The FSA and securities regulation: An introduction

This guide is based on UK law as at 1st February 2010, unless otherwise stated. It is part of a series on the FSA and Securities Regulation.

The Financial Services Authority (FSA) was given four statutory objectives in 2000 when it was created by the Financial Services and Markets Act:

• to maintain public confidence in the financial markets;
• to promote public awareness of those markets;
• to protect the consumers of financial services;
• to reduce financial crime.

The 2008 banking crisis led the government to add financial stability as a fifth objective for the FSA. The FSA has a variety of roles in pursuing these objectives: as the United Kingdom’s financial services regulator; as the Listing Authority; and as the investigating and prosecuting authority for breaches of FSA rules, market abuse and other offences described in this chapter. Most firms and senior individuals working in the financial services sector or selling financial services products have to be FSA-authorised and are therefore FSA-regulated; all companies listed on the London Stock Exchange are subject to FSA rules; and anyone guilty of market abuse (see: Market abuse, an OUT-LAW guide) can face FSA censure and fines.

The reach of the FSA, therefore, is wide; its powers extensive.

Successful FSA enforcement action can mean:

• Criminal liability – the authority pursues cases through the criminal justice system if it believes it ‘appropriate’ and in the public interest to do so. In 2008, continuing concerns about the prevalence of insider dealing led to a renewed emphasis on criminal prosecutions.
• Heavy civil fines and/or public censure – the authority can levy unlimited penalties and issue public rebukes.
• Denying individuals FSA-approved status and so preventing them from carrying out regulated functions.
• Bad publicity and loss of reputation.

In 2008, the FSA described its enforcement strategy as one of ‘credible deterrence’, using enforcement action as one of its main tools to bring about real changes in behaviour to protect both consumers and markets.

The information given in this chapter – and the case studies that support it – should provide a guide to some of the circumstances that lead to FSA action against companies and their directors. Expert professional advice will, however, need to be sought in all cases.