By James Hamilton, J.D., LL.M.
There is no prospect of the UK Financial Services Authority moving to a regime based exclusively on principles, noted Chairman Callum McCarthy, since there will always be a mixture of specific rules and general principles. The great policy question, in his view, is to find the correct balance of principles and rules. In recent remarks, he noted that there is a constant flow of new rules from the European Union and the trade associations, all in theory committed to principles rather than rules. Further, there is very often a contrast between the expressed wish of senior management to embrace principles and the concerns of their lawyers and compliance officers who prefer the certainty of rules. Thus, while the balancing will not be easy, said the chairman, the FSA is determined to achieve it.
The FSA chief said that senior management will play a crucial role as the FSA moves toward more principles-based regulation. The FSA expects them to think hard about the principles being adopted, not in terms of mechanics, but rather in terms of the outcomes the FSA is seeking.