Our Rule Review Framework

The Financial Conduct Authority (FCA) has published a draft version of its proposed Rule Review Framework which shall guide the Authority in its post-implementation review of existing or new rules and its assessment of the impact of such rules upon the financial market and market participants. The framework is also aimed at providing transparency to financial players over the regulator’s approach to rule reviews. Moreover, the Rule Review Framework is generally a mandate of the new Financial Services and Markets Act 2023 which obliges the FCA to monitor its rules on an ongoing basis and to publish a corresponding rules review policy.
#### The Review Procedure(s)
The described review procedure would apply to all rules outlined in the FCA’s Handbook and – for existing rules – may be triggered by various factors, including (data) evidence that suggests that a rule is not working as intended, feedback from supervised firms regarding issues with a particular rule, international standard changes, calls from consumers, or a direction issued by the HM Treasury. For new rules, the FCA intends to set out the expected outcomes and corresponding metrics to measure such outcomes before a rule is implemented, monitor the functioning of the rule post implementation, and decide from there whether or not a review is indicated. This procedure is depicted in the following graphic:
Graphic 1 – Rule Review Process For New Rules

#### Types of Reviews
The FCA intends to perform the following types of reviews, depending upon the individual rule and the intended review outcome, including
(1) evidence assessments: According to the regulator, the purpose of an evidence assessment is to gather and analyze data that reveals whether the main intended results of a rule or policy intervention are being achieved or are on track to be achieved.
(2) post implementation reviews: These types of reviews are primarily used to determine, if a rule or policy intervention has achieved its intended goals, detect any implementation challenges or unforeseen effects, and review overall compliance with the rule.
(3) ex-post impact evaluations: Ex-post impact evaluations are typically planned ahead of rule implementations and are used to quantify the impact of a particular rule (e.g. ex-post cost analysis).
The corresponding triggers, that is those circumstances that best suit the use of a particular review type, the data used during the review, the reporting in relation to a particular review type, and related matters are also briefly described in the framework and presented in below graphic.
Graphic 2 – Types of Reviews

Finally, the FCA presents
– the challenges it (sometimes) faces in relation to performing reviews or during a review (time consuming, lack of human resources, etc.);
– the possible follow-up actions based on the outcome of a review (immediately intervene, further monitor the outcome, do nothing); and
– the reports the FCA will generate over the reviews and may or may not make public to allow stakeholders to be informed about a review and its outcomes.
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The review framework as described above will be open for public comment up to September 15, 2023.