As predictable as the sun rising in the east, every market crash and scandal is followed by regulators trying to protect their backsides and politicians promising regulatory reforms so that "this will never happen again". They really mean something like: "I don't want to be blamed for it when it happens next time so I have to be seen to be doing something now".
Market regulation is an evolving beast, sometimes mutating in a beneficial way and sometimes not. But even with the best politicians in the world, the sharpest regulators and the most enlightened guidance of the evolution, what it can never do is stop crime.
It is already illegal to rob people and commit fraud. It is already against the law to falsify accounts. It is already wrong for employees to follow a crooked boss' instructions to fiddle the numbers when the employee knows the numbers are being fiddled.
As more of the extraordinary details of the Opes Prime scandal come to light, it's clear existing laws and regulations were broken. Similarly, the liquidators examination into the collapse of Australian Capital Reserve's parent company, EPG, is disclosing what always seems to be disclosed after property developer collapses - an unhealthy relationship between property valuers and the developer.
When you see a developer give a valuer a free Mercedes and a massive discount on a unit purchase, you might well wonder if all is kosher.
The regulators - ASIC and ASX - are belatedly moving to clean up the mess of undisclosed shorting of stocks via the route of borrowing shares. That is good and overdue reform. Neither the ASX or ASIC deserve any credit for undertaking it, only approbation for not fixing the well-known rort years ago.
But is there more that urgently needs to be done to improve the equities market? Probably not. Existing regulations need to be enforced and more forensic work needs to be undertaken, but we should be wary of over-regulating the market. The situation is different in the dubious world of property valuation. No, most property valuers aren't dubious, but their industry is.
Just as good practice requires major companies to change auditors from time to time, we could benefit from reform that puts greater distance between developers and valuers.
There are plenty of grey areas in property valuation, plenty of wriggle room on the numbers that can make the difference between a project not going ahead and a developer being able to raise more money from an unsuspecting public.
Investment is property ventures always carries risk, but it starts with having some degree of confidence in the valuation process. I frequently don't have much confidence in the conduct of the process.
I would make more sense to me to formally separate the hiring and paying of valuers so that "unhealthy" relationships don't develop. I would like to see an industry-run panel system of valuers whereby developers can't pick a valuer of their choice - a valuer who might be more compliant or persuadable.
But that won't happen and thus investors should always think twice about property-backed investments and who they're dealing with. Why won't it happen? Easy - significant parts of the property development industry wouldn't want it and there is an unhealthy relationship between the industry and the state governments that are supposed to police them. Maybe not a free car, but who would like a nice, fat political donation?
In the end, no-one can regulate away risk from any investment. All you can do is diversify your investing to minimise the chance of being defrauded.