How FSA of UK function as an integrated regulator?
Introduction
Financial Services and Market consist of a many players rendering all the financial services below one roof. Earlier each market player had their own sphere and they do the business within their boundaries. The scenario had been changed and a many financial services are being rendered by similar institution below similar roof. The arena regarding the banking and financial business had met with oceanic changes during the final little years, by internationalisation regarding the finance market and free trade. The investment banking, clearing houses, loan disbursing and security services and the related financial services had been merged into one group. Similar financial institution had been serving as investment banking, clearing houses, loan disbursing and security services and the related financial services provider. As the middle class also started investing within the financial products and in securities, the business becomes one regarding the biggest within the world. The regulatory issue came into the fore front as banking and financial business becomes the integral component regarding the country's financial stability. The insolvency regarding the banking businesses created lot of problems. The structured product that is a combination of a verity of financial products is an example which sends light to the integrated financial services. Background
A historical view regarding the banking regulatory activities shall release light to the facts howcome the Financial Services and Markets Act 2000's primary objective was to have an integrated financial regulation. As per Section 4(3) regarding the Bank of England Act 1946, the Bank (The Bank of England) shall request facts and release recommendations to any such person carrying on a banking undertaking as should be declared by order regarding the Treasury to be a banker, and can release directions with the approval regarding the Treasury. The Schedule 8 regarding the Businesses Act of 1948 also provided for banking businesses or businesses dealing in financial market to file accounts statements, the Prevention of Fraud (Investments) Act 1958 had provisions for regulation of business of securities In 1974, the German bank, Bankhaus I.D.Herstatt collaped and similar affected the foreign currency transactions round the globe. In 1979, The Banking Act of 1979 introduced authorisation procedures for the people who intent to do business of receiving deposits. Distant in 1984, Peter Matthey Bankers went into best trouble and the Treasury and the Bank ponder over to amend the Banking Act 1979, even though it had supervisory powers below Section 16 and 17 regarding the Banking Act 1979. Thus the Banking Act 1987 was enacted with more statutory supervisory powers.
The Financial Services Act 1986 introduced the Securities and Investments Board Ltd., a regulatory authority responsible for the system of regulation of investment business. It was a combination regarding the self regulatory system and the statutory regulations for regulation regarding the investment industry. The act even provided for civil remedies to investors who suffer loss on account of any contravention regarding the provisions. As per Section 114 regarding the Financial Services Act 1986, the regulatory powers were delegated to a designated body known as Securities and Investment Board Limited, which was a body corporate. The status and exercise regarding the regulated functions regarding the Securities and Investment Board Limited was described in Schedule 9 regarding the Financial Services Act 1986. The Securities and Investment Board Limited is authorised to regulate all the investment businesses in Schedule two other the business exempted by law. A Fair and Proportionate Lone Regulator
The Financial Services and Markets Act 2000, is a laudable piece of legislation, which integrated the regulators regarding the entire financial sector below a lone regulator. The Financial Services Authority, a business limited by guarantee was conferred with the functions of regulation of financial sector by this a by the Financial Services and Markets Act 2000. The general duties regarding the Financial Services Authority are to meet with the regulatory objectives by acting in such a method in compatibility with the regulatory objectives. To maintain confidence within the financial system operating in United Kingdom within regulated activities as envisaged by the Financial Services and Market Act 2000 (Regulated Activities) Order 2001, SI 2001/544 includes financial markets and exchanges, and other activities financial markets and exchanges. To promote public understanding of financial system, particularly awareness of risk and benefits associated with different kind of investment or other financial dealing by method of appropriate advices and information. To secure an apt degree of protection for consumers right within the financial services market. The regulatory objective to reduce the financial crimes, like fraud or dishonesty, misconduct in a financial market or misuse of facts on financial market, to the likely extent and in handling the proceeds of crime. The Financial Services Authority is duty bound to consult the Practitioner panel and the Consumer panel. The Practitioner panel is a panel of persons who represent the interest regarding the practitioners, which shall with the representatives from authorised persons, recognised investment exchanges and recognised clearing houses. The Consumer Panel shall consist regarding the persons who represent the interest regarding the consumers. The Financial Services Authority is duty bound to think about the representations created by the panels. If the FSA disagrees with the proposal regarding the panels it should be provided in writing.
The Financial Services market Act 2000, sends that any person who is engaged within the business of financial services shall be neither authorised by the Financial Services Authority or possessing permission according to law, unless exempted by law. All the persons dealing in investments, arranging deals with investments, deposit taking, safekeeping and administration of assets, managing investments, providing advice on investment, establishing collective investment schemes, creating use of computer based system for giving investment instructions shall be regulated by the FSMA 2000. Investments shall with securities, investments creating or acknowledging indebtedness, government and public securities, instruments giving entitlement to investments, certificates representing securities, units in collective investment schemes, options, futures, contracts for differences, contracts of insurance, participation in Lloyd's syndicate, deposits, loans secured on land, rights in investments etc. The about insurance Services and Markets Act 2000, provided for authorisation and permission of Lloyd's underwriting agents, Lloyd's members' advisers, an Appointed agent, persons who carry on overseas investment business and insurance business, Insurance companies, European businesses carry on reinsurance business and investment business etc. The Friendly Societies, societies other than friendly societies registered below the Friendly Societies Act 1974 and friendly societies carried on insurance business overseas all came below the manage regarding the FSA by virtue of Section 22 of FSMA 2000, view with Financial Services and Markets Act 2000( Transitional Provisions) ( Authorised persons Etc) Order 2001.SI 2001/2636. Members of recognised self regulating organisations, authorised persons below the Financial Services Act 1986, and an lone holding a certificate issued by a body which regulates the practice of a profession authorised by virtue of Section 15 of Financial Services Act 1986, and Listed money market institutions are also below the regulatory provisions regarding the FSMA 2000. Persons who is within the business of deposit receiving as per Section seven regarding the Banking Act 1987, and carrying overseas banking business shall also below the preview regarding the regulatory authority, FSA. Any person who carries on non- banking listed activities below Banking Act and Building Societies Act, shall also be below the supervisory manage of FSA. As per Component XX of The Financial Services and Market Act 2000, the an lone who is entitled to practice the profession who sends financial services also return below the purview regarding the Financial Services Authority. The Financial Services and Market Act 2000, regulates the activities within the financial market with similar criteria applicable to all the services. Even though it was not clearly mentioned within the act regarding the coverage regarding the act within the industry, by virtue of provisions of The Financial Services and Market Act 2000, the entire financial market came below its purview. From time to time the scope was widened by method of secondary legislations. Subsequently within the Financial Services and Market Act 2000 itself the applicability was also mentioned to close the financial market as whole. A regulated activity is described in Section 22 of The Financial Services and Market Act 2000, as an activity of a specified kind that is carried on by method of business related to an investment within any asset, right or interest of specified in an order created by treasury. The scope regarding the Financial Services and Market Act 2000 was kept very large and reveal to with any kind of activity financial and non- financial as and when compulsory from time to time. A verity of legal issues can to frontline on the emergence of multifunctional banks. The function of commercial banks with investment banking and other financial activities elevated the risk associated with the finance industry. The multifunctional character of banking business wants more supervision and regulation. The financial business in United Kingdom is interlinked and a lone regulated legal regime becomes a necessity. In The Financial Services and Market Act 2000 all the limbs of financial activity are regulated with similar degree. Core banking, investment banking and other financial activities are controlled and regulated equally but proportionally. Even though the yardstick is similar to the methodology differs from business to industry. The Financial services Authority like a lone regulator within the financial market had been conferred with powers to regulate the financial market in a proportionate way. All the sectors had been provided similar or equal consideration. The Financial Services Markets Act 2000 and different secondary legislations below it, had set forth a legal regime for regulating all the activities and the people who are involved within the activities related to financial sector. The financial markets within the investment market, insurance, securities, banking sector, non-banking financial sectors and so on are below the supervision regarding the Financial Services Authority. All the financial services, managing investments, investment advice in any shape within computer-based processes for giving investment instructions are all monitored by the Financial Services Authority. Right from primary multinational and transnational banks to friendly credit societies are below the guidance, supervision and manage regarding the Financial Services Authority as per the Financial Services Markets Act 2000. The huge investment houses and the financial advisors dealing with retail investors are also regulated by the Financial Services Authority. The tiny firms and multinational corporate giants within the financial sector are governed and regulated with similar authority of law and with equal status.
The proportionality of legal rules applicable and the implementation of law are similar to to the whole financial market so as to be fair to the aims and objectives as envisaged below the Financial Services Markets Act 2000. In Schedule 3 of The Financial Services and Market Act 2000, the different regulated activities, investments and so on, are described. The supervision and regulation regarding the financial and non financial activities below the purview regarding the Financial Services and Market Act 2000 is to be done fairly. The regulator Financial Services Authority is liable to act as per law. The treasury shall appoint an independent person to review the discharging of functions regarding the regulator, Financial Services Authority, to discover that the regulator is acting in accordance with law. The Treasury shall arrange independent inquiries regarding the activities regarding the authorised persons in financial sector, whether they can be acting in conformity with law even if the regulator, the Financial Services Authority had not taken appropriate steps to confirm the activities. The activities regarding the financial services authority should be questioned prior to the Financial Services Market Tribunal The actions taken by the Financial Services Authority are to be fair and it is obligatory to reflect it within the annual report to be filed to the Treasury which in turn submit it prior to the Parliament.
The Financial Services and Markets Act 2000, The regulator, Financial Services Authority shall release a notice in writing to the any applicant below Section 40 of Financial Services and Market Act 2000, and the application is rejected it shall release its determination on the application within six months and if it proposes to reject the application a warning notice shall be served. If the Financial Services Authority is prohibiting the performance of a regulated activity it should give a warning notice to the Authorised person setting out the terms regarding the prohibition and if refused, a decision notice should be given. Sequential to be fair to the conduct regarding the Authorised persons the Financial Services Authority shall issue statement of conduct issued to the approved persons and if compulsory a code of practice also. The Financial Services Authority shall give a warning notice to the Authorised person who is located to be guilty of misconduct prior to initiating any disciplinary action. The Financial Services Authority while imposing penalty for market abuse should release a warning notice and if the person who receives a notice had created any representation and appealed that he had taken all reasonable precaution and due diligence to stay away from such behaviour and satisfied the Authority, it shall not impose penalty. If the Financial Services Authority is imposing any penalty against the authorised persons it should state the no. of penalty within the notice. Hence it is quiet clean that the rule of ‘audi alteram partem' should be applied by the Financial Services Authority, who is the sole regulator below the Financial Services and market Act 2000 while dealing with the Authorised persons and applicants. Conclusion To sum up with, the Financial Services and Market Act 2000 is aimed to achieve the regulation regarding the whole financial sector in a fair manner, to be proportionate to all the sectors with clean objectives. The financial service regulator, Financial Services Authority is possessing the jurisdiction and power over all the financial market players. The Financial Services and Market Act 2000 integrated all the regulatory powers and conferred it on the Financial Services Authority. The accountability regarding the Financial Services Authority like a regulator is at its highest position so as to maintain the equilibrium regarding the finance market. The Financial Services Authority should be fair and reasonable to the persons engaged within the business, to the consumers within the financial market and to the other stakeholders who are working within the professions related to the financial market. The Financial Services and Market Act 2000 and its secondary legislations have clean objectives that are to be fair and the Act itself had these provisions incorporated in it. The characteristic regarding the business and the modes operandi are different for each sector of financial activity. The risk factors involved and the protection which should be offered to the consumers should vary from sector to sector. The Financial Services and Market Act 2000 had succeeded to gain in rendering a fair and proportional regulation and supervision to the entire financial sector. The Financial Services Markets Act 2000, is subsequently a laudable piece of legislation that is aimed to maintain the financial service market in a fair manner, by integrating the whole market below one roof. The applicability regarding the legal propositions to each and every sector of financial market shall also be within the right proposition. Bibliography
Books
1. Allan P. and Robert F (annotations) Financial Services Act 1986 ( 1st Edn. Tasty and Maxwell, London 1987)
2. David Palfreman, The Law of Banking,( 3rd Edn. M&E Handbooks London 1986) 3. 3. Keith Walmsley (edn.)Butterworths Business Law Handbook (22nd Edn. LexisNexis, U.K, 2008)
4. Loo Choo Chiaw (edn.) Butterworths Banking and Financial Law Reiew 1987(1st Edn., Butterworths London 1987)
5.Maxmillian J.B.H, Handbook of Banking Regulation and Supervision ( 1st edn. Woodhead-Faulkner, London, 1989) Story by ANISH KUMAR KUNJACHAN KADANCHIRAYIL, UW Bangor, UK.
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