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7. April 2014 11:47
by Irene

Welcome to the world of ‘Shadow regulation’

7. April 2014 11:47 by Irene | 0 Comments

Politicians can’t always get it right. Nor can the FCA. But lately the FCA has had its fair share of blunders, and that is not just with insurance companies.

Think about crowdfunding. Unlike the Prime Minister, the FCA does not think that the public knows what they are doing or could be trusted with their investments. From next month onwards, inexperienced investors in equity schemes will have to certify that they will not invest more than 10% of their portfolio in unlisted businesses. Just thinking about the extra work that is involved might deter many of us. As Barry James, the founder of The Crowdfunding Centre, says, “it takes the crowd out of equity crowdfunding”. The UK could risk getting behind not just the US in entrepreneurial spirit and innovation, but also France. Both countries let their people choose whether and how much they want to invest in any of these schemes, so why shouldn’t the UK.

Now while I guess most people do not particularly like the regulator, probably most of us feel that some regulation is necessary, especially for a quite risky investment like crowdfunding. But how much regulation is enough? Here is an interesting fact: if the jobs in the private sector of the financial services industry and at the FCA increase by the same speed as over the last 30 years, we will have one person at the FCA for any one person working in finance by 2060. Just think about it, a personal assistant from the FCA for each of us doing all the compliance work for you. Now that’s what I call ‘Shadow Regulation’.

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