Responsibility for the regulation of the major participants in the London bullion market lies with the Financial Services Authority (FSA) under the Financial Services and Markets Act 2000. Under this Act, all UK-based banks, together with other investment firms, are subject to a range of requirements including capital adequacy, liquidity and systems and controls.
Conduct of business in the London bullion market falls under two jurisdictions dictated by the type of business. The FSA is responsible for “investment business” as defined under the Act. For the bullion market, this covers derivatives. The requirements upon firms in their dealings with market professionals are set out in the IPC MAR 3, the FSA’s chapter on Inter-Professional Conduct.
For spot, forwards and deposits in gold and silver, which are not covered by the Act, guidelines for the conduct of business are set out in The London Code of Conduct for Non-Investment Products, the NIPs code. This code has been drawn up in conjunction with the Bank of England by market practitioners representing the foreign-exchange, money and bullion markets. It sets out the standards of conduct and professionalism expected between market practitioners with each other and with their clients. The text may be found on the Bank of England website.
REACH, which concerns the Regulation, Evaluation and Authorisation of Chemicals, is a new piece of European Union legislation. This affects not only the producers and users of chemicals (including metals) in the EU but also companies that import them to the EU.