I watched a very interesting interview this week on a US TV show with Matt Taibbi, who has just written a book in conjunction with Molly Crabapple, called ‘The Divide: American Injustice in the Age of the Wealth Gap’. The basic topic of the book is the inequality of justice within the US system depending upon the wealth and position of the people involved in the crime. The main example that was given was the recent HSBC money-laundering case (details of which have been included in a previous blog) and the punishment handed down. The bank was fined $1.9 billion, but no individuals were held responsible for the breaches of the anti-money laundering regulations. The pattern in the US has been for corporate fines instead of personal consequences for financial wrong-doing and the there have only been a handful of convictions from all the fallout from the credit crunch and the financial wrong-doings that came to light.
The reason that I have brought this up in this blog is that it is an interesting backdrop to the current MMR environment and the focus that is on regulation and compliance. Or should I say the increased focus on regulation and compliance as this is really a step-up in an already heavily regulated market.
I am fortunate that the commercial market is still relatively lightly regulated and though I (and I am sure the overwhelming majority of commercial brokers) always attempt to find the best product for the clients there is not the requirement for product sourcing, IDDs, KFIs, suitability letters etc. I contrast this with my colleagues on the mortgage, (regulated) bridging and second charge desks. Their plans and systems are being upgraded to ensure that they are fully compliant with all the current and upcoming regulations.
I know from friends and contacts that operate solely in the regulated mortgage market that a great deal of their time is spent on making sure that their files are fully completed and I can’t imagine that this burden is going to get any less. So, how does this all tie-in with Matt Taibbi and his book? Well, my colleagues and other contacts are ultimately personally responsible for anything that goes wrong and the potential consequences are life changing. I am sure that you receive regular reports of brokers being heavily fined, jailed or disqualified and while criminal activity should always be punished I wonder how many brokers are going to be caught up in unfortunate circumstances, genuine oversights or missed papers and end up paying a heavy price personally.
The financial rewards on individual, regulated mortgage contracts tend to be relatively small and contrast that personal responsibility with the huge, potential rewards at the top of the financial ladder and the apparent lack of personal consequence when things go wrong.
Maybe I am getting more cynical as I get older, but in so many walks of life the odds seem to be heavily stacked in favour of the ‘haves’ and the lack of a level playing field is ultimately a problem for the successful operation of any business, market or economy.