‘Regulations must change with the times’
KUALA LUMPUR: Regulators should reconsider some of the regulations that may not necessarily be applicable today and change them to evolve with the times, said Distinguished Fellow of the Asia Global Institute at The University of Hong Kong, Tan Sri Andrew Sheng.
“There is no such thing as regulation for all time. When the times change, you need to change the regulation. After the 2007/08 crisis, the regulations became very complicated as we all know, with Dodd-Frank, Basel III, all these rules.
“Now some of these, the Americans themselves are unwinding. So if they are unwinding some of these rules, maybe we should reconsider some of the rules that do not necessarily apply to us,” he told reporters at the Global Emerging Markets Regulatory Conference 2017 yesterday.
Sheng, who spoke at a panel session titled “Regulation in the New Abnormal”, said that rules have become more complex as bureaucracy has become more complex thus rules and regulations need to evolve in a different manner.
“The mistake that we made was to think about markets as inanimate, dead things. They are living. Because markets are living, regulators cannot impose laws on living things without these laws and rules being gamed; because gaming is fundamentally part of life, biology,” he said.
Sheng said the business model of traditional financial institutions is fundamentally disrupted by technology today, while 19th century rules, regulations and laws are being used to regulate institutions that are emerging today.
“Securities regulators now face a very fundamental difficult question. In the area of technology, where a technology company can lose money and get the IPO at 40-50 times valuation, how much can we protect the retail investors from such risks? And is transparency able to solve this issue?
“I don’t have the answers. All I know is that somehow it seems to work and out of this ashes of 1,000 startup failures, two or three make so much from their valuations that they are able to invest in new technologies and push our frontiers forward,” he added.
Sheng said regulators also need to consider whether regulations are crimping equality and whether smaller firms are able to afford lawyers, accountants and risk models to deal with the very complex regulations today.
Meanwhile, the International Organization of Securities Commissions’ (IOSCO) first Asia Pacific hub, which was launched yesterday, will be fully operational by mid-year, said the Securities Commission Malaysia chairman Tan Sri Ranjit Ajit Singh.
The hub, IOSCO’s first presence outside of its headquarters in Madrid, Spain, will provide technical assistance and capacity building programmes.