The FiSMA and the current regime
The FiSMA did not work very well in practice because (aggrieved) firms could protest that FSA's actions were ultra vires and take it to court. (Note that the FSA can only police firms who were FSA members.) There was also confusion as to who actually did what during the FiSMA era. Minor ''paperwork offences'' (Atkinson,2002:144) resulting from sloppiness rather than ill-intent were dealt with directly by the FSA/UKLA; product mis-selling, unauthorised business and confidence-trick activities were the remit of FSA, Office of Fair Trading or Department of Trade and Industry; catchall 'market abuse' offences were covered by the FSA (civil jurisdiction) and/or the Serious Fraud Office, Scotland Yard, City Police fraud squads and a host of other regional and county forces.
On paper, the FiSMA looked fine; in practice, there was frequent frictions amongst the various agencies and market wrongdoers were the ones benefiting from this confusion and enforcement agency squabbles.
The FSA seems to emphasize less its quasi-policing function and focuses, I think, too much on its management consultancy aspect. This is perhaps also a fault of Parliament in that the view seems to be that the FSA's main duty is to guard London's competitive position as a leading world's financial centre. The City can look after its competitive position and the FSA's proper business should be to look after market participants.
To use Levy and Post's football analogy(2005), a referee who focuses too much on a league's position in the world and less on enforcing the rules of the game is bound to have some problems. As Levy and Post note ''financial stability is a collective good'' (p, 123) and market participants' confidence in a market go hand in hand with financial stability.
The current FSA principle-based regime is good in theory but when compared to a rule-based regime it is very deficient (Davidson,2006). Principles ''enable the FSA to present a case more easily against firms than excessive reliance on rules, in which clever lawyers may look for loopholes'' (Davidson, 2006:168). I agree but all other regulatory bodies (SEC, EU directives) are rule-based and as co-operation is paramount in an increasingly global market, perhaps it is time to reconsider the principle-based regime.
The Big Bang and the regulations that came with it were meant to widen share ownership. It is perhaps too early to say if this revolution was a success. Foreign ownership in the UK has risen from under 13% in the late Eighties to 40% at the end of 2006; over the same period, the proportion of UK shares owned by individuals has fallen from just over 20% to under 13% (The Observer, 2007:29). UK citizens, it seems, still only trust large mortgages and not exotic share portfolios.
