Consider the Principles of Good Regulation – for both the regulator and business as explained by the Financial Conduct Authority (the regulator of financial institutions in the United Kingdom). Discuss: 

(a) To what extent do you think that the same principles apply to the company and the industry you wish to work for when graduating from university? 

(b) To what extent these principles should apply to the way accounting and financial reporting is performed by the company and in the industry, you wish to work for? 

(c) As a manager, what might you need to do to be able to operate within the principles personally? 

(d) What might the implications be if 

● You personally, or 

● The business you work for, or 

●The regulator within your industry do not operate within the principles? The principles of the regulator are as follows:

1. Efficiency and economy 

We [the Regulator] are committed to using our resources in the most efficient and economical way. As part of this [we are open to] value-for-money reviews of our operations. 

2. Proportionality 

We must ensure that any burden or restriction that we impose on a person, firm or activity is proportionate to the benefits we expect as a result. To judge this, we take into account the costs to firms and consumers. 

3. Sustainable growth 

We must ensure that there is a desire for sustainable growth in the economy of the United Kingdom in the medium or long term. 

4. Consumer responsibility 

Consumers should take responsibility for their decisions. 

5. Senior management responsibility 

A firm’s senior management is responsible for the firm’s activities and for ensuring that its business complies with regulatory requirements. This secures an adequate but proportionate level of regulatory intervention by holding senior management responsible for the risk management and controls within firms. Firms must make it clear who has what responsibility and ensure that its business can be adequately monitored and controlled.

6. Recognising the differences in the businesses carried on by different regulated persons 

Where appropriate, we exercise our functions in a way that recognises differences in the nature of, and objectives of, businesses carried on by different persons subject to requirements imposed by or under [applicable laws]. 

7. Openness and disclosure 

We should publish relevant market information about regulated persons or require them to publish it (with appropriate safeguards). This reinforces market discipline and improves consumers’ knowledge [for e.g. about their financial matters]. 

8. Transparency 

We should exercise our functions as transparently as possible. It is important that we provide appropriate information on our regulatory decisions, and that we are open and accessible to the regulated community and the general public.  

The principles for businesses are as follows: 

1. Integrity 

A firm must conduct its business with integrity. 

2. Skill, care and diligence 

A firm must conduct its business with due skill, care and diligence. 

3. Management and control 

A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems 

4. Financial prudence 

A firm must maintain adequate financial resources. 

5. Market conduct 

A firm must observe proper standards of market conduct. 

6. Customers’ interests 

A firm must pay due regard to the interests of its customers and treat them fairly. 

7. Communications with clients 

A firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading. 

8. Conflicts of interest 

A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client. 

9. Customers: relationships of trust 

A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.  

10. Clients’ assets 

A firm must arrange adequate protection for clients’ assets when it is responsible for them. 

11. Relations with regulators 

A firm must deal with its regulators in an open and co-operative way and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.