The Financial Services Authority: An introduction
This article is based on UK law as at 1st April 2007, unless
otherwise stated.
The Financial Services Authority (FSA) was set up in 2001 as the
UK equivalent of the Securities and Exchange Commission (SEC), the
mighty US regulator born in the aftermath of the 1929 Wall Street
crash. Its duties and powers are the creation of the Financial
Services and Markets Act 2000 (FSMA) and numerous pieces of
secondary legislation that flow from it.
The authority has four statutory objectives:
- to maintain public confidence in the financial markets;
- to promote public awareness of those markets;
- to protect the consumers of financial services;
- to reduce financial crime. In pursuing its objectives, the FSA
may investigate and take action against companies and
individuals.
The reach of the FSA is wide, its powers extensive. It is the UK
Listing Authority, so all companies listed on the London Stock
Exchange are subject to its rules; most companies and senior
individuals working in financial services have to be authorised by
it and so are regulated by it; it is the investigating and
“prosecuting” authority for market abuse, which anyone can commit
(see section 3, below).
Successful FSA enforcement action can mean:
- criminal liability – the authority pursues cases through the
criminal justice system if it believes it “appropriate” and in the
public interest to do so;
- heavy civil fines and/or public censure – the authority can
levy unlimited penalties for breaches of its rules and for market
abuse and will publish its findings;
- bad publicity and loss of reputation.
It is impossible to insure against the risk of an FSA fine –
though you can take out cover for the costs of defending yourself
against FSA action and for compensation to third parties such as
customers and investors.
How can people be sure they are toeing the FSA line? The
authority sets out the many relevant rules in a handbook, available
– along with other useful guidance – on the FSA website.
Expert professional advice will, however, need to be sought in
all cases.
