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This paper aims to summarize and explain the recently enacted UK Financial Services Act 2010 (the FS Act) and the coalition government's proposals for a new regulatory structure.

The paper explains the purpose of the FS Act, the statutory objectives of the Financial Services Authority (FSA) under the Financial Services and Markets Act 2000, and the FS Act's provision of the FSA with: an explicit financial stability objective, extensive powers to require information, extended enforcement powers, the power to prohibit or require disclosure of short selling, the duty to require authorized firms to prepare and maintain recovery and resolution plans, the obligation to make remuneration rules and the requirement to establish a new consumer education body. Explains proposals dropped from the FS Bill to secure its enactment during the “wash‐up” process. Summarizes the recently announced coalition government proposals for reform of the UK financial services regulatory structure.

The FS Act is a legislative response by the predecessor government to the causes of the global financial crisis, delivering significant reforms that seek to enhance financial regulation. The FS Act mainly amends the Financial Services and Markets Act 2000 (the FSMA) in order to give the UK Financial Services Authority (FSA) new objectives and duties and extend its powers variously. The recently elected coalition government has announced proposals for a new regulatory structure likely to take effect in 2012.

The paper provides practical guidance from experienced securities lawyers.

The spectacular performance of the US financial market in recent years, the financial crises in South‐East Asia and Russia and the collapse of one of the most established merchant banks in the world are landmark events in economic history that have prompted concerns around the globe. The advent of the information age and globalisation means that the consequences of these events are felt more readily and extensively than ever before. Sustainability of financial growth and avoidance of future crises raise questions with a common denominator — good governance. With one of the principal financial centres in the world, it is trite to suggest that the need for good governance in the UK cannot be overstated. Protecting investors against abusive and fraudulent practices in the financial services industry has always assumed great importance. Since its emergence as an international financial and trading centre in the 13th century, the City of London has consistently emphasised the values of market confidence and integrity. In the Financial Services and Markets Bill, which is currently being read in Parliament, it is stated that its object is to maintain confidence in the financial markets, to promote public awareness and understanding, to secure an appropriate degree of protection for consumers through recognising the different degree of risks involved in different transactions and the different degrees of expertise and experience of different consumers, and to reduce the extent to which financial undertakings are used for the furtherance of financial crime.

The Serious Fraud Office (SFO) has been provided with the statutory authority to demand the attendance of suspects at its offices and also to demand that information is supplied, irrespective of whether or not the suspect has been charged with a criminal offence. It has been held that the provisions of Art. 6 of the European Convention on Human Rights (ECHR) do protect the defendant from self‐incrimination, and the UK government has been successfully challenged at the European Court of Human Rights (ECtHR) over these issues. The powers conferred on the SFO remain in place, but these must now be viewed in the context of the Human Rights Act 1998, which became law in the UK in October 2000; unless the powers of the SFO are reviewed by Parliament, it would seem to be the courts who will take responsibility in the UK for ensuring that the rights of suspects are upheld.

The Economic Secretary to HM Treasury, Miss Melanie Johnson, announced on 15th March that ‘N2’, the date on which most of the Financial Services and Markets Act 2000 will be implemented, will definitely take place before the end of November 2001. That important and long awaited announcement has been followed by a spate of government and parliamentary activity in order to put in place essential elements of the secondary legislation that HM. Treasury has the power to make under the Financial Services and Markets Act 2000 (FISMA). Much of that Act, important as it is to changing the structure, policy grounding and direction of UK financial regulation, is enabling in effect and leaves many key areas, such as, the scope of the general prohibition on carrying on regulated activities without authorisation or exemption, to be detailed by secondary legislation. On 9th May Miss Melanie Johnson made a further significant announcement in response to a parliamentary question, namely that the provisions of FISMA which confer rule‐making powers and status as the sole financial regulator on the Financial Services Authority (FSA) will be commenced on 18th June, 2001. This is necessary in order to enable it legally to ‘make’ and therefore finalise its by now very extensive Handbook of Rules and Guidance so that firms can prepare for N2 on the basis of its content. The following Orders and Regulations have already been made with the main effects as described.

‘It must be remembered there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system. For the initiator has the enmity of all who will profit by the preservation of the old institutions and merely lukewarm defenders in those who would gain by the new one.’ Machiavelli.

Compliance is key to the operation and reputation of the financial services sector and is now completely embedded in the way financial services organisations carry on investment business. It is also fundamental to the Financial Services Authority (FSA) in seeking to achieve its regulatory objectives as set out in SS. 3‐6 of the Financial Services and Markets Act 2000. A great deal has been written on the topic of compliance and the core objective of this paper is to review and comment on the current approach to compliance which has evolved since the introduction of the Financial Services Act 1986. It notes the change of emphasis by the FSA from individual compliance competence to organisational compliance competence. It focuses on conduct of business regulation and highlights the importance of training and competence to compliance and explains how the regulatory approach has been changing from a rules‐based approach to a more flexible ethical one.

After first being issued in draft in July 1998 and then taking a year to go through Parliament, the Financial Services and Markets Act 2000 (FISMA) finally became law on 14th June, 2000. The Treasury, the government department responsible for the UK financial services industry, has, however, just announced that the FISMA will not come fully into force until summer 2001, although some sections may perhaps come into force earlier.

An updated version of the original (1985) text, the book covers all aspects of marketing and selling bank services: the role of marketing; behaviour of customers; intelligence, planning and organisation; product decisions; promotion decisions; place decisions; price decisions; achieving sales. Application questions help to focus the readers' minds on key issues affecting practice.

The strategic importance of distribution for financial services was reflected in and reinforced by the provisions of the Financial Services Act. Through requirements relating to polarization, best advice and commission disclosure, the Financial Services Act sought to create a regulatory framework which would provide the level of investor protection which was appropriate in a market characterized by a high level of information asymmetry and a heavy dependence on commission‐based selling. In practice the desired level of investor protection has failed to materialize, and this can be attributed not so much to a failure of the principles within the Financial Services Act as to a failure in the way in which those principles have been implemented.