12th December 2011

Is this some form of regulatory Cluedo?

So the RBS report is now released, another fine example of a lack of Clear English being used with a great many “if only’s, woulda’s, coulda’s and shoulda’s” wrapped up in legal speak.

Lord Adair Turner, recently described by Kelvin McKenzie as “he of the ten-dollar haircut and the ten cent brain” arrived in the summer at the TSC telling them that making a regulator accountable would place a financial burden on the industry.

By applying this logic for some reason I note he conveniently ignores the cost impact of badly formed, executed or reasoned regulation on the industry and the nations taxpayers. The RBS scenario it would seem.

Additionally he sees that by making those who regulate accountable for their mistakes would mean that they would be constrained in the judgments they may make.

Surely that is what responsibility in office is all about, getting it right and facing the consequences of getting it wrong. If there is no risk to getting it wrong there is no balance in the judgment. It was Joseph Addison, an English essayist, poet and politician who said, “if you give a man the power of doing what he pleases with impunity, you extinguish his fear, and consequently overturn in him one of the great pillars of morality”

Turner said “The FSA as an institution has no money and no shareholders. Any suits against it which result in payments to particular groups would mean another group of people in the industry would have a levy placed upon them to pay for it. We have talked about the need to get away from box ticking and giving the regulators the ability to make more judgments. But the more individuals are subject to legal sanctions the more the automatic response of a cautious individual will be just to stick to the box-ticking approach.”

Really?

Why is it that those in an unelected position of power and authority fail to see that an element of responsibility should attach to that power? As Shaw observed, “those who have once been intoxicated with power, and have derived any kind of emolument from it, even though but for one year, can never willingly abandon it”

Life is a series of checks and balances, without this society is lost. What we are talking about here is actually morality. If an IFA firm gets it wrong there is a price to pay, nowadays the Consumer rightly expects it, so why should they not expect it from those who are charged with overseeing their “protection” when they get it wrong?

In an institution that has money and shareholders, and especially a regulated one, a price is paid and often a very high one for getting it wrong. For those without means in society today the price is still paid by giving something back to the community.

Turner says the FSA is a completely different organisation to what it was in 2007, with far more resources and skills. True but does that exempt those responsible for being exposed even if sanctions are not legally possible?

Not where the banks are concerned it would appear or those responsible at the FSA who focused it is said on conduct and not prudential regulation.

A clear case of the FSA not being able to walk straight and chew gum at the same time then means nobody is sanctioned either in the bank or the FSA!

Turner reasoned that no enforcement action had been taken against anyone at RBS because “three separate cases the regulator had looked at had been deemed unlikely to succeed, but that this could lead to a change of rules in the future”.

Still why bother when there are so many smaller fish to fry. The FSA brought its powers to bear instead on IFA Athanass Stefanopoulos, 67, who was advised his permissions had been cancelled as he had failed to pay his fees on time, did not satisfy the threshold conditions and was ‘not fit and proper’.

True he was not fit- he suffered a major heart attack in 2007 and he was late in paying his fees- the Cardinal sin!!

As one IFA observed “The only surprises in the report are that

1 - IFA's were not blamed for not spotting the problems within the banks.

2 - The FSA are not trying to put the cost of the �£45.5 billion taxpayer bailout of RBS which currently shows a �£25 billion loss to taxpayers onto the FSCS levy (advisers only), and the FSCS to launch a miss- advice claim against any IFA who allowed a client to leave a deposit with RBS.

The above actions after all are exactly what the FSA are trying to do in Keydata and Arch Cru.

Shame on you FSA. Tell us who did it and with what and where.

Investments, Panacea Comment