Enter the revolving regulators

Abstract

Discusses the keen debate on both sides of the Atlantic about the merits of people shifting jobs between industry and supervision: the UK's chief securities enforcer Margaret Cole announced recently that she would become general counsel of PwC, the professional services firm, and she thus became a high profile example of the growing tendency of regulators to switch hats with corporate executives on the other side of the fence. In the USA, changing sides is commonplace, but the shift in the UK to a US-style "revolving door" has reopened debate on the merits of the practice. Advocates of a free flow between government and industry say the exchange benefits both sides, and that regulators who understand the sector are better positioned to draft sensible regulations and catch those who evade them. But the downside to this job rotation is that it can undermine supervision and enforcement: regulators easily become too cosy with the industry and may be reluctant to take tough action for fear of alienating a future employer or a former colleague.