In a complete revamp of the way regulation works, the FSA will be able to take civil action against anyone who abuses financial markets - not just those who are members of an official regulator.
Anyone who engages in share ramps, false trades or attempts to corner the market will be open to civil action under a universal Code of Market Conduct.
Wives of directors or even golfing partners could be fined under the code, which will spell out what is meant by unacceptable market behaviour.
Until now, regulators have often been powerless to pursue suspected market abuse which stops short of insider trading. The new powers will allow the FSA to avoid the lengthy and often cumbersome process of going to the courts.
Alistair Darling, chief secretary to the Treasury, said: "It is essential that the financial markets are protected from abuse. Damage to the markets damages the economy as a whole. For the first time, the regulator will have a set of coherent and comprehensive civil powers in this area."
The City's super-regulator will also have the power to prosecute insider dealers as criminals, a job usually reserved for the Department of Trade and Industry and the Crown Prosecution Service. Money-launderers will also come within its scope.
The new powers will form part of the Financial Regulation Reform Bill, to come into force in 1999. A draft version of the Bill will be published in the summer.
City firms were reassured there will be an independent tribunal to consider appeals against FSA decisions. The tribunal will be part of the courts system, independent of the FSA.
Howard Davies, chairman of the FSA, said the proposal to create a new civil regime was in response to concerns about the inadequacies of the current system. The FSA would shortly consult market participants on a draft code of market conduct.Reuse content