ARROW as an FSA's risk based approach to regulation
ARROW stands for Advanced, Risk-Responsive Operating Framework. In January 2000, FSA set out a proposed approach to regulation to meet its statutory objectives. It was projected as ‘A New Regulator for the New Millennium'. In fact, it is at the heart of the FSA's risk-based approach to regulation.
As a risk-based regulator, it gives a clear statement of the realistic aims and limits of regulation, recognizes the proper responsibilities of consumers and firm's own management, and also the impossibility and undesirability of removing all risks and failure from the financial system.
Legal Framework - FSA
Financial Services and Markets Act (FSMA) Legislation
The Financial Services Authority is the competent authority under the European single market directives for banking, insurance, investments, listing, and other financial services matters. Its powers are conferred primarily by the Financial Services and Markets Act, 2000 (FSMA), which combined the previous sectoral arrangements and regulators. It also sets out a number of explicit standards that the FSA must meet in carrying out its duties - for example, time periods within which it must take certain decisions.
The FSA has authorization, enforcement, supervision, and rule-making functions in relation to firms. It has registration functions under the various legislation applicable to mutual societies and related functions under other legislations applicable to financial services and listing.
The FSA is a body corporate and is subject to normally applicable company and accounting law. FSMA assigns specific responsibilities to the FSA's non-executive directors.
Non-FSMA Legislation
In addition to FSMA, the FSA has regulatory powers under the
Building Societies Act, 1986;
Friendly Societies Acts (1974 and 1992); and
Industrial and Provident Societies Act, 1965.
The following are some of the more significant functions, the FSA has under non-FSMA legislation:
- Enterprise Act, 2002 :The FSA is designated as a consumer enforcer under the Act. This gives the FSA the power to approach the courts to stop traders from violating a wide range of consumer protection legislations where those infringements harm the collective interests of consumers.
- Unfair Terms in Consumer Contracts Regulations 1999: The FSA may seek an injunction to prevent the use of a contract term drawn up for general use in a financial services contract that appears to be unfair to the FSA.
- Distance Marketing Regulations 2004: The FSA is designated as the body responsible for considering and if necessary, taking action against persons responsible for breaching specified contracts.
- Electronic Money Directive: The FSA is responsible for regulating the issuing of e-money (money stored on an electronic device such as a chip card or computer memory).
- Electronic Commerce Directive: The FSA has a number of powers under the directive including the power to direct that an incoming provider may no longer carry on a specified incoming electronic commerce activity, or may only carry it on subject to specified requirements.