Friday, March 14, 2014

The Securities (Amendment) Bill 2013 - Serves The Interest of The Established Investment Houses

The primary purpose of these new regulations are not to protect the investor rather they serve erect and maintain high barriers to entry into the securities market, thereby limiting competition for the established market participants. This is why these regulations are drafted only after extensive consultations with established players in the securities industry. 

The rules and regulations that are implemented will most certainly be even more onerous than before thereby increasing the regulatory cost of a smaller new entrant -making it less attractive for a competitor to enter the market. Consequently bigger established firms are given an advantage as they would have a greater capacity to absorb increased regulatory cost or lobby regulators in their favour. 

Ironically more regulation does not make investors safer it:
  1. Lulls the investor into a false sense of security under the delusion that some nameless, faceless government bureaucrat will protect them; thereby making them complacent and neglectful of conducting their own due diligence. 
  2. Limits the number of participants or options the investor has and limits their ability to discipline errant service providers by moving their investment dollars elsewhere.
  3. Serves to place the regulator and bureaucrats in privileged positions to defend or destroy a market player or potential entrant solely at their discretion for political or personal reasons. 
More bureaucracy is never the answer the best protection for the investor is open competition.

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