The basic allegation against self-regulation is that it cannot adequately protect the public from exploitation. I would argue, however, that a statutory body, such as a London Securities Exchange Commission, would be in no better position to protect the public interest and would, probably, be less effective.
Experience suggests that state bodies place a premium on avoiding criticism rather than taking prompt and decisive action. Public expectations are raised that cannot be fulfilled, while each setback is met with the cry: 'Provide more power, more rules and more money'. Above all, judging from the US experience, statutory regulation will lead to a greater concern with the letter, rather than the spirit, of the law.
In addition, the principles on which a voluntary code is based - openness, integrity and accountability - are particularly difficult to capture through a statutory code. To quote Neil Hamilton, the Minister for Corporate Affairs, commenting on corporate governance: 'Statute law inevitably tends to be backward-looking and sets in tablets of stone the lessons of the past.'
In contrast, the major benefits of the self-regulatory system at its best lie in its flexibility, sensitivity, practitioner commitment, legitimacy and economy. In my profession, we have recognised that a system which may have worked yesterday must adapt to serve the needs of today. Hence the considerable programme of reforms of the past two years. In carrying out our regulatory and disciplinary responsibilities, we involve in our self-regulatory procedures not only members of the accountancy profession but also individuals of the highest calibre who are independent of the profession. In this way we aim to enhance regulation of the profession by the profession, to the public benefit.
W. I. D. PLAISTOWE
The Institute of Chartered
Accountants in England
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