The FSA has announced it will take account of industry guidance issued by MiFID Connect in its supervision of outsourcing by firms. This is part of the regulator’s recent move to more ‘principles-based’ regulation.
MiFID Connect is a joint project set up by 11 trade associations to support their members in implementing MiFID (the Markets in Financial Instruments Directive). The trade associations include the Association of British Insurers and the British Bankers’ Association.
A new guideline document from MiFID Connect sets out measures that firms may adopt in complying with the FSA Rules relating to outsourcing. It is aimed at ‘common platform firms’: those that are subject to MiFID or the Capital Requirements Directive.
The guidance combines legal interpretation with practical examples.
The FSA plans to encourage greater use of industry guidance. It has stated that the MiFID Connect document should be used to help firms determine how to meet FSA expectations.
Although industry guidance supplements rules rather than replacing them, the FSA has made it clear that it will not take action against a firm that has complied with recognised guidance covering the issue concerned.
From 1 November 2007, when MiFID comes into effect, firms will have to comply with new rules in the FSA’s Senior Management Arrangements, Systems and Controls (SYSC) sourcebook. Companies should check now that their approach to outsourcing is compliant: MiFID does not exempt existing outsourcing arrangements.
Further industry guidance on complying with these rules may well be forthcoming. The FSA is keen for firms to take account of such guidelines in meeting their regulatory obligations.
The MiFID Connect outsourcing guidance is available here.
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The original publication date for this article was 30/05/2007.