Code should stem tide of regulation
Monday 22nd February 2010, 2:30PM GMT.
AN EFFECTIVE code of corporate governance for Guernsey’s finance industry should result in a reduced need for unyielding new regulation, it has been claimed.
The consultation period with industry ended on 11 February and the head of the practitioner working party, Institute of Directors committee member Carol Goodwin (pictured), who drove the drafting process with assistance from the Guernsey Financial Services Commission, hopes the responses will help shape the final version.
‘What persuaded me to assist the GFSC with drafting the code was two things. Firstly that I felt, and still feel, very strongly that this is something that needs to be driven by practitioners rather than regulators on the basis that it is the behaviour of practitioners that it seeks to influence.
‘Secondly, that I also strongly believe if we have the right people heading our financial services businesses in the right way and providing robust governance and oversight, then there should be less need for rigid and voluminous new regulation.’
More than 50 responses were received from industry on the matter, which included submissions from some member organisations that were representative of their particular sector as a whole.
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‘Secondly, that I also strongly believe if we have the right people heading our financial services businesses in the right way and providing robust governance and oversight, then there should be less need for rigid and voluminous new regulation.’
Correct me of I’m wrong, but, to summise (minus the spin), is it that Ms Goodwin is proposing that the finance industry make up it’s own rules and be it’s own regulator, thus policing itself and avoiding any objective outside bodies doing so?
Pardon me for asking, but if finance is already as up to speed, well regulated and above reproach (as it and it’s mouthpiece, GuernseyFinance, constantly says it is), then why on earth would it suddenly feel the need to implement ‘more’ regulation in the face of being scrutinised by any outside body?
Cynics could be forgiven for thinking that finance have been exaggerating a tad as to the purity of their whiter than whiteness, are keen to carry on profiting in that manner, and don’t want to be found out…fortunately, I believe every word they say…
I must go, the fairies at the bottom of my garden are having a terrible dispute with the Easter bunny about the presents Father Christmas brought, and I have to go and provide an objective ruling on the issue before it all ends in tears and tantrums.
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And to think all stick Arnald was getting, seems he knows more than some would have us believe?.
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Scarlett
You’ve got it bang on.
I could imagine the outrage if a group of illegal drug users were proposing that they redrafted the misuse of drugs act.
I fail to see why finance regulation should be treated in this manner.
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I really do not know what they want to achieve with this dog’s dinner of a code.
It is based on the UK Combined Code but is then applied to a completely different scenario.
To those not familiar with the Combined Code, it should not be confused with regulation by a regulator such as the GFSC or FSA. That regulation is enforced independently (so Scarlett, no need to worry about the practitioners setting their own rules). The Combined Code on the other hand, is a set of principles of best practice that is designed to smooth the relationship between publicly traded companies and their shareholders – on the basis that those shareholders have few opportunities to find out what really happens in the company or to influence how it is run. The code therefore lays down some principles aimed at promoting good management for the benefit of shareholders. It is a measure designed to provide information to shareholders buying shares in public companies, and maintaining confidence in equity markets. Listed companies are required to explain whether or not they comply with the code, and if they do not they are required to explain why not. Shareholders then have the information and may choose to invest or not.
This proposal adopts that policy and then seeks to apply it to all financial services businesses and regulated funds. The funds are already regulated (more extensively and more explicitly than this code proposes) and the concept is inappropriate for FSBs as it is their activities which need to be regulated (and already are), not how they are managed (since most of them are closely held private companies where the shareholders know full well what is happening).
I am all for ensuring that our industry adopts the best practice, and even leads the way. But this proposal is the equivalent of trying to improve driving standards by making drivers tell other road users how their engine works.
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Thank you for your informative and detailed explanation, TL. It certainly does sound like a complicated can of worms to a simple (non finance) soul, such as I.
I do find the pearls of wisdom quoted here by Ms Goodwin rather ironic, though, bearing in mind that it was the industry she’s representing that, thanks to it’s passionate interest in it’s own profits above any and everything else, brought the world to it’s knees not so long ago.
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