The report assesses the regulator's progress under each of its three broad aims:
- to promote efficient, orderly and fair financial markets, both wholesale and retail
- to help the retail consumer for financial services obtain a fair deal
- to improve its business capability and effectiveness, so as to make the FSA easier to do business with.
Sir Callum McCarthy, chairman of the FSA, said: "The past year has been one of continuity for the FSA. The economic environment in which we operate has continued to be benign; there have, I am glad to say, been no major changes to the FSA’s responsibilities; and, as a consequence, we have been able to deal steadily with the many tasks which fall to us.
"Central to our work is a concern to measure how successfully we affect the world we set out to influence. This is not a trivial or an easy task. But in the last year we have made significant progress. Our assessments of the extent of market conduct problems and of the true nature of financial capability among adults in the UK provide new standards against which to measure progress. And our work, conducted jointly with the Practitioner Panel, to establish a better understanding of the additional costs imposed by regulation, shows our determination to measure and then consider further the justification of the costs we impose.
"This project exemplifies our overall approach to our programme of better regulation, including our determination to withdraw from regulation which we judge no longer to be justified, and to shift the balance of the regulatory regime from specific and detailed rules towards general principles.
"We are, of course, determined to be fair as well as proportionate in our regulation. The review of the FSA’s enforcement procedures we completed last year shows that when we recognise failures in our processes we will seek to remedy them. I regret that it took so long for us to recognise the legitimacy of concerns expressed to us that these processes were not fair to those subject to them. I am glad that the changes made by the FSA Board have been widely accepted as dealing with the previous problems.
"It is in our interest as much as that of those we regulate that all our processes are, and are seen to be, fair and efficient. We have put in place systems designed to make it easier for those affected by our decisions, whether supervisory or enforcement, to comment on how those decisions have been made and implemented. I hope that those we regulate will not be inhibited from making intelligent and constructively critical use of these systems."
Appendices to the report, published on the FSA website, provided further statistical information on the FSA's work during the year. This included:
- The number of authorised firms increased by 23,511 to 28,969, largely as a result of the extension of the FSA's responsibilities to cover mortgage and general insurance business and the significant number of financial advisers who chose to leave networks and become directly authorised.
- The number of approved persons fell from 165,587 to 164,821
- The FSA approved approximately 1,600 Listings transactions, a 33 per cent increase on last year. In particular the number of debt transactions submitted for approval has significantly increased as a result of a number of issuers choosing the UK as their ‘Home Competent Authority’, following the introduction of the Prospectus Directive (PD) on 1 July 2005, which harmonised rules for issuing securities across the EU. A further change resulting from the introduction of the PD is that the FSA is now responsible for vetting prospectuses in relation to public offers. Since 1 July 2005, it has approved 44 public offer documents. 100 new applicants have joined the official list and individual guidance has been provided on more than 5,500 queries on the listing and prospectus rules.
- The Regulatory Decisions Committee considered 172 new cases. Of these, 46 related to authorisation refusals, nine to mortgage and general insurance applications, 109 to enforcement cases, and four to breaches of the listing rules. There were four cases involving civil/criminal proceedings.
- The FSA's enforcement division closed 227 investigations during the year. Of these, 81 concluded with the use of powers (such as prohibition, financial penalties and variations of permissions) and 146 without the use of powers. Private warnings were issued in 12 of these 146 cases.
- The FSA levied £17.43 million in financial penalties during the year. Of this, £13,960,860 was paid by Citigroup Global Markets Limited and £3,469,140 by 16 other individuals or companies. In 2004/05, the total was £22.25m, of which £17m was paid by the Shell Transport and Trading Company and £5.25m by 30 firms or individuals.
- Of the 70 targets the FSA set itself for 2005/06, 52 were delivered on schedule. Of the remaining eighteen, ten were re-planned for delivery in 2006/07, while eight were re-planned but still delivered in the 2005/06 financial year.
