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Misconduct in the long-term?

May 16, 2019

 

Ashley Adler, chairman of the International Organisation of Securities Commissions (IOSCO) and the Securities and Futures Commission in Hong Kong said at the opening of the ASIC Forum 2019 ‘Other People’s Money’ that misconduct seems to win out in the long-term, while regulation comes in cycles.

 

This comes just months after the release of the final report of the Royal Commission into Banking, Superannuation and the Financial Sector.

 

That the recent royal commission into banking superannuation’s and financial services was an in-depth perspective into Australia’s conduct crisis.

 

He said that what Australia was experiencing was a conduct crisis and that this something that happened in other jurisdictions before after the GFC.

 

“Around 2012 actuall there was conduct crisis which was around, not retail markets, but around wholesale markets which was kicked off by the LIBOR scandal.”

 

The IOSCO chairman said that much of the work that international standards setter does has to do is largely connected to the GFC.

 

Adler said that the opening session for the IOSCO forum that was also held in Sydney was about to conduct and it was on this that IOSCO spends a lot of its time on the ground.

 

“What was interesting about what we did on Tuesday is that we brought the chair of something called the FICC Market Standards board which was established in the UK following the LIBOR crisis.

 

The paper presented by the FICC at the IOSCO meetings titles The Behaviour Cluster analysis considered incidents of misconduct dating back to the 18th century and found that there were just over 20 themes of conduct that are unchanging over time.

 

“Now as regulators that is but good news because it means that we are not going to be out of a job anytime soon.” Adler said. “There will be cause notwithstanding that in the short term there will paroxysms of policy-making and complaints and fines—we all know this goes on cycles. Over the long term, just like markets smooth out in the long-term misconduct basically smooth out in the long term in the sense that it is consistent because the incentives built into the system around misconduct are extremely difficult to alter.”

 

He said that there was always potential for misconduct in the wholesale markets because informs retail financial activity as much as anything else.

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