The FSA: A Quick Guide

What is the FSA?

Otherwise known as the Financial Services Authority, the FSA is an independent and non-governmental body. The institution received statutory powers and delegation by the Financial Services and Markets Act of 2000.

In layman’s terms, the FSA is actually an independent company that is tasked to regulate the financial services industry in the United Kingdom that was set up and founded by the UK government. Reporting to the Treasury Ministers, the FSA is accountable to the Parliament of the country.  However, this does not mean that the FSA is funded by the government: instead the FSA receives funds from the firms that it works with and maintains.

The FSA has its policies, plans, objectives and rules listed on the official FSA website.

What are the objectives and goals of the FSA?

The organization’s objectives could be summarized as:

  • Helping to promote efficient, orderly and fair markets

  • Helping retail consumers get a fair deal

  • Improving business capability and effectiveness

What does the FSA do?

Since the FSA got statutory powers from the Financial Services and Markets Act of 2000 in December 2001, it has consistently been the only regulatory body for financial services in the United Kingdom. The organization is responsible for maintaining and handling a wide array of, if not most, financial services, markets, exchanges and firms. Regulation is done by setting up standards and policies that the financial firms must follow. In the event that  financial companies fail to comply to the rules, the FSA will then be tasked to file related cases and suits to the financial firms involved.

What is the FSA’s scope of work?

The FSA can make rules, investigate and enforce powers in order for it to exercise its regulatory tasks. It aims to protect consumers and guarantee that they are given fair deal in their financial services. At the moment, the FSA handles more than 29,000 firms in the country. These companies range from the smallest single-person operation to the biggest publicly listed multinationals. The FSA is geared towards regulating firms that have varying financial offerings and activities, tailoring its services to suit each one’s specific circumstances.

The organization was recently tasked to regulate other financial services. In November 2004, the FSA was mandated to regulate mortgage business firms and, in January 2005, it was also tasked to handle general insurance activities.

The organization also publishes a Handbook of rules and guidance that is given to all authorized business firms in the country.

How does the FSA perform its job?

Basically, the FSA calculates and regulates risks in the activities of the financial firms. To do this, the FSA must be able to assess given risks. It plays the role of middleman between the consumers and financial firms by protecting consumers and making sure that business management of the firm is not negatively affected during the course of such action.

The FSA abides by its statutory objectives in identifying possible risks. Having established general principles of good regulation, the FSA looks for evidence of risks. And because certain financial activities could impose a handful of risks, the FSA makes sure that these situations are handled and solved according to priorities. Mitigation of evident risks is the foremost step to solve such occurrences.

How does the FSA approach risks?

The FSA has its own Enforcement Guide that it strictly follows. This guide provides the framework for the most cost-effective solutions. Using this framework, the FSA will assess all the various measures available and assess their various impacts as it searches for solutions. Once the proposed measure proves that it can provide notable outcomes and effectiveness, it is then presented to the parties concerned so that it can be put into effect.

How does the FSA provide guidance to financial firms?

The FSA puts a lot of effort into providing financial firms with high quality guidance and support materials. These resources are fully loaded with the information that firms need to know in their day-to-day operation and activities. To further explain the regulated principles, the FSA also includes the principles of good business in these materials.

Aside from this information, the organization also provides financial businesses with case studies, FSA speeches, analyses and clear examples of ideal and bad financial practices. By doing so, it hopes that firms can obtain a clearer picture of industry problems that may be solved using its industry-tested solutions.