Why Financial Services Require Regulation
I hope to report back to the FSA on the reasons why financial services require regulation – rules and directions made and enforced by an authorising body – and the consequences that occur if they are not followed. Various issues will be covered including ethics; moral principles that a person or a group of people abide by, regulation; rules or directions maintained by an authorising body and law; rules that are enforced by a particular country where penalties and fines are issued If the rules are not followed.
Findings
1. Tax
Comedian Jimmy Carr has been using a legal tax avoidance scheme which has allowed him to pay a minor 1% income tax. When he was discovered people branded his actions as ‘the moral equivalent of benefit cheats’ however, what he did was legal.
The treasury regulates the UK’s tax office and they were responsible for ensuring HMRC were taking the correct amount of tax from each working individual. The treasury’s regulation was in place to enforce the law for all working citizens to pay income tax of the correct percentage and to maintain public confidence in the tax system by neither under or overpaying taxes which of course, they failed on in the Jimmy Carr incident.
This incident shows the importance of regulating financial services as it helps to spot and prevent potential unethical or illegal crime and reduces the possibility of a person to be connected with a crime.
http://www.bbc.co.uk/news/magazine-18537051
2. Complex Products
Customers are at risk from being mis sold financial products like pensions, insurance and mortgages since these areas of the market are considered ‘specialist’ areas and so there is potential for consumers to lose money either through buying an unsuitable product for their needs or not being fully aware of the options available from the product i.e. varying interest rates or term of loan. To prevent this happening, how financial products sold are regulated by the FSA to protect customers from the mis
Findings
1. Tax
Comedian Jimmy Carr has been using a legal tax avoidance scheme which has allowed him to pay a minor 1% income tax. When he was discovered people branded his actions as ‘the moral equivalent of benefit cheats’ however, what he did was legal.
The treasury regulates the UK’s tax office and they were responsible for ensuring HMRC were taking the correct amount of tax from each working individual. The treasury’s regulation was in place to enforce the law for all working citizens to pay income tax of the correct percentage and to maintain public confidence in the tax system by neither under or overpaying taxes which of course, they failed on in the Jimmy Carr incident.
This incident shows the importance of regulating financial services as it helps to spot and prevent potential unethical or illegal crime and reduces the possibility of a person to be connected with a crime.
http://www.bbc.co.uk/news/magazine-18537051
2. Complex Products
Customers are at risk from being mis sold financial products like pensions, insurance and mortgages since these areas of the market are considered ‘specialist’ areas and so there is potential for consumers to lose money either through buying an unsuitable product for their needs or not being fully aware of the options available from the product i.e. varying interest rates or term of loan. To prevent this happening, how financial products sold are regulated by the FSA to protect customers from the mis
Bibliography: http://www.cuna.org/newsnow/12/system083012-8.html http://www.financialservices.co.uk/news/2011/mar/consumer-confidence-at-all-time-low.html http://www.fashioncapital.co.uk/Industry/StartUps/9960-Importance-of-Financial-Regulation.html http://www.imf.org/external/pubs/ft/survey/so/2012/int062012a.htm http://www.nationwide.co.uk/NR/rdonlyres/CB145F57-7395-49AB-9F66-30F9B29A232D/0/NCCI_October_2011.pdf http://www.telegraph.co.uk/news/uknews/crime/9188424/Canoe-man-how-John-Darwins-obsession-with-becoming-rich-led-to-audacious-plan.html http://www.telegraph.co.uk/finance/personalfinance/consumertips/9141122/Savers-still-at-risk-of-being-mis-sold-complex-products.html http://www.bbc.co.uk/news/magazine-18537051