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Davies Leaves the FSA: McCarthy and Tiner Step Up

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LONDON (–Howard Davies, the chairman and chief executive of the U.K.’s Financial Services Authority, will leave both of those posts effective Sept. 22, for a new job as director of the London School of Economics.

Mr. Davies’ attitude toward hedge funds has been two-fold. He has pushed for increased oversight at the international level, but has also resisted increased regulation of hedge funds on his home turf.

On the global scene, Mr. Davies has been active in the deliberations of the Financial Stability Forum, which was established by the G-7 nations in 1999 to study threats to the stability of the world financial system. For example, Mr. Davies headed a working group of the FSF that recommended, in March 2000, that regulators in all countries take steps to limit the exposure of regulated institutions to failures on the part of hedge funds, which the FSF prefers to refer to as Highly Leveraged Institutions, Previous HedgeWorld Story.

In terms of his own nation’s regulatory system, though, Mr. Davies warned in September 2002 against the “serious risk of ratcheting up regulation in a way that, in my view, could have damaging consequences in the longer term,” especially in light of London’s position as a center of world finance, Previous HedgeWorld Story.

In March 2003, the FSA announced that after requesting and receiving industry feedback regarding possible changes in the regulation of hedge fund marketing, it had concluded that the status quo provided the right balance of consumer protection and investor access, Previous HedgeWorld Story.

Mr. Davies has headed the FSA since before it was called that. He was named chairman of the Securities and Investment Board on Aug.1, 1997. It took on its present designation eight weeks later, and became the U.K.’s single financial regulator in 1998. His two roles within the FSA will go to two successors. The next chairman, Callum McCarthy, is currently the chair of the Gas and Electricity Markets Authority. The next chief executive, John Tiner, has been the managing director of the Consumer, Investment and Insurance Directorate at the FSA since April 2001.

Before he joined the FSA, Mr. Tiner was an accountant with Arthur Andersen, becoming head of their financial services industry practice in 1997. He led the Bank of England’s review of U.K. banking supervision in 1996 and worked on financial services assignments in Japan, the United States, Germany, Norway, and the Czech Republic.

“I am very pleased to have this opportunity to lead the FSA,” Mr. Tiner said in a statement. “It is a huge challenge and, given the dynamic and innovative nature of financial markets, I anticipate few dull moments.”

Mr. Tiner outlined some of his views on regulatory matters last month, at a speech before central and eastern European regulators in Poland.

He said there that transparency in policy making, and explicit concern with both the costs and the benefits of any regulatory change, are crucial in building confidence in the regulatory system and in minimizing unintended consequences.

“It is pleasing to see that our colleagues in Brussels are increasingly moving towards this form of public consultation and it should be expected that we will see such a practice embedded in the modus operandi of the Lamfalussy Committee structure. Indeed, CESR, the Committee of European Securities Regulators has written into its charter provisions for public consultation along these lines, including public meetings. As part of this consultation process, before we are permitted to make any rules, we must first justify them publicly by Cost Benefit Analysis.”

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