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Communicate with regulators
When industry associations stop talking to the regulators it is a bad move for everybody, according to Cameron Ralph managing director Lynn Ralph.
“Associations can go and work out issues with the regulators,” she told a Super Ratings conference in Melbourne. “But people need to go and tell the associations what the problems are, despite a reluctance to share dirty linen with everybody.”
Ralph, who has worked for a regulator, the Australian Securities and Investments Commission (ASIC), industry association the Investment and Financial Services Association (IFSA) and fund managers in the US, believes it is a love/hate relationship with regulators.
“They are the police force of the financial services industry which upholds the regulations set by governments,” she said.
“Regulators don’t control the law, but they have a large degree of flexibility in enforcing the law.”
Ralph said whinging about the regulators does not achieve anything other than annoying them.
“If a fund or company is not happy with a decision by a regulator, get over the whinging, because there are two levels that can be pursued,” she said.
“Take it up at the industry level, which is usually about policy.”
Ralph said the only way the regulators come up with good policy is by being in conservation with the industry.
“During the last 20 years, I can remember a time when regulators and associations have shut the door, and that is a bad thing,” she said.
Another approach is to go and work for the regulator to bring practical experience to regulating the industry.
“Finally, don’t take the approach of not being nice to the regulator and whinging to politicians,” she said.
“They just go back to the regulator and tell them you have been whinging.”
Ralph said the industry should see regulators as customs officers and, therefore, they are not to be upset.
“Should you challenge a regulator when they turn up at your offices?” she asked.
“If you do win, you will lose, as they will make it appear in the media as if they have won.
“Then there is the amount of management time, lawyer’s costs and reputation you will lose even if you have won.”
Ralph has some practical tips for managing a visit by the regulator and any subsequent action.
“Manage your lawyer and compliance people and see how they respond to inspections,” she said.
“Don’t [give] the regulator’s staff free access to the office, as you don’t know what they will discover.
“Don’t let the regulator insist on external experts to solve a problem. It is like giving an open cheque book to them, as the experts don’t know when to stop.”
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