Civil Enforcement as a Regulatory Device — An Analysis of Administrative and Civil Enforcement under the Financial Services Act 1986
| Pages | 319-333 |
| Date | 01 February 1996 |
| Published date | 01 February 1996 |
| DOI | https://doi.org/10.1108/eb025731 |
| Author | Caroline Currie |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 3 No. 4 — Analysis
ANALYSIS
Civil Enforcement as a Regulatory Device — An
Analysis of Administrative and Civil Enforcement
under the Financial Services Act 1986
Caroline Currie
INTRODUCTION
It has been commented1 that the topic of enforce-
ment needs little introduction 'since it is readily
apparent that the imposition of the [then] new
regulatory structure will prove to be a largely futile
exercise if regulation cannot be effectively
enforced'. Indeed, Professor Gower has made the
comment2 that 'it is not much use having regula-
tions unless they are enforced'.
An obvious justification for the regulation of the
financial services industry is the protection of
investor confidence. The Securities and Invest-
ments Board (SIB) has indicated that,3 'enforce-
ment' is but one of the means to achieve investor
protection, and ensuring the integrity of the
market place is an essential element of investor
protection. As regards 'integrity', Andrew Large,
Chairman of the SIB has suggested4 that there are
four aspects of integrity, namely fairness, order-
liness,
efficiency and freedom from abuse. The
fourth aspect requires an adequate system for
ensuring that abuse is one,
defined,
two,
detected,
and, three, robustly
dealt
with.5
The SIB has recently stated6 that 'vigorous' use
of its enforcement powers is a key element in its
efforts to make the two-tier system work. Appar-
ently, the Enforcement Division's primary objec-
tive is to help identify and stop investment
business abuse, seeking redress for investors who
have suffered loss, and punishment of those
responsible, as appropriate, through the exercise of
the SIB's powers under the Financial Services Act
1986.7
Such aims and objectives admittedly sound
very impressive, but before any suggestion that
these words are hollow can safely be rejected, an
examination of developments to date is essential.
THE REGULATORY STRUCTURE
The Financial Services Act 1986 (FSA) brought in
a new and sophisticated system of regulation of
investment business in the United Kingdom — a
regulatory framework that would enhance investor
confidence in the financial services industry as a
'clean place to do business'.8
The Government White Paper, preceding the
Act9 described the new system as 'self regulation
within a statutory framework'; however, Professor
Gower asserted that it would be more accurately
described as 'statutory regulation monitored by
self-regulatory organisations recognised by, and
under the surveillance of, a self-standing Commis-
sion'.10
The Act contains various enforcement options.
In general, the powers to enforce the requirements
of the FSA and the rules and regulations made
under it have been vested in the Secretary of State
for Trade and Industry (acting through the DTI).
Most of these powers have been delegated to the
SIB,11
yet subject to the retention of certain powers
by the Secretary of State and the reservation of
powers for him to act concurrently with the SIB in
certain circumstances.12
The SIB, as the 'designated agency', is in turn
empowered to recognise the other self-regulating
bodies, each of which is responsible for particular
aspects of investment business. The most signi-
ficant bodies are the self-regulating organisations
(SROs), of which there were, until recently,13 five.
Other important bodies are the Recognised Pro-
fessional Bodies (RPBs), Recognised Investment
Exchanges (RIEs) and Recognised Clearing
Houses (RCHs). Persons and firms authorised by
one of the self-regulating bodies will generally be
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