Overview

The Financial Services Act 2010 amended the Financial Services and Markets Act 2000, primarily to enhance the UK financial system's stability and improve public financial literacy. It also introduced regulations on executive remuneration, short selling, and consumer redress.

Description

Key changes introduced by the Act include:

• Financial Stability Objective: Added a financial stability objective to the Financial Services Authority's (FSA) regulatory objectives, requiring it to consider the economic and fiscal consequences of financial system instability.
• Enhanced Public Understanding of Financial Matters: Established a consumer financial education body to improve public financial literacy and knowledge.
• Executive Remuneration: Empowered the Treasury to regulate the preparation, approval, and disclosure of executives' remuneration reports for financial institutions.
• Short Selling: Granted the FSA the power to prohibit or require disclosure of short selling in specified cases to maintain confidence and stability in the UK financial system.
• FSA Disciplinary Powers: Expanded the FSA's disciplinary powers, including the ability to suspend or restrict permissions to conduct regulated activities.
• Consumer Redress Schemes: Allowed the FSA to create rules requiring financial firms to establish consumer redress schemes to address widespread failures to comply with regulations.
• Restrictions on Credit Card Cheques: Introduced restrictions on the provision of credit card cheques to prevent misuse.
• Information Gathering Powers: Expanded the FSA's power to require information to assess financial stability risks.
• Court Funds Administration: Allowed the Director of Savings to administer court funds.

Government Spending

The Act's impact on government spending is not explicitly stated in the provided text. However, it likely increased spending through the establishment of the consumer financial education body and potentially through enforcement costs related to the new regulations.

Groups Affected

• Financial Institutions: Subject to new regulations on executive remuneration, recovery and resolution planning, short selling, and consumer redress schemes. This may increase compliance costs.
• Executives of Financial Institutions: Subject to greater scrutiny and transparency regarding their remuneration.
• Consumers: Potentially benefit from increased financial literacy and improved consumer redress mechanisms but may face restrictions on the availability of credit card cheques.
• The Financial Services Authority (FSA): Given expanded responsibilities and powers, increasing its workload and potentially its budget.
• The Treasury: Given greater oversight of the financial sector.
• The Bank of England: Given a greater role in financial stability.

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