Financial Services and Markets Appendices to the Minutes of Evidence


Note by HM Treasury on the scope of regulated activities and delegation to Trading Standards Officers

  The Committee has sought written evidence on the possibility of extending the scope of the regime, either immediately or in due course to general insurance, motor insurance, occupational pensions and consumer credit. It also sought information on how far the FSA could delegate supervisory and enforcement functions to Trading Standards Officers.

Scope of Regulated Activities

  1. Clause 11 of the draft Financial Services and Markets Bill provides that the Treasury may by order prescribe regulated activities for the purposes of the Bill. It would be possible to include a variety of activities related to the areas identified by the Committee.

  2. As the Committee is aware, the Treasury published in February 1999 a consultation document entitled "Regulated Activities" which includes a draft order setting out proposals for the scope of regulated activities under the Bill. The closing date for consultation responses is 30 April 1999.

  3. The Government is able to keep under review potential changes to the scope of regulated activities. Current intentions as regards the activities identified by the Committee are set our below:

    —  General insurance (including motor insurance). At present, proposed regulation of general insurance is limited to the authorisation and prudential oversight of insurance companies and Lloyd's and to certain other proposals in relation to Lloyd's provided for in Part XVI of the draft Bill. Following consultation in 1998 on the need for statutory regulation of insurance brokers and other general insurance intermediaries, the Government is looking to the insurance industry to develop effective voluntary standards of professional practice that will command widespread support. It has been encouraged in this regard by the work done towards creating a General Insurance Standards Council, now expected to start operations early next year. Under proposals made by the insurance industry for this standards body, membership of the Financial Services Ombudsman Scheme will be a pre-condition of GISC membership, and membership will be open to insurance companies and intermediaries, including brokers, who sell personal lines general insurance.

    —  Occupational pensions. Under the existing legislation, certain persons who carry on investment business in connection with occupational pensions (for example, investment managers or trustees who manage the investment activity of a fund) will need to be regulated by the Financial Services Authority or one of the Self-Regulating Organisations. The Occupational Pensions Regulatory Agency (OPRA) also carries out regulatory functions concerning, amongst other things, the duties and activities of trustees and employers, and the rights of scheme members. The Government has no current plans to change these arrangements.

    —  Consumer credit. Providing consumer credit as such is not regulated by the Financial Services Authority and the Government has no plans to include providing consumer credit within the scope of regulated activities under the draft Financial Services and Markets Bill. The Government does however plan to review the case for regulating the provision of mortgage advice later this year, and there may be implications for those mortgages which fall within the Consumer Credit Act regime.

Delegation of supervisory and enforcement functions to Trading Standards Officers

  4. Under Paragraph 6 of Schedule 1 to the draft Bill, the FSA may arrange for monitoring functions, but not enforcement functions, to be carried out by another body or person which it believes is competent to perform those functions. The FSA could, in principle, delegate monitoring functions to a range of possible bodies or persons.

13 April 1999

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