Financial Times: FSA threatens 'light-touch' regime for energy: “The Financial Services Authority has threatened to scrap the "light-touch" regulatory regime governing companies that trade in energy markets such as oil, gas and electricity”: “"We expect the chief executives, of oil market participants in particular, to ensure that their staff understand and comply with our rules…” (ShellNews.net)

By James Boxell

Published: October 13 2004

The Financial Services Authority has threatened to scrap the "light-touch" regulatory regime governing companies that trade in energy markets such as oil, gas and electricity.

The UK's financial watchdog has taken a more liberal approach with energy traders until now because retail investors are not involved directly in such markets.

But in a letter to the chief executives of companies with energy trading interests, the FSA says it may impose a tougher regulatory framework because of "poor" compliance with existing rules.

Chris Rexworthy, head of wholesale investment firms at the FSA, says in the letter: "We expect the chief executives, of oil market participants in particular, to ensure that their staff understand and comply with our rules if they wish to convince us that the present light-touch regime should be maintained."

The FSA refused to single out companies for criticism but its letter was sent to a number of oil and gas groups, power utilities, trading companies and banks - all of which have energy market interests.

The recipients include trading arms of oil groups such as BP, Royal Dutch/Shell, ChevronTexaco, ConocoPhillips, ExxonMobil and Statoil, as well as Morgan Stanley, the bank, EDF, E.ON and Scottish Power, the utilities, and Glencore and Sempra, the independent traders.

There is no suggestion that companies have failed to comply with FSA rules.

The FSA visited 15 companies following the collapse of Enron, the US energy trader, to assess whether its rules were adequate.

Mr Rexworthy says in his letter: "While standards appear to have got better in recent years, some market participants still fall below our requirements and need to improve considerably their compliance and risk mitigation. Although [compliance failures] have not caused market turbulence or loss of confidence, there is potential for this to happen."

Not all the companies approached were willing to respond to the FSA's request for voluntary information, he adds.