Expectations of privacy and market abuse ‐ support for the Financial Services and Markets Act and the Canadian approach

DOIhttps://doi.org/10.1108/13590790310808673
Published date01 April 2003
Date01 April 2003
Pages117-129
AuthorMark Jones,Peter Johnstone
Subject MatterAccounting & finance
Expectations of Privacy and Market Abuse Ð
Support for the Financial Services and Markets Act
and the Canadian Approach
Mark Jones and Peter Johnstone
THE UK FINANCIAL SERVICES AND
MARKETS ACT: AIMS AND
OBJECTIVES
The ®nancial services industry is vital to the British
economy,
1
and it is paramount that it has an eective
and ecient regulatory system. Regulation has
become an integral element of the global market
and is a key source of competitive advantage or dis-
advantage. The British government and the City of
London have made, through the implementation of
the Financial Services and Markets Act (FSMA),
2
a
concerted eort to bring ®nancial regulation ®rmly
into the 21st century. The Act creates a regulatory
Goliath that has ultimate authority over all ®nancial
services in the UK.
3
The formation of a monolithic
regulator will undoubtedly have a major impact
upon global ®nancial markets and Britain is attempt-
ing to create regulatory history by providing a com-
prehensive one-stop regulation of banks, brokerage
®rms, investment advisors, insurance companies and
trading exchanges.
The FSMA received Royal Assent on 14th June,
2000. The Act provides the framework within
which a single regulator (the FSA) for the ®nancial
services industry will operate. It equips the Authority
with a full range of statutory powers and creates the
Financial Services and Markets Tribunal, to act as an
impartial appellate channel.
4
It also establishes, inter
alia, a framework for a single ombudsman,
5
replacing
eight dispute resolution schemes. The Act also makes
provisions for the control of ®nancial promotion;
powers of the Authority to authorise, regulate, inves-
tigate and discipline authorised persons;
6
the recogni-
tion of investment exchanges and clearing houses;
7
arrangements for the approval of controllers and
the performance of regulated activities;
8
the oversight
of ®nancial services provided by members of the pro-
fessions;
9
regulation and marketing of collective
investment schemes;
10
certain criminal oences;
powers to impose penalties for market abuse;
11
and
the transfer to the Authority of registration functions
in respect of building societies, friendly societies,
industrial and provident societies and certain other
mutual societies.
12
Following the government's announcement of its
proposals to introduce legislation to reform the regu-
lation of ®nancial services in May 1997, the ®rst initial
steps were taken to transfer responsibility for regula-
tion to the Authority. These reforms would partially
recreate the regulatory structure of the Financial Ser-
vices Act 1986, and in doing so `establish a statutory
regulator for a considerable part of the UK ®nancial
services industry, with regulatory objectives'.
13
However, many of the provisions found in the
FSMA re¯ect those of its predecessor.
14
In July
1998 the Treasury published a paper,
15
which
explained its policy in detail and included a draft
of the Bill. That consultation exercise attracted
comments from over 220 ®rms and bodies inter-
ested in the regulation of ®nancial services, includ-
ing those representing consumers. Although there
was broad support for the creation of a single reg-
ulator, concerns were expressed about the account-
ability of the FSA and the fairness of its
procedures.
16
The government believed that this
process of scrutiny was valuable in improving
what was inevitably a wide-ranging and highly
technical Bill.
17
Both the City and government
were wary of the fact that the integrity and reputa-
tion of the ®nancial services industry was of para-
mount importance to everyone in the UK. The
FSMA regulates a huge and very important aspect
of British industry, so it was important regardless
of its complexity, that it ensured the con®dence
of the consumer and of the City. However,
although suering from `battle fatigue',
18
the gov-
ernment passed the Act irrespective of leading com-
mentary stating that the Act in its present condition
was in contravention of the European Convention
on Human Rights. This fuelled much debate
from both the government and City practitioners;
whether this ultimately damages con®dence in the
®nancial market and undermines the eectiveness
of its new regulatory body, remains to be seen.
Page 117
Journal of Financial Crime Ð Vol. 10 No. 2
Journal of Financial Crime
Vol.10,No. 2,2002,pp. 117 ±129
#HenryStewart Publications
ISSN 1359-0790

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