- to promote efficient, orderly and fair financial markets, both wholesale and retail;
- to help the retail customer for financial services obtain a fair deal; and
- to improve its business capability and effectiveness, so as to make the FSA easier to do business with.
In his introductory statement, the FSA chairman, Callum McCarthy, says:
"Regulation depends not only on legal powers, but on the effective, proportionate and fair exercise of those powers. We have therefore been much concerned to review our policies and practices to see that the FSA exercises its powers in this way. In particular, we are reviewing two aspects of our performance.
The first is to examine the costs we impose on those we regulate, both the direct costs of the FSA and the wider costs of compliance, and whether, and if so how, these can properly be reduced. We are doing this jointly with the Practitioner Panel.
The second is to examine the effectiveness and fairness of our enforcement processes, so that those affected receive decisions which are – and are seen to be – fair; are made promptly; and are not unnecessarily costly – all of which are in their as well as the public interest.
I do not expect those who are subject to FSA enforcement action to welcome it, but it is important that they and others understand the process and recognise that they have been treated fairly. Both studies raise important issues, which we wish to see discussed openly and on the basis of agreed objective data."
Appendices to the report, also published today on the FSA website, provide further statistical information on the FSA's work during the year. This includes:
- Of the 36 milestones set out in the 2004/05 Business Plan, 31 were achieved. Four were rescheduled because of factors outside of the FSA's control or because the FSA and the industry agreed that a delay would be useful. In the fifth case, consultation on projection rates and product disclosure, the delay was caused by the FSA.
- The number of authorised firms increased by 14,479 to 24,423, largely as a result of the introduction of mortgage and general insurance regulation. 566 firms withdrew their application during the process.
- The number of approved persons rose from 139,337 to 165,587
- The Regulatory Decisions Committee considered 269 new cases. Of these, 30 related to authorisation refusals, 148 to mortgage and general insurance applications, 77 related to enforcement cases, 11 related to breaches of the Listing Rules and there were 3 cases involving civil/criminal proceedings.
- The FSA's enforcement division closed 200 investigations during the year. Of these, 79 concluded with the use of powers (such as prohibition, financial penalties and variations of permissions) and 121 without the use of powers. Private warnings were issued in 11 of these 121 cases.
- The FSA levied £22.25m in financial penalties during the year. Of this, £17m was paid by the Shell Transport and Trading Company and £5.25m by 30 firms or individuals. In 2003/04, the total was £12.4m from 22 firms or individuals.
Background
1. The FSA Annual Report 2004/05 covers the FSA's regulation of the financial services sector from 1 April 2004 to 31 March 2005 under the Financial Services and Markets Act. It is presented to the Chancellor of the Exchequer and a copy has been placed today in the libraries of both Houses of Parliament.
2. The Annual Report is available here on the FSA website. Further information, including statistics and responses to the annual reports of the Financial Services Practitioner Panel, the Financial Services Consumer Panel, the Smaller Businesses Practitioner Panel and Complaints Commissioner are also on the FSA website.
3. As required by the FSM Act, the Report includes an estimate by the FSA of how far it has met its four statutory objectives and had regard during the year to the principles of good regulation set out in section 2(3) of the FSM Act. The Annual Report also contains, as required by the Act, the report by the FSA’s non-executive committee on the discharge of its functions.
4. The report also includes details of the remuneration of FSA Board members. Callum McCarthy's total remuneration, in his first full year as chairman, was £382,448, made up of salary of £314,000 and benefits totalling £68,448. Mr McCarthy was appointed on 21 September 2003, hence his remuneration quoted for 2003/04 covers only part of the financial year. John Tiner, in his first full year as chief executive, was paid a total of £540,242. This comprised salary of £365,000, a performance-related bonus of £65,000 and other benefits totalling £110,242. Mr Tiner's salary rose during 2003/04 to reflect the additional responsibilities he took on when promoted from Managing Director to Chief Executive on 21 September 2003. Full details of the directors' remuneration appear on page 78 of the Report.
5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the appropriate degree of protection for consumers; and fighting financial crime.
6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
