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The asset management sector in the UK is very competitive, but not very price competitive. This apparent paradox runs through the FCA’s report on asset management, but is never adequately recognised or explained. But only by acknowledging it can regulators help to create an industry which works better for investors and for the economy as a whole.
The reality of Brexit and trade negotiations is a review of the rules governing myriads of individual products in mind-numbing detail. Those who thought Brexit meant less regulation, less bureaucracy, fewer civil servants, are in for a surprise.
When a corporation is unable to meet valid claims, control passes to the holders of these claims in a legally defined order of priority. But, as finance has grown more complex, these rules have come to look more shaky; they can falter dangerously in modern banking or in the case of a struggling retail business such as BHS.
Explaining your possibly complex financial affairs to unsympathetic journalists adds to the already too long list of reasons why able people might not want to go into politics. And such scrutiny draws attention away from genuinely serious and widespread tax evasion, corruption and money laundering, practices.
Recent stumbles by Bernie Sanders illustrate a misdirection in his attack on the banking establishment. The central problem is not so much “too big to fail” but “too complex to fail”.
Uber's superior service threatens London's black-cab drivers, just as (my namesake) John Kay's flying shuttle eventually led to rebellion by out-of-work Luddites in the 19th century. The losers from such innovations should in some circumstances be compensated. But restricting competition is against the public interest.
Two recent events have served to highlight the range of difficult questions raised by pharmaceuticals regulation. Last week, a man died in the French city of Rennes after a clinical trial of a painkiller went tragically wrong. In New York last month, the company controlled by former hedge fund manager Martin Shkreli, raised the price of the life-saving drug, Daraprim, from $13.50 a tablet to $750.
In cases of fraud official action inevitably damages both the business and its share price, and no agency will be right all the time. Short selling hedge funds are not right all the time either, but when they are wrong they lose their own money.
The Parliamentary Commission on Banking Standards, which reported in 2013, recognised the central significance of executive responsibility for systemic failure in the sector. It proposed a senior managers regime which would hold executives liable for wrongdoing in activities for which they had responsibility even if they had no specific knowledge of the improper conduct. Having accepted this recommendation, the UK government is now backtracking.
Bad events in organisations are generally the product of bad systems rather than bad people. So, while it is right to place responsibility for the VW scandal with the chief executive rather than the individuals who falsified emissions tests, we need to go on and ask what it is about modern corporate life that has made such misbehaviour not only possible but appear increasingly common.