Speaking yesterday (18 November) afternoon at the Tax Incentivised Savings Association’s annual conference, the FCA’s competition and strategy division head Bob Ferguson challenged the relevant financial services sectors to rise to the challenge of innovation.
On the first anniversary of Project Innovate, which he heads, Mr Ferguson said that last week’s confirmation of the ‘sandbox’, for safe testing of innovative new financial products and services, was a milestone.
“Frankly, form a legal point of view, it’s been very tricky to set up,” he commented, explaining that the in-house project would be up and running by next Spring.
Addressing questions over the potential for mis-selling, Mr Ferguson responded that it really depends on what comes through, but added that each experiment will have a clearly defined beginning, middle and end evaluation process.
“I don’t see it as being a space where consumers are led naked into an arena and wild animals are set on them. There will be suitable consumer safeguards built in.”
He continued that any business that does get out the other side seeking authorisation will not get watered down standards applied.
Exactly the same requirements expected around being properly capitalised will be demanded of firms once they have been through the sandbox plus they must have the right systems and controls in place, he said.
Mr Ferguson also put out the call to larger institutions, admitting that over the last year only a quarter of the FCA’s engagement had been with big firms, while the other three quarters had been concentrated on small and often not yet authorised companies.
Reeling off some statistics about the first year of Project Innovate, he also mentioned that there have so far been 327 requests for support, of which 54 per cent have been offered it and 35 per cent have been given an ‘informal steer’.
In talking to firms, the FCA had found that communication was one of the biggest problems, with accusations of things taking too long to be resolved or guidance being too “on the fence”, according to Mr Ferguson.
So, Mr Ferguson said the informal steers were introduced to give fintech innovators an idea of what the regulatory implications of their ideas were in a quick and candid way.
“Unlike individual guidance, it is not a get out of jail free card. The firms proceed at their own risk but it lets them just get on with things.”
The Financial Advice Market Review was also discussed by Mr Ferguson, who stated that it presented an opportunity for the regulator to have a go at “re-calibrating the overall regime, so it does make sense and doesn’t throw up unnecessary obstacles”, adding that the FCA was determined to be innovation friendly and wants “open and frank” dialogue with the industry.