Risk based Regulation moves further centre stage

Joanna Gray, University of Newcastle

November was an interesting month for those concerned with the broader policy background and influences that will partly shape UK financial regulation in the future. On 28 November, when the Chancellor addressed the CBI conference, three initiatives reached significant stages of their progress. Firstly, the Hampton Review (commissioned in 2004 by the Cabinet Office, Better Regulation Task Force and HM Treasury) published a progress report on implementation of the Review’s 2005 recommendations, this is timely since the Legislative and Regulatory Reform Act 2006 arising from the review received Royal Assent in November 2006. Secondly, a set of recommendations was published by the Cabinet Office entitled “Regulatory justice: making sanctions effective.” Thirdly, a review of the way in which EU legislation is implemented into the UK and whether or not avoidable costs and burdens were being added at national level also reported with recommendations. Although each initiative was not exclusively concerned with financial regulation but indeed had a much wider remit across the piece of the modern regulatory and legislative state the UK financial services sector has been at the forefront of innovative and interesting developments in both policy and practical regulatory process in risk-based regulation and reworking and recasting of its enforcement processes. The impact of the various Directives and Regulations flowing from the EU’s 1999 Financial Services Action Plan has meant that the FSMA 2000 regime introduced in November 2001 has undergone significant amendment at the level of both primary and secondary legislation and continues to do so with the Markets in Financial Instruments Directive in particular. On that latter point readers should note the enactment in November also of SI 2006/2975 FSMA 2000 (MiFID) (Modification of Powers) Regulations 2006 which further amends FSA’s powers as currently set out in FSMA 2000.