Congratulations on your appointment as head of the rather Stalinist sounding Consumer Protection and Markets Authority (CPMA), a successor to the barely missed FSA.
Of course Osborne & Co’s decision to start afresh with a new regulator is a chance to bring some much-needed fresh thinking to the job. I have been told that you are an open-minded, pleasant sort of fellow so here are some proposals to prevent your colleagues just carrying on with their bad old habits.
To take the latest debacle first. I am of course talking about the FSA/FSCS’s decision that the fund management and advisory industry must pay out an extraordinary £326m to compensate investors in the failed investment company, Keydata. What is the point of having regulation if, when the regulator fails to spot malfeasance, that regulator turns round and orders the good guys to pay up” No, this is just pandering to your political masters who, as always, want to play to the gallery. The time has come to remind the consumer of that much-ignored phrase: “caveat emptor” (let the buyer beware). If the consumer can’t be bothered to read risk warnings and make his own mind up accordingly, why should everyone else have to pay for his mistakes” Ignorance of the law is no defence. The CPMA and hence the FSCS is not there to protect the consumer from his own ignorance. You should make that perfectly clear to one and all.
Another area you need to address sharpish is an old City Grump favourite, namely your predecessor’s deeply unconstructive attitude to investing in small companies. You may have spotted the banks are feeling very pleased with themselves over hoodwinking the government into believing they are about to turn on the lending taps to SMEs. We all know nothing could be further from the truth, don’t we (as witnessed by this week’s announcement from Barclays that they will no longer provides asset based finance to customers with turnover of less than £5m)” Having done long stints at the London and Hong Kong Stock Exchanges, you will appreciate the importance of equity funding to businesses. Please don’t fall into your colleagues’ mental trap that the investor/consumer cannot possibly be trusted to go anywhere near the small-cap markets. Here nanny, in the form of the CPMA, undoubtedly does not know best.
Finally I am hearing from Investment Managers and IFAs alike that the FSA, in its twilight months, seems to have chosen to turn itself into a giant call centre. Now if one of your authorised firms wants to discuss something, he/she is put through to an automated call service and, if lucky, some temporarily employed imported bod from overseas comes back with a sort of a response several weeks later. If ever there was a time to engage in an intelligent and constructive dialogue with your authorised firms, it is now. A call centre approach is an insult to the industry and its customers.
I look forward to you seizing the day!
The City Grump