The FSA (Financial Services Authority) is an independent, non-governmental body that regulates the financial services industry in the UK, including most financial services markets, exchanges and firms. Granted statutory powers in the UK by The Financial Services and Markets Act 2000, the FSA sets standards to which such organizations must comply and can take action against them should they fail to meet required standards.
The core of the operating framework for the FSA is sometimes described by the acronym, ARROW, which stands for Advanced, Risk-Responsive Operating Framework. ARROW defines the essence of the FSA's risk-based approach to regulating financial markets, services, and firms. The statutory objectives for the FSA may be defined as follows:
- Market confidence: maintaining public confidence in the financial system
- Public awareness: promoting public understanding of the financial system.
- Consumer protection: securing an appropriate degree of protection for consumers.
- Reduction of financial crime: reducing the use of business practices for criminal purposes or activities.
The FSA is also subject to political and public accountability, and must report on how well these objectives have been met annually, subject to scrutiny by parliamentary committees. Its objectives govern how the FSA carries out its general function of making rules, dispensing guidance and advice, and determining general policies and principles. The FSA is also legally accountable, and must interpret its objectives correctly and consider them properly, or be liable to judicial review.
The FSA's principles of good regulation may be read as a series of admonitions for businesses and organizations of all kinds on how to conduct themselves well, and how to practice good citizenship at many levels. The body of guidelines covers important practices regarding efficiency and economy, proportionality, innovation, international character, and competition.
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- To learn about the ARROW framework and how it is practiced and applied, please read 'A New Regulator for the New Millenium.'