In November 2015, as part of the Financial Conduct Authority’s Project Innovate, the FCA published a call for input in regards to supporting the development and adoption of RegTech. With its publication, the regulator aims to help the UK capitalise on the development and commercialisation of new business models and disruptive innovation (collective referred to as ‘FinTech’) and to help the UK become the world’s leading FinTech hub. The FCA plans to sustain this by supporting innovation in financial technology and encouraging collaboration between Government, business and academia. In order to realise this while ensuring that the integrity of the UK financial system is maintained with an appropriate level of protection for consumers, it is vital that there is an effective and an innovative regulatory regime.
In this regard, the FCA have been engaging and meeting with a variety of companies in the FinTech industry and as a result have identified some emerging themes which would benefit from being explored further with the FinTech community. The themes are as follows:
- technology accelerators: there are several accelerator initiatives between FinTech and financial services firms that are already encouraging, fostering and, in some cases, funding innovation in the use of technology to deliver regulatory compliance and reporting;
- real-time and system embedded compliance/risk evaluation tools: innovation and advances in compliance and risk technologies have the potential to improve operational efficiency and effectiveness within financial services firms. Some examples of this include trade surveillance, financial crime risk monitoring, anti-money laundering, customer profiling and conduct risk monitoring;
- big data techniques: there is increasing use of big data to streamline and reduce the costs of providing data to regulators;
- visualisation and robo tools: the emergence of online visualisation and robo-advice tools intended to deliver regulated advice and guidance more cheaply, efficiently and effectively has been well-publicised and there is a growing interest in the application of these tools in regards to helping financial services firms better understand regulation and their individual responsibilities;
- software integration tools: innovation in software that allows off the shelf accounting and compliance tools to interact directly with regulatory reporting systems significantly reduces manual keying of data and improves the accuracy of regulatory reporting, hence reducing the cost of compliance for firms as well; and
- cloud technologies: recent development of cloud based platforms and technologies are providing flexible and potentially cheaper alternatives for FinTech entrepreneurs, Financial Services firms and regulators.
In this regard, the FCA will be providing clarifications of what FinTech/RegTech firms would need to do in order to be compliant with the UK regulatory regime, taking into account the above mentioned themes. There will also be ongoing support of the FinTech and RegTech environment by identifying further areas of interest and emerging themes. The FCA believes that its increased collaboration between accelerator programmes, academia, FinTech firms and financial services firms will help increase the development, adoption and innovation of RegTech.
CALL FOR INPUT:
In order for the FCA to gain a deeper and more practically oriented understanding of these matters, it has issued a call for input from any firm which might associate itself with RegTech, FinTech or providing such services. The questions which they have asked firms are as follows:
“What RegTech could be introduced in order to make it easier for firms to interact with regulators, at a lower cost and administrative burden?”
“What role would it be most useful for the FCA to play in order to foster development and adoption of RegTech in financial services, and what method would best suit this engagement?”
“Are there any specific regulatory rules or policies that cause barriers to innovation or adoption of RegTech for financial services (products or processes)? Please provide examples of when these rules or policies have stifled development/adoption and describe the impact (e.g. delay, abandonment of project, economic impact). We are also interested in hearing about regulatory rules or policies that may extend beyond the UK regulatory jurisdiction including, for example, European or international policies and agreements.”
“Are there any regulatory rules or policies that should be introduced to facilitate innovation and adoption in RegTech for financial services (products or processes)? Please provide examples of when the absence of these rules or policies has stifled development/adoption and describe the impact (e.g. delay, abandonment of project, economic impact).”
“Which existing regulatory compliance or regulatory reporting requirements do you feel would most benefit from RegTech?”
If you would like to submit feedback to the FCA on any of the above questions please follow this link.
As a next step, the FCA will consider all responses to this call for input and, where appropriate, follow up with individual respondents. A summary of the responses will be made available on the regulator’s website. There will be a number of workshops in Q1 2016 in which the key priority areas of mutual interest identified from the responses will be discussed.
In addition, the FCA will continue to proactively engage with participants in the FinTech and RegTech community to seek their views on regulatory barriers, and how the FCA can support the development and adoption of RegTech.
An update on the FCA’s overall progress on the matter will be provided in Spring 2016.
To see the full FCA Call for Input: Supporting the development and adoption of RegTech publication please follow this link.
Should you require any further advice or information on the above, Cleveland & Co, your external in-house counsel, are here to help.