As the sector fights back from the financial crisis, firms are starting to launch new products, investing heavily in intellectual property protections and differentiating their products through branding.
According to my colleague Jeremy Drew, trade mark registrations by financial services firms in the UK have increased by 100% since the bottom of the crisis. There were apparently 3,396 trade mark registrations made by financial services businesses last year compared to just 1,698 made in 2009.
New market entrants and firms launching new products should beware the FCA's product intervention powers (for example, as set out in a Policy Statement in March 2013). The FCA will consider making temporary product intervention rules with immediate effect which are, in its view, necessary and expedient to meet its consumer protection objective or competition objective, because of the risks posed by a particular product or product type.
The FCA has promised generally to be a 'shoot first, ask questions later' regulator. That judgement-based, interventionist approach has come under attack (most recently for the widely reported zombie funds debacle surrounding its announcement that it would investigate 30 million life insurance policies dating as far back as the 1970s).
On reading the news about welcome product launches, I wondered whether firms may be taking the understandable but risky view that "if an interventionist FCA hasn't banned it, it must be ok". The FCA has, of course, always been at pains to say it does not 'approve' products; one cannot get an FCA product 'kite-mark'.
Firms now looking to grow their retail financial products offering could, instead, take comfort from the introduction of the new Regulator's Code. This enforces the Coalition Government's current primary focus on compliant business growth. No further than a few lines into the Code, it sets out clearly in principle 1 that "Regulators should avoid imposing unnecessary regulatory burdens through their regulatory activities...[and] should consider how they might support or enable economic growth for compliant businesses and other regulated entities". (Click here for our latest blogs on the Code).
Perhaps most significantly, article 5.5 of the Code requires regulators to provide advice and guidance to assist those they regulate and "to ensure that the advice can be relied on". It follows that, if firms ask the FCA for advice on their new business plans or products, and are entitled to rely on that advice under the Code, this will increase the likelihood of firms treating their products as 'approved' or, perhaps, asking the FCA to offer a mechanism by which they can seek 'approval' of such products.
In any event, the increase in trade mark registrations is a welcome sign of returning growth. Although firms will inevitably have to deal with the regulatory risk of innovation, they should take comfort in the fact that the Government is on the side of economic growth, a key part of which is a flourishing financial services sector.