Critically Assess The Impact Of The Financial Serv

Essay by EssaySwap ContributorUniversity, Master's February 2008

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The Financial Services Act 1986 came as a result of Margaret Thatcher¡¦s reforming of the infrastructure in British society. Its main objective was to provide a coherent legal framework for the regulation of financial services and protection of investors. At the time, the government encouraged people for a wider share ownership and privatisation was a duty in Thatcher¡¦s policy philosophy. Scandals also played an important role in Parliament¡¦s decision to provide the financial industry an act that everyone could rely on and work out from. At the time, information technology was brought more and more into the industry and innovation and development led to an outdated and incomplete legal system. Would the new act frighten people to not invest their money? Or would it encourage people in working as a protecting force? Four sub-objectives for the new regulatory system were set out. ¡§First, the financial services industry should be able to provide its services in the most efficient and economic way.

Secondly, regulation should stimulate competition and encourage innovation and be responsive to international developments, not a cover for protectionism. Thirdly, regulation should ensure that the financial services sector was a clean place to do business and thus would inspire confidence. And fourthly, the regulations should provide a guide and not cramp structural and other changes in the industry.¡¨ The Financial Services Act 1986 created a new method of regulation. What it did was to design a two-tier regulatory system based on the assumption that to conduct investment business, a person or organisation will have to be authorised. The authorisation came automatically if she is a member of a recognised self-regulatory organisation (SRO). Otherwise she would have to be authorised separately. To be recognised, ¡§an SRO will have to meet certain statutory criteria designed to ensure that it...