The framework to measure and evaluate culture was outlined by the then chief executive of the FSA, Hector Sants.
Starting from the premise that society has the right to expect ethical behaviour and warranted commitment to stated values, he maintained that regulators cannot avoid judging culture, a term he judged less problematic and more amenable to measurement than ethics.
Accountability and integrity, as Sants pointed out are, in essence, design issues. It is time to get to work. A necessary starting point would be virtual attendance at the imaginary inaugural lecture James M. Landis offered in 1930. It is time to go back to the seminar room.
Final thoughts
As I write this conclusion the news emanating out of both London and New York is unremittingly bleak. Attempts by business today to limit the remit of the Securities and Exchange Commission mirror the charged atmosphere facing Landis as he drew up the legislation that established the agency.
Writing in 1934 just before the bill was debated in Congress, Landis complained: “The Stock Exchange Bill is receiving a terrific beating. All the corporate wealth of this country has gone into the attack and carried it all the way to the White House.”
Although the bill was passed and the SEC established, its remit and authority waned incrementally at first and then dramatically in the 1990s. The reduction in power has consistently failed to ignite public controversy.
Paradoxically, periodic successes, such as the insider trading investigations and high-profile individual prosecutions, enhanced the visibility of the SEC but not necessarily its authority. In the absence of the kind of catastrophic crisis witnessed in the Great Crash of 1929 or the extent of corporate scandal revisited at the cusp of the millennium or again in 2008, battles over financial regulation take piecemeal form through refinements to individual legislative clauses.
Landis told the New York Times in 1937, somewhat optimistically, that brokers “are beginning to realize more clearly that their interest is tied up with the public interest. They are beginning more often to subordinate their own interest to the larger interest. People are beginning also to look upon the exchanges not so much as private institutions as public utilities”.
The tragedy here is not Landis’ misplaced optimism but the misplaced trust that the financial services sector has recognised its obligations. In this sense the failure to deliver on the pledge for restraint by the erstwhile chairman of Barclays to the Financial Times is talismanic of the sector’s bad faith. Society has a right to expect better.
Regulators have a duty to ensure protection is offered and political actors have an obligation to ensure the lessons of history are learnt, not repeated.
The author is writing a biography of James M. Landis, which will be published in 2014.
Read more:
Part One: Back to the Future: how global financial regulation has failed
Part two: Reinventing the rationale for market intervention
Justin O’Brien is a professor of law at University of New South Wales. This article first appeared at The Conversation.