With new chiefs having recently arrived and indeed being soon to join several global financial regulators, one thing can be certain; that change is afoot.
- Some current examples: 2020 saw the UK’s Financial Conduct Authority (FCA) appoint a new CEO. In the US, a new President is expected to shortly be announcing a new chair of the Securities and Exchange Commission (SEC). A replacement name is yet to be announced following the sudden departure in late January of Germany’s president of The Federal Financial Supervisory Authority (BaFin).
- We all know of the new boss adage and their 100-day plan. What are the heads of these regulators going to be formulating? “Fail to prepare, prepare to fail” is an oft quoted phrase in military, business and sporting circles. Some global regulators are feeling some low heat as of late with regards to legacy issues, not responding enough to matters on their watch, or perhaps keeping a rather low profile during COVID-19. Geo-political factors and regulatory staff working from home are most certainly impacting, but will the new chiefs seek a way to make an early impression? Firms are watching closely, pundits are speculating, politicians are lobbying, and consumers are hoping.
- This international co-operation amongst financial regulators is not a new concept, as seen through memorandum of understanding and bilateral agreements. The FCA’s CEO, Nikhil Rathi, has stated such co-operation as one of his key aims since his joining last Autumn from the London Stock Exchange and following his stellar career at the Treasury. But who will have the loudest voice at the international regulators’ table? If Gary Gensler should land at the SEC, as many commentators predict, how will this ex-Goldman Partner at thirty and former chair of the Commodity Futures Trading Commission (CFTC) make his mark during those 100 days? As mentioned, Germany is yet to announce its new head of BaFin and must only be too aware of the impressive candidates who have landed, and are possibly about to land, at its international regulatory partners.
- The Bubble Act 1720. Scarcely known perhaps outside the circles of say a BBC Mastermind contestant choosing regulation as a specialist topic. This act was invoked following the ‘South Sea Bubble’ crash that year. Making lots of money very quickly was now something to be questioned, albeit Britain’s Parliament being somewhat conflicted with 462 members of the lower house and 112 of the upper said to be involved somewhere in the South Sea Company. The US stock market crash of 1929, The Great Depression, saw the creation in 1934 of the SEC. Whilst Keynesian and monetarist economists remain divided on that crash’s cause, the economic shock of COVID-19 continues to wreak havoc with many losers on a horrendous multitude of fronts, but no crash as yet. There are in fact some big winners, such as investment banks.
- Market volatility has created a trading boom during the pandemic. Throughout history bust has so often followed boom. Have firms been thorough in their supervision as their trading revenues have soared? Without doubt, most will have been vigilant and rigorous in ensuring that control frameworks are adhered to. Best compliance intentions will inevitably have been tested by some employees and only time will tell if there are yet unknown regulatory nightmares brewing for a few firms. With new sheriffs at the helm of some regulators, with more regulatory staff at some juncture returning to their offices, do investment banks risk returning to the front page again for the wrong reasons? Will a reduced compliance headcount and reliance on new regulatory technology be sufficient to manage that risk? Having spoken to some senior compliance managers about this, no one is too sure.
“If you’ve got the inclination, I have got the crime”.
Pet Shop Boys, ‘Opportunities (Let’s Make Lots of Money)’, 1985
Disclaimer: The views and opinions expressed in this article article are provided for information purposes only and not offered or intended to be used as advice.