FCA launches regulation support service to help firms innovate

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FCA launches regulation support service to help firms innovate

The Financial Conduct Authority has launched a support service called innovation pathways to remove barriers to entry for firms trying to innovate or launch new products. 

The regulator said its new innovation pathways combines its direct support and advice unit services and through the launch it aims to promote innovation by helping firms understand how regulation relates to their activities.

Speaking at the Innovation Finance Global Summit 2022 today (April 4), Jessica Rusu, chief data, information and intelligence officer, announced the launch of the service.

She said: “Innovation Pathways will provide bespoke regulatory support to firms with innovative business models that want to deliver positive innovations and consumer outcomes in the market. There will be a greater focus on sharing insights into our data and the support provided to firms.

“Alongside our now ‘always open’ regulatory sandbox, innovation pathways will play a key role in informing and ensuring our regulatory environment is fit for future innovation.”

The City watchdog said the pathways will help in situations where there is a new idea and overcome the complexities of financial regulation. This will particularly be the case if a firm is working on a product that does not fit into an existing regulatory category.

“Our support can help you understand the complexities of regulation. We don’t tell you how to organise your business, but we do help you understand our rules, the implications for your business model, and what you need to do to launch a regulated business,” it said. 

The service includes guiding firms through regulation through one-to-one discussions with a dedicated case manager and supporting firms to understand regulation and navigate processes through customised signposting .

It will also help firms to understand whether a specific rule or piece of guidance applies to their business, through discussions and feedback with FCA subject matter experts and said it can provide informal steers designed to clear up grey areas of regulation.

The FCA will also offer pre-authorisation meetings to clarify the authorisation process and the standards firms must meet and provide supervisory support for the first year after authorisation to ensure a seamless experience of the regulatory processes. 

The innovation pathways can apply to authorised firms, unauthorised firms that require authorisation and technology providers that are looking to deliver innovation to UK consumers or firms. 

The regulator will accept applications from firms of any size, at any stage of development and from all sectors of financial services.

Artificial intelligence

In her keynote speech, Rusu described technological innovation as a “powerful force”, with the ability to disrupt existing structures at speed and scale. 

“The financial sector is no stranger to this phenomenon,” she said. “My role is to build the digital regulatory future of the FCA whilst expanding and protecting the intelligence and data assets we hold.”

The use of artificial intelligence is another force area the industry is looking at.

The FCA, together with the Bank of England, recently published the final report of the AI Public-Private Forum to better understand how AI is changing UK financial markets and the challenges associated with its use.

“We are also exploring the concepts of ethics and bias in algorithms and AI,” Rusu said. “As a practitioner, I know that there are analytical tools to explain black box models, and as a regulator, we want to ensure that all technologies – including AI – are used in a responsible way that avoids causing harm to consumers.

“Being at the forefront of innovation is not only about supporting its development, but also harnessing its opportunities for our own work at the FCA, becoming an intelligence-led regulator.”

The FCA said there are three themes at the centre of its work which include fostering innovation, being intelligence-led using data science and advanced analytics and preparing for the future.

The regulator said its data shows that a high proportion of firms that use its innovation services successfully become authorised – with 92 per cent of firms who have used the regulatory sandbox and 98 per cent of those that have used the direct support and advice unit.  

The FCA said these services support firms outside the regulatory perimeter and provide it with insight into the technologies being used and their potential implications.

sonia.rach@ft.com

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