The Tribune of Thursday, June 7, 2007 quotes Mr. Kendrick Christie, president of the Bahamas Institute of Chartered Accountants as saying government should regulate pensions in the country. He asks the rhetorical question: "Can you imagine a $1bn unregulated industry?"
He joins of the chorus of special interest investment firms wanting to use the power of government to help their business. Of course it is couched in caring language about their concern for protecting pension funds of Bahamians.
This is laudable until we get to the catch.
The catch is that they (accounting firms/investment managers) will be mandated to manage the funds, as no one else has their expertise and of course they note how unscrupulous business people can be.
Mr. Christie outlined several areas of concern to him and presumably his colleagues. He notes that:
1. Pension assets might be placed in sister or parent companies.
2. Pension assets might not be segregated
3. Irregular provision of statements
5. Inadequate investment controls
5. No independent board of trustees
6. Companies might use a different firm to audit the pension holdings
7. Portfolio assets need to be diversified
It occurs to this not so humble blogger that most of these "irregularities" relate to possible criminal offences. And of course, penalties for offences of fraud are covered under the penal code.
Items 1 through 6 above can be adequately addressed in a Trust Deed between the employer and employee before anyone invests in the pension fund.
Even item 7, where the pension professionals might believe they have a foothold is easily dealt with up front. The investors in the fund can agree investment strategies incorporating them them in the agreements before the first dollar is invested.
Of course there are companies that would wish to use the services of accounting firms and investment advisors and this is why they exist. But using coercive government power to force savings or investment with a government designated entity is socialist policy.
So to answer Mr. Christie's question. Yes, I can imagine a $1bn unregulated industry.
