The Financial Services
Authority (for which this is not the website) has immense powers.
It gets these powers from the Financial Services and Markets
Bill, which has recently been passed by the Commons. The Bill
will soon go through the Lords and is expected to become law in
April. If you are feeling particularly masochistic, you can read
the bill here.
Here are some of the FSA's
powers and (wink wink) accountability under the Bill:
The FSA is a limited
company. It has a Chairman (who is, unusually, also the
Chief Executive) and two Managing Directors appointed by
the Treasury. There are also 11 non-executive members
chosen by the FSA.
The FSA must appoint
a practitioners panel, but this can be as big or as small
as it decide. The FSA appoints all the members and
chooses the chairman, with the approval of the Treasury.
It does not have to follow the panel’s advice,
merely ‘have regard’ to it.
There is also a
consumer panel. Again, the FSA appoints it and decides
how many people are on it, who they are, and who is the
chair. Again, it does not have to follow its advice. The
current ‘representatives of ordinary people’
include the Provost of Worcester College at Oxford
University, the chief commissioner of Northern
Ireland’s Equality Commission, and the head of a
personal finance publishing group.
The Treasury can
appoint an independent person to review the FSA’s
economy and efficiency with its resources, but has no
power to review a policy.
In case you were looking
for the FSA's accountability, that was it. In other words, the
policy of the FSA cannot be challenged by ordinary people, or
even MPs. Even the advice of the advisory panels cannot change
FSA policy against its will. This unelected body is able to
regulate the finance industry with no effective checks and
balances on its policy. The only possible sanction is for the
Treasury to remove an FSA board member.
Things get worse:
The FSA can issue a
‘statement of principle’ whenever it wants.
This is a set of rules which financial firms must follow.
If the FSA thinks ‘it appears’ that a firm has
acted against the ‘statement of principle’, it
can issue a unlimited penalty. They can demand this money
within 14 days. This money goes to the FSA. There is no
need for the FSA to prove its case beyond reasonable
doubt as is the case with normal criminal law.
If somebody wishes to
appeal against the FSA’s penalty, they can appeal to
a tribunal run by the Lord Chancellor. Details of this
are, so far, somewhat vague.
The FSA can, at its
discretion, demand that a finance firm gives them a
particular document or piece of information. This must
only be done if the document is ‘reasonably
required’ by the FSA – but it is up to the FSA
to decide what is reasonable. They can also demand that a
finance firm produces a report for the FSA, in whatever
form the FSA demands. If the firm refuses to give them a
document, the FSA can get a search warrant and take the
document by force, and the person who refused to give
them the document may face up to two years in prison.
If the FSA are
carrying out an investigation, it can demand that anybody
at any time give it a document, with no need to give
reasons for wanting it.
The FSA has an
independent investigator for when people complain about
the FSA’s activities, but complaints must go to the
FSA which then decides whether to pass them on to the
investigator. If the investigator finds against the FSA,
he can only report this fact and ask the FSA to act on
his report. He cannot order it to carry out a particular
action. The FSA does not have to pay compensation to the
person or firm whose complaint is upheld. The
investigator looked at six cases last year, and upheld
none of them.
The FSA must hold an
annual public meeting but, as long as (in its opinion) it
allows reasonable opportunity for questions and
discussion, this meeting can be held in whatever manner
the FSA chooses.
The FSA can set fees
for finance firms to be allowed to carry on in business.
The amount of these fees is up to the FSA. At the moment,
a one man company offering finance advice may have to pay
the FSA £8,000 a year for the privilege of being under
its control.
As long as they do
not breach the subjective legal rule of ‘bad
faith’, neither the FSA nor any of its employees can
be held legally liable for any action they take. This
means FSA employees could act recklessly or negligently
in their duties, with no fear of court action.
In short, the balance of
justice between the FSA and everyone else is about as level as a
see-saw with Giant Haystacks on one end and Twiggy on the other.
Also on this site, you can
find quotes about the FSA, addresses and other interesting details of
the FSA board members, and some interesting FSA facts.
