The Financial Services Authority (FSA) has today published feedback to its Discussion Paper on platforms, published in June 2007, which confirms its commitment to the current, principles-based approach to platforms.
In the Discussion Paper, the FSA set out its view that principles-based regulation is the right approach for platforms, as in a new and rapidly developing market detailed rules risk stifling innovation and are likely to become out of date quickly - respondents agreed.
However, the FSA remains concerned about a number of potential risks it highlighted in the Discussion Paper: that platform adoption may lead to increased complexity and costs for consumers (without new – or valued – services being received in return), and create conflicts of interest for advisers, and the risk that advisers may not always have the appropriate competence to provide the level of investment advice they are offering through a platform.
As a result, the FSA will be looking at platform providers and intermediaries that use platforms to ensure that customers are being treated fairly through the existing regulatory approach.
Dan Waters, Director of Retail Policy and Themes at the FSA, said:
"We are grateful to all those who responded to our Discussion Paper, and are pleased with the level and quality of responses we received. We believe that our principles-based approach to platforms, favoured by the industry, is appropriate - this gives firms discretion over how they approach platforms, and in a way that treats customers fairly, in line with their own business models.
"However, we are anxious that firms place customers at the heart of their operations when using platforms, and we are planning follow-up work with platform providers and intermediaries to ensure that this is the case."
In the second quarter of 2008, the FSA will begin thematic work on intermediaries' use of platforms to assess current market practice and the extent to which firms are treating customers fairly. The FSA will also shortly be contacting platform providers to examine in more detail and seek to clarify and improve standards of costs and services disclosure across the industry.
The Financial Services Authority (FSA) has today published feedback to its Discussion Paper on platforms, published in June 2007, which confirms its commitment to the current, principles-based approach to platforms.
In the Discussion Paper, the FSA set out its view that principles-based regulation is the right approach for platforms, as in a new and rapidly developing market detailed rules risk stifling innovation and are likely to become out of date quickly - respondents agreed.
However, the FSA remains concerned about a number of potential risks it highlighted in the Discussion Paper: that platform adoption may lead to increased complexity and costs for consumers (without new – or valued – services being received in return), and create conflicts of interest for advisers, and the risk that advisers may not always have the appropriate competence to provide the level of investment advice they are offering through a platform.
As a result, the FSA will be looking at platform providers and intermediaries that use platforms to ensure that customers are being treated fairly through the existing regulatory approach.
Dan Waters, Director of Retail Policy and Themes at the FSA, said:
"We are grateful to all those who responded to our Discussion Paper, and are pleased with the level and quality of responses we received. We believe that our principles-based approach to platforms, favoured by the industry, is appropriate - this gives firms discretion over how they approach platforms, and in a way that treats customers fairly, in line with their own business models.
"However, we are anxious that firms place customers at the heart of their operations when using platforms, and we are planning follow-up work with platform providers and intermediaries to ensure that this is the case."
In the second quarter of 2008, the FSA will begin thematic work on intermediaries' use of platforms to assess current market practice and the extent to which firms are treating customers fairly. The FSA will also shortly be contacting platform providers to examine in more detail and seek to clarify and improve standards of costs and services disclosure across the industry.
© 2008 Financial Services Authority