Rules and Regulators

Background information

When prosecutors asked Renato Squillante, a Rome justice arrested on corruption charges amid the Tangentopoli (Bribeville) scandal in the early Nineties, where several million dollars he hid in a secret bank account in Switzerland did come from,he candidly answered it was just the capital gain he earned thanks to insider information he had access to when he was a director of the Italian security and exchange commission Consob. It was a perfect alibi, as insider trading was not a crime at that time in Italy. The episode tells something about rules and regulators, specially in financial matters, in our country. Since then much has changed. Legislation on public offers, stock brokerage, antitrust and, yes, insider trading have been passed through Parliament, while a number of regulatory authorities have been set up in the following years. This set of new rules and law enforcement bodies allowed to a huge process of privatizations, liberalizations and mergers to take place in a quite orderly fashion in the last decade of the past century. Italy has currently five major regulators: the Bank of Italy, which supervises the banking and the insurance industry, the Consob, the Antitrust authority in charge for abuse of position and the M&A clearing, the AGCOM which regulates the telecoms and the information industry and the AEEG which supervises the power market and sets a cap to electricity and gas retail and wholesale prices. Whether the new tools are effective in fulfilling their task is still an open question, again specially in financial matters. Take the case of derivatives: before almost all district courts countrywide there are cases pending where municipalities or other local governments are suing large international lenders over derivatives contracts they allegedly sold without fully disclosing risks and costs. The number and the wideness of this phenomena tells that something failed to work at regulatory level. As a result, prosecutors and courts have to deal with sophisticated and complex financial contracts they are often not really equipped to fully understand. As for the insider trading, after a couple of decades the law stating it is a crime became effective only small fishes got caught in the net. It seems fair to say that the effort of legislators in the Nineties produced some noticeable and positive effects but the amounts of legal controversy and the financial scandals which regularly happen and shake the confidence of investors tell that the work has at least to be completed yet.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s