On 14 July 2023, the FCA published for comment its proposed rule review framework (Framework).

The Framework explains how the FCA plans to monitor and review how its rules are working in practice. This is in line with the Financial Services and Markets Act 2000 (as amended by the Financial Services and Markets Act 2023) which requires the FCA to keep its rules under review generally.

The Framework sets out the FCA’s intention that it will collect and monitor data to assess the effects of rule changes. This will allow the FCA to build understanding and evidence of how its rules are working.

The FCA updates and amends its rules where necessary; but for many existing rules already in the FCA Handbook, the FCA may not have been systematically monitoring their outcomes. As such, the Framework sets out how the FCA may have to take a different approach in these cases. The FCA may choose to review these rules where it has evidence that the rule is not working as intended, or where it wants to understand the overall effect (positive or negative) that the rule has on the market, while also considering if there have been substantive changes in circumstances which affect how the rule is working. If the data suggests that there may be a problem with how a rule is working, the FCA will consider a range of actions that it may take to address this, including undertaking a review.

The Framework sets out the three main types of review that the FCA may undertake, their purpose and when the regulator may use them.

The three types of review are:

  • Evidence assessment: This type of review aims to collect and analyse data which indicates whether the key intended outcomes of a rule or policy intervention are being, or are on course to be met.
  • Post implementation review: This type of review aims to establish whether a rule or policy intervention has met its intended outcomes while also identifying implementation issues and potential unintended consequences, assessing compliance with the rule and examining the wider state of the market after an intervention.
  • Ex post impact evaluation: This type of tool is the most rigorous tool for interventions. Ex post impact evaluations focus on quantifying the impact of the FCA’s interventions and more reliably attributing to its actions. To ensure that the FCA has the right data to undertake this kind of analysis, impact evaluations are planned in advance, at the stage of developing the policy and rules. The FCA is already committed to do 1 impact evaluation a year and it intends to continue with this pipeline. It uses a set of criteria to determine which rules are suitable candidates for an impact evaluation, including the ability to identify a counterfactual against which causal impacts can be measured.

The FCA invites feedback from stakeholders on the Framework.

The deadline for feedback is 15 September 2023.