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JOURNAL FOR THE CAPITAL MARKETS INDUSTRY - UGANDA

                                  JULY - SEPTEMBER 2016

     THE LIMITS OF REGULATION IN
ESTABLISHING IMPROVED GOVERNANCE

                                                 By SIMON OSBORN, FCIS,
                                           Chief Executive Officer, ICSA UK/UKRIAT

Regulators have a range of tools at their disposal to achieve these purposes – hard and
fast rules, “comply or explain” codes, guidance, reporting requirements, inspection and
sanctions, “naming and shaming”, empowering or working through third parties and so on.

Sometimes even just threatening to take action can be an
effective way of bringing about change.

Introduction                       by rules or codes. That is because    it is more a matter of failing to
                                   they concern people, not process.     meet the unrealistic expectations
I should like to discuss what                                            of investors, politicians or the
I see as the limitations of        So I will start by discussing the     public.
regulation and codes in bringing   different reasons for regulation –
about good governance and to       and for this purpose I am using       Finally, I will reflect on what,
suggest that we are now at the     the word “regulation” to cover        if anything, regulators can
point where using them to add      anything that governments and         do to address the remaining
further prescription and process   regulators do in an attempt to        governance challenges.
would be both unhelpful and        change or influence behaviour,
unsuccessful.                      not just the law.                     The purpose of regulation

That is not to say that there is   I will then explain the link between  This is an over-simplification, but
not a need for regulation and      the reason for regulating and the     as far as regulating companies
codes – they have undoubtedly      choice of how to do so. Some          is concerned, most actions by
contributed to a general           examples of what people see as        regulators have one of three
improvement in governance          failed regulation stem either from    different but often overlapping
practices. Rather, I think that    choosing the wrong tool for the       purposes:
many of the remaining, and         job or a lack of clarity about the
seemingly intractable, challenges  objective. For some other cases       1.	 Setting minimum acceptable
are not ones that can be “fixed”                                             standards of behaviour to be
                                                                             observed by all companies;

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