Thaindian News

By Venkata Vemuri
London, June 23 (IANS) Britain’s finance watchdog Financial Services Authority (FSA) has reacted strongly to its disbanding by the new coalition government, warning the shake-up of financial regulation may encourage insider dealing.

Chancellor of Exchequer George Osborne last week announced that the FSA’s responsibilities will now be divided between the Bank of England and a new Consumer Protection and Markets Authority (CPMA).

He appointed FSA chief executive Hector Sants as a deputy governor of the Bank in charge of a new prudential regulation subsidiary that will oversee banks and insurers for safety and soundness.

Sants has cautioned that unless supervisors and enforcers in the new regime work closely and without friction controls over insider trading and mistreatment of customers could weaken.

According to the Financial Times, most of the FSA’s enforcers are expected to join the CPMA, but the government also plans to create a serious economic crime agency to prosecute white-collar offences.

This agency would handle criminal insider-dealing cases along with other frauds, but the FSA is lobbying hard to retain its dual criminal and civil jurisdiction in the area.

FSA Enforcement Director Margaret Cole also warned: “We have established a strong track record as a ‘heavyweight criminal prosecutor’ in the area of our specialist remit - insider dealing - in support of our objective of market cleanliness, and we have momentum and a strong pipeline of cases. We must build on this progress, not lose it.”

The FSA, though accused of ignoring banking excesses that led to the recent recession, is praised by private sector professionals for its enforcement record. Thanks to a record &pound33 million penalty against JPMorgan in a recent case, the regulator has already levied more fines in the first two months of this fiscal than it did in all of 2009-10.

(Venkata Vemuri can be contacted at venkata.v@ians.in)