Portfolio Manager Global Fintech Equities LOIM | Global Trends Investor | Innovation | Board member | Tokenized Asset Management
A lively discussion on #Dora and #MiCar at yesterday’s Funds Tech Forum. My positioning: - Regulators come in to create a level playing field, which makes sense from a societal perspective. However, they are often late to the party (on average about 4 years), damage is already done and the rules dont always solve the problem. This last point is the reason why we developed our own #cybersecurity screening for all companies we invest in. #dora does not tackle basic cyber hygiene and does not solve the problem that over 20% of listed companies are vulnerable to exploits because of outdated software. - Once regulators come up with new rules, there is little proportionality in executing on those rules. Big bureaucratic processes are set up, which increase compliance costs and raise the barriers to entry. Paradoxically, the end-result of new rules is often a strenghtening position for incumbents and reduced competition/innovation! This does not serve clients/investors in the end. - The financial sector is a special case when it comes to regulations. Especially after 2008-2009 regulators hit the turbo-button. I am not sure if the actual services provided became safer though. Buy-now-pay-later, payment coins, spacs, DeFi, private credit etc. in many cases are just old wine in new unregulated bottles. At the same time, new rules made it costlier to serve clients, thereby leaving many “low value clients” unserved, which is contrary to intent. - Big financial institutions are scaling back on risk staff (see announcement of Lloyds Banking Group on April 10th) in a fight to stay competitive. Especially in Europe this is a hot topic, as also discussed in depth in a great FT article by Nicolai Tangen this week. The fear of being fined for not complying 100% cripples innovation. In an ideal world, financial regulations are set up to serve as clear guidelines for participants in how to offer their services to (retail) investors/clients. Rules should be easy to intepret and proportional to the size of the business. Rules should be set “in the spirit of” instead of page-thick bookworks trying to close every tiny gap that could be exploited. This should foster innovation within regulatory boundaries and create room for competition. We are far from that ideal world today, unfortunately. Will we ever get there?
No-one doubts the importance of regulation for delivering investor protection and market stability. But the regulatory costs on asset managers are substantial and occur at a time when firms are investing heavily in digital transformation and when smaller fintech players who lack regulatory resources are trying to aid positive change in the industry. Is there a danger that regulation could hinder innovation? Do regulators take proportionality into account? And will #DORA – the digital resilience act – hinder progress, just as another slab of regulation – #MiCA – is trying to foster progress? Great panel discussion "The conflict between regulation and innovation" between Jeroen Van Oerle from Lombard Odier Investment Managers, Martin Bednall from Jacobi Asset Management, Quentin Werlé from 6 Monks (6M) and Henning Swabey from fundcraft, moderated by Nick Fitzpatrick from Funds Europe. #FundsTech #fundstechforum #fundstechforumlondon
Great to meet Jeroen van Oerle, CFA