The Gower Report into

investor protection An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital the investor usually purchases some species of property. Types of in ...

proposed regulations for the

financial services Financial services are service (economics), economic services tied to finance provided by financial institutions. Financial services encompass a broad range of tertiary sector of the economy, service sector activities, especially as concerns finan ...

industry in the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

in the late 1980s. It led to the establishment of the Securities and Investments Board, the forerunner to the

Financial Services Authority The Financial Services Authority (FSA) was a quasi-judicial body accountable for the regulation of the financial services industry in the United Kingdom between 2001 and 2013. It was founded as the Securities and Investments Board (SIB) in 1985 ...

Background

Throughout the greater part of the 20th century the UK

industry was largely self-regulated in its nature. The main regulatory legislation was the Prevention of Fraud (Investments) Act 1958 which was introduced in an attempt to provide a degree of

consumer protection Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent business ...

, but in itself did not go far enough as the scope was narrow and was frequently open to interpretation. A number of factors, both positive and negative, forced the government to reconsider the way financial services were regulated in the UK. These included a number of highly publicised

scandal A scandal can be broadly defined as the strong social reactions of outrage, anger, or surprise, when accusations or rumours circulate or appear for some reason, regarding a person or persons who are perceived to have transgressed in some way a ...

s to hit the UK financial services sector in the '70s and '80s involving mis-selling of

personal pension scheme A personal pension scheme (PPS), sometimes called a personal pension plan (PPP), is a UK tax-privileged individual investment vehicle, with the primary purpose of building a capital sum to provide retirement benefits, although it will usually al ...

s, endowments and

split capital investment trust A split capital investment trust (split) is a type of investment trust which issues different classes of share to give the investor a choice of shares to match their needs. Most splits have a limited life determined at launch known as the wind-up d ...

s. In response to these factors the Government appointed the Wilson Committee in 1980 to review the financial system. The Government, unsatisfied with their findings, recruited Professor

Laurence Gower Laurence Cecil Bartlett Gower (29 December 1913 – 25 December 1997) known as 'Jim' and universally credited as "LCB Gower" in his writings, was a lawyer and academic who was Vice Chancellor of the University of Southampton from 1971–79. ...

in 1981 to consider new

legislation Legislation is the process or result of enrolling, enacting, or promulgating laws by a legislature, parliament, or analogous governing body. Before an item of legislation becomes law it may be known as a bill, and may be broadly referred ...

.Research Paper 99/68
UK Parliament, 24 June 1999: Financial Services and Markets Bill His mandate was as follows:- *The level of statutory investor protection *how

investment Investment is traditionally defined as the "commitment of resources into something expected to gain value over time". If an investment involves money, then it can be defined as a "commitment of money to receive more money later". From a broade ...

advice and management advice are controlled *whether law changes should be made to improve consumer protection *the relevant developments of the

EEC The European Economic Community (EEC) was a regional organisation created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lisbo ...

(European Economic Community) Gower produced his report and the Government adopted a number of his proposals in a

white paper A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. Since the 199 ...

(Jan 1985). The

Financial Services Act 1986 The Financial Services Act 1986 (c. 60) was an Act of the Parliament of the United Kingdom passed by the government of Margaret Thatcher to regulate the financial services industry. The Act used a mixture of governmental regulation and self-regu ...

(FSAct) followed the white paper, receiving royal assent in November 1986. Its scope centered on Investment business and activities carried out in relation to those investments. In line with the proposals given by Gower, The FSAct named the

Securities and Investments Board The Financial Services Authority (FSA) was a quasi-judicial body accountable for the regulation of the financial services industry in the United Kingdom between 2001 and 2013. It was founded as the Securities and Investments Board (SIB) in 1985 ...

(SIB) as the designated agency for the supervision of investment business within the UK (the forerunner to the

FSA). The SIB created five Self-Regulatory Organisations (SROs), later condensed to three: *The Personal Investment Authority *The Investment Management Regulatory Organisation *the Securities and Futures Authority These were all later subsumed into the FSA. In addition the SIB also recognised other bodies that conducted day-to-day regulation of investment business:- *Recognised professional bodies (RPBs) (nine in total including the Law Society) *Recognised Investment Exchanges (RIEs) *Recognised Clearing Houses (RCHs)

References

*Swift, Hollie. The International Compliance Association Training Notes, ICT (International Compliance Training, 2009). {{DEFAULTSORT:Gower Report Financial regulation in the United Kingdom Reports on finance and business 1985 in British politics 1985 in economic history 1985 in politics Reports of the United Kingdom government Financial history of the United Kingdom