More Principles-based Regulation

By Paul Grainger – Managing Director, Institutional Division, Resources Compliance

The FSA’s principles-based approach to regulation brings challenges and opportunities in equal measure 14 financial services review March 2008 cover story more principles-based regulation The FSA’s principles-based approach to regulation brings challenges and opportunities in equal measure, as Paul Grainger explains. More Principles-Based Regulation was launched by the Financial Services Authority with great fanfare in April 2007. MPBR as it is often known signals a shift away from prescriptive rules towards an outcomesbased approach to regulation.

The MPBR initiative is not new. My colleague, David Jackman, must take the credit for starting this particular ball rolling in October 2002, when as head of ethics and industry training at the FSA, he issued Discussion Paper 18 entitled ‘An Ethical Framework for Financial Services’. In DP18, David set out a vision that suggested there might be a different approach to regulation based upon ethical values. He stated “In summary, reputation is the key to the business case for ethics, and reputation of the sector and the firms within it is important to all of us. We threaten no ‘stick’ as such, but we would emphasise a significant ‘carrot’; good, ethical behaviour can also be a competitive advantage, and, in time, a way to lighter regulation.”

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