A Competitive Market For Regulators

I had lunch with an old friend yesterday who is an insolvency practitioner (IP).

Times are not easy for IPs. Amongst many issues they face my friend was bemoaning her regulator. They had reduced her to tears in their handling of one case (and then, when she paid for legal advice and it was proven the regulator was wrong and she was right, had not had the grace to apologise). She felt they were generally inconsistent, illogical and expensive.

As a result, she told me, she was thinking of changing her regulator.

Wait a minute, said I. Hold up there a moment. You’re going to do what?!

You see, it turns out that there are several regulators an IP can choose from. They each have to win the business of the IP practitioners by being the most attractive regulator, like the colourful flowers in a meadow seeking to attract the honey bee.

This got me to thinking. What would a regulator of financial services have to do in order to attract firms if there was a competitive marketplace for regulators. How would I, a regulated firm, choose one over another. I was thinking some of the following points would be included. You know, hypothetically, like.

  1. A competitive and predictable charging structure

  2. Regulation that, if I followed all guidance, would ensure I would not lose a complaint in the future

  3. A whistleblowing service that took swift action

  4. Staff that were paid in accordance with an open market. For example maybe a Chief Executive whose earnings in one year was not more than my entire earnings over 15 years in practice

  5. Communication I could understand without needing to employ third party compliance consultants to translate for me

These are a few points, I suspect you can think of others. With a blank piece of paper, what would you want from your regulator, what would make you choose one over another?

Now, there is an obvious question that you no doubt are already contemplating. Suppose there was a competitive market for regulation of a financial advisory practice. Imagine there were alternative regulators that, in order to attract firms, fulfilled the above criteria.

In this fictional world, would you choose to stick with the FCA?