Regulating the investment market

We agree with Mr Audley Shaw, the finance minister, that the crash, two years ago, of the UFOs - those unregulated financial organisations that 'guaranteed' stratospheric returns - provided ample evidence of the need to continually educate the public about investments and the nature of markets.

Any such project must insist on the essential truth of that adage of investing: when promised returns are too good to be true, they usually are.

It is an idea that apparently has the full embrace of Mr Shaw, for which we are happy.

But even more important is Mr Shaw's declaration about the importance of regulation of financial markets, and his warning that some of the UFOs, or even legitimate firms, with esoteric products "are threatening to rear their ugly heads again".

"They are providing and promising lucrative returns without providing the investor with a clear and unambiguous identification of either the risks that are involved or the basis on which those earnings can be yielded," he said.

So, the minister wants the Financial Services Commission, the watchdog of the financial markets, to be vigilant.

This, of course, is welcome and reassuring, for we would not wish Mr Shaw to slip back into old habits, such as when, as the shadow minister of finance, he used the privileged platform of Parliament to criticise the former administration for attempting to bring UFOs to book.

Stifling entrepreneurs

He warned against stifling entrepreneurs and accused the then administration of being difficult or spiteful. As it turned out, some of these organisations were, in effect, Ponzi schemes, whose collapse, according to one study, left investors out of pocket to the tune of around $200 billion.

Financial companies, as all firms operating in a market economy, taking risks, can fail. It is the nature of capitalism. But as Mr Shaw acknowledges, markets, too, require regulation.

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