Wednesday, April 21, 2010

Regulatory desert

I have been meaning to write something on Jane Diplock's interview on Q&A, commented on by Adolf here.

This quote of Diplock got me thinking:
There are many, many factors that led to the finance company collapses, and the regulatory desert was one of them.

I think we certainly, looking back, could say we needed a better regulatory framework at the time.

Regulatory desert? Really?

In this country we have at our disposal as a regulatory framework in this area (inter alia):

  • Fair Trading Act, specifically sections 9 & 14 concerning misleading and deceptive conduct.
  • Contractual Remedies Act, particularly sections 6-10 regarding misrepresentation and breach/cancellation.
  • Companies Act, specifically sections 131-138 concerning directors duties, including reckless trading and director's duty of care.
  • Securities Act, which includes a myriad of provisions regarding prospectus and statements made in them.
  • The criminal law/police, which includes fraud, theft by appropriation and other ancillary offences.
  • The Serious Fraud Office (see above).
  • Standard and Poors ratings on said finance companies.
  • Auditors and their reports on said companies.
  • Common law torts including deception, negligence and negligent misstatement.

There are more - feel free to add them in the comments.

The best way to finish this post is with this comment from Brent Sheather:

The answer to this problem is not regulation. It needs to be driven by the investing public - demanding realistic annual fees from their advisers and threatening to leave the money in the bank as per Warren Buffett's good advice of April 2004.


Adolf Fiinkensein said...

Started off well, farted before finishing.

What a lame brained comment by Sheather. Just think about it for for more than five seconds.

Gooner said...

I have thought about it. The answer is not regulation.