The UK breaks the FSA into two parts – the FCA, and the PRA.
The UK's Financial Services Act 2012 goes into effect today, (technically yesterday, April 1 2013, but it was the Easter Monday bank holiday in the UK), whereby the UK's financial regulator the FSA is being broken into two parts -- the FCA, or Financial Conduct Authority, and the PRA, or the Prudential Regulation Authority.
The UK is certainly going against the general global trend of merging, streamlining and increasing the powers of national financial regulators -- for example in Switzerland, where in 2009 the three Swiss regulatory bodies – the Federal Office of Private Insurance, the Swiss Federal Banking Commission, and the Anti-Money Laundering Control Authority – merged to form the Swiss Financial Market Supervisory Authority, or FINMA.
So what changes for the Forex and online trading industry? Not much, really. The online trading world in the UK will now deal with the FCA, instead of the FSA. The FCA will be headed by Martin Wheatley, who was brought in by the FSA in 2011 (from the SFC in Hong Kong) to head the FSA's Consumer and Markets Business Unit, which is effectively being spun off to become the FCA.
Life, however, will become more complicated for larger UK financial institutions such as banks, insurers and major investment firms, which from now on will be 'dual regulated. The FCA will focus on conduct issues, and the PRA on proper capitalization. All other firms will be supervised by one supervision area for both conduct and prudential issues.
So will this work, and make UK traders, investors and savers any safer? We doubt it. As in Switzerland, we prefer one powerful and integrated regulator to several "point" regulators, which are supposed to cooperate and share information. Separating regulatory powers is, in our view, just a recipe for each blaming the other when something inevitably goes wrong, as has happened in the US between the CFTC, the NFA, and the SEC in several cases such as Lehman Brothers, Bear Stearns, MF Global, PFGBest...
A good review of the planned transition in powers between the FSA, and the new FCA and PRA is available by clicking here.