Über die Autorin bzw. den Autor

JOANNA GRAY LL.B. (Newcastle), LL.M. (Yale) Reader in Financial Regulation, University of Newcastle upon Tyne and Solicitor (England and Wales) has also taught at the Universities of London, Dundee, and Strathclyde and qualified as a solicitor with a leading City of London practice for whom she subsequently worked as a consultant. In 2000 returned to practice full-time doing advisory work relating to financial regulation at a leading Edinburgh law firm.
She taught the first UK undergraduate Law School course of its kind in 1986-1987 in financial services regulation at UCL (jointly with Dr Cento Veljanovski an economist). She has had extensive experience in training and consultancy work in financial services law and regulation both for law firms and for industry and has published widely in academic and industry journals on financial services law and company law.

JENNY HAMILTON Professor in Law, University of Strathclyde, UK has taught at the University of Strathclyde for the past nine years, primarily in the field of commercial law, consumer law and financial services regulation. Qualified as a barrister and solicitor in Australia she practiced law and taught in Australia before moving to Scotland in the mid 1980s where she has since taught. She is also a visiting lecturer on the LLM program at Monash University, Australia.
She was formerly a Council member of the Scottish Consumer Council (1999–2003) and is currently the Council Moderator of a co-operative lending society based in the north of England that aims to reduce poverty in the world, by providing fair and just financial services.

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Implementing Financial Regulation: Theory and Practice examines the most important aspects of the UK financial regulatory environment introduced by the Financial Services and Markets Act 2000. These aspects are firstly, the move towards risk-based regulation and in particular FSA’s risk-based operating framework for supervision; secondly, the trend towards direct regulation of individuals within financial services businesses and in particular senior managers; and thirdly how regulatory rhetoric and action have changed over the last twenty years to mirror the re-drawing of the boundary between collective and personal responsibility that has led to increasing emphasis on financial citizenship and personal financial autonomy that has taken place over the same period. Highlights include:

• What does (and should) risk-based regulation mean? How does FSA interpret and use conceptions of “risk”?
• How FSMA 2000 and the FSA Handbook have built a bespoke governance regime for the finance sector regulatory apparatus governing senior management responsibility, arrangements, systems and controls?
• How is the regulatory regime with its increased emphasis on issues internal to the business of governance, organisation and performance by key individual staff being made to “bite” at the level of FSA enforcement against firms and individuals?
• Can regulation and regulators employ their techniques to empower and enable individual financial citizens to make rational choices faced with a dizzying array of (increasingly directly regulated) products and services?

The book aims to explain and critique each of these features in terms of broader trends in thinking and practice about regulation and the appropriate individual allocation of risk and governance responsibilities in some other areas of business law. It asks whether insights provided by social theorists into both the possibilities and limits of regulation can aid understanding of some of these more novel features of the UK financial regulatory landscape.

Aus dem Klappentext

Implementing Financial Regulation: Theory and Practice examines the most important aspects of the UK financial regulatory environment introduced by the Financial Services and Markets Act 2000. These aspects are firstly, the move towards risk-based regulation and in particular FSA’s risk-based operating framework for supervision; secondly, the trend towards direct regulation of individuals within financial services businesses and in particular senior managers; and thirdly how regulatory rhetoric and action have changed over the last twenty years to mirror the re-drawing of the boundary between collective and personal responsibility that has led to increasing emphasis on financial citizenship and personal financial autonomy that has taken place over the same period. Highlights include:

• What does (and should) risk-based regulation mean? How does FSA interpret and use conceptions of “risk”?
• How FSMA 2000 and the FSA Handbook have built a bespoke governance regime for the finance sector regulatory apparatus governing senior management responsibility, arrangements, systems and controls?
• How is the regulatory regime with its increased emphasis on issues internal to the business of governance, organisation and performance by key individual staff being made to “bite” at the level of FSA enforcement against firms and individuals?
• Can regulation and regulators employ their techniques to empower and enable individual financial citizens to make rational choices faced with a dizzying array of (increasingly directly regulated) products and services?

The book aims to explain and critique each of these features in terms of broader trends in thinking and practice about regulation and the appropriate individual allocation of risk and governance responsibilities in some other areas of business law. It asks whether insights provided by social theorists into both the possibilities and limits of regulation can aid understanding of some of these more novel features of the UK financial regulatory landscape.

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Implementing Financial Regulation

John Wiley & Sons

Chapter One

Financial services regulation has matured considerably in the past 25 years. The current regulator, the Financial Services Authority (hereafter "FSA"), has developed a sophisticated, comprehensive and potentially far-reaching regulatory tool kit through which to implement its objectives. This reflects the fact that the "art" of regulation is now understood to be far more diverse and intricate than when regulation first began to attract academic interest. While it operates within the statutory framework imposed by the Financial Services and Markets Act 2000 (hereafter "FSMA"), there are three aspects of this regulatory toolkit developed by the regulator that we believe are of particular importance and significance. These are the subject of this book, rather than the structure of the regulatory environment for financial services, which needs little explanation and has been extensively described and analysed elsewhere.

The first aspect of central importance is the adoption by the FSA of risk-based regulation, and the concomitant development of its risk-based operating framework for supervision. This is of fundamental significance, and provides the context within which analysis and discussion of the two further aspects are carried out. The first of these two further aspects is the trend towards greater regulatory incursion into the internal business management processes and strategies of regulated firms through regulatory tools which address the role of senior managements of firms, and directly regulate individuals within firms, especially senior managers. The second further aspect is the change in regulatory rhetoric and action over the last 20 years to mirror the re-drawing of the boundary between collective and personal responsibility. This has led to an increasing emphasis on financial citizenship and personal financial autonomy.

The centrality of these aspects is in stark contrast to the situation in the early days of the precursor of the FSA, the Securities and Investment Board (hereafter "SIB"). At that time regulation was viewed simply in terms of command and control. Its effectiveness was judged against compliance with prescriptive and detailed rules, and regulators in the financial services sector were left to determine their own broad regulatory objectives.

The rise of risk

In one sense the adoption of risk as the basis of regulation by the financial services regulator is neither particularly unique nor unusual. Discourses around risk have now become commonplace within executive government in the UK. As Fisher has commented:

One of the central tasks of the UK executive state is now perceived to be the handling of risk ... The task of public decision makers is increasingly characterised in terms of the identification and assessment and management of risk and the legitimacy of public decision-making is also being evaluated on such a basis.

Furthermore, risk has become the dominant concept across a range of regulatory spheres from environmental protection and health and safety to other diverse arenas such as health, penology, and child protection, as well as public sector management and finance. It has become the dominant concept in the regulatory reform process itself where regulation has to be proportionate to the risks. As Fisher notes, in some of these spheres a concern for risk has always been implicit, as, for example, in environmental protection, food safety and occupational health and safety. In other regulatory spheres a focus on the concept of risk is relatively recent. Increasingly, however, regulators are required to engage in formal risk assessment and risk management. It is clear now that the language of risk has permeated most areas of executive government. This is so much so that HM Treasury's Management of Risk: Principles and Concepts states that "it can now be presumed that all existing [government] organisations have basic risk management processes in place" and further that "every organisation which wants to maximize its success in delivering its objectives needs to have a risk management strategy, led from the very top of the organisation, which is then implemented by managers at every level ... and embedded in the normal working routines and activities of the organisation".

As Fisher observes, however, the notion that risk is now embedded in public decision-making is not a simple case of rebranding past practices with new buzzwords. Instead, risk represents a new way of conceptualising what "public administration" and regulation do. She suggests it is not simply a tool for decision-making, but in fact represents a new way of governing, and adds that "the end result has seemingly been a dramatic evolution in what public administration does and what it is perceived that it should do". This evolution, she believes, has a number of fundamental implications for what is understood to be the role and the nature of the administrative state and the role of non-legal modes of regulating public administration, as well as how to identify good and bad public decision-making. It raises not only questions about the meaning of risk but also questions relating to the ways it is deployed by regulators and administrators, and its implications for citizens.

But it is recognised that the way risk has been embedded varies across public bodies and agencies. Consequently, it cannot be analysed as if it were a uniform and unifying development across administrative and regulatory spheres. Rather each sphere needs to be examined for its specific implications. But in the call for more site specific examination of the embedding of risk it is important not to lose sight of the fact that this embedding is taking place within the context of an embedding of risk generally across a whole range of administrative and regulatory spheres. To ignore this wider context would be to overlook more subtle and broad-based implications of this development, and it is worth therefore analysing why risk has become so central in administrative and regulatory spheres generally. At the same time, risk is a concept that may be taken for granted by those involved in the everyday practices associated with it, and requires to be unpacked before looking at it further in the context of financial services regulation.

Why risk has become central

Very different explanations are given for why risk has come to be central across government and regulatory spheres. These explanations are, in part, influenced by the different approaches to what risk is, discussed below.

In attempting to account for the emergence of risk as a strategic organising principle in the public sector some commentators have simply pointed towards the particular needs of government. They highlight the need to restore confidence in the aftermath of mismanaged crises (especially responding to particular stimuli such as the collapse of the Barings banking group and BSE), and the need to improve communication with the public, in order to better manage public expectations.

Political scientists, however, convincingly suggest that the adoption of the language and practices of risk reflects a deeper, more complex process, that of "political isomorphism". This is a process of policy transmission such that bodies will adapt to or adopt governance strategies that have a common...