Out-Law News | 02 Jun 2014 | 10:03 am | 2 min. read
The FCA's chief executive Martin Wheatley said that the aim of 'Project Innovate' is "to make sure positive developments – by which I mean the ones that genuinely promise to improve the lives of consumers or clients – are supported by the regulatory environment".
"It’s an imperative for regulators to be standing on the right side of progress," Wheatley said in a speech last week.
Under Project Innovate, businesses will have the chance to seek advice from the FCA on how to "navigate the regulatory system" when developing new business models and products. In addition, the FCA will review whether changes need to be made to the regulatory regime to account for new technology "rather than the other way round", Wheatley said.
"We want an FCA that creates room for the brightest and most innovative companies to enter the sector," Wheatley said. "So, priority areas here might include the likes of mobile banking, online investment or money transfer, where we’re seeing innovations such as apps that allow you to take a picture of a bill and make payments with a tap of the smartphone. The possibilities opening up for consumers are extraordinary – and it’s clearly important they can be developed in the UK."
"To help this happen, the FCA is opening its doors to financial service firms (large and small) who are developing innovative approaches that aren’t explicitly addressed by current regulation – or where the guidance may be ambivalent," he said.
Technology and payments law expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said that the initiative would be welcomed by companies of all sizes.
"It sounds like the FCA will be taking a much more proactive approach to helping industry bridge the gap between technology and regulation. Traditionally the FCA has been reluctant to give ‘clearance’ or focused advice to firms on these areas, leaving the firms at risk if problems appear down the line, and it would be good to see a shift here."
McFadyen said that an example where technological developments and innovation in a market had outpaced regulatory guidance was in the retail advice market.
In this market a number of online tools are available which help people make investment decisions, but there has been widespread debate about whether the information presented to users of the tools constitutes retail investment advice, the provision of which is heavily regulated, or whether it merely acts to guide investors through the process of selecting financial products to invest in, he said.
McFadyen also said that the move to support innovation is also aligned with one of the statutory objectives of the new Payment System Regulator (PSR).
"Right now, the PSR is working on its strategy for supporting innovation, identifying areas that it should get stuck into, and those that would be best left to develop organically," he said.