Rohan Barnett inside his office at the Financial Services Commission.

This is the second of a two-part article. The first was published in The Financial Gleaner of January 30.

At September 30, 2008, the securities industry had more than $800 billion in total assets under management, a significant part of that held in pension funds.

While giving a keen ear to the industry with a packed schedule of introductory meetings now underway, Rohan Barnett, executive director of the Financial Services Commission (FSC), says some of the concerns of the entities he supervises are not the purview of his agency.

While not disclosing the particular concerns, in those instances, he says, he is not averse to bringing moral suasion to bear on the appropriate authorities in the interest of the industry and investors.

practised in Nigeria

After studying for an undergraduate degree in economics at New York University and pursuing legal training at Brooklyn Law School, Barnett practised briefly at a law firm in Nigeria, then moved to the American financial services powerhouse, now troubled, Citigroup.

It was there that he garnered most of his experience in finance and came in contact with the regulatory aspects of the business.

He began as a litigator for the Smith Barney division, Citi's profitable retail brokerage arm that provides investment banking and asset management services to corporations, governments and individuals, and which is now being offloaded by the cash-strapped Citigroup for some US$2.7 billion to rival global wealth managers, Morgan Stanley.

From defending Smith Barney against customer complaints, Barnett transitioned to the division's corporate advisory unit, negotiating general corporate issues and assisting with mergers and acquisitions. Over time, his portfolio extended to providing legal support for Smith Barney's stock purchase plan and option plan programmes.

As first vice-president, Barnett led the team that provided legal coverage for Smith Barney's investment advisory functions and dealt with all legal and regulatory compliance issues related to the development of the brokerage house's first non-discretionary advisory programme.

senior vice-president

Barnett left Citi for the FSC after serving as senior vice-president and divisional counsel for Smith Barney's northeast division, providing legal coverage for the firm's branches in the area bounded by Maine, northern Virginia and Illinois, and leading many legal and regulatory investigations stemming from the conduct of the investment house's army of brokers.

Barnett says his markedly private sector background makes his entry into the government system a new dynamic, with which he must get up to speed in short order, throwing him a short learning curve.

From a career perspective, he says, the new job is everything he had hoped for.

"It is challenging," he said. "The issues have a very high level of sophistication. Jamaica has to deal in a real way with the very same issues you have to deal with on Wall Street or in London."

Guided by the developments of the past year or two which, for him, underscores the point that the exercise of blind faith in the investment arena can be catastrophic, Barnett lists effective investor education as ranking high on his list of priorities.

He says the FSC's vital role as the authority that authenticates the investment practices of licensed securities dealers needs to be understood by all classes of the investing public.

"The regulator is a kind of buffer that creates the confidence so you can say beyond the shadow of a doubt where your money has gone," he suggests, adding that the FSC does not exist to punish entrepreneurism, but to maintain the integrity of the industries it supervises.

investor education

The commercial lawyer says he brings to the FSC a fresh set of eyes and a new level of sensitivity to the issues that, combined with the reservoir of talent he has found at the commission, should result in a successful tenure.

Noting that the task of investor education is shared between his organisation and the 62 FSC-licensed securities dealers, Barnett is stressing that such collaboration is essential to the financial services sector.

He believes that the financial problems in the US could have been avoided had there been better communication between the regulators and debt rating agencies.

This, he says, could have helped to maximise efficiency and correct the flawed rating of certified debt obligations which did not correctly reflect the level of risk attached.

Rather than wielding a big stick in his new role, Barnett is promising consistent communication with the industry and the investing public to drive efficiency which, he says, is the ultimate objective of the regulatory body.

appropriate influence

He is of the view the FSC can exercise appropriate influence over the actions of the entities it regulates without a heavy hand.

The financial services regulatory czar does not believe the industry is operating at maximum efficiency.

To avoid repeating some past mistakes, Barnett says the finance houses must be more responsive to the needs of clients.

The growth and fleeting success of the unregulated investment schemes, he has concluded, was due in large measure to the failure of licensed securities dealers to fully satisfy the needs of the investing public - a public that was displaying an appetite for higher returns from greater risks.

At the same time, he was dismissive of the view that existing regulations necessarily constrain the industry from offering more creative investment products to the market.

facilitating more diversity

Accepting that investors are now more skittish about where they put their money, the FSC head says that while it might not be a good time to introduce what he described as the more esoteric investment products, the industry needs to present alternatives to the investor and provide the cue for new regulations to facilitate greater diversity in the market place.

As a regulator, the FSC at times takes its cue from what the market is demanding as well as what the industry is seeking to roll out, he acknowledged, but said that is the way it should be.

"I would be loath to create a regulation in anticipation of a product coming on line and there is no demand," Barnett said. "It would be a waste of time."

huntley.medley@gleanerjm.com.