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United Kingdom

The Financial Services and Markets Act

The Financial Services and Markets Act finished its long journey through parliament and received royal assent on June 14 2000. The new law consolidates previous legislation on financial services into one statute. The Act provides a framework in which a single regulator for the UK financial services industry, the Financial Services Authority (FSA), will operate, equipped with a full range of statutory powers. The new law co-ordinates and modernizes financial regulatory arrangements which have been the responsibility of a range of different independent bodies. The Act also extends protection to consumers by establishing a single Ombudsman, a compensation scheme and by creating an administrative appeal board: the Financial Services and Markets Tribunal.

The Financial Services and Markets Act was subject to over 1,700 amendments over the two years it spent in parliament. Many notable issues arose, including the debate over whether the proposed disciplinary proceedings of the FSA were to be criminal or non-criminal in nature. These were eventually classified as criminal proceedings after it was argued that the failure to afford legal rights to an accused appearing before FSA disciplinary proceedings would be a violation of the European Convention on Human Rights. Issues also arose about the definition of the offence of "market abuse". Having started as a widely-defined offence including any action which damages "confidence in a true and fair market," market abuse is now defined more restrictively as a failure to "observe the standard of behaviour reasonably expected of a person" in relation to the market. A safe haven from this offence has been established for those complying with FSA's Code of Market Conduct. While there are substantive changes to financial services law under the new statute, the fundamental principles of the previous legislation remain unchanged. Details of the new regime will be revealed in draft rules and guidance materials to be published by the FSA later this summer. The Financial Services and Markets Act is not expected to be implemented before 2001.

Patrick Crocco

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