FSA Annual Report 2006/07 - Better Regulation Ltd

Section three – Improving our business capability and effectiveness
FSA Annual Report 2006/07
37
Improving our business
capability and effectiveness
Introduction
Improving our business capability
and effectiveness encompasses the
investment we make in our people
and information systems and in
improving our processes to make it
easier for firms, consumers and
other stakeholders to do business
with us. During the year we have
made improvements in areas that
directly affect our stakeholders, such
as core regulatory transactions,
integrated regulatory reporting and
contact centres. Overall, the
standards we use to measure our
performance show that the level of
service we offer our stakeholders
continues to improve. 2006 was also
the first full year of using our new
enforcement executive settlement
procedures, which have enabled us
to achieve more prompt redress and
remedial action.
As outlined elsewhere in this report,
we are making progress towards
principles-based regulation. To help
us measure and report on our
effectiveness in delivering regulatory
outcomes against our strategic aims
we have developed an outcomes
performance report (OPR). In April
2007 we published an overview of
the OPR and further detail will
follow later this year. We have also
carried out work to assess the costs
and benefits of regulation to help us
strike the right balance between
discharging our statutory duties and
avoiding unjustified costs.
Costs of regulation
In 2005, together with the
Practitioner Panel, we commissioned
Deloitte to carry out a study of the
costs that firms incur in complying
with our rules. The study focused on
three sectors (institutional fund
management, corporate finance, and
retail investment and pensions
advice) and estimated, rule by rule,
the costs which firms considered
they would not incur other than to
comply with our requirements
(‘incremental costs’).
The Deloitte report was published
in June 2006. The study confirmed
that much of what regulation
requires is good business practice.
Most of the rules identified as
imposing the highest incremental
costs were in the retail investment
and pensions advice sector and
related to point-of-sale disclosure.
No individual rules imposed costs
of more than minimal significance
in the two wholesale sectors,
supporting the findings of other
studies that regulatory costs in the
UK are not generally seen as putting
the UK’s wholesale markets at a
competitive disadvantage.
Alongside the Deloitte report, we
published a progress report on our
Better Regulation Action Plan. This
included our plans to use the results
of the Deloitte study to assess the
benefits of the regulatory
requirements that generate the
highest incremental costs (and that,
for example, are not required to
remain in place as part of the
implementation of a directive).
Some initiatives were already under
way, such as the simplification of
our conduct of business rules (see
Section two). Others we started
work on during the year, including
studies of the benefits associated
with three of the highest
incremental cost rules identified by
the Deloitte study: suitability letters;
reduction in yield; and the Menu
and initial disclosure document.
People strategy
We continue to attract high quality
people through our graduate scheme
and experienced hire programme. In
September 2006 56 graduates
started our graduate scheme and for
the first time we entered The Times
Top 100 Graduate Employers list.
Of the 43 undergraduates who
joined our summer internship
scheme in 2006, 26 will return on
our graduate programme. We have
also had continued success in
recruiting experienced people, with
307 joining us during the year.
Annual turnover for the financial
year remains relatively low
compared with the financial services
sector, at 11%.