The Tribune of Thursday, June 7, 2007 quotes Mr. Kendrick Christie, president of the Bahamas Institute of Chartered Accountants as saying government should regulate pensions in the country. He asks the rhetorical question: “Can you imagine a $1bn unregulated industry?”
He joins of the chorus of special interest investment firms wanting to use the power of government to help their business. Of course it is couched in caring language about their concern for protecting pension funds of Bahamians.
This is laudable until we get to the catch.
The catch is that they (accounting firms/investment managers) will be mandated to manage the funds, as no one else has their expertise and of course they note how unscrupulous business people can be.
Mr. Christie outlined several areas of concern to him and presumably his colleagues. He notes that:
1. Pension assets might be placed in sister or parent companies.
2. Pension assets might not be segregated
3. Irregular provision of statements
5. Inadequate investment controls
5. No independent board of trustees
6. Companies might use a different firm to audit the pension holdings
7. Portfolio assets need to be diversified
It occurs to this not so humble blogger that most of these “irregularities” relate to possible criminal offences. And of course, penalties for offences of fraud are covered under the penal code.
Items 1 through 6 above can be adequately addressed in a Trust Deed between the employer and employee before anyone invests in the pension fund.
Even item 7, where the pension professionals might believe they have a foothold is easily dealt with up front. The investors in the fund can agree investment strategies incorporating them them in the agreements before the first dollar is invested.
Of course there are companies that would wish to use the services of accounting firms and investment advisors and this is why they exist. But using coercive government power to force savings or investment with a government designated entity is socialist policy.
So to answer Mr. Christie’s question. Yes, I can imagine a $1bn unregulated industry.
My question: Why does the amount of money – or the size of an industry be a reason for regulation?
Secondly – the regulating of anything means regulating people. You can make special laws for people employed in a specific industry – which is a form of discrimination – unless the same “laws” are applied to everyone else.
The assumption by Christie is – in the first place that regulation is desirable.
The second assumption is that regulation is a form of benefit.
The third question is – for whom is there a benefit, and in what way – other than the fact that fraud happens – and is a criminal offence – as you say already covered in the penal code.
Are we surprised that the pension companies – would like to make it difficult – or illegal for private companies to have their own plans?
They are using the classic monopoly strategy. Partnership with government to remove the competition from individual companies with their own pension plans.
Naturally the accountants want a piece of the action as well.
Hence the cost of saving money goes up – more than if individual companies were running their own pension plans within the operations of their own companies – that they can control.
Throw in the meaningless numbers – stir in some “fear” about the changing demographics – which has no relevance to what an individual saves – only to whether he saves.
This is typical of the big brother government symdrome – and particular companies using the system they demand to cut competition and increase their bottom line.