Financial Services Act 1986


Financial Services Act 1986, (FSA), legislation passed in 1986 in the United Kingdom that provided a new framework for investor protection through wide-ranging statutory powers and the establishment of new criminal offenses relevant to the financial services industry. It incorporated recommendations of the Gower Report (1984) and was designed to cope with the changes that would inevitably follow the October 1986 Big Bang, which ended the strict separation of stockjobbers (market makers) and stockbrokers (clients` agents), and the practice of minimum commission charges on securities transactions. It led to the creation of big financial conglomerates of a type that had not been seen in the United Kingdom before.

The main provisions of the FSA took force

The main provisions of the FSA took force in 1988. The Securities and Investments Board (SIB), to which was delegated most of the powers under the act (excluding listing requirements for public issues, takeovers and mergers, and insider dealing investigation and prosecution), set about creating a rulebook. It was aimed to be flexible enough to cope with changes and developments in the various markets, and the FSA was amended in 1990 in order to increase this flexibility.

The SIB is assisted by several self-regulating

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 (IMRO); Financial Intermediaries, Managers, and Brokers Regulatory Association (FIMBRA); and Life Assurance and Unit Trust Regulatory Organization (LAUTRO). However, FIMBRA and LAUTRO are now being wound down, and their activities and some of those regulated by IMRO and SFA have been taken over by a new self-regulating organization called the Personal Investment Authority.

Despite the good intentions behind the

Despite the good intentions behind the act and of those who are responsible for operating the regulatory framework it established, there has been much criticism of how things have worked in practice. On the one hand, those involved in selling financial services complain of being overburdened with paperwork and unable to advise their clients in the way they would like for fear of contravening the regulatory code. On the other hand, it is beyond doubt that many thousands of people have been persuaded to buy unsuitable financial products such as pensions. The regulators have imposed heavy fines and other requirements on several financial services firms, including big and well-established companies as well as smaller ones. It is believed that the compensation that the industry will have to pay for bad advice on pensions will be huge.

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