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The FSA rarely took on wider implication cases. For example, thousands of consumers have complained to the Financial Ombudsman Service about payment protection insurance (PPI) and bank charges. However, despite determining that there was a problem in the selling of PPI,[31][32][33] the FSA took effective action against very few firms in the case of PPI and it was the Office of Fair Trading (OFT) that finally took on the wider implications role in the case of bank charges. The FSA and the FOS had staff placed within their co-organisation to advise on wider implication issues. It is surprising, therefore, that so little action took place.[citation needed]

The FSA in an internal report into the handling of the collapse in confidence of customers of the Northern Rock Plc described themselves as inadequate.[34] It was reported that to prevent such a situation occurring again, the FSA was considering allowing a bank to delay revealing to the public when it gets into financial difficulties.[35]

The FSA was criticised in the final report of the European Parliament's inquiry into the crisis of the Equitable Life Assurance Society.[36] It is widely reported that the long-awaited Parliamentary Ombudsman's investigation into the government's handling of Equitable Life is equally scathing of the FSA's handling of this case[37]

The FSA ignored warning signals from Northern Rock building society and continued to allow the bank to operate without a risk mitigation programme for months before the bank's collapse.[38]

The FSA was criticised by some within the IFA community for increasing fees charged to firms and for the pe

The FSA in an internal report into the handling of the collapse in confidence of customers of the Northern Rock Plc described themselves as inadequate.[34] It was reported that to prevent such a situation occurring again, the FSA was considering allowing a bank to delay revealing to the public when it gets into financial difficulties.[35]

The FSA was criticised in the final report of the European Parliament's inquiry into the crisis of the Equitable Life Assurance Society.[36] It is widely reported that the long-awaited Parliamentary Ombudsman's investigation into the government's handling of Equitable Life is equally scathing of the FSA's handling of this case[37]

The FSA ignored warning signals from Northern Rock building society and continued to allow the bank to operate without a risk mitigation programme for months before the bank's collapse.[38]

The FSA was criticised by some within the IFA community for increasing fees charged to firms and for the perceived retroactive application of current standards to historic business practices.[citation needed]

The perceived lack of action by the FSA in many cases, and allegations of regulatory capture led to it being nicknamed the Fundamentally Supine Authority by Private Eye magazine.

The FSA was not legally able to circumvent statute yet hid behind secret legal opinion regarding its summary removal of practitioners' legal rights in respect of their ability to use a longstop defence against stale claims.

FSA regulation was also often regarded as reactive rather than proactive.[citation needed] In 2004–05 the FSA was actively involved in crackdowns against financial advice firms who were involved in the selling of split-cap investment trusts and precipice bonds, with some success in restoring public confidence.[citation needed]. However, despite heavily criticising split-cap investment trusts, in 2007 it suddenly abandoned its investigation.[39] Where it was rather poorer in its remit is in actively identifying and investigating possible future issues of concern, and addressing them accordingly.[citation needed]

There were also some questions raised about the competence of FSA staff.[40]

In 2005, the FSA had ignored warnings from Tony Shearer (then chief executive of Singer & Friedlander) about the legitimacy of transactions he has seen in Kaupthing's financial records. The FSA went on to approve a Kaupthing merger with Singer & Friedlander, which went on to be a key player in the Icesave dispute. The UK invoked national security laws to secure Icesave funds.

The composition of the FSA board appeared to consist mainly of representatives of the financial services industry and career civil servants. There were no representatives of consumer groups. As the FSA was created as a result of criticism of the self-regulating nature of the financial services industry, having an independent authority staffed mainly by members of the same industry could be perceived as not providing any further advantage to consumers.

Although one of the prime responsibilities of the FSA was to protect consumers, the FSA was active in trying to ensure companies' anonymity when they were involved in misselling activity, preferring to side with the companies that have been found guilty rather than consumers.[41][42]

This was most obviously seen in the case known as the LAUTRO 19, where the FSA identified 19 insurers which had breached their contractual warranties by using incorrect charges to calculate the premiums for mortgage endowment policies. This miscalculation led to massive consumer detriment as well as vast and unquantifiable costs for the advisers who unwittingly sold these products. The FSA steadfastly refused to publicly name the miscreant companies and spent £100,000s on legal fees to baulk the efforts of the Information Commissioner who had concluded that naming the companies would be in the public interest.

It was announced in November 2008, that despite self-acknowledged failures by the FSA in effectively regulating the financial services industry, FSA staff would receive bonuses.[43] On 31 May 2008, The Times confirmed that FSA staff had received £20m in bonuses for 2008/09, a 40% increase on the previous year.[44]

On 11 February 2009, FSA deputy chairman, Sir James Crosby resigned after it was revealed that he had fired a whistleblower, Paul Moore, who had warned of dangerous lending practices at HBOS when he had been in charge of risk regulation.[45]

Lord Adair Turner, the then FSA chairman, defended the actions of the regulator on the BBC's Andrew Marr show on 13 February 2009. His comments were that other regulatory bodies throughout the world, which had a variety of different structures and which are perceived either as heavy touch or light touch also failed to predict the economic collapse. In line with the other regulators, the FSA had failed intellectually by focusing too much on processes and procedures rather than looking at the bigger economic picture. In response as to why Sir James Crosby had been appointed deputy chairman when his bank HBOS had been highlighted by the FSA as using risky lending practises, Lord Turner said that they had files on almost every financial institution indicating a degree of risk.[46]

Turner faced further criticism from the Treasury Select Committee on 25 February 2009, especially over failures to spot or act on reckless lending by banks before the crisis of 2008 occurred. He attributed much of the blame on the politicians at the time for pressuring the FSA into "light touch" regulation.[47]

On 17 April 2009, a whistleblower (former FSA employee) alleged that the FSA had turned a blind eye to the explosion in purchases of whole sale loans taken on by various UK building societies from 2005 onwards. The FSA denied the claims – "This is not whistleblowing, it is green ink" a spokesman said. "The allegations are a farrago of lies, distortions and half truths made by an obviously disgruntled former employee who clearly has an axe to grind. It does not paint a realistic picture of our supervision of building societies."[48]

On 18 August 2012, the Treasury Select Committee criticised the FSA for its poor enforcement of the LIBOR rate setting rules.[49]

There were suggestions that the FSA stifled the UK financial services industry through over-regulation, following a leaked letter from Prime Minister Tony Blair during 2005. This incident led Callum McCarthy, then Chief Executive of the FSA, to formally write to the Prime Minister asking him to either explain his opinions or retract them.[50]

The Prime Minister's criticisms were viewed as particularly surprising since the FSA's brand of light-touch financial regulation was typically popular with banks and financial institutions in comparison with the more prescriptive rules-based regulation employed by the US Sec

The Prime Minister's criticisms were viewed as particularly surprising since the FSA's brand of light-touch financial regulation was typically popular with banks and financial institutions in comparison with the more prescriptive rules-based regulation employed by the US Securities and Exchange Commission and by other European regulators;[51] by contrast, most critiques of the FSA accused it of instigating a regulatory "race to the bottom" aimed at attracting foreign companies at the expense of consumer protection.[52]

The FSA countered that its move away from rules-based regulation towards more principles-based regulation, far from weakening its consumer protection goals, could in fact strengthen them: "Our Principles are rules. We can take enforcement action on the basis of them; we have already done so; and we intend increasingly to do so where it is appropriate to do so."[53] As an example, the enforcement action taken in late 2006 against firms mis-selling payment protection insurance was based on their violation of principle six of the FSA's Principles for Business, rather than requiring the use of the sort of complex technical regulations that many in financial services find burdensome.[54]

The FSA was criticised for its supposedly weak enforcement program.[55][56][57] For example, while FSMA prohibits insider trading, the FSA only successfully prosecuted two insider dealing cases, both involving defendants who did not contest the charges.[58] Likewise, since 2001, the FSA only sought insider trading fines eight times against individuals and companies it regulated,[59] despite the FSA's own studies indicating that unexplained price movements occur prior to around 25 percent of all UK corporate merger announcements.[60]

After the HBOS insider trading scandal, the FSA informed MPs on 6 May 2008 that they planned to crack down on inside trading more effectively and that the results of their efforts would be seen in 2008/09[61] On 22 June, the D

After the HBOS insider trading scandal, the FSA informed MPs on 6 May 2008 that they planned to crack down on inside trading more effectively and that the results of their efforts would be seen in 2008/09[61] On 22 June, the Daily Telegraph reported that the FSA had wrapped up their case into HBOS insider trading and no action would be taken.[62] On 26 June, the HBOS chairman said that "There is a strong case for believing that the UK is exceptionally bad at dealing with white-collar crime".[63]

On 29 July 2008, however, it was announced that the Police, acting on information supplied by the FSA, had arrested workers at UBS and JP Morgan Cazenove for alleged insider dealing and that this was the third case within a week.[64] A year after the subprime mortgage crisis had made global headlines, the FSA levied a record £900,000 on an IFA for selling subprime mortgages.[65]

The FSA was held by some observers to be weak and inactive in allowing irresponsible banking to precipitate the credit crunch which commenced in 2007, and which has involved the shrinking of the UK housing market, increasing unemployment (especially in the financial and building sectors), the public acquisition of Northern Rock in mid-February 2008, and the takeover of HBOS by Lloyds TSB. On 18 September 2008, the FSA announced a ban on short selling to reduce volatility in difficult markets lasting until 16 January 2009.[66][67]

Certainly, the FSA's implementation of capital requirements for banks was lax relative to some other countries. For example, it was reported[68] that Australia's Commonwealth Bank is measured as having 7.6% Tier 1 capital under the rules of the capital requirements for banks was lax relative to some other countries. For example, it was reported[68] that Australia's Commonwealth Bank is measured as having 7.6% Tier 1 capital under the rules of the Australian Prudential Regulation Authority, but this would be measured as 10.1% if the bank was under the jurisdiction of the FSA.

In March 2009, Lord Turner published a regulatory review of the global financial crisis.[69] The review broadly acknowledges that 'light touch' regulation had failed and that the FSA should concentrate on macroeconomic regulation as well as scrutinising individual companies. The review also proposed cross-border regulation of banks. There were no further promises to improve consumer protection or to directly intervene against financial institutions who treat their customers badly. The review was reportedly met with widespread relief in the city of London where firms had feared a 'revolution' in the way that they would be regulated.[70]