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The FSA comes into its own

In just a matter of days, the moment the industry has been anticipating for over four-and-a-half years will finally arrive. Bar some unforeseen occurrence between now and midnight on Friday, November 30, the financial services industry will finally have a single regulator replacing the hotchpotch of bodies overseeing its activities.

While images of the UK dramatically sailing out of Hong Kong harbour on the eve of handing it over to China come to mind, the reality of the birth of the FSA will be less dramatic. After all, explaining the cost of such a gala event to those who pays the FSA&#39s bills might be a tough job.

The regulator says everything is ready for the official transition, it is simply a matter of waiting for the clock to strike midnight. It says that IFAs will not wake up on Monday, December 3 and notice a huge difference in the way that they are regulated.

This latest incarnation is the most recent in a long line of authorities. The concept of regulation has evolved significantly from the early days of Lautro and Fimbra moving on through the era of the PIA, the SFA and Imro to the FSA.

Is this the end of the road as far as the development of the regulator?

Could it be the process has come to an end and the FSA will stay around for the duration?

Aifa director general Paul Smee says: “There will be regulation in 20 years&#39 time. The schedule of financial products will expand, not contract, in that time so there will be a role for regulation. You cannot go much further than a statutory regulator. It is sort of the end of the road.”

But Smee&#39s opinion that the statutory basis of the FSA gives it a sense of permanence does not necessarily represent that of the entire industry. The LIA&#39s director of public affairs John Ellis isn&#39t convinced the FSA is the answer to the regulatory quagmire.

Ellis says: “I do not see how it can be the end of the road for regulation. It is an interesting and a quite brave experiment really to try and bring everything under one roof.

“But is the FSA going to be able to cover such an enormous range of subject matter? The jury is still out and only time will tell.”

An FSA spokesman says it is unlikely that a future Government will come into power and want to start over, given the length of time and effort the process in creating the present regulator has taken.

But it might not be the UK Government which has the final say but European developments. There are rumours of a desire to create an EU wide financial regulator for the single financial services market that is being fostered.

The FSA will undoubtedly change with the times. It has yet to prove that its risk based attitude towards regulation will work effectively. Its remit will expand as time goes on, all one has to do is look at mortgage regulation coming in next year as an example.

The FSA does have a permanent feel about it, everything from its posh offices in Canary Wharf to its standing in legislation to the experience of its staff. Of course, not all the staff are permanent. Rumours are already afoot that Howard Davies will not hang around long after N2. His current five-year contract expires in July and he may be looking for a new challenge.

If the concept of a single regulator proceeds, perhaps Davies will be persuaded by an offer of being chairman of an EU-wide regulator.


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