GIM3050 | Regulatory framework: the Financial Services and Markets Act 2000 (FSMA 2000)

The Financial Services and Markets Act 2000 (FSMA 2000) created a single statutory regulator, the Financial Services Authority (FSA) for regulating all deposit taking, insurance and investment business in the UK. The Act also created the Financial Services Compensation Scheme (replacing, among others, the Policyholders Protection Board) and the Ombudsman Scheme, and gave the FSA responsibility for tackling market abuse, promoting public understanding of the financial sector and reducing financial crime. FSMA 2000 therefore provides the framework in which all forms of financial services business, including insurance companies, Lloyd’s, banks, building societies, friendly and mutual societies, credit unions, investment and pensions advisers, stockbrokers, investment services firms, fund managers, derivative traders, and so on, are authorised and regulated.

The powers previously conferred on the DTI, the Treasury and others were subsumed within the statutory framework under which the FSA operates. In particular, the FSA is given extensive powers in Part 10 of FSMA to make rules and to issue guidance in furtherance of its objectives. The FSA and its predecessor bodies had contracted with the Treasury to perform certain functions even before FSMA 2000 came into effect, so there was continuity. Authorisations, restrictions and prohibitions made under the previous rules were treated as if they were made under FSMA 2000 by virtue of The Financial Services and Markets Act 2000 (Transitional Provisions) (Authorised Persons etc) Order 2000, SI2001/2636.

Amendments to primary and secondary tax legislation for all purposes (not exclusively insurance) were made by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (SI2001/3629).

The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI2001/544) (the ‘RAO’) is the principal item of secondary legislation which defines in detail which activities are regulated activities for the purposes of the Act. The provisions of the RAO came into effect (with a few exceptions) on 1 December 2001.