Financial Services Act 1986

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Financial Services Act 1986

Legislation in the United Kingdom that largely deregulated financial services. Specifically, it removed from courts the ability they previously held to regulate derivative contracts. Most of the Act (though not the aforementioned example) was repealed by the Financial Services and Markets Act 2000.

Financial Services Act 1986

(as amended by the Financial Services and Markets Act, 2000) a UK act which provides a regulatory system for the FINANCIAL SECURITIES and INVESTMENT industry. The Act covers the businesses of securities dealing and investment, commodities and financial futures, unit trusts and some insurance (excluding the Lloyds insurance market). Also excluded from its remit is commercial banking, which is supervised by the Bank of England, and mortgage and other business of the building societies, which is regulated separately by the BUILDING SOCIETIES ACT 1986.

The main areas covered by the Act are the authorization of securities and investment businesses, and the establishment and enforcement of rules of good and fair business practice. The DEPARTMENT OF TRADE AND INDUSTRY, together with its appointed agency, the Financial Services Authority (formerly the Securities and Investment Board), is responsible for the overall administration of the Act, in conjunction with Recognized Investment Exchanges (RIEs) and Recognized Professional Bodies (RPBs).

Originally the Act set up five Self-Regulatory Organizations (SROs) to regulate firms providing financial securities and investment services: The Securities Association (TSA), Association of Futures Brokers and Dealers (AFBD), Investment Management Regulatory Organization (IMRO), Life Assurance and Unit Trust Regulatory Organization (LAUTRO) and Financial Intermediaries, Managers and Brokers Regulatory Association (FIMBRA). The TSA and ABRD merged in 1991 to form the Securities and Futures Authority (SFA) and in 1994 LAUTRO and FIMBRA merged to form the Personal Investment Authority (PIA). In 2000 the newly established Financial Services Authority took over the responsibilities for the three remaining Self-Regulatory Organizations thus bringing all aspects of the regulation of the securities and investment industry under the ‘one-roof.

The general objective of the legislation is to ensure a high level of investor protection by ensuring that only persons deemed to be ‘fit and proper’ are authorized to undertake securities and investment business, and that they conduct their business according to standards laid down by the SROs, RIEs and RPBs; leading, for example, in the former case, to the clarification of the relationship between the firm and its clients, especially as regards disclosure of fees, charges and the capacities in which the firm may act, and, in the latter case, to open and fair pricing.

The Financial Services Act also paved the way for important changes in the structure of the personal financial services industry. The Act together with the BUILDING SOCIETIES ACT, 1986 has enabled financial services providers such as insurance companies and building societies to broaden their portfolio of product offerings to include, for example, personal pensions, unit trusts and individual savings accounts (ISAs) thus increasing competition in the industry by breaking down traditional ‘demarcation’ boundaries in respect of ‘who does what’.

A Recognized Investment Exchange is a body such as the STOCK MARKET, LONDON DERIVATIVES EXCHANGE which provides an organized framework within which transactions can be effected, including facilities for making a market in a financial asset or commodity (see MARKET MAKER), monitoring and reporting completed transactions and providing for settlement and delivery through an appropriate clearing mechanism.

A Recognized Professional Body is an organization such as the Chartered Accountants in England and Wales, which is responsible for regulating its members in relation to their work in advising clients on their investments.

Financial Services Act 1986

(as amended by the Financial Services and Markets Act 2000) a UK Act that provides a regulatory system for the FINANCIAL SECURITIES and INVESTMENT industry The Act covers the businesses of securities dealing and investment, commodities and financial futures, unit trusts and some insurance (excluding the Lloyds insurance market). Also excluded from its remit is commercial banking, which is supervised by the Bank of England, and mortgage and other business of the building societies, which is regulated separately by the BUILDING SOCIETY ACT 1986.

The main areas covered by the Act are the authorization of securities and investment businesses, and the establishment and enforcement of rules of good and fair business practice. The DEPARTMENT OF TRADE AND INDUSTRY, through its appointed agency, the Financial Services Authority (formerly the Securities and Investment Board), is responsible for the overall administration of the Act, in conjunction with RECOGNIZED INVESTMENT EXCHANGES (RIES) and RECOGNIZED PROFESSIONAL BODIES (RPBS).

Originally the Act set up five SELF-REGULATORY ORGANIZATIONS (SRO) to regulate firms providing financial securities and investment services: The Securities Association (TSA), Association of Futures Brokers and Dealers (AFBD), Investment Management Regulatory Organization (IMRO), Life Assurance and Unit Trust Regulatory Organization (LAUTRO) and Financial Intermediaries, Managers and Brokers Regulatory Association (FIMBRA). The TSA and AFBD merged in 1991 to form the Securities and Futures Authority (SFA), and in 1994 LAUTRO and FIMBRA merged to form the Personal Investment Authority (PIA). In 2000 the newly established Financial Services Authority took over the responsibilities of the three remaining self-regulatory organizations, thus bringing all aspects of the regulation of the securities and investment industry under ‘one roof.

The general objective of the legislation is to ensure that only persons deemed to be ‘fit and proper’ are authorized to undertake securities and investment business, and that they conduct their business according to standards laid down by the SROs, RlEs and RPBs, leading, for example, to the clarification of the relationship between the firm and its clients, especially as regards disclosure of fees and charges.

The Financial Services Act also paved the way for important changes in the structure of the personal financial services industry. The Act, together with the Building Societies Act 1986, has enabled financial services providers such as insurance companies and building societies to broaden their portfolio of product offerings to include, for example, personal pensions, unit trusts and individual savings accounts (ISAs), thus increasing competition in the industry by breaking down traditional ‘demarcation’ boundaries in respect of ‘who does what’.

References in periodicals archive ?
The Government passed legislation, in the form of the Financial Services Act, to introduce the requirement for competition and innovation in banking.
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Yesterday, at the high court in Glasgow, he admitted two charges brought under the Financial Services Act of operating an unauthorised investment business after a five-month trial.
I was in the insurance industry for almost 25 years and we agreed that when the Financial Services Act was introduced in the mid-Eighties, it would eventually lead to many people dying without life assurance.
Mr Hale can't now send out an official offer of pounds 100 a share, due to procedural demands by the Takeover Panel and the necessity to comply with the Financial Services Act.
However, because I was sold the policy by a financial adviser who is no longer in business, before the Financial Services Act came into force, Windsor Life denies liability.
The Financial Services Act, better known as Gramm-Leach-Bliley, allows financial institutions, such as banks, insurers and securities firms, to affiliate under one corporate roof.
It is entering into a partnership with CGU Life to offer products regulated under the Financial Services Act.
Under the terms of the Financial Services Act the Insurance Ombudsman was told it could only check whether the endowment was a suitable investment to back a mortgage - grievances relating to the loan were simply ruled to be out of its remit.
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11971 of May 14,1999 (the CONSOB Regulation), all as amended or in any other circumstances where an express exemption from compliance with the restrictions on offers to the public applies, as provided under article 100 of the Consolidated Financial Services Act and article 34-ter of the CONSOB Regulation and in accordance with Italian laws and regulations.

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