FSA changes - April rules

The answer is 'yes' - and 'no'. The rules in Senior Management Arrangements Systems and Controls change from 1 April 2009 but the changes are slight and nothing to worry about.

There are, however, many changes to the guidance and this is important because the updates cover areas not dealt with in detail before. The Financial Services Authority stresses repeatedly that its guidance is not binding; you do not have to follow if you do not want to and it need not be followed to achieve the relevant rule or other requirement.

It states: "We have no presumption that departing from guidance indicates a breach of the relevant rule. Guidance is generally designed to throw light on a particular aspect of regulatory requirements, not to be an exhaustive description of firms' obligations."

You need to have a good reason to ignore guidance - especially as it is often in short supply in some areas - and in the new principles-based regulation regime, life can be very uncertain.

The new rules and guidance can be found in FSA Policy Statement PS08/09, which can be found online at fsa.gov.uk/pubs/policy/ps08_09.pdf.

The full title is Organisational systems and controls - extending the common platform and what it does is apply the various strict rules from the Market in Financial Instruments Directive to general insurance, though only as guidance.

The purposes of SYSC are:

- To encourage directors and senior managers to take practical responsibility for the way in which they run their businesses.

- To increase certainty so that a firm will take care to organise and control its affairs responsibly, effectively and with adequate risk management.

- To encourage firms to delegate and share responsibility between directors and managers.

The areas covered are:

- A firm's governance, internal controls and organisation.

- A firm's business continuity.

- A firm's accounting policies.

- A firm's audit committee.

- The persons controlling a firm and senior management responsibility.

- Skills, knowledge and expertise.

- Segregation of duties.

- Awareness of procedures and general requirements.

- Compliance (including internal audit) and financial crime.

- Risk control.

- Outsourcing.

- Conflicts of interest.

- Apportionment and oversight.

The guidance is achieved by changing the word must in the rules to should wherever it is dealing with general insurance.

There is a lot in this paper and some of it will make regulation more understandable, provided that you can understand the jargon-rich language that it is written in.