FSA confirms Industry Guidance on outsourcing
16th May 2007The Financial Services Authority (FSA) today confirmed that its supervision of outsourcing by firms will in future take account of industry guidance which has been issued by MiFID Connect.
This is the first guidance developed by industry which the FSA has recognised since publishing its Discussion Paper 'FSA confirmation of Industry Guidance' in November 2006, and the first formal Industry Guidance related to the Markets in Financial Instruments Directive. The guidance covers so-called 'common platform' FSA firms - those subject to MiFID and/or the Capital Requirements Directive. MiFID Connect is a joint project set up by 11 trade associations to support their members in implementing the Directive.
The Discussion Paper set out plans to encourage greater use of Industry Guidance as the FSA moves toward a more principles-based approach to regulation.
Michael Folger, FSA Director of Wholesale and Prudential Policy, said:
"We stressed in our paper last month on Principles-based Regulation that industry guidance will play a key role in helping firms determine how best to meet our expectations in the new regulatory environment. We think it right to proactively confirm this MiFID Connect guidance now ahead of our formal response later this year to the comments we have received on the industry guidance Discussion Paper. It will help common platform firms ensure their existing outsourcing arrangements will meet the FSA new requirements from 1 November 2007, when MiFID comes into effect. Firms need to start checking their approach now as MiFID does not exempt existing outsourcing arrangements."
The FSA has worked closely with MiFID Connect over several months to ensure that its outsourcing guidance meets the recognition criteria. The guidance strikes a balance between legal interpretation and practical examples and will act as a benchmark for future industry guidance requests. Then FSA will review the wording of its confirmation of the guidance in light of its formal response to the Discussion Paper.
