By Laurence Fletcher
LONDON | Tue Jan 25, 2011 6:06am EST
LONDON (Reuters) - The financial services industry is practically
"lawless" and needs better regulation of individuals entering the
sector, a partner at Toscafund, one of the UK's most high-profile
hedge fund firms, said on Monday.
Savvas Savouri, partner and chief economist at Toscafund, has called
for tighter scrutiny despite a wave of recent regulation tackling
bank capital requirements and bonuses as lawmakers try to avert a
repeat of the credit crisis.
"Finance is almost lawless. The nature of regulation is so light
touch that it may as well not be there at all," Savouri said at the
London School of Economics' Alternative Investments Conference.
"It (the financial services sector) is like medicine in the 18th
century -- it's full of frauds ... and is very poorly regulated...
You need to be that much better (than your rivals) if you don't
perform underhand or insider trades."
Savouri's comments make Toscafund one of the few hedge fund firms to
argue the case for more regulation following the European Union's
Alternative Investment Fund Managers directive which seeks closer
supervision of hedge funds even though many regulators say they were
not directly responsible for the crisis.
However, Savouri said regulating people, rather than trying to cap
bonuses, would be a far more effective method for controlling the
sector.
"What should be happening ... is rather than (regulating) bonuses,
you regulate the human capital. Graduate trainees turn up (to a new
job) and far too soon they're given control over assets."
"Because they look the part ... that can be very dangerous."
Savouri also told Reuters on the sidelines of the conference that he
favoured positions in capital goods stocks and resources for his
funds, but was avoiding consumer-related stocks because of pressure
on their margins.
Toscafund's main portfolio suffered big losses in 2008 during the
credit crisis but its funds have since rebounded strongly.
(Editing by Sinead Cruise and David Cowell)
Source: Reuters.Com
