Three Wise Monkeys: Lessons for the Investment Industry
Rummaging through my desk the other day, I found a set of little carved monkeys I’d picked up at a Hong Kong flea market years ago. They were the “see no evil, speak no evil, hear no evil” trio from folklore. I put them on my desk and have looked at them often this past week. They seem to mock me as I read the news these days. Penn State University given exemption from public access to records. High profile investors not required by the SEC to publicly disclose their holdings in companies. Members of the U.S. Congress not bound by U.S. insider trading laws. CEOs of investment banks not required to pass basic regulatory exams.
The three wise monkeys have been interpreted in the West to mean, “Look the other way … don’t ask.” When the special players in these news stories made their special pleadings for these exemptions, each one of them probably made sense at the time, from their point of view. It just gets a little uncomfortable when these waivers get held up to public scrutiny in light of scandals, bankruptcies, and the yardstick of common sense.
The three figures from folklore also are a little like those in positions to grant special exemptions. Some of the onus of fixing the problem falls on them. Regulators and lawmakers need to show the public that equal treatment doesn’t only apply to the little guy. For example, how is market transparency furthered by granting selective exemption to disclose significant ownership positions? The SEC has said little, but among factors widely considered as important in granting the “Buffett-delay” seems to revolve around whether the target company is comfortable that the acquiring investor is non-activist in nature.
Doesn’t that invite more of the coziness that got us into this mess in the first place? To regulators: Consider ending these selective exemptions. Investors privileged enough to take strategic stakes should be able to handle having those stakes disclosed the same as other market players.
But these episodes remind us that the real gauntlet is thrown down before those who would seek special treatment. What’s the compulsion to get the rules changed “just for me?” These folks and these institutions are centers of power, money, and influence. No one should begrudge them of what they have earned. But we see this pattern of the privileged seeking to adjust the rules to suit their own interests when, in reality, they should be held to a higher standard.
In these confused, troubled days of “occupy” and its offshoots, we must insist on moving to higher standards of professionalism, transparency, and public interest. The recent news flow is not encouraging.