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The Financial Services and Markets Act 2000 is the Act of Parliament of the United Kingdom that created the Financial Services Authority (FSA) as a regulator for insurance, investment business and banking.

This was the Act by which Gordon Brown removed responsibility for regulating the banking industry from the Bank of England, a decision that many people now feel was a major error that contributed greatly to the financial meltdown in the UK banking sector. Clearly the Governor of the Bank of England, Mervyn King, agrees with this opinion as he tries to pressure Gordon Brown and Alistair Darling to return the responsibility to him.

 

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2 Responses to “The Financial Services and Markets Act 2000 (or “FSMA” 2000)”

  1. James Green says:

    Of course since I originally made the post the Conservatives have come out to say that if (when) they get into power they will abolish the FSA and return regulation of banks and building societies to the Bank of England.

    That’s fine in theory – and in general I welcome it – but the fact is that whatever organisation does the regulation the chances are that it the same people who will do the day-to-day regulation.

    In my experience (and I have had far too much of it) the people doing the regulation are at best second rate.

    Just think how it must be when a succesful hedge fund manager – multi millionaire – comes up with a complex, complicated product and presents it to the regulator who doesn’t actually understand it. By force of arguement or by bullying the hedge fund manager pushes the product through because at the end of the day the regulator doesn’t undertand it and probably says nothing being unwilling to admit their ignorance.

    So when the scheme goes wrong who was to blame?

    Further, what actually happens is that the regulator ends up regulating completly unimportant areas of the business. You get regulation for regulation’s sake and a complete “tick-box” system.

    Would self-regulation work any better? Possibly but in my humble opinion people (investors) should take responsibility for their own decisions and not expect regulators to do it for them. If it sounds too good to be true then it possibly is too good to be true.

    More pertinately – if you don’t understand what it is you are investing in then don’t invest. Apart from anything else if it is complicated then you can rest assured the regulator doesn’t understand it either!

  2. Leo says:

    There still seems to be no really clear policy here. The present government takes the attitude that the industry can regulate its self. I think it is very clear that privately run industry that uses public money is just not capable of that. As the present train crisis in the UK demonstrates. In fact it has been rumoured that certain banks are perusing the exact same policy as before the financial crash,

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