Overview

The Financial Services Act 2010 amended the Financial Services and Markets Act 2000, primarily to enhance the UK's financial system stability, improve public financial literacy, and strengthen regulatory powers. It introduced new rules on executive remuneration, recovery and resolution planning, short selling, and consumer redress schemes.

Description

Financial Stability

The Act added "financial stability" as a key objective for the Financial Services Authority (FSA). The FSA was required to develop and review a strategy for achieving this objective, considering both domestic and international factors.

Public Financial Education

The Act established a new body, the consumer financial education body, to improve public understanding of financial matters and personal financial management. This included promoting financial planning and educating the public about financial products and services.

Executive Remuneration

New regulations were introduced regarding the reporting and disclosure of executive remuneration in financial institutions. This aimed to align executive pay with risk management and broader stability objectives.

Recovery and Resolution Planning

The Act mandated that financial institutions develop and maintain recovery and resolution plans. These plans outline strategies for dealing with financial distress and potential failures.

Short Selling

The FSA gained powers to prohibit or require disclosure of short selling in certain circumstances to help maintain stability in the market.

Consumer Protection

The Act introduced provisions for consumer redress schemes to ensure consumers receive compensation if firms fail to comply with regulatory requirements. It also placed restrictions on the provision of credit card cheques.

FSA Disciplinary Powers

The FSA's disciplinary powers were strengthened, including the ability to suspend or restrict permissions to carry on regulated activities.

Information Gathering

The Act granted the FSA broader powers to collect information related to financial stability, particularly from investment funds and service providers.

Court Funds Administration

The Act allowed the Director of Savings to administer court funds, taking over some of the functions previously held by the Accountant General of the Senior Courts.

Government Spending

The Act did not directly specify government spending figures. However, the creation of the consumer financial education body and the increased regulatory responsibilities would likely lead to increased government expenditure, offset potentially by levies on financial institutions and consumer credit licensees.

Groups Affected

• Financial Institutions: Subject to new regulations on executive pay, recovery and resolution planning, and short selling. May face increased compliance costs and potential penalties for non-compliance.
• Executives of Financial Institutions: Affected by the new rules on remuneration reporting and disclosure.
• Consumers: May benefit from improved financial literacy resources and stronger consumer redress schemes.
• The Public: Will benefit from enhanced public financial literacy, and hopefully a more stable financial system.
• FSA: Takes on increased regulatory responsibilities and may face increased workload.
• Consumer Credit Licensees: May be required to contribute financially to the consumer financial education body.
• Treasury: Will have greater influence over the financial system's stability.

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