This Week in Regulation


UK and Hong Kong Authorities Sign Co-operation Agreement

The FCA and Hong Kong’s Securities and Futures Commission (SFC) have signed a co-operation agreement to support FinTech innovation in their respective markets. This follows similar agreements signed with regulators in Japan and Canada.

The authorities have committed to sharing relevant information and referring innovative firms who are seeking to enter one another’s markets. This will help both regulators offer enhanced support to FinTech businesses looking to expand internationally.


Latest NCSC Guidance on Ransomware

The National Cyber Security Centre has issued guidance on Ransomware following the recent attack that affected organisations nationally. The FCA encourages firms to read these guidelines and take action where necessary.

The malware used in this attack encrypts files, provides the user with a ransom demand, a countdown timer and a bitcoin wallet to pay the ransom into. Home users are encouraged to ensure their antivirus products are up to date and regularly back up important data. Enterprise Administrators have been provided with a step-by-step process which they can follow in order to contain the propagation of the malware.


New Features for Searching the FCA Handbook Website

The FCA has created a new ‘topic tree’ which will allow you to search for key topics within the Conduct of Business Sourcebook (COBS).

Other changes to the website include new icons beneath each provision number on the contents pages, however the modular table for contents will remain the same.

The FCA is seeking feedback on the changes under plans to roll out the changes to the whole handbook.


Competition and Innovation in Financial Services: The Regulators Perspective

Christopher Woolard, Executive Director of Strategy and Competition at the FCA has recently delivered a speech on competition and innovation in the financial services industry. He addresses the regulators perspective on promoting competition and innovation within financial services and its approach to regulation.

For financial markets to run effectively, markets must promote competition to innovate on behalf of customers and ensure value for money. Innovation has influenced the development of new technologies and has revolutionised the accessibility of products and services for consumers. If competition poses a risk or threat to the market, the FCA has a duty to step in and mitigate this. A number of initiatives have been introduced by the FCA, including Project Innovate which positively nurtures innovation, aiming to provide better outcomes for consumers.

Competition & innovation strategy

With instruction from Parliament, the FCA has a duty to ensure markets work well, by promoting competition and protecting consumers. This can be achieved by a combination of key elements from both the market and the FCA:

  • Honesty in the foundations of the financial system;
  • Certainty around standards, expectations and clarity in decision making and behaviour.

Regulation is a persuasive tool shaping markets, in which the FCA implements interventions to provide consumers with the confidence to explore the market. In addition, it is the FCA’s duty to prevent harm and correct things when they go wrong.

Competition is also heavily promoted across the FCA, with the aim of encouraging consumer choice and the disciplining effect that has on firms, encouraging them to develop products and services that meet consumers’ needs and expectations around quality and price. The FCA also works closely with the Prudential Regulation Authority (PRA), launching the New Bank Start-Up Unit in early 2016. Acting as a support to new banks and those that are in the process of starting up, it helps ensure trust and confidence in the regulatory system.

Duty of ensuring competition

Not only does the FCA have the responsibility of ensuring effective regulation is in place but it also has the capability of using competition powers as a way of mediating the market. The FCA is to publish an Approach to Competition statement which will outline its reasoning around how competition impacts its work. This stems from the issue of weak price competition identified in the FCA’s study into the Asset Management Industry. Findings showed the amount of charges faced by customers were affecting the value of consumer’s long term investments and pensions. Therefore, the FCA aims to implement a strategy that aims to provide clarity to consumers around prices, objectives and performance so that market consumers are better able to seek value.

Promoting innovation

The FCA is also placing emphasis on the concept of new entry and innovation into the market as a way to drive competition. With the hope that competition will encourage innovation where firms are motivated to provide value for money for consumers.

Innovation within financial services is about constantly improving products and services with the priority of ensuring customers’ needs are being met and making markets work well for consumers. To support this the FCA introduced Project Innovate in 2014 to help firms address regulatory barriers, either through defining regulatory expectations, reviewing FCA rules or enforcing policy changes.

The FCA seeks to understand all perspectives when designing policies, including the promotion of innovation internationally. Bilateral agreements have recently been signed with other regulators to encourage innovation and help new firms minimise the barriers to entry when entering global markets.

Progressive and protective approach

The main purpose of the FCA’s focus on innovation is centred on its impact on the everyday lives of consumers, equipping firms with the knowledge they need when entering the market, with the help of its Innovation Hub, where firms can gain advice on the regulatory implications of the firms intentions and the options available. As well as its regulatory sandbox which enables firms to test innovative products and services before they are launched to the market.

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