Roger Miles writes about financial service providers, the United Kingdom’s Financial Conduct Authority, and consumer interests.
Suddenly behavioural regulation is more than just a fashionable theory: it is real, and compliance with its mandate is becoming very expensive. Financial service providers are being fined huge sums, not just for the bad behaviour they have inflicted on customers, but also for actions that they have not taken that have negatively impacted their customers, with regulators prepared to punish sins of commission as well as omission. The first of the self-styled Behavioural Regulators, the UK Financial Conduct Authority, is now a voluble two-year-old, talking up its latest behavioural research to every audience and blazing a trail that other regulators increasingly follow. From the outset, the FCA set an assertive agenda using behavioural analysis to “place consumer interests at the heart of [regulated] business”, and it is willing to both define its own role broadly and work with other watchdogs to get results. Its behavioural weapons of choice include compelling businesses to design out “asymmetric incentives”, such as quick-cash commissions and systemic conflicts of interest; promoting “more functional market structures”; and banning sales practices that “take advantage of consumer bias”.