Banking Essay

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May 1, 2008 EVOLUTION OF UK CAPITAL MARKETS REGULATION 1986-20081 by Alix Prentice 1986 “Big Bang” Deregulation of London Stock Exchange (“LSE” or the “Exchange”) Prior to the “Big Bang” reforms enacted on October 27, 1986, the LSE was a “closed shop” marked by antiquated, anticompetitive regulation. Brokers charged fixed commissions, and the jobs of broker and jobber (dealer) were separated. After the “Big Bang”: · Member firms may be owned by outside institutions, including merchant banks. · Move from floor-based open outcry to screen-based trading. · All firms are permitted to act as both broker and dealers, able to operate in a dual capacity. · No minimum fixed commissions. · Individual members no longer have voting rights. · The Exchange becomes a private limited company. 1991 LSE Governance Reforms The governing Council of the Exchange is replaced with a Board of Directors drawn from the Exchange’s executive, customer and user base. Alternative Investments Market (AIM) Established AIM allows smaller companies to list shares without being subject to the regulations of the LSE’s Main Market. AIM-listed companies do not need particular financial or trading records, and are not subject to minimum capitalization or minimum float requirements. Commencement of the Financial Services Authority (FSA) The Securities Investment Board (SIB), responsible for the activities of SROs in the UK, formally changes its name to the Financial Services Authority. FSA Publishes Consultation on its eleven “Principles for Business” The FSA publishes the eleven principles for business applicable to all firms doing any type of regulated investment business in the UK. These Principles form the architecture of the UK regulatory system, underpinned by more detailed rules and guidance. Becomes UK Banking Regulator Pursuant to the Bank of England Act, regulatory and supervisory authority

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