Spot-the-vested-interest game starts

By Michael Coote

Friday 1st October 2004

"Eh, comrade, gizza job!" So the cry has gone up to the Ministry of Economic Development since Great Helmswoman Margaret Wilson decreed to the grateful nation that she would constitute a taskforce to investigate regulation of financial intermediaries, a suspect clique of class exploiters and capitalist wreckers if ever there was one. These kulaks must be packed on to the cattle trucks. Worthies from the industry and elsewhere have positively flocked to the ministry's callup of eminent persons to Ms Wilson's unfurled red banner.

According to a report there was a veritable stampede of hopefuls. It quoted MED official Matthew Farrington as stating that the number of applicants clamouring to assist Ms Wilson commence the Ezhovshchina of the financial sector was, "Pushing three digits." At least he didn't say pushing up daisies, or perhaps not in so many words.

So big was demand that the group may be expanded to include a seventh member, and there will be a senior MED official plus a two- person contract secretariat to keep them on message.

It would be interesting to know how many applicants were actually from the industry as opposed to the veritable hordes of consumer advocates whose antennae would have been set a-twitching.

The report noted that the possible concession of an extra member may address industry fears that "given the range of intermediaries the task force will be covering including investment advisers, financial planners, insurance advisers, sharebrokers and mortgage brokers three industry appointees may not be sufficient to adequately represent the viewpoints of all interested sectors." You don't say.

For those selected, their task will be to decide the degree of force to be applied to the industry. Their brief will range wide but be shortlived. The MED's letter to interested parties stated that the taskforce was budgeted for eight half-day meetings and a half-day's preparation by members for each. And it is supposed to report within six months. Thus four working days total plus a bit of swot will determine the collectivised fate of at least five different types of financial intermediary, although the MED's secretariat will amount to 1.75 full-time equivalents and do the scurrying around.

Terms of reference give some clue as to key constraints on what the taskforce will be graciously permitted to consider. Of special note are requirements that the group must work to the MED's Policy Framework for Occupational Regulation, have regard to the Australia New Zealand Closer Economic Relations Agreement and the Memorandum of Understanding on the Co-Ordination of Business Law and take cognisance also of the "international dimension, including overseas perceptions of New Zealand's securities markets."

The international dimension is none other than the recent IMF mission's report on New Zealand as part of its financial sector assessment programme on regulation of financial intermediaries. That report was critical of New Zealand's standards of regulation and Ms Wilson gave her pending taskforce ventriloquistic steer when proclaiming its formation by saying, "I also want to respond positively to that report." A word to the wise: read the lady's lips.

Of course, Australia has instituted an onerous licensing regime for financial intermediaries that, if it presently stops short of having enemies of the people beaten and shot in the cellars of the Lubyanka, still has a fair old dose of purging, expropriation, hard labour and expulsion from state-authorised career thrown in.

The MED's own policy document is worth a read as it sets out in exact detail the range of government intervention options and the scope of self-regulation that might be inflicted. If the taskforce wants to deviate from this ukase it is required to provide sufficient justification. Altogether it looks like the pitch is queered, so to speak, in favour of some sort of prescriptive regulation by either the socialist state, or a complaisant industry body itching to don jackboots, crack the whip and set its tills a-ringing.

It will be fun to play spot-the- vested-interest once appointees are announced but somewhat chastening to note probable absence of a free marketer in the ranks of three to four eminent industry representatives. No pleasure is unalloyed.

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