1. This Memorandum is submitted to the Committee
in the context of its inquiry into "E-Commerce: Policy Development
and Co-ordination in the EU". The FSA looks forward to elaborating
on this note in oral evidence on 19 April.
2. The Financial Services Authority is currently
responsible under the Banking Act 1987 for the supervision of
banks and for the oversight of investment business regulation
under the Financial Services Act 1986. It will become the single
statutory regulator for all financial services in the UK when
the Financial Services and Markets Bill, currently before Parliament,
is implemented; our current expectation is that this will be in
early 2001. Ahead of the new legislation, the FSA has managerially
integrated the staffs of the existing regulatory bodies and co-ordinates
their delivery of regulation under the various continuing regimes.
3. The new legislation will give the FSA
four statutory objectives: to maintain confidence in the UK financial
system; to promote public understanding of the financial system;
to secure an appropriate degree of protection for consumers; and
to reduce the extent to which a financial institution can be used
for purposes of financial crime. In pursuing these objectives
the FSA must also have regard to a number of statutory requirements.
These include: the desirability of facilitating innovation; the
need to minimise the adverse effects of regulation on competition;
the desirability of facilitating competition; and the international
character of financial services and the desirability of maintaining
the competitive position of the UK.
4. The FSA's interest in e-commerce stems
from our role as regulator of financial institutions carrying
on business in the UK and from our specific statutory responsibilities,
referred to above. The FSA regulates the conduct of EEA-authorised
firms carrying on investment business in the UK. We will also
be responsible for the licensing and prudential supervision of
other banks, investment firms and insurance companies, whether
incorporated in the UK or operating through branches in the UK.
5. E-Commerce raised issues that are relevant
to all four of the FSA's statutory objectives. This importance
is reflected in our decision to carry out a specific project to
consider e-commerce in the round, so as to ensure that in meeting
our statutory objectives we are taking advantage of the opportunities
and meeting the challenges presented by e-commerce.
6. In regulating e-commerce in the financial
services sector, the FSA will be concerned to ensure that the
same regulatory protections apply as for business conducted through
other media: adequate capital and competent management on the
part of providers; arrangements to protect consumers, especially
during the sales process; disclosure of information to consumers,
and measures to raise consumer awareness and understanding; and
arrangements for paying compensation to customers of failed firms.
7. Two further FSA functions give us a particular
interest in e-commerce developments. We are responsible for the
control of investment advertisements by overseas-authorised firms
aimed at UK customers. These controls stretch to advertisements
by overseas unauthorised firms (in the EU and beyond) aimed at
UK consumers. Second, we are responsible for supervising investment
exchanges and alternative trading systems operating in the UK.