THE Financial Services Authority (FSA) is planning a radical overhaul of its rulebook as it seeks to simplify regulation and meet new European Union requirements.

The move is aimed at bringing in a more principles-based approach, rather than relying on prescriptive rules. It comes after complaints within the City over the large number of minor requirements in the FSA’s conduct-of-business rulebook.

Dan Waters, the FSA’s director of retail policy, said: “The move towards principles-based regulation means focusing on the outcomes that really matter rather than on procedural box-ticking.”

The overhaul also seeks to incorporate key provisions of the EU’s Markets in Financial Instruments Directive (Mifid).

Mifid, which comes into effect in November next year, aims to create a pan-European market in financial services that will ensure customers get value for money and greater transparency. The new rules affect how financial firms do business with customers, covering issues such as transparency and best execution of share dealing. Mifid also aims to increase competition among Europe’s stock exchanges.

The financial industry welcomed the FSA’s proposals. Ernst & Young, the accountancy firm, said: “Despite its length, the paper [on reforms] does in fact propose a substantive cutting-back of detailed regulation in a number of areas like complaint-handling and puts a greater onus on firms’ management to work out more for themselves how to comply with higher-level requirements.”

The FSA also said that it planned to cut its workforce by 10 per cent by 2010 as part of a review. It said that the reduction of about 300 employees was roughly equivalent to annual staff turnover at the regulator, which employs 2,800 people.

The FSA’s plans come five years after it took on extended powers under the Financial Services and Markets Act.

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