The FSA announces plans for enforcing the new perimeter

Dan Waters, Director of the FSAs Enforcement Division, said:

"The Bill provides the FSA with substantial powers to act quickly and decisively where the perimeter has been breached to protect consumers'' interests. Consumers who suffer losses in dealing with unauthorised firms, however, are not able to apply for compensation under the Financial Services and Markets Scheme or pursue complaints through the Financial Services Ombudsman Scheme. This is because these schemes are only open to customers of authorised firms. Consumers should remember that especially in this area prevention is better than cure: consumers should take care to avoid dealing with firms who do not have appropriate authorisation."

Feedback

Respondents generally welcomed the proposals and were very supportive of the FSAs overall approach. There was a strong consensus that control of unauthorised financial services activities will help to prevent discredit to the financial services industry, damage to market confidence and the risk of loss of consumers. The responses raised some general points that the FSA has responded to as follows:

• The FSA will provide further guidance on the scope of the regulatory regime to allay concerns that firms and individuals might inadvertently breach the perimeter. The FSAs Authorisation Manual will provide additional guidance on the types of investments covered by the Financial Services and Markets Bill and the types of activity that will require authorisation and those that are specifically excluded.

• The increased use of the Internet for financial promotion purposes clearly raises enforcement challenges, particularly where the unauthorised firms are based in jurisdictions other than the UK. The FSA places a lot of importance on its good working relationships with regulators in a wide range of jurisdictions, and participation in international groups such as IOSCO, in meeting these challenges.

• The FSA believes that, as it is in the interests of the regulated community that enforcement action is taken against firms or individuals that breach the perimeter, it is reasonable for the regulated community to bear the costs of such action. In certain cases the FSA may apply to the court for an order that the defendant pay a part of all of the FSAs costs in bringing the action.

Next Steps

The next stage in the process of formulating the policies and procedure that the FSA will follow when exercising its enforcement powers, will be the publication of the draft Enforcement Manual in the Spring of next year. The Manual will consolidate and summarise the FSAs enforcement policies and procedures in relation to both the regulated and unregulated communities.

Notes for editors

1. The Governments intention, as set out in the Financial Services and Markets Bill currently going through Parliament is that the FSA should be the single statutory regulator of financial services business.