JOB OF THE WEEK

The FSA is today going to the Court of Appeal in order to clarify the extent to which it is expected to co-operate with the US' Securities and Exchange Commission (SEC). This poses some interesting questions: first with financial services regulation increasingly being seen as an international, if not global game, how much should regulators co-operate and how much should one regulator use another to do its "dirty work"? Second, with mounting worries about the "long arm of US justice", what  protection do UK executives have if the FSA simply does SEC's bidding? And third, what are the implications for EU supervisors given the far closer working relationships necessitated by the creation of the pan-European regulatory authorities that are now replacing CEIOPS and CESR?

The FSA and SEC have a "memorandum of understanding" to exchange supervisory information and have an often touted "positive working relationship". As, arguably, the regulators for the world's two most sophisticated financial services markets the relationship between the two bodies is often scrutinised. It is said that Callum McCarthy spent a great deal of his Chairmanship getting this balance right.

The FSA's court action relates to an SEC investigation into Rhino , the New York based investment adviser. The US regulators asked the FSA to recover 20 boxes of correspondence held by Goodman Jones, the London Accountant, which the SEC said might be relevant to its investigation. The files were being held on behalf of two companies: Amro International and Creon Management - neither were subject to SEC investigation and so won a legal challenge stopping FSA's actions.

It appeared to many that this smacked of being a "regulatory fishing trip" hauling in as much information as possible to see what turned up!

So what are the implications? Through the banking crisis there were cries for closer co-operation between regulators. It is worth noting that there is a useful difference between sharing of regulatory thinking, policy and indeed normal supervisory procedure - and the "en-joining" in enforcement-led action. Regulators must be careful that they are not being asked to either go beyond their own legal powers by a fellow regulator or, indeed, being asked to bolster a weak case via a hopeful fishing trip!

FSA also needs to be mindful of its "duty of care" to those it regulates. I would contend that its role is more than a passive transmitter of information to other regulators about those firms that operate in its domestic market. It is one of my long held beliefs that the FSA, and the market as a whole, would enjoy far higher levels of consumer confidence if the regulator could have squared the circle between being a consumer protector and an industry cheer-leader. This is certainly true in an international context where I see other regulators putting national interest ahead of any grand vision for European harmonisation.

The Court of Appeal's decision may fire a warning shot that other regulators cannot simply make demands of the UK authorities without sufficient just-cause. This will be a positive step.

It is worth reflecting on the international nature of regulation today. The banking crisis laid to rest the notion of local regulation - for good and for ill. However, that does mean that all regulators have a duty to co-operate at policy level, share information, and seek to deliver solutions that work - not just in their country but across the market. The story of this next decade, and the UK's competitiveness, may well be determined by how we work to promote our national interest more effectively than to date in the increasingly international financial services market. We'll need a regulator that is on our side if we are to win that particular battle.

Did the PBR bring any positive news for anyone? The Chancellor had some major targets to hit - and could have seized the opportunity to start to confront some of the UK's most pressing social problems.

With an ageing but under-pensioned society where were the proposals to increase pension provision - let alone start the debate about the type of retirement society now wants? Was the apartheid of public vs private sector pensions addressed? I simply don't think the £1bn extra that public sector employees will pay or the 1% extra NIC's they'll be paying in 2011 is sufficient to address the root cause of the problem. The attack on pension tax relief weakens the system as a whole and risks undermining the notion that pension saving is important. If a Government can strike at the heart of individuals' prudent planning for retirement, where is the incentive to be prudent?

Where was the encouragement to restore a savings culture to the UK? Surely at times such as these, and the difficult period ahead, we need more people taking responsibility for their actions and the consequences of them. The lessons of the "easy credit binge" decades need to be learnt. The moral that people, and the nation, cannot keep borrowing to finance a lifestyle beyond their means needs to be heeded. The promotion of savings does not rob the economy of growth - savings are merely personal spending deferred but it does help fuel growth through savings institutions' increased ability to invest and stimulate the economy.

While help for those who are at greatest risk of losing their homes is welcome, a far more long term, better move would have been to address the unfairness of the stamp duty system. A sensible approach to borrowing, reinforced not by greater regulation but by access to better advice, would also help more by building positive behaviour at outset rather than remedies at times problems strike.

The delay in increasing corporation tax for small businesses is very welcome. But I worry about the rise in employers' NICs - as combined with the employers' contribution to Personal Accounts - these start to feel like a tax on job creation. In times of economic difficulty any friction in employing people needs to be eradicated.

So does the PBR deliver? In terms of making the UK a better place to do business, to be an employer, to be an employee, or even to live, it was hard news.

 Last week I attended an anti-money laundering conference organised by the Asset Recovery Working Group ‘Payback' Team and hosted by the Serious Organised Crime Agency's (SOCA) UK Financial Intelligence Unit (UKFIU). The conference was very well attended by a real cross section of businesses ranging from financial advisers and mortgage brokers to retail stores and nightclub/casino organisations.

Speakers sent out a very clear message about the Suspicious Activity Reports (SARs) regime; suspicion based reporting works! Now I hear some of you saying that you've submitted SARs in the past but no action appears to have been taken on these. SOCA readily admits that it has failed to communicate well with the industry in the past but is now attempting to remedy this situation. After making its first SAR a firm can expect to get feedback from SOCA to let them know that it has been received and to also help with any further submissions. Another means of communication with the regulated community is "Payback Times", a quarterly publication which gives information on the recovery of the assets of crime.

You might think that making a SAR on what seems trivial to you is not worth the effort. You should remember that an individual SAR may not have much for law enforcement to go on in isolation but it can become part of a jigsaw that builds a case showing criminal activity. Although the reporters' identity remains confidential, SARs are held on a database that can be accessed by local law enforcement and other government agencies. These records are kept for between 6 and 10 years and can highlight not only what most people consider to be organised crime, such as drug crime and/or people trafficking, but also cases of tax evasion and benefit fraud.

At the conference a speaker from FSA talked about the change in regulatory approach of late, mainly due to the economic crisis. Internal fraud is on the increase with employees being targeted by criminals to steal client information for ID fraud; it has also been reported that there's been a 15% increase in attempted mortgage fraud. A thematic review is currently being carried out and although the results aren't due to be published until January next year, early evidence shows that small firms don't take the threat of being used for financial crime seriously enough. One of FSA's four statutory objectives is the reduction of financial crime so we are likely to see more enforcement action against firms and individuals who shirk their responsibility.

As a closing shot FSA said that law enforcement had closed down a document factory which was producing fake ID, evidence of income and such documents which were being used by the perpetrators of financial crime. What was more surprising was that a list of this factory's customers was found and many of these were regulated firms. I'm guessing those firms can expect a knock on the door from the Regulator......................... or worse!