Newspaper article The Evening Standard (London, England)

The Role of City Regulators

Newspaper article The Evening Standard (London, England)

The Role of City Regulators

Article excerpt


WORKING in the City is very different from the heydays epitomised by the Eighties and Nineties. Multimillion-pound transactions are made at the flick of a switch rather than face-to-face on the floor of the London Stock Exchange. Traders with PhDs in astrophysics - unheard of at the time of Big Bang in 1986 - are commonplace and have devised new financial instruments, the complexity of which makes the mind boggle.

Recently, the City has witnessed considerable upheaval during the prolonged bear market, and this has been accompanied by the heightened level of personal liability that is attached to staffers in their everyday roles.

Powerful new regulator Much of this change can be attributed to the new regulator, the Financial Services Authority. This body is an amalgam of a number of specialist regulators. The Government has armed it with the powers that were lacking when regulators conspicuously failed to discipline managers connected with previous embarrassing financial scandals, notably the collapse of Barings in 1995.

On an individual level, staff in positions of responsibility at regulated firms are now more accountable. Key staff must be registered with the FSA if their roles are deemed to be "a controlled function". If the FSA finds that an individual has behaved in a manner inconsistent with accepted standards (ie, not "fit and proper"), it can take action and, in the most serious cases, even bar them from working in financial services permanently.

Previously, firms have protected their staff by paying fines imposed on them by the regulator. The FSA has recently proposed a rule change to prevent this, "to ensure that fines are paid by the person on whom they are imposed".

Taking a regulator to court to defend your reputation is costly and all-consuming, especially when it boasts statutory immunity.

The public purse can fund the best QCs.

Many director and officer liability policies restrict coverage in such instances, or may not cover retrospective action if an individual has changed firm. A person may have to float all legal costs until the insurer has processed the claim. …

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