Financial Regulation — A British Experience
| DOI | https://doi.org/10.1108/eb025903 |
| Date | 01 February 1999 |
| Published date | 01 February 1999 |
| Pages | 333-342 |
| Author | Jason D. Haines |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 6 No. 4 — Analysis
Financial Regulation — A British Experience
Jason D. Haines
'It must be remembered there is nothing more
dif-
ficult to plan, more doubtful of success, nor more
dangerous to manage than the creation of a new
system. For the initiator has the enmity of all
who will profit by the preservation of the old insti-
tutions and merely lukewarm defenders in those
who would gain by the new one.'
Machiavelli.1
The existing arrangements for financial regulation
involve a large number of regulators, each responsi-
ble for different parts of the industry. In recent
years there has been a blurring of the distinctions
between different kinds of financial services business:
banks,
building societies, investment firms, insurance
companies and others. This has added further to the
complexity of financial regulation. The government
believes the current system is costly, inefficient and
confusing for both regulated firms and their custo-
mers.
It is not delivering the standard of supervision
and investor protection that the public has a right
to expect. 'We are therefore establishing a single,
statutory regulator for the UK financial services
industry, with clearly defined regulatory objectives
and a single set of coherent functions and powers.'2
On 30th July, 1998, Howard Davies, chairman of
the newly created Financial Services Authority
(FSA) announced3 the publication in draft of the
Financial Services and Markets Bill. He stated,
'Today's publication of the draft Financial Services
and Markets Bill is a crucial step towards the creation
of a single financial services regulator. The draft bill
gives the FSA clear statutory objectives and flexible
powers to achieve them, to allow regulations to
adapt to changing market circumstances.'
Indeed, for those involved in financial regulation,
whether regulators, compliance officers, lawyers or
bankers, this summer has been extremely busy in
terms of digesting the content and spirit of the draft
Financial Services and Markets Bill. The Financial
Services Authority, which is the newly formed
regulator in the UK, is intended as an umbrella orga-
nisation which will encapsulate pre-existing responsi-
bilities of the regulatory agencies that were created in
response to the Financial Services Act 1986. How-
ever, before embarking on an analysis of the possible
implications on implementation of the Financial
Services Bill, it is essential to put in context develop-
ments in financial regulation post-1986 and the events
that have acted as a catalyst to the Financial Services
Bill in 1998.
THE FINANCIAL SERVICES ACT 1986
AND 'BIG BANG'
July 1983 had seen the Parkinson-Goodison
agreement,4 to dismantle the London Stock
Exchange as generations had known it and this
pointed the way directly ahead to the 'Big Bang' of
27th October, 1986. Major changes were enacted
on that date, for example the London Stock
Exchange rules that enforced a rigid distinction
between jobbers and brokers were abolished; and
among other things the abolition of fixed commis-
sion rates charged by stockbrokers to their clients.
Since 1986 Big Bang has also been associated with
the globalisation and modernisation of the London
Securities Market.
Besides the reorganisation of market traders, an
important catalyst, which had an influence on the
introduction of legislation, was the technological
revolution in market trading. Big Bang created a
financial services revolution and influenced new
styles of trading and conducting financial business,
due to the fact that financial services were now facili-
tated by the electronic medium. This, inevitably,
enabled financial practitioners to create new styles
of trading, modelled on new technology. As a
result, this facilitated global business, by providing
access to international market participants in most
market arenas in the world.
However, in the City of London, there were other
concerns about business practice and consumer con-
fidence, in relation to transactions executed on the
market floor. Indeed at a political level5 it had
become increasingly clear that the government
could not remain aloof from manifest abuses and
breakdowns in control. The 'unacceptable face of
capitalism' may appear to some (as this author
argues) as the only one that capitalism wears, thereby
bringing directly into question the public's confi-
dence in the integrity and, thus, the efficiency of the
markets.
Page 333
To continue reading
Request your trial