Says it is up to the management teams and professionals to maintain self-discipline
By Chandeepa Wettasinghe
Regulators will never be able to keep up with capital markets, and it is up to the management teams and professionals to maintain self-discipline, failure of which should bear repercussions, according to the Lord Mayor of London.
“Rules are always going to be behind markets which are always evolving. Regulators will always be behind the curve. Markets now act in nano-seconds, they can’t keep up,” Alan Yarrow said.
"‘‘Rules are always going to be behind markets which are always evolving. Regulators will always be behind the curve. Markets now act in nano-seconds, they can’t keep up"
He said that regulators ideally shouldn’t try to over-regulate or under-regulate, and that even British regulations are never truly ideal.
“Regulations are moving targets. There is no right model for a regulator. We haven’t gotten the right model yet, they need constant academic and industrial research and you need to get the balance right for each moment,” he added.
Yarrow noted that a regulator setting rules and the market players attempting to see how far they can stretch them is the American practice, which should be frowned upon.
“Prescription is much too dangerous. Then it becomes too legalistic. Just because it is legal doesn’t make it right. The British system is based on self-discipline. It values principles such as integrity, and good practices from individual judgements,” Yarrow added.
He said that those who are found unethical should be punished by the regulator as well as the professional bodies of which they are members of.
“Markets and professionals get it wrong regularly. They need to be disciplined. Professionals must ensure that the management behaves,” he added.
The Securities Exchange Commission of Sri Lanka is currently attempting to amend the SEC Act to include civil procedures in addition to the existing criminal actions which are hard to enforce.
Recently, Finance Minister Ravi Karunanayake himself a management accountant said that professionals such as accountants had to be blamed for capital market and procurement corruption, since they actively help the management in hiding irregularities.
Yarrow said that a right combination of lawyers, finance professionals and banking services are required to be in one location for it to become a finance hub, and that an economy needs a good, broad capital market to reach higher development.