| Financial Services Authority |
Article Index for Financial Services |
Shopping Authority |
Website Links For Financial Services |
Information AboutFinancial Services Authority |
| CATEGORIES ABOUT FINANCIAL SERVICES AUTHORITY | |
| financial regulatory authorities | |
| quasi-judicial bodies | |
|
The FSA's Chairman and CEO are Callum McCarthy and Hector Sants . HISTORY The FSA has the legal form of a company limited by guarantee (number 01920623). It was incorporated on 7 June 1985 under the name of The Securities and Investments Board Ltd (SIB) at the instigation of the UK Chancellor Of The Exchequer , who is the sole member of the company and who delegated certain statutory regulatory powers to it under the then Financial Services Act 1986. It changed its name to the '''FSA''' on 28 October 1997 and now exercises statutory powers given to it by the Financial Services And Markets Act 2000 , which replaced the earlier legislation and came into force on 1 December 2001. In addition to regulating banks, insurance companies and financial advisers, the FSA has regulated mortgage business from 31 October 2004 and general insurance intermediaries from 14 January 2005 . STATUTORY OBJECTIVES The Financial Services and Markets Act imposed four statutory objectives upon the FSA:
REGULATORY PRINCIPLES The statutory objectives are supported by a set of principles of good regulation which the FSA must have regard to when discharging its functions. These are:
ACCOUNTABILITY AND MANAGEMENT The FSA is accountable to Treasury Ministers, and through them to Parliament. It is operationally independent of Government and is funded entirely by the firms it regulates through fines, fees and compulsory levies. Its Board consists of a Chairman , a Chief Executive Officer , three Managing Directors, and 11 Non-executive Director s (including a lead non-executive member, the Deputy Chairman) selected by, and subject to removal by, HM Treasury . This Board decides on overall policy with day-to-day decisions and management of the staff being the responsibility of the Executive. This is divided into three sections each headed by a Managing director and having responsibility for one of the following sectors: retail markets, wholesale and institutional markets, and regulatory services. Its regulatory decisions can be appealed to the Financial Services And Markets Tribunal . HM Treasury decides upon the scope of activities that should be regulated, but it is for the FSA to decide what shape the regulatory regime should take in relation to any particular activities. RETAIL CONSUMERS The FSA has a priority of making retail markets for financial products and services work more effectively, and so help retail consumers to get a fair deal. Over several years, the FSA has developed work to raise levels of confidence and capability among consumers. Since 2004, this work is described as a national strategy “Financial capability in the UK", Financial Services Authority, 2004, ISBN 1-84518-176-X on building Financial Capability in the UK. This programme is comparable to financial education and literacy strategies in other OECD countries, including the United States. CRITICISM OF THE FSA The FSA has been criticised by some within the IFA community for increasing fees charged to firms and for the perceived retroactive application of current standards to historic business practices. FSA regulation is also often regarded as reactive rather than proactive. In 2004-05 the FSA was actively involved in crackdowns against financial advice firms who were involved in the selling of split-cap investment trusts and precipice bonds, with some success in restoring public confidence. Where it has been rather poorer in its remit is in actively identifying and investigating possible future issues of concern, and addressing them accordingly. There have also been some questions raised about the competence of FSA staff Regulator, heal thyself , The Economist , 20 January 2005. More Principles Based Regulation There were suggestions that the FSA stifles the UK financial services industry through over-regulation, following a leaked letter from Prime Minister Tony Blair during 2005. This incident led John Tiner, then Chief Executive of the FSA, to formally write to the Prime Minister asking him to either explain his opinions or retract them. Freedom of Information request for disclosure of the letter from Sir Callum McCarthy to the Prime Minister FSA, 29 May 2007 The Prime Minister's criticisms were viewed as particularly surprising since the FSA's brand of light-touch financial regulation has typically been popular with banks and financial institutions in comparison with the more prescriptive rules-based regulation employed by the US , 12 June 2006; by contrast, most critiques of the FSA accuse it of instigating a regulatory "race to the bottom" aimed at attracting foreign companies at the expense of consumer protection [http://www.sec.gov/news/speech/2006/spch111606cc.htm Speech by SEC Chairman: 'The Hunters and the Stag': Why National Securities Regulators Must Collaborate In the Era of Global Investing] 16 November 2006. The FSA counters that its move away from rules-based regulation towards more principles-based regulation, far from weakening its consumer protection goals, can in fact strengthen them: "''Our Principles are rules. We can take enforcement action on the basis of them; we have already done so; and we intend increasingly to do so where it is appropriate to do so.''" Treating Customers Fairly and more principles based regulation Clive Briault, Managing Director for Retail Markets, FSA, 24 July 2006. As an example, the enforcement action taken in late 2006 against firms mis-selling Payment Protection Insurance was based on their violation of principle six of the FSA's Principles for Business ("a firm must pay due regard to the interests of its customers and treat them fairly"), rather than requiring the use of the sort of complex technical regulations that many in financial services find burdensome. FSA fines home shopping company £270,000 for PPI selling failures FSA, 20 December 2006 Enforcement cases The FSA has been attacked for its supposedly weak enforcement program. How can this still happen? , , 11 June 2007 despite the FSA's own studies indicating that unexplained price movements occurs prior to around 25 percent of all UK Corporate Merger announcements. Measuring Market Cleanliness , FSA, March 2006 It should be noted, however, that although aggregate evidence of potential insider dealing exists across global financial markets, cases are notoriously difficult to prove in court. The FSA would contend that any criticism of its enforcement program is moot: unlike other foreign regulators, the FSA's regulation is ''supervision-led'', not ''enforcement-led''; rather than punishing firms for breaching regulations, FSA supervisors work closely with their firms to prevent breaches occurring in the first place, thus reducing the need for a large enforcement program. NOTES For criticism of the slogan "principles-based" regulation, see Lawrence A. Cunningham, A Prescription to Retire the Rhetoric of 'Principles-Based Systems' in Corporate Law, Securities Regulation and Accounting (2007) . For a comparative look at "principles-based" regulation in the United Kingdom and Canada, see Cristie L. Ford, New Governance, Compliance, and Principles-Based Securities Regulation (2007) . EXTERNAL LINKS |
|
|