Editor's blog: We must act now to avoid past mistakes

Our regulators, government and others in the financial services industry are constantly saying they have learnt from the mistakes of the past.

Whether this means they are capable of avoiding these pitfalls in the future remains to be seen but at least they are aware of the problems and have engaged with possible solutions.

However, two of the worst financial debacles in recent years, namely the collapse of Keydata and the failure of the Arch cru fund range, are yet to provide any real lessons for the future for the new incarnation of the FSA.

This is partly because of the lack of any sort of independent review of the regulator’s role in these cases, which caused huge misery for thousands of investors and incalculable damage to the reputation of our industry.

The Treasury has now ruled out launching its own independent inquiry into the collapse of Keydata until after the FSA has completed its own review. Don’t hold out your hopes for this coming anytime soon though as it has so far stretched to two years without any public findings. The FSA announced in May it was forced to put the investigation on hold pending the outcome of a judicial review launched by Keydata founder Stewart Ford.

Meanwhile, MPs are also putting pressure on the Treasury to probe the role of the FSA in the Arch cru debacle.

However, financial secretary to the Treasury Mark Hoban said the investigation was again in the hands of the regulator: “The FSA is currently investigating the issues surrounding the suspension and winding up of the Arch cru funds. It would not be appropriate for the government to comment on an ongoing investigation by the independent regulator.”

So why does it matter so much to hold the regulator to account so long after the event? The main reason is surely that it is only possible to truly learn from our past mistakes if we are told what those failings are by an independent judge that won’t try and cover up the shortfalls.

The regulator is undergoing huge change at the moment and is also deciding what type of watchdog it will be post-2012. There seems little point trying to finalise new rules on areas like product intervention without being very sure it can avoid the likes of Keydata and Arch cru ever happening again.

Investors have waited more than two years for some answers and there are no real excuses why these should not be forthcoming sooner rather than later.

Katrina Baugh is editor of Professional Adviser and IFAonline.co.uk