One oft-used complaint about today’s children is that ‘they watch too much television’. And I would have to agree. But I would not confine this to today’s kids – my own childhood is completely benchmarked by what programme I was hooked on at the time. In years’ gone by, the nation’s children would have watched and learnt from Play School – a programme which gave us the delights of Hambel, Jemima and Brian Cant. It was a sad day when it was sent to TV Heaven and the children’s schedules have never been the same without the likes of Floella Benjaman and Derek Griffiths. After all, at any age we need to learn and be educated, even if it is through the medium of soft toys.
While the world may no longer have Big Ted and Little Ted, let us go through the AMI window, as I tell you the story of Big ‘G’ Guidance and Little ‘g’ guidance. Part of AMI’s role is to provide guidance – note the use of a little ‘g’ – to our members on a variety of issues. AMI does this through newsflashes and newsletters but mostly through our factsheets which, in the last few months alone, have covered topics such as ‘Dealing With Retention Business’, ‘Treating Customers Fairly’ and ‘Sub-prime Financial Promotions’. We don’t insist our members read or use these factsheets or police their use – that would be Guidance with a big ‘G’ – it is purely up to them, but they are available and aim to provide support to intermediaries in various areas.
A growing role
As part of its move to a more principles-based regulatory regime, FSA see a growing role for industry guidance. So, in the future, the factsheets AMI produces could seek ‘Financial Services Authority (FSA) confirmation’ – this would mean that when the FSA looked at a firm’s process and the guidance they have used, the regulator would take this into account when making its decision on whether the firm was acting compliantly.
This month, the FSA published a discussion paper setting out its thinking on industry guidance, defining it, setting out how it can recognise guidance and how bodies such as AMI can seek ‘FSA confirmation’. AMI has been heavily involved with the FSA on this issue, indeed we allowed our equity release factsheet to be used as a case study in the Discussion Paper.
For the FSA, the paper:
- Recognises that industry guidance is not new, but already exists in different parts of the regulatory system;
- Makes clear that industry guidance will supplement rules, not replace them;
- Sets out a standard process for the FSA to recognise industry guidance;
- Makes clear the standards that will be applied in recognising such guidance; and;
- Confirms that the regulator will not take action against a firm which has complied with recognised guidance covering the issue concerned.’
AMI will be responding formally to the Discussion Paper and we feel strongly on a number of issues. Firstly, as mentioned above, any guidance we offer to members is little ‘g’ guidance and it is not AMI’s intention to become a second-tier regulator policing our members to ensure they have complied with the information we publish. It’s up to our members’ to decide how they use our guidance.
Secondly, we are concerned that industry guidance is not used to simply plug any regulatory gaps. With the move to a more principles-based regulator regime, it may well be that we have a gap between the high-level principles and the prescribed rules, necessitated, for example, by European directives. While we are broadly supportive of the move to principles, we are concerned that prescribed rules are not removed only to be replaced by a raft of varying, possibly conflicting, industry guidance.
In the Discussion Paper, the FSA defines industry guidance as: ‘Information created, developed and freely issued by a person or body, other than the FSA, which is intended to provide guidance from the body concerned to the industry about the provisions of our Handbook’. It proposes a form of ‘FSA recognition’ of industry guidance so that the industry can ‘place an appropriate level of reliance’ on it and ‘to encourage its development’. The provider of the industry guidance has the responsibility for keeping it up-to-date and relevant and the FSA may withdraw ‘FSA confirmation’ although there will be no time limits on how long ‘FSA confirmation’ will last.
Our initial thoughts on the definition is that it is too broad and we do not agree that any guidance AMI chooses to produce, which is then ‘confirmed’ by the FSA, should have to be made available free-of-charge. AMI members pay their subscriptions to receive information and it is not our intention to provide any ‘AMI guidance’ we produce free-of-charge to non-members. We do not believe our members, who may well have been involved in drawing up the guidance, subsidise those who are not.
The other point is around our role in providing industry guidance. Where, for example, AMI is contacted by members to provide guidance in a specific area, we will facilitate the provision of this guidance. We will bring the industry together (including consumer groups) to produce it. Firms must come together to agree what ‘good’ looks like and this little ‘g’ guidance will be drafted by practitioners rather than AMI itself.
Rob Griffiths is Associate Director of the Association of Mortgage Intermediaries (AMI)
