Financial Services Authority's

The Financial Services Authority (FSA) is an independent non-governmental body, quasi-judicial body and a company limited by guarantee responsible for the financial regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury.[1] Its main office is based in Canary Wharf, London, with another office in Edinburgh. When acting as the competent authority for listing of shares on a stock exchange, it is referred to as the UK Listing Authority (UKLA), and maintains the Official list.

The FSA's Chairman and CEO are Lord Turner of Ecchinswell and Hector Sants.

On June 16, 2010, the Chancellor of the Exchequer, George Osborne, announced plans to abolish the FSA and separate its responsibilities between a number of new agencies and the Bank of England.
 

History

Main entrance - 25 North Colonnade (Canary Wharf, London) - FSA building

Main entrance - 25 North Colonnade (Canary Wharf, London) - FSA buildingThe 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. After a series of scandals in the 1990s culminating in the collapse of Barings Bank, there was a desire to bring to an end the self-regulation of the financial services industry and to consolidate regulation responsibilities which had been split amongst multiple regulators. The SIB revoked the recognition of The Financial Intermediaries, Managers and Brokers Regulatory Association (FIMBRA) as a Self-Regulatory Organisation (SRO) in June 1994 subject to a transitional wind-down period to provide for continuity of regulation whilst members moved to the Personal Investment Authority (PIA), which in turn was subsumed.

The Securities and Investments Board changed its name to the Financial Services Authority on 28 October 1997 and it now exercises statutory powers given to it by the Financial Services and Markets Act 2000, that 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 (excluding travel insurance) intermediaries from 14 January 2005.

Statutory objectives
The Financial Services and Markets Act imposed five statutory objectives upon the FSA:

market confidence: maintaining confidence in the financial system;
public awareness: promoting public understanding of the financial system;
financial stability: contributing to the UK's financial stability;
consumer protection: securing the appropriate degree of protection for consumers; and
reduction of financial crime: reducing the extent to which it is possible for a business carried on by a regulated person to be used for a purpose connected with financial crime

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:

efficiency and economy: the need to use its resources in the most efficient and economic way.

role of management: a firm’s senior management is responsible for its activities and for ensuring that its business complies with regulatory requirements. This principle is designed to guard against unnecessary intrusion by the FSA into firms’ business and requires it to hold senior management responsible for risk management and controls within firms. Accordingly, firms must take reasonable care to make it clear who has what responsibility and to ensure that the affairs of the firm can be adequately monitored and controlled.

proportionality: The restrictions the FSA imposes on the industry must be proportionate to the benefits that are expected to result from those restrictions. In making judgements in this area, the FSA takes into account the costs to firms and consumers. One of the main techniques they use is cost benefit analysis of proposed regulatory requirements. This approach is shown, in particular, in the different regulatory requirements applied to wholesale and retail markets.

innovation: The desirability of facilitating innovation in connection with regulated activities. For example, allowing scope for different means of compliance so as not to unduly restrict market participants from launching new financial products and services.

international character: Including the desirability of maintaining the competitive position of the UK. The FSA takes into account the international aspects of much financial business and the competitive position of the UK. This involves co-operating with overseas regulators, both to agree international standards and to monitor global firms and markets effectively.

competition: The need to minimise the adverse effects on competition that may arise from the FSA's activities and the desirability of facilitating competition between the firms it regulates. This covers avoiding unnecessary regulatory barriers to entry or business expansion. Competition and innovation considerations play a key role in the FSA's cost-benefit analysis work. Under the Financial Services and Markets Act, the Treasury, the Office of Fair Trading and the Competition Commission all have a role to play in reviewing the impact of the FSA's rules and practices on competition.
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, a Chief Operating Officer, two Managing Directors, and 9 non-executive directors (including a lead non-executive member, the Deputy Chairman) selected by, and subject to removal by, HM Treasury. Among these, the Deputy Governor for Financial Stability of the Bank of England is an 'ex officio' Board member. 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.

The FSA is also provided with advice on the interests and concerns of consumers by the Financial Services Consumer Panel [5]. This panel describes itself as "An Independent Voice for Consumers of Financial Services". Members of the panel are appointed and can be dismissed by the FSA and emails to them are directed to FSA staff. The Financial Services Consumer Panel will not address individual consumer complaints.

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[6] 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.

In June 2006, the FSA created its Retail Distribution Review (RDR) programme to help enhance consumer confidence in the retail investment market. To this end, RDR supports clear education of consumers about different types of services available, improved professional standards in the industry, and clear, fair practices in remuneration for financial advice. The RDR has a target for full-implementation of 31 December 2012.

2012 regulations
Major regulations were introduced in 2009.

The Payment Services Regulations 2009 came into force on 1 November 2009 and shifted the onus onto the banks to prove negligence by the holder of debit and credit cards in cases of disputed payments. The FSA said "It is for the bank, building society or credit card company to show that the transaction was made by you, and there was no breakdown in procedures or technical difficulty" before refusing liability.

On the same date the Banking Conduct Regime commenced. It applies to the regulated activity of accepting deposits, and replaces the non-lending aspects of the Banking Code and Business Banking Code (industry-owned codes that were monitored by the Banking Code Standards Board).
 

What are the regulated activities?
Specified activities are defined in Part II of the RAO and comprise:

•accepting deposits;
•issuing e-money;
•effecting or carrying out contracts of insurance as principal;
•dealing in investments (as principal or agent);
•arranging deals in investments;
•arranging home finance activities;
•operating a multilateral trading facility;
•managing investments;
•assisting in the administration and performance of a contract of insurance;
•safeguarding and administering investments;
•sending dematerialised instructions;
•establishing etc collective investment schemes;
•establishing etc stakeholder pension schemes;
•providing basic advice on stakeholder products;
•advising on investments;
•advising on home finance activities;
•Lloyd's market activities;
•entering funeral plan contracts;
•entering into a home finance activity;
•administering a home finance activity;
•agreeing to do most of the above activities.
Specified investments are defined in Part III of the RAO and comprise:

•deposits;
•electronic money;
•rights under a contract of insurance;
•shares etc;
•instruments creating or acknowledging indebtedness;
•sukuk (shariah compliant debt instruments)

•government and public securities;
•instruments giving entitlement to investments;
•certificates representing certain securities;
•units in a collective investment scheme;
•rights under a stakeholder pension scheme;
•rights under personal pension scheme;
•options;
•futures;
•contracts for differences;
•Lloyd's syndicate capacity and syndicate membership;
•rights under funeral plan contracts;
•rights under regulated mortgage contracts;
•rights under a home reversion plan;
•rights under a home purchase plan;
•Rights to or interests in anything that is a specified investment listed, excluding 'Rights under regulated mortgage contracts', 'Rights under regulated home reversion plans' and Rights under regulated home purchase plans'.

Statutory objectives
•market confidence
•financial stability
•consumer protection
•reduction of financial crime

•Provide political and public accountability.
•Assist in providing legal accountability.

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