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Should the FSA oversee investment advice to public bodies?

The collapse of the Icelandic banking system has prompted a committee of MPs to suggest that the FSA (Financial Services Authority) should have the power to oversee and regulate investment advice given to public bodies. It is well-known that UK public bodies held around £1 billion of UK taxpayer's money with Icelandic banking institutions at the time of the collapse. While around £100 million has since been returned there is growing concern about the standard of advice given to UK public bodies.

At this point in time the FSA has no powers to intervene in the public sector despite the fact that billions upon billions of pounds of taxpayer's money are invested in all manner of different financial instruments. It would seem sensible to bring public bodies under the remit of the FSA although this could potentially open a can of worms with regards to advice sought and taken in the past.

However, at the end of the day any investment decisions taken by public bodies are in effect covered by the UK taxpayer who will be expected to be bailout various public bodies in the short, medium and longer term. Whether this is a fair system is open to debate because on the surface it looks as though the introduction of new controls and regulations could prove very beneficial to all parties involved.

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