Financial Services Act 1986

Financial Services Act 1986 UK Investment Business Securities and Investment Board Self-Regulating Organizations Gower Report Financial Legislation Financial Regulation
The Financial Services Act 1986 was a landmark UK Act of Parliament aimed at regulating investment business through the Securities and Investment Board and Self-Regulating Organizations. It laid down comprehensive legislation for many of the recommendations of the Gower Report and was superseded by the Financial Services and Markets Act in 2000.
On this page

Financial Services Act 1986

Definition

The Financial Services Act 1986 was a UK Act of Parliament that came into force in April 1988. Its primary objective was to regulate the investment business sector in the UK. This regulation was achieved through the establishment of the Securities and Investment Board (SIB) and its associated Self-Regulating Organizations (SROs). The Act provided a legislative framework for implementing many recommendations outlined in the Gower Report. The Act was eventually replaced by the Financial Services and Markets Act 2000.

Examples

  1. Investor Protection: The Act required investment firms to adhere to codes of conduct established by the SIB and SROs, protecting investors from malpractices.
  2. Self-Regulation: Various investment marketplaces and professional organizations had to self-regulate under the oversight of the SIB.
  3. Enforcement: Breaches of regulations stipulated by the Act could lead to penalties and sanctions, ensuring compliance.

Frequently Asked Questions

Q1: What was the main objective of the Financial Services Act 1986? A1: The primary objective was to regulate investment business in the UK to ensure investor protection and market stability.

Q2: What organizations were established by the Financial Services Act 1986? A2: The Act established the Securities and Investment Board (SIB) and various Self-Regulating Organizations (SROs).

Q3: When was the Financial Services Act 1986 replaced? A3: The Act was replaced by the Financial Services and Markets Act 2000.

Q4: How did the Financial Services Act 1986 impact investment firms? A4: Investment firms had to comply with the regulations set forth by the SIB and SROs, adhere to conduct codes, and were subject to penalties for non-compliance.

Q5: What was the Gower Report? A5: The Gower Report, published in 1984, provided recommendations for the regulation of financial services, many of which were incorporated into the Financial Services Act 1986.

  • Securities and Investment Board (SIB): A regulatory body formed under the Financial Services Act 1986 responsible for overseeing the investment business sector in the UK.
  • Self-Regulating Organizations (SROs): Organizations that had the authority to regulate their members under the supervision of the SIB according to the provisions of the Financial Services Act 1986.
  • Financial Services and Markets Act 2000: The legislation that replaced the Financial Services Act 1986, introducing a more integrated regulatory framework for financial services in the UK.
  • Gower Report: A report published in 1984 that provided recommendations for the regulation of financial services, many of which were included in the Financial Services Act 1986.

Online Resources

  1. GOV.UK - Financial Services Regulation
  2. Financial Conduct Authority (FCA)
  3. The Financial Services and Markets Act 2000

Suggested Books for Further Studies

  1. “The Law on Financial Derivatives” by Alastair Hudson
  2. “Financial Services Law” by Michael Blair and George Walker
  3. “Regulation of Financial Markets: The United Kingdom and Germany” by Rainer Pitschas

Accounting Basics: “Financial Services Act 1986” Fundamentals Quiz

### When did the Financial Services Act 1986 come into force? - [x] April 1988 - [ ] June 1986 - [ ] January 1987 - [ ] March 1985 > **Explanation:** The Financial Services Act 1986 came into force in April 1988, aiming to regulate the investment business sector in the UK. ### What was the primary objective of the Financial Services Act 1986? - [ ] Increase tax revenue - [ ] Promote foreign investment - [x] Regulate investment business - [ ] Encourage small businesses > **Explanation:** The primary objective of the Financial Services Act 1986 was to regulate the investment business in the UK to ensure investor protection and market integrity. ### Which organization was established by the Financial Services Act 1986? - [ ] Financial Conduct Authority (FCA) - [x] Securities and Investment Board (SIB) - [ ] Bank of England - [ ] Financial Ombudsman Service > **Explanation:** The Act established the Securities and Investment Board (SIB) to oversee the regulation of the investment business sector in the UK. ### What did the Self-Regulating Organizations (SROs) do under the Financial Services Act 1986? - [ ] Collect taxes - [x] Regulate their members - [ ] Set interest rates - [ ] Provide investment loans > **Explanation:** SROs were granted the authority to regulate their members under the supervision of the SIB as per the Financial Services Act 1986. ### Which report provided recommendations implemented in the Financial Services Act 1986? - [ ] Vickers Report - [ ] Turner Report - [x] Gower Report - [ ] Kay Review > **Explanation:** The recommendations of the Gower Report, published in 1984, were extensively incorporated into the Financial Services Act 1986. ### When was the Financial Services Act 1986 replaced? - [ ] 1990 - [ ] 1998 - [x] 2000 - [ ] 2005 > **Explanation:** The Financial Services Act 1986 was replaced by the Financial Services and Markets Act in 2000. ### What type of penalties could be imposed under the Financial Services Act 1986 for non-compliance? - [x] Fines and sanctions - [ ] Reduced interest rates - [ ] Tax deductions - [ ] Deregistration from the stock exchange > **Explanation:** Firms and individuals found non-compliant with the regulations of the Financial Services Act 1986 could face fines and sanctions. ### What sector specifically did the Financial Services Act 1986 regulate? - [ ] Real Estate - [ ] Manufacturing - [x] Investment Business - [ ] Agriculture > **Explanation:** The Financial Services Act 1986 was designed to regulate the investment business sector in the UK. ### What role did the Securities and Investment Board (SIB) play under the Act? - [ ] Issued financial statements - [ ] Set national budgets - [x] Oversaw investment regulation - [ ] Managed banking services > **Explanation:** The Securities and Investment Board (SIB) was responsible for overseeing the regulation of the investment business sector as established by the Financial Services Act 1986. ### How did the introduction of the Financial Services and Markets Act 2000 change financial regulation? - [ ] Reduced tax rates - [x] Introduced a more integrated regulatory framework - [ ] Abolished financial regulations - [ ] Increased the number of SROs > **Explanation:** The Financial Services and Markets Act 2000 introduced a more integrated regulatory framework for financial services in the UK, replacing the Financial Services Act 1986.

Thank you for participating in this comprehensive review and quiz on the Financial Services Act 1986. Keep honing your financial regulation knowledge!

Tuesday, August 6, 2024
Financial Services Action Plan (FSAP)
Financial Risk
Gower Report January 1, 1

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.