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Financial Services Law - Essay Example

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The Finance Services Act 1986 (hereinto referred as the "Old Act) is the original legislation that regulates the conduct of investment business and incidentally, advertising of investments in the United Kingdom.1 Taking effect from April 1988, the Old Act provided a new framework for investor protection through wide-ranging statutory powers and the establishment of new criminal offences relevant to the financial services industry.2
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Financial Services Law

Download file to see previous pages... The Securities and Investment Board (SIB) was the over-all regulator of the investment businesses in the United Kingdom under the Finance Services Act 1986. The SIB is assisted by several-self regulating organizations and recognized professional bodies. The self-regulating bodies used to be: the Securities and Futures Authority Limited (SFA); Investment Management Regulatory Organization (MRO); Financial Intermediaries, Managers, and Brokers Regulatory Association (FIMBRA); and Life Assurance Unit Trust Regulatory Organization (LAUTRO).5
Because of the many regulatory bodies involved, many rules and regulations were enacted, thus confusion in the enforcement of Old Act did arise. There was a fear on the part of the those involved in the selling of financial services and they cannot give advice to their clients the way they want because of the fear that they will contravene the regulatory code and there was a heavy fine on the part of the financial service firm in case of bad advice given to clients.6 Another negative effect may be is that there was confusion on what procedure to apply in the investigation of offences and the enforcement of appropriate actions the Old Act considering the number of regulations produced by the number of self-regulating bodies involved
The Financial Services and Markets Act 2000
In the year 2000, a new legislation was passed replacing the Old Act. The New Act is called the Finance Services and Markets Act 2000 (hereinto referred as the New Act or FSMA). It received Royal Assent on 14 June 2000 and was brought into force at midnight on 30 November 2001, commonly known at that time as N2. Under the FSMA, the Securities and Investment Board (SIB) and the supporting regulatory bodies under the Old Act were replaced with the Finance Services Authority (FSA) as the over-all regulator of the Act. The FSA became the super-regulator of the Act, being fully in force from 30 November 2001. Under the FSMA, the FSA has four objectives: maintaining market confidence; promoting public understanding of the financial system; the protection of the consumer; and fighting financial crimes.7
Key Changes under the FSMA
The FSMA retained the fundamental principle of the Old Act8. Aside from establishing the FSA as the super-regulating body, the FSMA also introduced significant changes to UK financial services law, to include9:
1) a revised Financial Promotion Scheme;
2) powers to impose penalties for market abuse;
3) regulation, marketing and promotion of collective investment schemes;
4) recognition of investment exchanges and clearing houses;
5) delegation to the London Stock Excahnge of the relevant powers to regulated listing
activity and to approve all prospectuses;
6) establishment of a Single Ombusdman and compensation scheme, replacing the
various schemes already in existence, to provide further protection to consumers;
7) establishment of a Financial Services and Markets Tribunal (FSMT) to hear appeals
against decisions of the FSA.
For European or International considerations, the ...Download file to see next pagesRead More
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