The Financial Services Authority in the UK is moving toward more principles-based regulation and cutting out unnecessary rules, the regulator announced today.

The FSA set out the first phase of its effort to simplify its rulebook by removing unnecessary rules and guidance. The rulebook review will focus on eliminating or changing requirements that are more restrictive than needed to achieve the FSA’s statutory objectives, do not deliver benefits to justify their costs, or are not consistent with the FSA’s focus on senior management responsibility, it said. The initiative forms part of the FSA’s move towards a more principles-based approach.

In Canada, the British Columbia Securities Commission has proposed a move of its own toward more principles-based regulation, but other regulators haven’t taken up the cause; and its new securities act has been delayed.

Late last month, the Investment Dealers Association announced it has struck a committee to examine the content of regulation — an exercise that may also produce recommendations concerning unnecessary, superfluous rules. It will report in autumn 2006.

The first phase of the FSA review covers simplification and streamlining of anti-money laundering requirements, and registration and proficiency regimes. It also outlines a major review of the retail business conduct regime.

“We are determined to be more rigorous about the costs and burdens that regulation imposes on firms. We are also simplifying our handbook requirements and the way we express them, which will help all firms but particularly smaller ones who do not have access to expert advice,” said FSA chairman Callum McCarthy. “It sits alongside other major initiatives we have in hand to make us an easier organization to do business with.”

For example, it proposes to reduce the scope of detailed rules on training and competence, so that they do not apply to individuals who only deal with wholesale (or non-private) customers.

Regarding anti-money laundering, the main proposal is to take a less prescriptive approach that will put a focus on senior management responsibility for AML systems and controls rather than simply treating AML as complying with detailed requirements. “Firms will benefit from having more flexibility to implement AML systems and controls in the most appropriate way for them. It will also create a better fit between FSA requirements and money laundering legislation and industry AML guidance, so the overlaps are less,” it says.