Legal and Conduct Risk in the Financial Markets

2018 ◽  
Author(s):  
McCormick Roger ◽  
Stears Chris
Keyword(s):  
Financial Markets ◽  
Financial Services ◽  
Financial Stability ◽  
Current Approach ◽  
Fiduciary Duty ◽  
Regulatory Change ◽  
Regulatory Structure ◽  
Legal Risk ◽  
The Uk ◽  
Libor Manipulation

This third edition on legal risk has been expanded to include much new material specifically on conduct risk. It has been updated to take into account developments in the law and professional standards concerning such risks and associated values in the context of the financial markets. Significant (and in some cases, endemic) conduct-related scandals, such as the widespread mis-selling of financial products and LIBOR manipulation, exposed by the financial crisis, have resulted in legal and regulatory change in equal measure (and profound effect) to that of the prudential and financial stability concerns captured in the second edition. Consequently this new edition fully examines the current approach to trust, ethics, and conduct within the broader framework of reputational and legal risk. In doing so, it clarifies what constitutes legal risk in contemporary financial markets and how to manage it, drawing on examples and case studies. Other developments in areas such as the resolution/insolvency of banks, the revision of the UK regulatory structure from the Financial Services Authority to the Financial Conduct Authority and Prudential Regulation Authority, and the recently made new crime of reckless management of a bank are all considered in full. There is also discussion of trends in areas ripe for development such as fiduciary duty amongst financial markets participants.

5. Bank Supervision in Practice: The Case of the UK and of the European Banking Union

2018 ◽  
Author(s):  
Ross Cranston ◽  
Emilios Avgouleas ◽  
Kristin van Zweiten ◽  
Theodor van Sante ◽  
Christoper Hare
Keyword(s):  
Financial Services ◽  
Financial Stability ◽  
Debt Crisis ◽  
Banking Union ◽  
Financial Policy ◽  
Regulatory Structure ◽  
Bank Supervision ◽  
European Banking Union ◽  
European Banking ◽  
The Uk

This chapter discusses banking supervision in practice. It focuses on two jurisdictions: the UK and the European Banking Union (EBU), and considers in particular the type of powers enjoyed by the UK and EBU regulators, and the way they exercise them in their supervisory approaches. In the process the chapter highlights loopholes in the respective regimes and to some extent evaluates their effectiveness. On 1 April 2013 the Financial Services Act 2012 came into force, removing the Financial Services Authority and delivering a new regulatory structure for the UK, which comprises the Prudential Regulation Authority responsible for microprudential regulation and supervision of banks, building societies, and investment firms; and the Financial Conduct Authority, in addition to a financial stability (macroprudential) body within the Bank of England, the Financial Policy Committee. The EBU brought about the centralization of bank supervision and resolution within the Eurozone. The trigger for the establishment of the EBU was the Eurozone debt crisis.

5 The Regulatory Duties Arising from the Provision of Investment Advisory and Management Services

2018 ◽  
Author(s):  
Spangler Timothy
Keyword(s):  
Financial Services ◽  
Public Investment ◽  
Private Investment ◽  
The United States ◽  
Fiduciary Duty ◽  
Regulatory Regime ◽  
Investment Funds ◽  
Investment Advisers ◽  
The Uk ◽  
Management Services

This chapter examines the regulatory duties of investment managers arising from the provision of investment advisory and management services. Managers of private investment funds that are authorised or regulated as investment advisers or managers can owe regulatory duties arising under the Financial Services and Markets Act 2000 (FSMA) in the UK and the Investment Advisers Act of 1940 in the United States. The chapter begins with a discussion of the UK Financial Conduct Authority’s (FCA) regulation of the conduct of firms authorised under the FSMA, including collective investment schemes, public investment funds, and fiduciary duty in the financial services regulatory regime. It then considers the FCA’s regulatory response to private investment funds as well as the U.S. Securities and Exchange Commission’s compliance programme for investment advisers and managers primarily under the Advisers Act. It concludes with an analysis of financial services regulation of fiduciary duties.

Part IV Regulatory and Other Developments in the UK 2010‒2016, 13 Financial Services Act 2012: Changes to the Regulatory Architecture

2018 ◽  
Author(s):  
Mccormick Roger ◽  
Stears Chris
Keyword(s):  
Financial Services ◽  
New Product ◽  
Regulatory Structure ◽  
Regulatory Architecture ◽  
Bank Of England ◽  
Regulatory Approach ◽  
Significant Change ◽  
The Uk ◽  
Business Requirements ◽  
Individual Accountability

This chapter charts the passage of the Financial Services Act 2012 (FS Act 2012), from its policy conception through its consultation phase, and to its enactment. The FS Act 2012 received royal assent on 19 December 2012 and came into effect from 1 April 2013. The Act comprised 10 parts and 21 schedules and formally amended the Bank of England Act 1998, the Financial Services and Markets Act 2000, and the Banking Act 2009, to give effect to the reforms. The enactment of the FS Act 2012 represented a significant change in not only the regulatory structure, but the regulatory approach to supervision and enforcement. The new mantra was far a more holistic and intrusive form of regulation. Whether viewed from the perspective of the prudential thresholds, conduct of business requirements and new product intervention powers, or in light of the enhanced investigatory and enforcement priorities and a focus on individual accountability, the reforms were significant.

Part I Regulatory Structure, 3 European Financial Services

2018 ◽  
Author(s):  
Walker George ◽  
Purves Robert ◽  
Blair Michael
Keyword(s):  
Financial Services ◽  
Primary Sources ◽  
Banking Union ◽  
The European Union ◽  
Regulatory Structure ◽  
European Court ◽  
Treaty Of Rome ◽  
The Uk ◽  
Council Of Ministers ◽  
The Eu

This chapter examines the evolution of the European Union' financial services law and its impact on the development of financial services law in the UK, as it stands at the end of 2016, six months after the EU referendum. It first describes the evolving role and functions of the EU institutions, namely: the Council of Ministers, the European Commission, the European Court of Justice, and the European Parliament. It then considers the primary sources of EU law, including treaties, and the effects of the various changes in the Treaty of Rome. It also discusses the establishment of the single market in financial services and the moves to establish a banking union. Finally, it analyses the substantive financial services measures that have been adopted in the EU since the 1970s.

Part I Regulatory Structure, 2 Statutory Framework for UK Financial Services Regulation

2018 ◽  
Author(s):  
Walker George ◽  
Purves Robert ◽  
Blair Michael
Keyword(s):  
Financial Services ◽  
Regulatory Structure ◽  
Prudential Regulation ◽  
Financial Services Regulation ◽  
Bank Of England ◽  
Break Up ◽  
The Uk ◽  
Regulatory Reforms

This chapter examines the statutory framework for financial services regulation in the UK. The regulatory reforms that culminated in the break-up of the Financial Services Authority (FSA) and the return of regulatory responsibilities to the Bank of England have complicated but in many ways reinforced the original vision of a consolidated statutory framework for all financial services regulation under the Financial Services and Markets Act 2000 (FSMA). The FSMA is undoubtedly more complicated because of the need to accommodate collaboration between the Financial Conduct Authority (FCA) and the Bank of England acting as Prudential Regulation Authority (PRA). The chapter provides an overview of the structure and statutory framework of the FSMA as well as the functions of the FCA and the PRA. It also considers the scope of financial services regulation under the FSMA and the confidentiality of information obtained by the FCA and the PRA in the discharge of their functions.

Introduction

2018 ◽  
Author(s):  
Mccormick Roger ◽  
Stears Chris
Keyword(s):  
Financial Markets ◽  
Financial Institutions ◽  
Financial Services ◽  
Financial System ◽  
The Other ◽  
Legal Risk ◽  
The People ◽  
European Banking ◽  
Prospective Risk

This introductory chapter first sets out the book’s purpose, which is to describe and explain legal and conduct risk, and suggest possible approaches to the management of these risks. Legal risk is defined as risk arising in the operation and practices of the financial markets. They are a part of the spectrum of risks that are inherent in the operations of banks and other financial institutions, affecting the lives of the people who work there and the customers who put their trust in them as well as, in more extreme cases, the financial system itself. On the other hand, the European Banking Authority defines conduct risk as ‘the current or prospective risk of losses to an institution arising from an inappropriate supply of financial services including cases of wilful or negligent misconduct’.

Part A Regulatory Matters, 8 The Market Regulators

2015 ◽  
Author(s):  
Proctor Charles
Keyword(s):  
Financial Services ◽  
Financial Stability ◽  
Credit Crunch ◽  
Market Regulation ◽  
European Level ◽  
Banking Market ◽  
Bank Of England ◽  
Regulatory Bodies ◽  
The Uk

This chapter explains the various authorities involved in UK banking market regulation. It first considers the role of the UK Financial Services Authority (FSA), including its statutory objectives and powers under the Financial Services and Markets Act 2000. It then discusses the role of the Bank of England in the fields of financial stability and monetary policy; the role of Her Majesty's Treasury; the development of regulatory bodies at the European level, largely in response to the credit crunch and the problems to which it gave rise; and some recent international initiatives.

Add-on goods, contingent services and product bundling

2016 ◽  
Vol 8 (2) ◽  
pp. 94-113
Author(s):  
John Kevin Ashton
Keyword(s):  
Financial Services ◽  
Regulatory Structure ◽  
Legal Intervention ◽  
Content Type ◽  
Legal Proceedings ◽  
Regulatory Processes ◽  
Behavioural Economic ◽  
Policy Agendas ◽  
The Uk ◽  
Regulatory Practice

Purpose The study examines influence of behavioural economic theories of add-on goods and contingent charges on the regulation of two touchstone markets in the UK. These markets, the payment protection insurance (PPI) market and the market for overdrafts can both be characterised as add-on goods, have displayed excessive levels of profitability and been the focus of continuing and substantial public mis-trust. Despite these similarities, the regulatory treatment of these two markets has been very different. The purpose of this paper is to explore the context of these cases and examine why these differences in regulatory reporting have developed. Design/methodology/approach The research questions are examined through a detailed review of the regulatory reporting in the UK PPI and overdraft market. This review of over 20 regulatory reports, numerous enforcement actions, associated legal proceedings and related international evidence is employed to determine commonalities and differences in the regulatory actions proposed, motives adopted and success of these regulatory processes. Findings It is reported the dynamic and fragmented regulatory structure, multiple policy agendas and a successful legal intervention have all influenced how these financial services markets have been regulated and behavioural economic concepts applied. In particular aspects of overdraft markets remain challenging to address as it is still possible to exclude competition within aftermarkets. The regulatory intervention into PPI markets by contrast addressed concerns raised by add-on good theory and amended the form of distribution underlying this market more directly and successfully. Originality/value There have been numerous excellent reviews of behavioural economics and finance published on a diversity of topics. Despite such a wide coverage, a relatively under-researched aspect of this literature remains the application of these relatively new theoretical insights within markets and how these have influenced regulatory practice. This review of regulatory reporting addresses this gap in the literature through considering two of the most problematic financial services markets of the last decade in the UK.

scholarly journals The UK’s Government and Regulatory Policy Responses to Fintech

2021 ◽  
Vol 65 (2) ◽  
pp. 45-52
Author(s):  
I. Podkolzina
Keyword(s):  
Financial Services ◽  
Financial Stability ◽  
Barriers To Entry ◽  
Services Sector ◽  
Regulatory Authorities ◽  
Trade Offs ◽  
Financial Exclusion ◽  
Systemic Risks ◽  
Leading Position ◽  
The Uk

The financial landscape is being transformed by technological innovations. This trend can be observed clearly in the UK where fintech is developing within the context of the ongoing digitalization of the economy. This paper examines the role of the British government and regulatory authorities in sparking innovation to improve the way financial services are provided. At the conceptual level, fintech-specific policy presumes the existence of complex trade-offs between competition, market integrity, and financial stability. The special consideration is given to Open Banking initiative as a key driver of competition in financial services sector. By removing barriers to entry and grow for fintech firms the policy enablers try to solve the longstanding problems of financial exclusion. Particular attention is paid to key approaches to fintech regulation. The Financial Conduct Authority undertakes the constant review of regulatory perimeter as a means of mitigating risks to market integrity and ensuring consumer protection. The Bank of England is rethinking the notion of financial stability and reviewing the approaches to managing systemic risks. The paper regards the initiatives implemented by regulatory authorities to support innovator businesses as a way to ensure the world leading position of the UK’s financial sector. It is argued that the supportive government policy and progressive regulation are the overriding factors of fintech development in the UK.

scholarly journals Financial Crisis and Regulatory Challenges

2009 ◽  
Vol 2 (2) ◽  
Author(s):  
Michel Prada
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Financial Services ◽  
Financial Stability ◽  
Emerging Countries ◽  
Regulatory Strategy ◽  
Low Interest Rates ◽  
The Uk ◽  
The International Monetary Fund ◽  
Regulatory Challenges

A number of reports have established a diagnosis of the financial crisis. The first was produced by the Financial Stability Forum, in April 2008 and was the basis for the preparation of the first G 20 meetings in 2008. The International Monetary Fund (IMF) and the G 30 produced updated analysis in 2008 and 2009. More recently, the Larosière Group, although mainly focused on E.U. issues, also addressed global concerns , as well as the Adair Turner report which presented the new regulatory strategy of the UK Financial Services Authority (FSA). The main features of this unprecedented financial crisis are linked to immense and growing global imbalances between the Asian and US economies which provided the world with abundant liquidity, low interest rates together with low inflation (due to low wages in emerging countries) and a geographic mismatch between savings and investment needs and opportunities.

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