On June 10, the UK Financial Services Authority (FSA) issued its annual report covering the year ended March 31, 2010. The FSA emphasized its priorities and targets including:

  • a radically changed approach to prudential supervision, particularly of high impact firms, including stress testing, accounting reviews, challenges to business models, detailed liquidity assessments and reviews of remuneration policy;
  • a fundamental change in its enforcement approach, aiming for “credible deterrence” and pursuing market abuse and management responsibility far more aggressively;
  • the launch of a new approach to “conduct” risk, improving customer protection in retail markets by earlier intervention to reduce the scale and frequency of problems potentially leading to customer detriment; and
  • the need for increased involvement in international and European regulatory initiatives.

Among many specific issues addressed in the 127-page report was market confidence. While highlighting action taken and planned against insider dealing and market abuse, the market confidence section of the report highlighted the result of FSA’s latest Market Cleanliness Study, which showed a further increase (from 29.3% to 30.6%) in the number of takeovers preceded by abnormal pre-announcement price movements.

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