Fsa Ethical Aproach

Abstract:

This paper intends to discuss if the Financial Services Authority (FSA) has an ethical approach in relation to investment regulation. First it will explain the recent history of regulation within the Financial Services Industry until the creation of the FSA , an independent and non-governmental body, with statutory rights given by the Financial Services and Markets Act 2000. Then it reflects about the meaning of compliance competent and if FSA had adopted an ethical approach.

In the beginning...

The story of the FSA is quite recent and it started from the need to regulate and control the rapidly changing markets of the 70’s and 80’s. Prior to the FSA, the market regulation was served ad hoc, combining government regulation and a heavy element of self regulation. Changes in the international financial system made the Government to look for new solutions and at that time Professor L.C.B. Gower was asked to review the investor protection within the financial services industry in the UK.

In his report, Professor Gower wrote that ” Logic and tidiness... are important only in so far as they contribute to a legal regime which can be understood, which will be regarded as fair by those which affects and which, as a result, will be generally observed and can be effectively enforced.” (Budd, L., Whimster, S., 1992)

A White Paper in 1984 followed the report and led to the Financial and Services Act (FSA) 1986. This act is mainly concerned with protecting the private investor and is a piece of legislation that brings sole practitioners and firms of the financial industry within one statutory framework.

With the FSA 1986 was created an agency, the Securities and Investment Board (SIB), with regulatory and enforcement powers and where most of the powers under the act were delegated. The SIB was assisted by self-regulating organisations (SROs) such as FIMBRA and LAUTRO and recognised professional bodies (RPBs). The SIB had power to make rules with legislated effect and reported to the Chancellor of the Exchequer. It maintains a list of authorised firms called the central register.

Unlikely its American counterpart SEC, the SIB was totally financed by the city but accountable not to the city but to the government (Budd, L., Whimster, S., 1992).

The Financial and Services Act 1986 was replaced by the Financial Services and Markets Act 2000. The SIB was replaced by the Financial Services Authority (FSA), and all the SRO’s were incorporated into this single regulator.

The new regulator, FSA, had under the act, four statutory