The Role of Third Parties in Regulatory Systems: Examples from Financial Services Regulation

Regulatory systems can include a variety of third-party intermediaries, performing a variety of roles, with variable capacities, motivations, strategic position, and authority. Third parties may be deliberately ‘enrolled’ in the regulatory system, or they may be ‘enrolled’ de facto, due to the business model/activities/markets of the regulated firms. Such third parties can be a benefit to the regulator, expanding its capacity. But as well as introducing unintended consequences, they can also introduce key dependencies, with associated risks to which the regulator needs to be alert, and which it needs to mitigate where possible through a range of formal and informal strategies.