So, first we have Hector Sants ‘Be scared, be very scared’ who, after an abysmal reign, was rewarded with a knighthood, widely presumed to have been his price for keeping quiet about instructions from the Treasury to go easy on the banks. Next we have Martin Wheatley ‘Shoot first and ask questions later’, given the boot for being too hard on the banks, although his incompetent handling of a press leak, which led to a disorderly market, provided a convenient catalyst. If the next incumbent avoids trying to impress with a cheesy catch phrase, that will at least be a step in the right direction.
But why, after 27 years of regulation, are commentators such as ourselves still talking about ‘steps in the right direction’? From modest (but at the time, very necessary) beginnings, the UK financial regulator has grown into a huge, expensive and all too often inefficient organisation. The cost of regulation to the intermediary sector is estimated at around 15% of turnover, far higher than in any other profession. There would be a lot more tolerance of this if the FCA acted promptly to prevent miss-selling scandals, rather than becoming outraged after members of the public have lost money.
According to City of London police, pension scam losses more than trebled in May rising to £4.7 million as a direct result of the new pension freedoms. A case in point. A recent article in the FT highlighted an unregulated scheme called ‘Park First’ which is targeting pension savers to buy car parking spaces at Gatwick airport for £25,000 each. There is a ‘guaranteed’ 8% yield for at least 2 years and an assurance that ‘you will receive a 25% rise in capital growth from day one on the asset value.’ Park First’ has a sister company ‘Store First’ which is now insolvent owing at least £ 1.6 million to investors. Why has such an obvious scam been allowed to get even this far? Outrage is no substitute for prevention.
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