"In London we have caused some fluttering in the dovecotes with our proposals on conflicts of interest in investment banking, and on soft commissions and unbundling.
"The consultation responses are still coming in. But on the first set of ideas we can already see widespread acceptance of the need for change, though there is nervousness about the scope of our ideas, and the impact on London if other centres do not operate to similar standards.
"We understand the point about competitive neutrality. That is why, at the same time, we are working with IOSCO colleagues to devise a set of principles which can be applied in all major financial centres. There is strong commitment to this work around the world. Indeed the chairmen are working on this issue themselves. We expect these principles to be published over the summer.
"On the second set, I detect diminishing appetite for defending the ancient practice of 'softing', though some would regret its passing. There is more nervousness about unbundling, generally on the grounds that the market changes that would be provoked are hard to model, and there is a risk that the quantity of research will diminish as a result.
"Again, we understand the argument, and will carefully consider well-reasoned cases for any alternative approaches, which might deliver similar transparency, performance and value for money for investors.
"I can certainly assure you that we will not rush these decisions, which do need careful thought."
Background
- Howard Davies was addressing the Institute of International Finance conference.
- The FSA proposals on conflicts of interest in investment banking were set out in Consultation Paper 171: Conflicts of Interest: Investment Research and Issues of Securities published in February 2003.
- The FSA’s proposals on soft commissions and unbundling were set out in Consultation Paper 176 Bundled Brokerage and Soft Commission Arrangements published in April 2003.
- 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; securing the appropriate degree of protection of consumers; and fighting financial crime.
- The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.
