City regulation

FSA Handbook of Rules and Guidance
FSA's handbook of rules

The Financial Services Authority has announced its final arrangements for authorising and supervising firms and individuals. The four manuals form the regulatory processes part of the .

The authorisation manual explains how the FSA will process applications from firms and individuals, and firms in the European Economic Area that want to set up a branch in the UK or to provide cross-border services into the UK.

The supervision manual covers the FSA's approach to ongoing supervision of firms, while the enforcement manual outlines how the regulator will use its enforcement powers with authorised firms, approved persons and others.

The decision-making manual details procedures that the FSA will use to reach decisions on issuing statutory notices that relate to authorisation, supervision and enforcement under the Financial Services and Markets Act.

Copies of the manuals, with a summary, are available on The FSA will assume its full powers and responsibilities no later than the end of November.

Prudential standards

In an effort to streamline and clarify its requirements in order to promote competition and ease compliance costs, the Financial Services Authority has published its draft new prudential standards.

It proposes that requirements on capital and related systems and controls be set as far as possible by risk factor rather than by the sector the firm comes from, so standards will be organised by market, credit, operational, insurance and group risk, not according to whether the firm is a bank, insurance company or investment firm.

Principal features include: a requirement for firms to determine for themselves the level of resources they need to meet the risks in their business; the modernisation of requirements on insurance companies, including more guidance on systems and controls, simplified rules for valuing assets and less rigid rules on the use of derivatives; and a single requirement on outsourcing - that firms assess how outsourcing functions will affect their own risk profile.

The consultation document, CP97 Integrated Prudential Sourcebook - Consultation Paper and Draft Rules, has a comment deadline of 31 December 2001, for implementation in 2004. Visit for details.

Investigating complaints

The Financial Services Authority has published its final arrangements for investigating complaints against itself from firms, individuals within firms, consumers and others.

The complaints scheme, which includes a key role for an independent complaints commissioner, will operate from 1 September, ie, before the main parts of the Act come into force.

The Complaints Scheme covers complaints alleging mistakes and lack of care, unreasonable delay, unprofessional behaviour, bias and lack of integrity. The commissioner will have the resources to conduct full investigations and to recommend that the FSA award compensation if the commissioner upholds a complaint. He/she will produce an annual report on investigations concluded by him/her, and may issue individual reports if there are matters that should be brought to the public's attention.

The FSA is consulting about how to deal with pre-N2 complaints in a number of areas.

CP 93 Investigation of Complaints against the FSA, feedback on CP73 and 'final' text can all be found at

Account aggregation

Speaking at the seventh ICAEW Banking and Capital Markets Conference, Financial Services Authority managing director Phillip Thorpe said that the FSA will now have powers to regulate the provision of account aggregation.

Account aggregation services are where consumers can view any number of online accounts, from bank accounts to air miles, in a single location on the web. Many types of firm, including banks and internet portals, could provide such a service.

Consumers should be aware of the risks involved in disclosing passwords and PIN numbers before they use such services.

The FSA will publish a discussion paper on this subject later this month.

FSAVC returns online

Some 1,500 small firms - with fewer than 50 free-standing additional voluntary contribution review cases - can now submit their returns online to the Financial Services Authority.

This will save time - firms will not need to rekey information - and data can be updated whenever necessary. Firms with 50 or more cases must send their returns on disc, CD-Rom or tape. Information on this guidance can be seen at

Comparative tables

The Financial Services Authority has published the first of its comparative tables on financial products for consumers: information on unit trust individual savings accounts will be ready by the end of September this year. Tables covering personal pensions (including stakeholder pensions), investment bonds, savings endowments and mortgage endowments will appear later in the year. The FSA expects mortgages to follow early in 2002.

Copies of Comparative Tables: Bulletin 1 will be available from FSA Publications on 0845 608 2372 or can be seen at pubs/other/tables.

Mis-selling mortgage endowments

The Financial Services Authority has now published final guidance on how consumers who have been mis-sold endowment mortgages can get fair compensation.

In most cases the compensation will be calculated to reflect the difference in an individual's finances between having an endowment mortgage and a repayment mortgage. This will take into account the capital repaid on a repayment mortgage compared with the surrender value on the endowment and any difference in monthly outgoings.

Copies of the final guidance and a feedback statement giving responses to CP 75 Endowment Mortgage Complaints can be seen on

LSE admission and disclosure standards

The London Stock Exchange has issued revised admission and disclosure standards to clarify the Exchange's role in the admission of securities to trading. The revised rules took effect from 1 June.

The Techmark eligibility and admission criteria have been incorporated in the standards and revised to enable international equity securities and retail depositary receipts to be included. There is a requirement that Techmark securities must be eligible for electronic settlement and admitted to trading on the Exchange's domestic equity market.

All applications for admission to Techmark must be supported by a written submission. From 1 June, international companies will be eligible for admission to the domestic equity market where: they are either joining Techmark or are constituents of the Eurotop 300 or S&P 500 indices; they are admitted to the Official List (either primary or secondary listing); there are adequate arrangements for electronic settlement by UK investors; and the issuer pays the fees at the UK rate.

The Exchange has also issued a revised booklet, .

Small firms' regulation

In its second annual report to the FSA's board, the Financial Services Authority Small Business Practitioner Panel warns that the new regulatory burden on small firms may lead eventually to less consumer choice if some of those firms cease to exist.

The annual report calls for flexibility in rule-making so that small firms are not disadvantaged, and for the FSA to heed the burden of regulatory costs for small firms.

The full report can be seen on

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