The FSA, which was set up by the government and is accountable to Parliament, is the main statutory regulator for the UK financial services industry. The FSA is impartial so it neither makes recommendations on financial products nor does it handle complaints or compensation claims.
Before they can sell financial products or financial advice, UK firms, bodies and individuals (including some from the European Economic Area) must be authorised by the FSA. Once firms are authorised, they are listed on the FSA’s register which is available for public inspection.
In very basic terms, banking, investment, insurance, personal pension, insurance and mortgage products are the main areas of financial activity where FSA authorisation is required. (There are a number of areas of finance the FSA does not regulate which are ‘policed’ by other bodies: Loans, credit cards and second-charge loans are supervised by The Office of Fair Trading (OFT);The Pensions Regulator deals with matters relating to the selling of occupational pension schemes and the Ministry of Justicemonitors the activities of claims management services.)
As far as the public is concerned, the FSA’s role is to protect consumers’ interests by setting standards that firms selling financial services and products must adhere to if they wish to continue doing business or avoid being financially penalised.
Through regular and unannounced inspections and other measures, the FSA monitors authorised entities to check that they are keeping to the required standards. A number of aspects of a firm’s activities are scrutinised including (for example) their administrative systems, advertising and contract terms and conditions. If mistakes or irregularities are discovered, then the FSA will require the firm to rectify them as soon as possible. In the worst cases, firms and individuals can either be banned from doing business altogether or fined, the amount of the fine being determined by the size of the firm and/or by the nature of its business.
Levies — paid by the firms the FSA regulates — cover the cost of maintaining the FSA, which in the tax year 2010/2011 is estimated to be £458 million.