STSM123080 | Financial markets: trading venues: regulation of the UK financial markets

Regulation

The Financial Conduct Authority (FCA) is the UK regulatory body established for the protection of investors. The FCA is responsible for the registration and monitoring of investment businesses which operate in the UK. It is a criminal offence to undertake investment business (“regulated activities”) in the UK unless authorised by the FCA to do so or specifically exempted from authorisation. The main legislation which covers the regulation of the UK financial markets is the Financial Services and Markets Act 2000 (FSMA).

For each regulated activity for which a business seeks authorisation it must identify which investment type the activity will be concerned with. The regulated activities for which authorisation is required and the related specified investments are defined in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO).

Regulated activities are defined in Part II of RAO and include:

• dealing in investments (as principal or agent);

• arranging deals in investments;

• operating a multilateral trading facility;

• managing investments;

• safeguarding and administering investments;

• sending dematerialised instructions;

• establishing etc collective investment schemes;

• advising on investments;

• Lloyd’s market activities;

• agreeing to do most of the above activities.

Specified investments are defined in Part III of RAO and include:

• shares etc;

• instruments creating or acknowledging indebtedness;

• sukuk (shariah compliant debt instruments);

• government and public securities;

• instruments giving entitlement to investments;

• certificates representing certain securities;

• units in a collective investment scheme;

• options;

• futures;

• contracts for difference.