Thematic reviews are now a well established part of FSA's approach to regulation. They are one aspect of the FSA's drive to develop over time a more "Principles-based" approach, with fewer detailed rules and greater emphasis on meeting the underlying Principles, such as treating customers fairly, in a proportionate way. Thematic work plays a particularly important part in the regulation of smaller firms, with which the FSA does not generally have an ongoing supervisory relationship.
Some thematic work - TCF is the prime example - is "big picture": extending over a long period, and relevant to all, or a substantial proportion of, regulated firms. Some sector-specific projects may also achieve a high profile, for example the FSA's major programme of work to improve standards in the sale of Payment Protection Insurance (PPI). Other projects may be smaller in scale and narrower in focus. They may therefore attract less public attention; but for firms within their scope they may be just as important as the higher-profile projects.
The FSA publish information in advance about the areas where thematic work is planned. In relation specifically to smaller firms their 2007-8 business plan refers to:
- ways that firms that offer advice identify, manage and mitigate risks that customers are not treated fairly;
- improving regulatory compliance, particularly in the secondary general insurance market;
- credit unions' practices in relation to the JMLSG Guidance Notes;
- the quality of RMAR submissions.
The FSA also say that they "will increase the extent to which we use information provided by firms on the practices of other firms in their sector" and that they will seek to ensure that their thematic work covers significant numbers of those firms which otherwise have little or no contact with the FSA.
Other areas of likely thematic focus include (this is not a complete list):
- the implementation of the new conduct of business rules (from November 2007);
- compliance in the sub-prime mortgage sector;
- standards in the sale of lifetime mortgages and the introduction of regulation of home reversion schemes;
- the effectiveness of depolarisation and assessment of the suitability of recommendations to advised clients;
- continuing work on Payment Protection Insurance;
- the handling of client money by insurance intermediaries (feedback on recent work in this area);
- assessment of the industry's implementation of the new approach to anti-money laundering;
- information security risks to both firms and consumers;
- work in relation to private equity, including feedback on the November 2006 discussion paper;
- market abuse, including controls over information in non-public mergers and acquisitions;
- management of risks in the use of derivatives by asset managers;
- disclosure of side letters by hedge fund managers;
- compliance with rules on the use of dealing commission;
- procedures for handling confidential information;
- delivery of contract certainty in the insurance market;
- transparency of commission in wholesale insurance;
- collateral management practices in investment banks;
- banks' controls and processes in relation to trade confirmation, focusing on equity, interest-rate and commodity derivatives.
FSA also monitor financial promotions. An update on their financial promotions work in August 2006 indicated that areas for future work included:
- direct mail;
- internet promotions;
- mortgage brokers;
- spread betting;
- venture capital trusts.
Irrespective of whether they are directly involved by the FSA in a particular thematic project, firms need to monitor what is going on in areas relevant to their business, and in particular to pick up and act on where necessary the feedback which FSA gives to firms generally on the findings of thematic work. We can help with this both through our "Bespoke" monitoring and regulatory update service and with project work to address specific issues.