Random Thoughts on Ethics and Regulations

So my day job, the one that actually pays bills, involves regulations. I used to enforce those rules and now I consult for companies that need to comply with them.

I’m in an industry that has high barriers to entry. Anyone who wants to start a company in this field has to go through a months’-long review process and prove themselves to be qualified and without known criminal issues.  Anyone who wants to work for a company in this field in customer-facing sales roles also has to prove a certain amount of knowledge about the product as well as about the rules.

Which is not to say that the industry is without its ethical lapses.  I brought more than one case against individuals who out and out engaged in horrible activity involving vulnerable people and then sat there and lied to me about it to my face while on the record.  People with zero conscience.

Those people definitely existed and are attracted to industries like mine because of the amount of money involved.

But far more common were the ones in the middle.  The ones who would never set out to do something blatantly against the rules, but who end up doing so anyway either out of ignorance or greed.

I can’t tell you how many times I heard over the years, “But X person does it and they’ve never gotten into trouble” or “But we’ve been doing it this way for years.”  Which was true in some instances.  One of the biggest investigations I was part of involved thousands of companies who had been doing something wrong for years that cost their customers millions if not billions of dollars.

But you know what?  When that was finally discovered, it didn’t matter that everyone had been doing it that way for years.  Perhaps it did influence how the situation was handled, but it didn’t keep it from being handled. And once it was discovered and people were adequately informed of the issue, they were expected to comply.

The problem with regulation is you can never list everything people shouldn’t do. But if you try to use a principles-based approach you will soon find that your idea of “fair dealing” or “best efforts” or “good customer experience” are not the same as someone else’s. What seems obvious to you is not obvious to them.

You can be damned sure that there will always be people in every industry trying to find the cracks, to get that little advantage that will let them “win”.  These aren’t the ones who flat out ignore the rules (there are always those as well).  These are the ones who push right up against the edge or find the one place where you haven’t been clear enough or aren’t looking close enough and exploit it for all it’s worth.

Right now I spend most of my time dealing with an industry with absolutely no barriers to entry–self-publishing. And there you see this play out every single day.  Someone will say, “Well no one told me I couldn’t scrape content off the internet and package it as my own and then click-bot my book up the ranks and get a hundred fake reviews on it so that Mary Sue in Idaho thought it was a legitimate book…”

No, they didn’t.  Because they thought it should be obvious that that was a shitty thing to do.

The problem with self-publishing is that bad techniques spread like wildfire, and that the big enforcer, Amazon, is slow to act. So by the time something spins out of control there are hundreds or thousands of people, some who just didn’t know better, engaging in it who then get slapped hard by losing their accounts or having their books pulled.

Having seen a number of these conversations happen, I don’t know how you even teach people to see what’s “right”.  A lot of these scenarios that have cropped up (like offering Book A for sale for two weeks and then changing the content out so it’s hardly the same but keeping the reviews from Book A), seem pretty obvious things you shouldn’t do.  But each time one of these scenarios crops up I find myself amazed by the number of people defending it. Either as perfectly legitimate or what they have to do to stay competitive.

And it’s just…Sigh.  More than I can discuss in one blog post.

So let me try to sum something up here:

Regulations and rules are annoying. And some are poorly written. But they exist because at some point someone did something that made them necessary. And if you don’t want there to be more regulations or ridiculous requirements or costs to what you do, the best thing to do is to always step back and ask not “Do the rules allow me to do this?” but instead “Does this pass the smell test? If I had to sit across the table from someone like a judge and tell them exactly what I’ve done without providing justifications or excuses, would they agree with what I did?”  If the answer is no, don’t do it.

Author: M.L. Humphrey

I'm a consultant with a focus on financial regulation and a writer with too many pen names.

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