Financial Services Act 1986
Financial Services Act 1986
Financial Services Act 1986
(as amended by the Financial Services and Markets Act, 2000) a UK act which provides a regulatory system for the FINANCIAL SECURITIES and INVESTMENT industry. The Act covers the businesses of securities dealing and investment, commodities and financial futures, unit trusts and some insurance (excluding the Lloyds insurance market). Also excluded from its remit is commercial banking, which is supervised by the Bank of England, and mortgage and other business of the building societies, which is regulated separately by the BUILDING SOCIETIES ACT 1986.The main areas covered by the Act are the authorization of securities and investment businesses, and the establishment and enforcement of rules of good and fair business practice. The DEPARTMENT OF TRADE AND INDUSTRY, together with its appointed agency, the Financial Services Authority (formerly the Securities and Investment Board), is responsible for the overall administration of the Act, in conjunction with Recognized Investment Exchanges (RIEs) and Recognized Professional Bodies (RPBs).
Originally the Act set up five Self-Regulatory Organizations (SROs) to regulate firms providing financial securities and investment services: The Securities Association (TSA), Association of Futures Brokers and Dealers (AFBD), Investment Management Regulatory Organization (IMRO), Life Assurance and Unit Trust Regulatory Organization (LAUTRO) and Financial Intermediaries, Managers and Brokers Regulatory Association (FIMBRA). The TSA and ABRD merged in 1991 to form the Securities and Futures Authority (SFA) and in 1994 LAUTRO and FIMBRA merged to form the Personal Investment Authority (PIA). In 2000 the newly established Financial Services Authority took over the responsibilities for the three remaining Self-Regulatory Organizations thus bringing all aspects of the regulation of the securities and investment industry under the ‘one-roof.
The general objective of the legislation is to ensure a high level of investor protection by ensuring that only persons deemed to be ‘fit and proper’ are authorized to undertake securities and investment business, and that they conduct their business according to standards laid down by the SROs, RIEs and RPBs; leading, for example, in the former case, to the clarification of the relationship between the firm and its clients, especially as regards disclosure of fees, charges and the capacities in which the firm may act, and, in the latter case, to open and fair pricing.
The Financial Services Act also paved the way for important changes in the structure of the personal financial services industry. The Act together with the BUILDING SOCIETIES ACT, 1986 has enabled financial services providers such as insurance companies and building societies to broaden their portfolio of product offerings to include, for example, personal pensions, unit trusts and individual savings accounts (ISAs) thus increasing competition in the industry by breaking down traditional ‘demarcation’ boundaries in respect of ‘who does what’.
A Recognized Investment Exchange is a body such as the STOCK MARKET, LONDON DERIVATIVES EXCHANGE which provides an organized framework within which transactions can be effected, including facilities for making a market in a financial asset or commodity (see MARKET MAKER), monitoring and reporting completed transactions and providing for settlement and delivery through an appropriate clearing mechanism.
A Recognized Professional Body is an organization such as the Chartered Accountants in England and Wales, which is responsible for regulating its members in relation to their work in advising clients on their investments.
Financial Services Act 1986
(as amended by the Financial Services and Markets Act 2000) a UK Act that provides a regulatory system for the FINANCIAL SECURITIES and INVESTMENT industry The Act covers the businesses of securities dealing and investment, commodities and financial futures, unit trusts and some insurance (excluding the Lloyds insurance market). Also excluded from its remit is commercial banking, which is supervised by the Bank of England, and mortgage and other business of the building societies, which is regulated separately by the BUILDING SOCIETY ACT 1986.The main areas covered by the Act are the authorization of securities and investment businesses, and the establishment and enforcement of rules of good and fair business practice. The DEPARTMENT OF TRADE AND INDUSTRY, through its appointed agency, the Financial Services Authority (formerly the Securities and Investment Board), is responsible for the overall administration of the Act, in conjunction with RECOGNIZED INVESTMENT EXCHANGES (RIES) and RECOGNIZED PROFESSIONAL BODIES (RPBS).
Originally the Act set up five SELF-REGULATORY ORGANIZATIONS (SRO) to regulate firms providing financial securities and investment services: The Securities Association (TSA), Association of Futures Brokers and Dealers (AFBD), Investment Management Regulatory Organization (IMRO), Life Assurance and Unit Trust Regulatory Organization (LAUTRO) and Financial Intermediaries, Managers and Brokers Regulatory Association (FIMBRA). The TSA and AFBD merged in 1991 to form the Securities and Futures Authority (SFA), and in 1994 LAUTRO and FIMBRA merged to form the Personal Investment Authority (PIA). In 2000 the newly established Financial Services Authority took over the responsibilities of the three remaining self-regulatory organizations, thus bringing all aspects of the regulation of the securities and investment industry under ‘one roof.
The general objective of the legislation is to ensure that only persons deemed to be ‘fit and proper’ are authorized to undertake securities and investment business, and that they conduct their business according to standards laid down by the SROs, RlEs and RPBs, leading, for example, to the clarification of the relationship between the firm and its clients, especially as regards disclosure of fees and charges.
The Financial Services Act also paved the way for important changes in the structure of the personal financial services industry. The Act, together with the Building Societies Act 1986, has enabled financial services providers such as insurance companies and building societies to broaden their portfolio of product offerings to include, for example, personal pensions, unit trusts and individual savings accounts (ISAs), thus increasing competition in the industry by breaking down traditional ‘demarcation’ boundaries in respect of ‘who does what’.