This day in history: April 8, 2013: Goodbye FSA, Hello FCA
In the second part of a new series on FinanceFeeds, we take a look back at “This day in history” within the world of FX. Every Friday morning, we take a look back through the various groundbreaking developments that continue to take place in our fascinating industry. Exactly three years have passed since the long-established Financial Services […]
In the second part of a new series on FinanceFeeds, we take a look back at “This day in history” within the world of FX. Every Friday morning, we take a look back through the various groundbreaking developments that continue to take place in our fascinating industry.
Exactly three years have passed since the long-established Financial Services Authority (FSA) in Britain went out of service, paving the way for two new regulatory authorities to take the reins.
At that time, the regulatory structure was separated by the British government, giving rise to the establishment of the Financial Conduct Authority (FCA), which overseas the activities of all non-bank financial services businesses, and the Prudential Regulatory Authority (PRA) which overseas all bank activity.
Some 28 years after at-the-time Prime Minister Margaret Thatcher inaugurated what has become one of the world’s most highly respected regulatory structures and most prestigious frameworks within which the financial services industry can operate, the FCA is world renowned for overseeing today’s prominent institutional and retail electronic trading firms, liquidity providers, fintech initiatives, prime brokerages and the entire support ecosystem that has been built around Britain’s established business sectors.
As far as its roots are concerned, the FSA was introduced in June 1985 by Chancellor of the Exchequer Nigel Lawson under the name Securities and Investments Board (SIB).
Throughout the 1980s, the UK experienced a booming economy and as more of the country’s working population had disposable income, many started to look toward investment for their future. This led to a proliferation of Independent Financial Advisers (IFAs) establishing business. These were effectively small brokerages, often consisting of just one or two financial advisers, who would place business with various investment or life assurance companies in return for a commission.
There quickly became a need for regulation of what was becoming a very diversified financial sector. The UK was moving away from being a nation of heavy manufacturing, engineering, shipbuilding and export to financial services in various guises. The country’s traditional London-based financial sector was built on reinsurance for the marine industry and traditional banking, with exchange-traded products being available on the London Stock Exchange.
The banking sector was traditionally overseen by the Bank of England and was tightly controlled. In order to begin to regulate the fast changing financial sector and its alternative divisions such as brokerages, stockbrokers, financial consultants and independent portfolio managers, a self-regulatory organization called the Financial Intermediaries, Managers and Brokers Association (FIMBRA) was introduced. A large majority of IFAs joined FIMBRA in order to maintain credibility.
It was not uncommon to walk through British neighborhoods during the late 1980s and see the FIMBRA sign on the door of the home at which an IFA lived, a symbol I remember very well indeed as a teenager whilst walking through residential streets to my apprenticeship at British Telecom where I spent two years programming PBX switches, configuring Cisco routers and builing performance test networks for bank trading desks in Britain in 1991 and 1992.
The SIB ceased to recognize FIMBRA as a satisfactory regulatory body in 1994, and implemented steps for its wind-down. Briefly replaced by the Personal Investment Authority (PIA), which was the first organization which had the ability to bring brokers and intermediaries to book over misconduct, new rules were set out to increase transparency, effectively the beginning of Know Your Client questionnaires and risk disclosure as well as commission disclosures.
By this time, online trading was making its debut into the world, and coinciding with this was the incorporation of all bodies into one, forming the FSA. This took the responsibility of overseeing the banking sector away from the Bank of England, a move which resulted in some dissent by conservatives, placing the entire financial sector from traditional banking to pension advisers and life assurance products right through to forex trading companies under the auspices of the FSA.
On June 16, 2010, following the return to office of the Conservative government, the Chancellor of the Exchequer, George Osborne, announced plans to abolish the FSA and separate its responsibilities between a number of new agencies and the Bank of England.
Today, regulatory matters within the electronic trading and non-bank sector have evolved so significantly that no longer is the previous structure of the FSA recognizable in any shape or form. FinTech is dominating the financial landscape, spearheaded by some of the initiatives within the FX and electronic trading industry which is at the very leading edge of technological development not only in the financial services industry, but above many other industry sectors worldwide.
Consultancy firms such as MAP S Platis, which provides legal, consultancy and professional services as well as ERP reporting for European regulations, have moved in line with this. Indeed MAP S Platis has a FinTech consultancy division, headed by Christodoulos Papadopoulos.
The grey suit and the wood paneled walls of the 1980s analog bureaucracy has now been replaced by the plate glass youthfulness of technological wizadrdy within the regulatory sector.
Rather than coming from a civil service career, Mr. Papadopoulos has a technological background. Before becoming CEO of MAP Fintech in December 2015, he was CEO of Confisio, a technology provider for the financial services industry which formed an EMIR reporting solution with ICAP’s Traiana in January 2014.
Three years may well now have elapsed since the birth of the FCA, but the landscape has changed at a faster rate during that period than it did during the entire 28 year existance of the FSA.
Photograph: Former British Prime Minister Margaret Thatcher. Photograph courtesy of Jason Statham