Creighton Gone Troppo

Adam Creighton is generally on the money, so to speak.  But some of his latest contributions are almost worthy of the Whish-Wilson-aWard.  Consider Adam’s effort from this past weekend:

Time ripe for a tough stance by our regulators

Even the title confuses how Australian (financial services) regulators work.

Wanna see a tough stand?  Ask a small to medium financial services operator who faces the full weight of ASIC, essentially blown out of the water not necessarily because they have done wrong, but because they can’t compete with the resources.

Imagine also, a 23 year old university graduate with no prior work experience deciding whether someone, using their own money to run a business has the qualifications and experience to actually run that business.

The way ASIC deals with smaller operators would make Kafka proud.

And the result …. there are no longer small operators but only large operators who actually have the resources to compete in a legal battle with ASIC and such battles ASIC usually runs from like a typical school yard bully when stood up to.

Competition.  That’s for other industries.  It’s much easier to regulate a couple of largish, fatish, sluggish entities with similar business models than to regulate a diverse economic eco-system.

Yeah yeah.  The regulators are all macho now post-Hayne.  But what about some responsibility for actually creating the conditions, of eliminating the small to create the big.

Adam.  Honestly.  You need to speak to people other than un-named “former senior ASIC officials” who could be anyone from the person signing visitors in at reception to former Chairs.

And if this is the depth of your analysis and reflection, then perhaps ….

We regulate financial services because banks enjoy an implicit guarantee and a government licence to create money.

NO.  The implicit guarantees that banks receive and the power to create money is why we regulate BANKS.  This is not a reason to regulate financial services.

Deregulation as a general principle may well improve the country’s economic performance, but it shouldn’t be the responsibility of law enforcement agencies.

Rubbish.  Unproven and unsupported rubbish.  Financial services has never been about re-regulation or de-regulation.  It is about right-regulation.  It is because there is a public good, via things like a lower cost of capital, lower transaction costs and the spillovers from trust in the system.  It is about right regulation and right regulators.  Unfortunately what Australia has is the wrong regulations and the wrong regulators.  With a special thanks to the bipartisan efforts of the ALP and the LNP in creating this regulatory cluster fluck

The opening paragraph may read amusing, but it is not actually correct:

Imagine if the police force code of ethics went something like this: “Police must strive to enforce the law with minimum disruption to the economy, without placing undue burden on criminals, while promoting the benefits of living within the law.”

It also neat and cute to refer the ASIC Act, but perhaps you should also have a look at the Corporations Act and the associated regulations.

What consecutive Australian Governments have created is a creature that will eat the economy.  Just give it some time.

Using the cute police analogy, imagine the police having the power to write the laws they administer and then to set and keep the fines they charge.  They feel like more police, sure.  They can just increased fines and find new people to fine.  A few conflicts of interest?  Well this is what ASIC does.

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3 Responses to Creighton Gone Troppo

  1. Good – now get stuck into Troy Bramston and the classic myopic view of the Trump impeachment. It is on a par with the otherwise sensible Creighton (not Admirable here).

  2. Bruce of Newcastle says:

    now get stuck into Troy Bramston

    Just about to comment the same thing. Mr Bramston has got troppo TDS in the worst way.

    Cameron Stewart hasn’t been much better either. Both are excellent advertisements for me not subscribing.

    As for ASIC and ACCC they’ve gone feral. Yummy fines are like exotic crystaline substances for them. High as kites. ScoMo needs to send the entire executive strata of both organizations out to fight bushfires or something, so they get a perspective of reality.

  3. RobK says:

    Ask a small to medium financial services operator who faces the full weight of ASIC, essentially blown out of the water not necessarily because they have done wrong, but because they can’t compete with the resources.
    The same thing happens in the various “departments for the Environment”. Just over a decade ago I was awarded costs and the magistrate commented that the department appeared not to understand the process or the law. I was still out of pocket big time. The process is the punishment but only for the minions.

    And the result …. there are no longer small operators but only large operators who actually have the resources to compete in a legal battle with ASIC and such battles ASIC usually runs from like a typical school yard bully when stood up to.
    At a “Water for Food” (WA)seminar I attended a few years ago, I spoke to one of the senior bureaucrats during the meet and greet afterward. He was quite open about the department’s preference for dealing with larger corporates because they were able to cope with the necessary paperwork and regulatory hurdles.
    Our government at work.

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