The UK should create a separate securities regulator that combines market supervision, setting listing standards and oversight of corporate reporting and governance, according to the chairman of the Financial Reporting Council.

Lady Hogg writes in Thursday’s Financial Times that this alternative would serve London and the investing public better than the government’s current plan to split up the Financial Services Authority in 2012.

The coalition’s proposal seeks to return bank supervision to the Bank of England, creating a Consumer Protection and Markets Authority and combining the FRC and the UK Listing Authority.

Many traders and brokers worry, however, that the CPMA might focus so much on consumers that market regulation would fall by the wayside.

They also fear the CPMA may be ill-equipped to lobby for the City in Brussels and at the new European regulatory body that will supervise markets starting next year.

Dividing up consumer protection and markets would be a better solution, Lady Hogg writes: “Better to have two separate bodies, with clear objectives and clear accountability.”

Combining the FSA markets division with the UKLA and FRC would “enable the UK to speak with one clear, powerful voice” on securities regulation, she says.

Lady Hogg has previously said that the UKLA and FRC had important synergies, but her current proposal goes much further by adding in the FSA’s markets division.

City leaders have been arguing for a separate markets authority since the Conservatives first proposed splitting the FSA last year, but with little success. The official consultation period on the coalition proposal ended last month and the FSA is already working on a plan to informally divide itself early next year.

The consultation sought a different home for the UKLA, which is currently part of the FSA and oversees the prospectuses of companies coming to market in London.

The issue gained further currency last month when Xavier Rolet, the chief executive of the London Stock Exchange, warned that separating the UKLA from the rest of market regulation might “sow the seeds for the next crisis” by making it harder to spot emerging threats.

A Treasury spokeswoman said: “The Government welcomes views from all interested parties to our consultation on the approach to financial regulation.

“We have received a large number of responses and will respond in due course.”

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