On Wednesday May 27, John Plender wrote in his ‘Insight’ column in the Financial Times that "Re-regulation will fail to curb bankers’ worst excesses". The author explains that effective lobbying from the sell-side means that "we are now witnessing re-regulation with a banker-friendly face".
As someone who deals regularly with clients on both the sell-side and the buy-side – i.e. institutional investors, for example asset managers, private banks, wealth funds, insurance companies, regional banks and pension funds) of the structured finance and derivatives markets, I would observe that it is the lack of an effective lobbying presence from the buy-side which might be equally responsible for "re-regulation with a banker-friendly face". The buy-side is a more disparate group, it’s true; but, by definition it represents half of the structured finance industry, so it should be effectively represented.
It is difficult to think of any other market (let alone one which is worth as much money globally and which has done so much damage to economies around the world in the last year) where such an imbalance of representation would be allowed to continue. After all, for every dollar or pound sold in the structured finance market, there is a dollar or pound bought. So why is the buy-side not lobbying at least as effectively as Wall Street in the policy dialogue? It is, presumably, because there does not exist an effective representative body for the buy-side of the structured finance market. The representative bodies which exist in the structured finance market are usually dominated by the sell-side and, to a lesser extent, by hedge funds which should be considered as being in a distinct class from other institutional investors. It is difficult to see how financial crises could be avoided in the future until an effective buy-side representative body is created in the structured finance market.
Stephen Turvey is Chairman of LPA Legal Recruitment and formerly Chief Executive Officer of David Doble Solicitors (May 2009)