HISTORIC PRESS RELEASE : Plans to Modernise Financial Regulation – Financial Services and Markets Bill Published [July 1998]

The press release issued by HM Treasury on 30 July 1998.

Proposals to modernise and simplify the structure of the UK’s financial regulatory structure were published today by the Chief Secretary, Stephen Byers.

Under the draft Financial Services and Markets Bill the Financial Services Authority (FSA) will become the single regulator for the UK’s financial services industry, backed by law.

Publishing the Bill, Mr Byers said:

“This bill will allow the creation of a financial regulatory system that is independent, flexible and accountable to those regulated by it and to the consumers that it protects.

“A single regulator will remove the scope for duplication, gaps and inconsistency that affects the current system.

“In the light of the personal pension mis-selling scandal we also want to see an improvement in standards so that customers are better protected and better informed about the products  they buy.

“Financial services is an important and internationally competitive sector of the economy. These reforms are the opportunity to apply best practice across the board and to  shape a financial regulator that will maintain confidence in UK markets at home and abroad, setting an example for  financial regulation around the world.

“We have consulted widely in putting this draft bill together and we are now delivering on our commitment to publish it in  the summer.  There will now be a further period of public consultation on the detail of the draft Bill.  I also  anticipate – and welcome – the involvement of the Treasury  Select Committee in the consultation process.  This  consultation is an important part of the process to ensure that the new system is efficient and effective. We want to lay the  foundations of a regulatory system that will last well into  the 21st century.”

The main features of the Bill include:

• new statutory objectives for the FSA to improve transparency and accountability. The FSA will be required to report annually on its achievements against the objectives of market confidence, public awareness, the protection of consumers and the reduction of financial crime.
• a single set of powers for the FSA. This will allow the regulator to authorise all those kinds of financial services business requiring regulation. It will have flexible powers to make rules governing regulated activities, subject to consultation and cost-benefit analysis. It will have full powers, where necessary, to investigate and intervene in authorised firms’ activities and to discipline, including the power to fine.

• powers for the Treasury to change the scope of what is regulated. For example, the Council of Mortgage Lenders’ code of practice is to be reviewed in 1999. If required, it would be possible to make mortgages subject to regulation under the Bill.
•  a new independent appeals tribunal. This will come under the Lord Chancellor’s Department and will give and effective right of appeal for those affected by the FSA’s decision.
• single ombudsman and compensation schemes to ensure improved access for consumers by providing single points of entry and improved public profile. This will reduce the scope for confusion about the roles and responsibilities of different schemes.
•  a new regime to regulate financial promotion. The draft Bill includes a single framework to cover existing activities such as issuing advertisements and making unsolicited ‘cold calls’, taking account of changes in technology.
• new civil fines for market abuse which will fill a gap in the current framework and will complement, not replace, the criminal regime.
• the recognition of investment exchanges and clearing houses. TheFSA will continue to be able to recognise the status of such bodies.
• statutory oversight of Lloyd’s. New FSA powers will provide, for the first time in many areas, a major element of external regulatory accountability.