There are some who will say that rugby is not as serious as work – it is much more important.
Recent incidents in the sporting world confirmed a theory also held by many esteemed people in the financial services industry, that excessive regulation is strangling the hen that lays a substantial number of golden eggs for the authorities, apart from depriving consumers of a vital service. The irony of it all is that the proper provision of financial services eases the burden on the state in providing for its people, both in terms of short- and long term needs.
Last weekend we saw yet another controversial incident or two where the public differed sharply with the interpretation of the rules of rugby as applied by the officials. It appears that, technically, the officials got one right and one wrong, yet few are convinced that it was fair.
If one looks at the application of the complicated legislation affecting the provision of financial services, the picture is no different. It is difficult to ascertain what standards apply, for instance, when fines are meted out by the Enforcement Committee of the FSB.
In one instance, a company was fined R1 million plus a cost order of R500 000 for contraventions of the FAIS Act. Another was only fined R50 000 for an infringement from which it gained substantial financial reward. A study of the mitigating circumstances do not fully explain the huge difference in the penalties, specifically if one considers that, in the first case, the view is expressed that “There is no evidence of any prejudice resulting from the contraventions.”
The Enforcement Committee consists of highly experienced legal experts, and I have no doubt that their decisions were based on sound legal principles. For those who have to learn from these examples, though, it is difficult to ascertain the difference in the gravity of the transgressions by looking at these and other examples.
When William Webb Ellis picked up the soccer ball in 1823 and started running with it, he created a new sport which had to develop its own rules as the game grew. Today, these rules have become so complicated that not even the officials, who spend a lot of time studying the laws, are able to apply it consistently.
Currently, there are at least six pieces of legislation under review which will impact on the financial services industry:
- Protection of Personal Information Act
- Treating Customers Fairly
- Solvency Assessment and Management (SAM)
- Cell Captives
- Financial Services Laws General Amendment Bill 2012
- Insurance Laws Amendment Bill 2013
Possibly the most important reason why Australian Rules Football is so much more popular than rugby, is the simplicity of the game. Football, too, has legislation to help the game flow, rather than hamper it with constant blows of the referee’s whistle.
The result of trying to regulate an industry in line with highly complicated legislation is similar to what is happening in rugby at the moment. In rugby, the biggest losers are spectators who are frustrated by the constant stop-go spectacle, rather than a flow of running rugby which the game started out as.
In the financial services industry, fear of contravening the regulations often lead to advisors choosing options that safeguard their own interests, rather than that of the client.
Perhaps the focus of future legislation should be on simplification, rather than prevention. No amount of legislation will prevent transgressions, but simple rules will assist those wishing to toe the line in doing so, and help the authorities to identify those who do not, more readily.
Prevention is still better than cure.