Regulation’s role in promoting good culture is not to make rules around it, that was the main thrust of Andrew Bailey’s speech at the Investment Association Culture Conference.
Andrew Bailey suggests Prescriptive rules can often undermine the original intentions as it’s impossible for a rule-book to predict every situation or eventuality. As a result, Mr Bailey believes it is the role of the regulator to encourage, enable and incentivize the right culture, rather than prescribe it.
A test of a firm’s culture is the effectiveness of its customer communication. Often firms tend towards complacency, relying on a few favorable indicators to balance out ones that aren’t.
In the investment sector, we are seeing a shift towards higher levels of passive investing, combined with a greater desire for more ethical and social investments and an increase in longer-term patient capital. These can co-exist, and if the industry supports these changes, market trust is likely to be stronger, and a positive culture will prosper.
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