Financial Law

Financial law is the law and regulation of the insurance, derivatives, commercial banking, capital markets and investment management sectors.Understanding Financial law is crucial to appreciating the creation and formation of banking and financial regulation, as well as the legal framework for finance generally.
Overview:
For the regulation of the financial markets, see Financial regulation which is distinguished from financial law in that regulation sets out the guidelines, framework and participatory rules of the financial markets, their stability and protection of consumers; whereas financial law describes the law pertaining to all aspects of finance, including the law which controls party behavior in which financial regulation forms an aspect of that law.
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Understanding the legal implications of transactions and structures such as an indemnity, or overdraft is crucial to appreciating their effect in financial transactions. This is the core of Financial law. Thus, Financial law draws a narrower distinction than commercial or corporate law by focusing primarily on financial transactions, the financial market, and its participants; for example, the sale of goods may be part of commercial law but is not financial law. Financial law may be understood as being formed of three overarching methods, or pillars of law formation and categorised into five transaction silos which form the various financial positions prevalent in finance.
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The implementation and value of soft law within the system, is particularly notable in its relationship with globalization, consumer rights, and regulation. The FCA plays a central role in regulating the financial markets but soft law, voluntary or practice created legal schemes play a vital role. Soft law can fill market uncertainties what are produced by common law schemes. Obvious risk that that participants become lulled into believing statements of soft law is the law. However, the perception that an opinion constitutes ipso facto a clear and widely held opinion is wrong
[13] For example, the consumer relationship in the case of Office of Fair Trading v Abbey National [2009] UKSC 6 where the bank was fined by the FSA for failing to handle complaints set out in soft law principle practices on broadly worded business principles which state that the bank must pay due regard to the interests of its customers and treat them fairly.
[14] Oftentimes the self-regulation of soft law can be problematic for consumer protection policies.
Another example of the expansiveness of soft law in the financial market is the explosion of Credit Derivatives in London, which has flourished on the back of the characteristically robust opinion of Potts for Allen & Overy regarding the ISDA Master Agreement in 1990 which helped the industry separate itself from current market restrictions. A the time, it was unclear whether Credit Derivatives were to be categorised as insurance contracts under English legislation of the Insurance Companies Act 1982. ISDA was firm in rejecting a statutory definition of insurance, stating that
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This was crucial as Insurance companies were restricted from participating in other financial market activities and a licence needed to be granted to participate in the financial market. As a result of the Potts Opinion, credit derivatives were categorized as outside of insurance contracts, which allowed them to expand without the limitations set in place by insurance legislation.