distinction in impact between different documents is blurred. While the FSA does use a ‘star rating’ system, indicating the relative importance of its material, this applies only to formal documents, such as consultation papers and policy statements.”

The CISI Compliance PIF found that although many documents might not be relevant to any given firm, it is dangerous to set them aside until it has been reviewed in detail. A ‘read it all’ policy may be labour-intensive, but the wisdom of this approach has been often demonstrated. For example, documents stated not to be ‘formal guidance’ appear in disciplinary final notices, with the FSA criticising the firm in question for not taking account of the document’s content.

To assist the FSA in getting its message across to firms, the CISI Compliance PIF has suggested that:

  • The star-rating system used for formal communications be extended to all other FSA output (as supported by 91% of respondents to the survey).
  • The FSA should consider the timetable of other institutions for issuing material, in particular the European Commission (EC). It should avoid issuing its own documents on the same subject when it is known that EU consultation is in hand.
  • The regulator should reduce the amount of informal guidance issued. Speeches need not be accompanied by press releases, newsletters could be reduced in number.
  • The FSA should stop or limit its practice of issuing press releases. Regulated firms are well able to review material without the need for press releases.


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