Role and Effects of Financial Intermediaries Essay

Role and Effects of Financial Intermediaries - Essay Example Typically the first party is a provider of a product or service and the second party is a consumer or customer. In the U.S., a financial intermediary is typically an institution that facilitates the channelling of funds between lenders and borrowers indirectly. That is, savers (lenders) give funds to an intermediary institution (such as banks), and then that institution in turn gives those funds to spenders (borrowers). This may be in the form of loans or mortgages. Alternatively, they may lend the money directly via the financial markets. (Wikipedia, 2006) (Paraphrasing made) Riskinstitute (n.d) said, â€Å"The FSA provides that no person shall carry on, or purport to carry on, investment business in the UK unless he is authorised or exempted from authorisation (FSA, s.3). It explained that pursuant to the FSA, a person carries on investment business in the UK if he carries on investment business from a permanent place of business maintained by him in the UK or if he engages in an activity in the UK which falls within one of several categories identified in Part II of Schedule I to the FSA and are not excluded by Part III and, in respect of that activity, he is not an exempt person. It explained, â€Å"A financial intermediary is, therefore, subject to regulation in the UK where investment business is carried on from a UK base, wherever the customer is situated. A financial intermediary will also be subject to UK regulation where that financial intermediary, not operating from a UK base, nevertheless carries on business from overseas into the UK (e.g., soliciting UK customer business). Certain exceptions apply in the latter case, e.g., where the overseas person is: transacting with a UK authorised person; responding to an initiative taken by a UK investor or continuing an existing business relationship with him; or promoting his investment services in accordance with the advertising and cold-calling rules, provided that overseas person is not otherwise