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FMA Focus on Improving Conduct and Increasing Trust in Financial Markets

Rob Everett, Chief Executive of The FMA has set out the evolving approach for the FMA as the regulator’s mandate expands under the Financial Markets Conduct Act, taking effect from 1 December.

Mr Everett said, “The FMA’s mandate is expanding, from 1 December, with several hundred businesses and professionals expected to apply for new licences. Licensing allows us to establish minimum standards for firms and professionals who want to deliver financial services. But this is only part of the increased powers granted to the FMA under the Financial Markets Conduct Act (The Act). Read full article here on FMA website.

How Regulators Can Help Innovators

Heavy regulation can be an obstacle to innovation. Detailed and prescriptive regulation can entrench practices that, while being compliant, may also be inefficient. Even a principles-based regime can slow things down a lot because regulators get used to seeing the same sorts of responses to those principles. Being regulators they do not tend to be innovators. Albert Einstein in the patent office was the exception, not the rule.

All that means that when someone wants to innovate in delivering a regulated service they can often look for ways to stay 'unregulated' - that isn't helpful. Regulators all over the world are conscious of the issue of unregulated services. They can damage confidence in consumers who are confused about what is or is not protected. They can undermine the relationship between the regulator and the regulated services providers. 

In the UK the regulator has launched Project Innovate. This is a nice idea designed to support new approaches (by new companies or existing ones) that could benefit the customer. There is a kind of trade-off. The FCA gives more support, and faster responses, but the adviser business has to take some of the risk with the advice from the FCA.

It has not been popular with existing businesses. They are concerned that they are funding a kind of 'fast-track' for innovators that are often competing with their businesses. The regulator, of course, says this isn't happening - existing companies are welcome to innovate too. 

It is an interesting response to the problem of innovation in a regulated environment.