Here’s an ‘officious’ list of 10 principles for regulators | Mint

Here’s an ‘officious’ list of 10 principles for regulators

All policies must be well formulated and amended with caution and circumspection because a regulator’s policy pronouncements are bound to impact its constituency and its environment.
All policies must be well formulated and amended with caution and circumspection because a regulator’s policy pronouncements are bound to impact its constituency and its environment.

Summary

  • Regulation is tough even at the best of times, but a short checklist of principles—in the spirit of Machiavelli’s advice on statecraft—could be of use to regulators.

The idea of penning this down came from a re-reading of Machiavelli’s Prince. This book laid down principles of statecraft back in 1513, but remains valid today. In the same spirit, this is an ‘officious’ list, entirely unsolicited, of principles for regulators of all kind. Readers, please do pay heed to caveat emptor.

Know your principal constituency well: A regulator must ab initio know whose interests it must primarily protect. This ought to be written into the Act or law that establishes and governs the regulator. But doing this is one thing and it getting encoded in the regulator’s internal belief system is another. The regulator must be aware of the needs, difficulties and expectations of the constituency it serves, and it must play a developmental role. It’s like the ‘Principality’ that Machiavelli talks about; when it flourishes, the country prospers.

Hear, listen and build listening posts: The regulator should be aware of perceptions of it held by its principal constituency and other people connected with it. For this, the regulator should set up appropriate high-fidelity listening posts to relay feedback and provide early warning signals. The regulator must develop transparent mechanisms to gather the opinions of its constituency and other relevant players, especially about their concerns over its policies and impending changes. If policy shifts are well informed and implemented through open consultations, they will be accepted more easily.

Use advisors but choose them carefully: It is not possible for a regulator to know everything in its field of oversight. It must select advisors from among representatives of its primary constituency, intermediaries who are linked to the business under regulation, critics of the regulator, experts in the field, academics and the media. But the regulator must also stay aware that many will seek and cajole for inclusion in this list of advisors for reasons that are personal.

The regulator’s policy pronouncements are bound to impact its constituency and its environment. So all policies must be well formulated and amended with caution and circumspection.

It would serve the broad purpose well for the regulator to set up forums for weekly, fortnightly and monthly open interactions (be it intra- or inter-department) among senior management personnel and other members of the staff. This will help the organization function as one entity rather than as a cluster of islands out of touch with one another.

The regulator must build a team: Effective regulation takes team work. The regulator must build a strong, cohesive and modern team that keeps itself updated with latest developments in the field, is technologically savvy, understands the distinctive features and responsibilities of the job, and grasps the importance of guarding its own reputation. On the reputation of team members rests that of the regulator.

Preserve confidentiality: Because the regulator’s job involves dealing with a wide range of confidential matters, it must build impervious and impregnable walls through administrative mechanisms to prevent leakage of confidential information. Such administrative mechanisms should include appropriate norms of discipline whenever confidentiality breaches occur.

Discrimination is an important virtue for a regulator: The regulator must discriminate between the sets of advice it gets. Some of it will be sagacious, while some would only seem so, and it can also expect mischievous hidden motives in a garb of innocence. While the regulator should let all advice and suggestions flow in, it must exercise fine judgement on what it eventually heeds.

Change is necessary and inevitable: No policy is cast in stone. None can remain fixed like the North Star. At times, change is necessary; but change for the sake of it may serve little purpose. Laws and policies need to be reviewed periodically, simplified and redundancy weeded out with caution, lest in the process important essentials are lost. Just as surgeons may need to remove a dysfunctional or injured kidney but must retain the one which is working well, rules and policy measures must not be abandoned that serve a critical purpose.

A regulator must not try to win a popularity contest: There is no such thing as a popular regulator. Popularity is not the aim, regulation is. It is enough for the regulator to be effective and efficient. If a policy or action pleases constituents (or others), then it will be worthwhile for the regulator to examine why this is so. Similarly, being “the world’s first" or the glory of playing a pioneer (like the spacecraft in Star Trek) should not motivate a regulator’s policies and actions. Its focus should be on the work to be done.

The regulator must have sufficient investigative and enforcement powers: Regulators must have real teeth, not dentures, to bite. To enable a regulator do its job effectively, it must be armed with the authority to probe violations and enforce rules, and it should use its power judiciously. Also, it must have personnel who are adequately trained to make good use of modern technology like artificial intelligence (AI) and aids like behavioural analysis to help in the detection of fraud and other criminal activity.

A regulator must be feared and respected: The regulator must be widely respected for its policies. It must deliver on its promises and promise only what it can deliver. It must be unsparing and fearless in its actions against misconduct, malfeasance, infringements and violations—as specified in the statute. For that, it must be feared.

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