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FSA finalizes new regulations for financial benchmarks

The UK Financial Services Authority (FSA) has finalized new rules and regulations for financial benchmarks, a move that follows the recommendations of the Wheatley Review of the London Inter-Bank Offered Rate (LIBOR).

As per the new finalized proposals, the benchmark administrators will be required to support submissions and monitor for any suspicious activity, and the companies submitting data to benchmarks will need to have in place a clear conflicts of interest policy and appropriate systems and controls.

The other proposal includes creation of two new significant influence controlled functions under the FSA’s Approved Persons Regime for administrator and submitting firms.

The new move will result in a clear, robust set of rules which will provide companies and their employees comfort that the regulatory regime clarifies what is expected of them.

Commenting on the finalization of new benchmark regulation, FCA designate CEO Martin Wheatley said that the confidence and trust are critical to financial markets, which was swallowed by the LIBOR scandal and the recent enforcement action against several banks.

"These new rules today should help restore that faith and bring integrity back to LIBOR," Wheatley added.

Many global banks came under the scanner of global regulators for allegedly fixing the London inter-bank offered rate for their advantage, which is used across financial markets in a broad range of activities.

On 2 July 2012, the Chancellor of the Exchequer commissioned Martin Wheatley, CEO designate of the Financial Conduct Authority (FCA), to undertake a review of the structure and governance of LIBOR and the corresponding criminal sanctions regime.

According to the Wheatley Review, a 10-point plan for comprehensive reform of LIBOR including those LIBOR activities should be brought within the scope of statutory regulation.

Subsequently, the UK government included provisions into the Financial Services Act 2012 to allow the regulation of activities in relation to benchmarks.

The legislation will begin on 1 April 2013 and initially, the only specified benchmark will be LIBOR.