FSA Fall Short on Investor Protection -- WSJ

The FSA’s principle-based approach to regulation has won it a lot of favorable attention in the US. Leave it to the Wall Street Journal to weigh in with criticism for its failure to protect individual shareholders in the UK. The Journal sees the FSA as trying to protect the London marketplace rather than the individual investor and quotes Jim Cousins, a member of Parliament, saying the SEC would have been tougher in cases like the split-capital investment trusts.

The Journal story leaves a lot to be desired, focusing on one or two cases and quoting Cousins and a Harvard business prof—its comparison of the number of FSA staff at 2,700 while the US has 15 times as many in financial services doesn’t mention that includes 50 separate state insurance regulatory bodies, many of dubious value.

Nor does it look at the way the SEC in the past has chased after kids while ignoring the huge conflicts of interest in major Wall Street firms that Elliot Spitzer uncovered as New York’s Attorney General.

The differences between American and British regulation are getting a lot of attention as many in the US including Treasury Secretary Hank Paulsen argue for lighter regulation to keep New York competitive with London. See my blog review of commentary by Michael Bloomberg, Sen. Charles Schumer and skeptic Ben Stein—an economics writer perhaps better known for his role as the teacher in Ferris Bueller’s Day Off.

A lot of complex issues here and they deserve better treatment than the Journal’s story.

Tom Groenfeldt