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The Financial Services Authority's (FSA) new and radically simplified regime for the conduct of investment business – the Conduct of Business Sourcebook (COBS) - comes into force today.
Reform of the FSA's investment rules has been a flagship project in the regulator's move towards more principles-based regulation. COBS moves away from reliance on detailed prescriptive rules and will be about half the length of the old rulebook. The new rulebook incorporates the implementation of the relevant conduct of business provisions of the Markets in Financial Instruments Directive (MiFID), but also covers firms and business outside MiFID scope.
COBS will benefit consumers by enabling firms to tailor their products and services to their target audience. In addition, the new regime maintains robust standards of consumer protection, and the FSA will continue to expect firms to demonstrate high standards in relation to how they treat their customers.
Dan Waters, Director of the Retail Policy and Themes Division at the FSA, said:
"Our emphasis on more principles-based regulation means focusing on the outcomes that matter, rather than processes and procedures. COBS gives firms the flexibility to achieve the regulatory outcomes we expect in a way that suits them best, but this comes with greater responsibility on firms' senior management to meet these outcomes.
"The new rulebook will be easier for firms to understand and comply with, and we are committed to working with the industry, as well as consumer bodies, to achieve successful implementation of these significant changes. Although the introduction of COBS is being co-ordinated with MiFID implementation, COBS covers non-MiFID firms as well, and it is vital that all firms subject to the regime implement the necessary changes."
The FSA has provided a range of resources to help firms prepare for the new regime, including COBS webpages with case studies and related question and answer material. The FSA has also developed several COBS and MiFID e-learning modules, and will be running a series of COBS workshops from November, aimed particularly at small firms.
Background
1. Policy Statement 07/18: 'Conduct of Business Regime' (published in October 2007), Policy Statement 07/14: 'Reforming Conduct of Business Regulation – Final Feedback on CP06/19' (published July 2007) and Policy Statement 07/6: 'Reforming Conduct of Business Regulation' (published in May 2007) are available on the FSA website.
2. The FSA has published a factsheet for smaller UK financial advisers to help them determine whether COBS applies to them as MiFID firms.
3. Details of the FSA's COBS and MiFID training are available on the training & events pages.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
