Hector Sants is to take the top job as the head of the Financial Services Authority. The Times has purloined – or, at least, imagined – a copy of the letter that John Tiner, the outgoing FSA chief executive, left in the top drawer of his desk for his successor.

Hector, Sorry. If you’re reading this, then you have the misfortune of being the next FSA chief executive. Bad luck.

You take the reins of the FSA just after the National Audit Office has hailed the work of the regulator and as the FSA’s principles-based regulation is held up as the model for overseeing financial services everywhere. Unfortunately for you, this will not last. And, quite unfairly, you will come to be seen as the face of the FSA as its reputation declines.

Frankly, there is not much you can do about this. This is partly because, while I did a pretty good job, the current praise heaped on the regulator is undeserved. It is as much a measure of the rude good health of the financial markets as it is the fortitude of the Financial Services Authority. As, and when, the market dips, the FSA’s halo will slip.

There will be some concern that your past lives running European investment banking at Credit Suisse and overseeing the wholesale and institutional markets at the FSA, mean that you will focus on the City rather than financial services on the high street. I know you wouldn’t be so foolish. The FSA’s credibility with politicians and the public depends on consumer protection.

The real challenge for you is going to be how far you are willing to see the FSA take responsibility for London as a modern, global financial capital. This will mean addressing issues that we have largely skirted:

–– the quality of the market: the FSA, under your leadership, is going to have to go beyond a consultation document and act to defend the reputation of London. This will mean making a judgment on whether it is good for the City for the likes of Kazakhmys, PartyGaming and SportsDirect to list, without qualification, on the exchanges.

–– the responsibility of ownership: the FSA is going to have to address disclosure of investors who buy contracts for difference and other derivatives and use them to pressure company management to change course. Indeed, it will have to look at the role of hedge funds and activist shareholders. And it will have to do so without intervening in such a way that it inhibits value creation.

–– alternative asset managers: your remit is going to have to stretch beyond Canary Wharf and the Square Mile and on to address transparency and ethical conduct among the private equity and hedge funds in Mayfair.

–– Mifid: Europe’s new rules on markets in financial instruments come into effect on November 1 and they could well have a bigger impact on Big Bang.

–– syndication of risk: there has been such widespread dispersal of debt that we do not really know where it will surface when there is a crack in the market. And, by the way, there will be a crack in the market.

–– market abuse: we are going to have to land a successful conviction for insider dealing. To do that, we are going to need immunity from prosecution for witnesses. Otherwise, we will never catch canny operators in the market and the FSA’s policy on insider dealing will continue to look like collective hand-wringing. All the best of luck and love to the family. John.

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