Regulatory Issues for Public and Private Organizations - Essay Example

Regulatory Issues for Public and Private Organizations There are various regulatory issues on which both public and private organizations deal closely with each other. New forms of regulations depend on shared enforcement, and supervisory responsibilities and various other ways to channelize public commands while ensuring that public environment is effectively maintained. The paper delves into different perspectives of regulation of complex financial institutes. One perspective is that intelligent and astute individuals oversee financial regulation, that they are dealing with complex matters, and that enforcement targeted against major financial institutions necessarily is challenging because of the ambiguities of the underlying issues and the high standards of proof required in legal proceedings. General complaints about a “lack of regulatory aggressiveness” ignore the realities of actually bringing enforcement actions in a tough environment. Regulatory enforcement in the United States operates surprisingly well given the difficulties of this operating environment, and critics have not presented credible alternatives to the present system. A second perspective is that major financial institutions escape meaningful regulatory constraints because their power and influence overwhelm regulators and because individuals from regulatory institutions give too much deference to major financial institutions and their key executives and staff. This perspective suggests that financial regulation in the United States is broken largely because of this political dynamic and needs fundamental reform. This paper will examine and look into how regulators and firms deal with each other, how interdependent they are on each other and the outcome of such interdependency. What kind of benefits and liabilities develop due to their strong ties. Financial institutes will be used as the premise of all discussion. Special attention will be given to potential benefits and risks of such cohesive regulatory networks. Regular dealings between regulators and financial institute beyond the regular rule making boost up co-operation. Ineffect transparency takes a toll. Information disparities also strengthen regulatory cultures and bring down the threshold of external pressure need to effect changes within firms. The conditions that bring this benefit impede flow of information and genuine criticism from outsider. As a result performance standards dip and various other problems crop up. The paper looks into various examples of such fraudulent activities and also the circumstances in which these tensions are more likely to manage without damage from these problems. Strong ties that encourage cooperation within insiders have a huge impact on the flow of information. Information disparity arises and outsiders are asked to stop criticism. A lot of problems shape up as a result. A very prominent example in this case would be the SEC, NASD and NYSE when they acted against conflicts of interests in investment banking and mutual funds, immediately after outsiders. In 2003, at a cost 1.4 billion dollars, regulator prosecutors and large securities firms settled charges. The firms had encouraged investment analysts to mask and exaggerate corporation’s investment value while misleading investors in order to win the corporation’s investment banking business. For many years, this was floating around as a secret in the industry while the press and various congressional hearings had focused on it. While the participants were aware of the ethical implications of such a business, they eventually came to terms with it and started living with it as if it was a normal part of the business. The Lehman Brothers came to the rescue and appealed for new synergy by announcing a new model for dealing between analysts and investment banking. This was widely accepted new paradigm for synergy and stated that “The analyst is THE key driver of the firm relationship with its corporate client base. Analysts need to accept responsibility and use it to expand the franchise and DRIVE PROFITABILITY EVERY DAY BUT IN A WAY THAT IS CONSISTENT WITH BUILDING A LONG-TERM FRANCHISE.” On the other hand there is State regulation. This outside the scope of main stream securities regulation. States regulate firms and individuals conducting securities business inside the borders but the establishment of SEC has shifted the center of gravity to Washington. As of today States are no longer as well integrated into regulation’s formal and informal network as SEC, SROs and firms. A very prominent indicator of this is how states are barely featured on panels at industry conferences on securities regulation. On the benefits and advantages side, higher levels of co-operation and understanding in such a system makes it very easy to resolve difficult problems without going through expensive litigation procedures. It narrows down the gaps between industry and regulators. In conferences held on these issues private and public regulators repeatedly bring individuals from industry into their organizations and keep them updated on the emerging developments. Various other cases can be cited to support the second perspective of this module. The readings on given on Wall Street claims how the financial crisis era saw all culprits scot away freely while the world economy suffered. Every major bank and financial company on Wall Street was a part of those horrendous criminal scandals that impoverished millions and made so many people jobless. However none of the actual culprits went to jail. Not a single executive or employee who was running these companies was ever convicted. All of them enjoyed themselves as they cashed in on the phony financial boom. A lot of these names are familiar to the common man of America such as AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Stanley. These firms were directly involved in the fraud and scam. Lehman brothers went so far to hide billions of dollars in loans from their investors. Bank of America masked billions by claiming that they were bonuses. The corporate chiefs of these companies enjoyed themselves while the investors suffered. Thus this paper highlights how newer forms of regulation and public management should be made more transparent and all policies require very close dealings among organizations. It is important to study how regulators and firm engage with other. It will help research, and education and public management and also promote awareness amongst masses so that effective action is taken next time round. We can never really completely understand how securities regulation is practiced with completely associating ourselves with the culture of that field. The second perspective of this module holds large true-that major financial institutions escape meaningful regulatory constraints because their power and influence overwhelm regulators and because individuals from regulatory institutions give too much deference to major financial institutions and their key executives and staff. This perspective suggests that financial regulation in the United States is broken largely because of this political dynamic and needs fundamental reform. Their needs more transparency in information outflow. It is important for the masses to be well educated about public reforms to encourage such transparency. Read More