Financial Services

The first section discusses the structure and objectives of the UK financial services regulatory system in the UK. Hugh Dalton, the Chancellor of the Exchequer, was noted (July 1945) to have said ''We are going to nationalise the Bank [of England]. We don't know how, but we're going to do it. Get the appropriate fellow to draw up the plans.'' The British financial services industry aka 'The City' up to then, and decades afterwards (until perhaps the Financial Services Act 1986), was still run like Eton or Harrow and the Bank's governor was its headmaster. As headmaster, it was believed the governor's 'raised eyebrows' were sufficient to get an ex-Oxbridge fellow to toe the line.

For more than six hundred years the financial markets were mainly regulated through self-regulation, prior to the regulatory reforms which took place in the 1980's.There was some statutory regulation in the securities market. Under the oversight of the Bank of England and the Joint Review Body, the day to day regulation was carried out by the Council for the Stock Exchange, the Council for the Securities Industry and the Take-Over Panel. All regulatory non-statutory bodies were covered by statutory protection in the form of the Companies Acts and the Prevention of Fraud (Investments) Act 1958 which was administered by the Department of Trade and Industry (DTI), which was introduced in an attempt to provide a degree of consumer protection, but in itself did not go far enough as the scope was narrow and was frequently open to interpretation. Statutory protection was fairly limited.

A number of factors, both positive and negative, forced the government to reconsider the way financial services were regulated in the UK. These included a number of highly publicized scandals to hit the UK financial services sector in the '70s and '80s involving miss-selling of personal pension schemes, endowments and split capital investment trusts. In response to these factors the Government appointed the Wilson Committee in 1980 to review the financial system. The Government, unsatisfied with their findings, recruited Professor L. Gower in 1981 to consider new legislation. Gower produced his report and the Government adopted a number of his proposals in a white paper (Jan 1985). The Financial Services Act 1986 (FSAct) followed the white paper, receiving royal assent in November 1986. Its scope centered on Investment business and activities carried out in relation to those investments.