It's the spirit of the thing

12 July 2006 Angelo Coppola

Organisations need to understand what regulations are coming, and the potential cost. They need to be prepared and any products that are under development might be affected by consumer protection legislation that is coming, for example.

Miles Crisp from Deloitte & Touche says it (the legislation) would probably affect that the way in which the new product is launched onto the market, and may result in products being introduced to a market in different ways.

Reputation management is a huge issue. Public mishaps aren't needed. The Price Forbes debacle is a prime example of not being prepared for new compliance legislation. A legal officer or compliance officer sitting in a corner, passing memos to the board occasionally is no longer acceptable.

Compliance and organizations that organize themselves around legislation do make themselves more attractive to investors, consumers and the markets, and institutional investors.

We are not over-regulated as a society, when compared to other first world countries. We are catching up, legislatively, says Karin Rathbone from Deloitte & Touche.

Risk committees are still not widely prevalent and the current situation is that it is a function of the audit committee. There needs to be more risk committees.

Financial metrics can be used to monitor the success. Legal advisers are more and more being asked to deal with matters from a business perspective and not from a purely legal perspective.

The regulators are increasingly using the courts of law as a sledge hammer to resolve compliance issues, with penalties reached by negotiation, rather than within the legal framework. The media are also used as part of their arsenal, in the drive to name and shame, and get resolution.

There is still some evidence of tick-boxing, while on the other hand there are those businesses that operate with the various legislative and regulatory frameworks in mind.

For example in terms of the Alexander Forbes situation, and the question around secret profits and disclosure and the question of administration, the regulators believe that no profits should be made.

At the spirit level it's about the right thing to do - the Regulator took the view that it wasn't in the spirit of the regulation. Alexander Forbes still maintains that they didn't act illegally.

There are a huge number of acts and regulations that impact on businesses operating in SA. In 1998 it was estimated that there were more than 350 pieces of legislation. There have been many acts and laws repealed and created since then.

In terms of the consumer protection act for example, there are plans to control when cold calls can be made. The national credit bill is another case, and there are issues that will directly affect the business.

Bank charges are another case in point, where the richer people pay lower bank charges while those that can least afford it, pay higher bank charges. This is inequitable.

Lobbying is helpful to all. The regulator and government will be more willing to talk to people who provide input and lobby. They are less likely to listen to critical comments from those businesses or groups that didn't contribute.

Size doesn't count. According to Phillip Austin at Deloitte & Touche, Government wants to hear from all parts of the business world, when it comes to lobbying.

This is a lesson for the various broker groupings. Having said this, there may be a perception that large corporate business is not always seen in a positive light, and there may be a perception that big business is merely lobbying to protect their own interests?

Editor's thoughts
* Compliance has to be at the core of any business. But more importantly intermediaries need to understand that they must operate within the regulatory environment.
* Intermediaries need to do their homework and understand what legislation affects them and it's not focused on Fica, Fais and the rest.

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