4 April 2012
In the third in a series of guest posts, Rowan Bosworth-Davies, a financial crime consultant and former Scotland Yard detective, examines the strange assumption that ultimately lay behind the Financial Services Authority’s failure
When I was a detective at the Metropolitan Police Company Fraud Department, in 1984, my commander sent me to the USA to study the American way of financial regulation. I returned a committed convert to US methods of regulating the financial sector.
Sadly, under president Ronald Reagan and then under president George W Bush, deregulatory tendencies were allowed to predominate. This directly led to financial carnage seen on Wall Street recently. However I remained impressed by the committed nature of US regulators and their desire to do the right thing. While I was in Washington D.C., studying at the Securities Exchange Commission, the British government published a White Paper that would become the basis for the Financial Services & Markets Act 2000.
The SEC’s head of enforcement, John Fedders, read this document, and when I went to see him to say goodbye, he said to me: “…You Brits assume that any man who looks after other people’s money is a gentleman and you are shocked and horrified when you find the converse is true. We Americans assume that every man who looks after other people’s money has the propensity to be a crook, and we legislate for the possibility. When your people take the time and spend the money necessary to regulate the financial sector properly, and stop assuming it can be done by accountants in their spare time, and bankers taking a sabbatical, then we’ll take you seriously. Until then, don’t waste our time…”
He was right then, and he would be right now, but I don’t think anything will change the status quo. All the time we have men like FSA chief executive Hector Sants running the show, we will continue to be at the mercy of the crooks and the wise guys!