Policing the Markets: Structures and Policies

Scandals are a recurring feature of UK financial services and they were probably more common in the 1840s than they are in the 1990s. There is no overwhelming evidence that general financial practice is less ethical than it was and it appears more likely that ethical standards have risen. They are certainly higher than in the Victorian era, for example the ‘railway mania’ of 1845—46 which structurally established large‐scale financial fraud in Britain. During this period, hundreds of railway schemes were launched as a source of enormous fees for promoters, lawyers, engineers and surveyors. Many were never intended to be built, with some promoters (once they had accumulated substantial funds from investors) actively lobbying for their Railway Bills to be rejected by Parliament. However, this relative rise in the ethical standards of contemporary general financial practice will be of little comfort to the thousands of angry investors who have been mis‐sold pensions, or have been victims of modern scandals perpetrated by Peter Clowes, Roger Levitt or Robert Maxwell. Their anger is understandable because modern society expects increasing levels of security from its industries and institutions, and regulation is the medium for achieving this. Despite general trends towards deregulation, in financial services increasing regulation is inevitable, and politically desirable, because of the rising complexity and elaborate nature of exchange relationships. It is the state which is taking on the role of guaranteeing the security of those relationships. It is this guarantor role of the state which ensures that when scandals happen, the anger of victims is not merely directed at the fraudsters, but also at the regulatory system and the government which is responsible for that system.