I’m not sure whether its myth or in fact true, that when John Harrison created his first longitude clock it would have been impossible for anyone else to have fathomed how to replicate it. Each time he encountered a miscalculation; instead of going back and adjusting he elected to make an overcorrection on the next layer. What he ended up with was a prototype that only he understood and which had too many layers, fortunately he lived long enough to solve the longitude problem and to make a reproducible clock.

As a nation we have an impressive reputation for creating functional laws, laws often even adopted by other countries.  Recently, the National Credit Act has widely been praised for mitigating the effects of the global recession on the country.  What we perhaps aren’t able to do adequately is police these laws satisfactorily, perhaps I should say, what we aren’t ‘ABIL’ to do…or is that being a tad impertinent.

The FAIS act was introduced to prevent the unscrupulous financial advisor or intermediary from taking advantage of the uninformed. The intention was to create transparency regarding services rendered and disclosure regarding the costs of such services. Advisors and intermediaries had to prove themselves to be of a certain salt in order to give advice, and service the clients adequately. The man on the street would now be protected…well not actually him because he doesn’t really have any assets or investment portfolio, apart from his cardboard sign; rather, the man in the house with the 1.75 cars 2.37 children 3.65 pets and 1.1 wives (for the purposes of this article ‘man’ can be read as ‘woman’ and ‘wives’ as ‘husbands’ however if that exchange is made the number 1.1 must be read as 1). I think, like Harrison I may now need a correction.

A major achievement of Act 37 of 2002 was the creation of an additional layer in the financial services industry, compliance. It became law to have a compliance officer (you could elect to be your own if you had the requisite time).  Generally, compliance officers are qualified legal people and qualified legal people generally have more than 1.75 cars. In addition, there is also a greater workload that accompanies the legal requirements in terms of record keeping, report submitting and confirmation to the client.  This may lead to the need for more staff and that’s not a bad thing because it has created more employment. But unless the salary expense of the few is maintained and divided amongst greater numbers, additional costs will also be incurred here.  Ultimately these expenses must be made up and there’s only one place that this can come from.

There is nothing wrong with the law, but isn’t it logical. Isn’t it the right thing to do to not ‘rip’ someone off. To be careful with their money, to not exploit any lack of understanding when it comes to products of a financial nature. I believe that the majority of service providers are made that way, I believe too that these are also the ones that will abide by the rules, that will submit returns on time, that will struggle slightly more to keep afloat.

Those who took advantage previously will spend their hours finding new ways to abuse the system. They are made differently and more than likely also have more than 1.75 cars. The odd thing about laws is that they don’t prevent things, most of us hopefully are aware that murder is wrong and humanity was hopefully aware of the fact prior to the law being written. I realise that the law is more complicated than what I am implying and that parameters need to be created in order to successfully prosecute.  The point is that in some ways the laws may actually force the hand of the previously holier than thou who has now become lowlier, and how. The law birthed by the greed of the few for the few is now the enemy of the many.

So this leads us back to the policing, without the policing the laws mean very little… We live in a society that is more inclined to a perfect crime, constantly reminded of how cool it is to live on the edge and how boring it is to abide by the rules. There’s also the case to be made for over protection, if the consumer doesn’t need to think then they probably won’t. The spiral of ignorance will increase and the man in the house will become more susceptible to infection.

There’s always a problem when a law acts as a restraint to business development; a bit of a catch 22 exists currently, where our economy requires stimulation to grow and regulation so as not to implode, decisions need to be made in the name of progress.  The notion of protecting the ‘man in the house’ is noble, no one can deny but ironically it’s he who will pay in the end.

Maybe we aren’t going back and fixing the real problem maybe we’ve created a bit of a John Harrison legal system, one that has created an overcomplicated layered society that’s forgotten what the point was in the first place.

Robin Ackerman
Operations Manager
Tel: 0861 373 257
Fax: 031 701 6537
www.threepeaks.co.za
robina@threepeaks.co.za