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© Business Money Ltd 2008

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The debate over just how much regulation is needed in life will run forever. There will always be those who wish to micro manage the lives of others, sadly, and all too often, the very last ones who should be allowed so to do. But a totally unregulated environment sees exploitation of the weak and the stupid.
 

As ever it is a question of balance and to achieve this end, a middle ground has to be identified. This too can lead to problems for what might have been the middle ground 20 years ago would be deemed far too loose today and there lies the problem with regulation.
 

Whilst the English legal system has evolved over the centuries through the application of clear thinking and common sense in addressing the challenges of ever-changing times and environments, regulation creeps and like glaciers and middle aged spread, the direction is always downhill.
 

Regulators are risk averse, their mindset has a core closely aligned to that of the control freak. Common sense interpretations of rules are squashed, the average citizen is denied any encouragement to think for themselves, the population grows more stupid and finds ever dumber ways of being ripped off and so the regulators make more rules and the vicious circle continues until the breath is squeezed out of everyday life.

Why should people who were “mis-sold” an endowment policy against a mortgage have any rights to redress should the policy not produce the goods to clear the mortgage? If the policy proved inadequate, clearly the premiums were too low but they enabled the policyholder to acquire a house that they would have otherwise have been unable to afford. Now rising house prices have created a fat capital gain for them which surely should be taken into account when reviewing the net benefits of the transaction and the whole purchase package.
 

But no, it has become a win-win bet for some and the losers are other policyholders who, maybe wisely, over provided and now find their bonuses diminished by payouts to mis-selling claimants.
 

Applying this type of 20/20 hindsight to commercial finance could produce farces worthy of a Tom and Jerry show given the unpredictability of business conditions over a period of time no matter how well planned a venture may be.
So now is the hour for the commercial finance industry to come together to agree some form of self regulation. Especially as the FSA, to its credit, has indicated that it has its hands far too full of personal finance issues to spend any time in the commercial sector.
 

On 6 July, at the Pasley-Tyler Club in London, a gathering took place of all of the major high street banks together with representatives from The Institute of Financial Services, The Banking Standards Board, a team from the National Association of Commercial Finance Brokers and the editor of Business Money, the industry journal.
 

A free and wide ranging discussion entailed and some developments were reported. The early day history of NACFB, its aims and objectives were repeated and a consensus emerged that a move towards self-regulation was desirable, and would, ultimately, be of benefit to everyone in ensuring higher standards prevailed amongst all practitioners of commercial finance at every level.
 

The evolution of banking products over the last decade, the blurring of the lines between what was once regarded as secondary and primary credits and the move to reach out to the intermediary via hunter networks were all debated.
 

Self-regulation demands accepted, and necessarily high, levels of training and education throughout all levels of the industry. The Institute of Financial Services has an examination prepared for commercial mortgage brokers and in this edition you will also find a searching feature on education from Kate Sharp, chief executive of the Factors and Discounters Association. The message is very clear. No matter how well intentioned, or how long their past track record, it is only a matter of time before anyone seeking to prosper in commercial finance will have to possess an appropriate level of training which, in certain circumstances will have to be acknowledged by passing an examination, having undertaken a structured training programme.
 

And so we move on to the body which will be the arm of self-regulation and the obvious candidate is the National Association of Commercial Finance Brokers.
The NACFB has been a curate’s egg of a body to date. Some top class and hard working directors have instilled the highest compliance and disciplinary standards, which have worked well.
 

But some commercial ventures, not all of them outstanding successes, while in no way casting any aspersions on the integrity of those involved, have created doubts over the wider judgement of certain of the board members.
 

They may claim that a need for income made them do it but that is also the line from unfortunate girls caught swinging handbags on the kerbs of night-time King’s Cross. It is a line that has yet to acquire the credibility to impress the establishment characters who sit in judgement.
 

The latest, and we hope the last, questionable exercise is to have the official newsletter of NACFB bound into a lightweight journal that accepted advertising from alleged advance fee fraudsters, the very crooks that NACFB was founded to defeat. Placing bullet holes in your own size nines like this does not inspire confidence.
 

This must cease forthwith and similarly, whilst acknowledging that this year’s event is too far down the road to wind back, so too must any future awards dinners in the NACFB name.
 

To be accepted in a supervisory role the NACFB has to be a radically different association from the one we have seen in the past and it must have a board comprised of members with a nationally recognised chairman of unimpeachable repute, supported by a team committed to the highest standards of corporate governance.
 

The NACFB has henceforth to be a Caesar’s wife model of strict impartiality, of high standards and undoubted integrity.
 

It has achieved so much since 1993 and can now crown the good work of the early day pioneers and their successors.
 

We will promote ceaselessly the cause of self-regulation now that the industry has been handed a once in the lifetime opportunity. Provided that the NACFB rapidly adopts the appropriate structures and postures, Business Money, the industry journal, will also campaign for it to be the supervisory arm of the intermediary sector so vital to the industry’s health.
 

To the chief executive of NACFB and his board the message must be: “The ball is in your court”.

                            Editor

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