Over the last month we have been catching up with our clients to gauge their reactions to some recent newsworthy events such as Greensill, Archegos, the Coinbase flotation and Gamestop.

One of the interesting points to come out of those conversations is how all of these issues share a common theme related to how weaknesses in existing regulation was a driving factor. Greensill’s supply chain financing enabled companies to hide debt that would otherwise be disclosed as such under financial disclosure regulations. Archegos was able to secretly accumulate enormous counterparty exposures by exploiting the fact that a family office wasn’t required to make the same level of regulatory disclosures as institutional investors. The listing of Coinbase will enable UCITS funds to get highly correlated exposure to cryptocurrency prices (something which isn’t currently permitted by EU regulators), as Coinbase’s share price, notwithstanding the fact that it is an infrastructure play, will almost certainly rise and fall in tandem with cryptocurrency prices. And the Gamestop saga has demonstrated how private individuals (also known as retail investors for whom most financial regulation seeks to protect) are free to pump and dump stocks on social media forums without any consequences while regulated stockbrokers face the full rigours of the law, including going to jail, for doing so.

All of the above outcomes serve to remind us that while the vast majority of regulation is well intentioned in that it seeks to eliminate behaviours that are likely to result in unfair and undesirable outcomes for markets in general and/or for investors, unless that regulation is all encompassing it will only drive those behaviours to other parts of the market that it doesn’t cover. In many cases, this can result in outcomes that are just as detrimental or even worse for markets and/or for investors as would have occurred if that regulation was never implemented in the first place. It ain’t easy being a regulator.