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.