AMI raises questions over FCA sandbox “consultation”

The Association of Mortgage Intermediaries has heavily criticised the Financial Conduct Authority’s proposals to create a new Global Financial Innovation Network.

The mortgage trade body accuses the regulator of carrying out a consultation “in name only” and claims the FCA’s proposals have been developed without selected stakeholders. It says the proposals, which set out the functions of the forum and the introduction of a global “sandbox”, omit fundamental information, particularly regarding costs and how costs will be apportioned to firms.

The sandbox would comprise of international regulators and will seek to provide a more efficient way for innovative firms to interact with regulators, and help them navigate between countries as they look to scale new ideas.

The FCA is legally required to undertake and publish a cost benefit analysis before proposing or amending rules, with cost benefits analyses historically being included as part of any consultation.

But AMI says for such significant proposals to lack any estimate of costs and whether they are proportionate to the potential benefits contradicts the regulator’s commitment to transparency.

In publishing the paper, the FCA referred to the proposals as following an initial consultation in February 2018 to which 50 responses were received. But AMI says it’s been unable to locate the initial consultation on the FCA website and claims it doesn’t appear to have been made public to fee-paying firms.

It’s AMI’s view the proposals have been developed on the basis of limited discussions with innovative firms. It pointed to the FCA’s 2018/19 business plan, published in April, which stated that “last month we invited stakeholders to share their views on what a global sandbox could look like; there is a lot of interest in the idea of cross-border testing and the benefits this could bring”.

AMI says this is the only prior public reference to its work on a global sandbox. The mortgage trade body has asked the regulator to publish its initial consultation, a list of the 50 respondents, and the stakeholders involved in these working groups (including the proportion of authorised and non-authorised firms and the percentage that these firms contribute to the FCA’s fees).

AMI chief executive Robert Sinclair (pictured) says: “We are concerned that the FCA continues to expand its innovation agenda by expanding its remit and objectives, and inappropriately allocating resources with a disregard for the firms that fund it.

“The FCA is expected to focus on relevant consumer and market issues, so helping overseas technology firms become authorised in the UK should not be a priority. It is already being anti-competitive with its existing sandbox as it gives dedicated regulatory support for some unauthorised firms (paid for by industry) whereas regulated firms have only the FCA call centre as a point of contact. To extend this cross-subsidisation of costs on an international scale is inappropriate for a domestic-facing regulator. The global sandbox will only benefit the firms that are in it and the FCA’s reputation for facilitating innovation.

“We are seeing a regulator that is less transparent and less willing to listen to feedback. This is a consultation in name only and we think that these proposals have been developed with selected stakeholders, with discussions mislabelled as consultations, and will no doubt continue to be implemented without any consideration of costs or industry feedback.”

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