Omar Davies, in his mostly thoughtful intervention in the budget debate on Tuesday, made a suggestion that surprisingly, has ignited little public comment, given current circumstances.

Dr Davies proposed that the major financial services regulators, the Financial Services Commission (FSC) and the Bank of Jamaica (BOJ), as well as the finance ministry, be asked, as a matter of urgency, to prepare assessments, legislative and administrative, of what they would wish to enhance their capacity to police the sector. The matter would then go before Parliament, perhaps first via a special select committee, for action.

Clearly, any such request to these agencies, as well as the suggested follow-up action, will have to come from Finance Minister Audley Shaw, or his boss, Prime Minister Bruce Golding. We hope they act. There are good, and obvious, reasons that they should.

Affect account holders

Yesterday, Carlos Hill, founder and chief executive officer of Cash Plus Ltd, the controversial and unregulated investment entity, appeared before a magistrate seeking bail on a charge of fraud and money laundering. He had been in custody for a week.

Whether Hill and his colleagues are guilty or innocent of the charges will, ultimately, be determined by the courts. But the matter highlights an issue that affects an estimated 40,000 account holders, who perhaps have $4 billion in Cash Plus. They had expected to receive interest of upwards of 10 per cent a month. Many did.

The fact, though, is that the FSC and others had warned that in the normal world of investments, such returns were unsustainable. They were ridiculed as protectors of traditional financial companies and the wealthy, who did not wish to see poor people prosper.

Cash Plus and other so-called alternative investment schemes fought hard to resist regulation by the FSC.

Unfortunately, Audley Shaw, who now has to face the potential fallout from Cash Plus, was among the voices appearing to give succour to a Wild West approach to the financial sector.

Moral hazard

From the opposition benches 14 months ago, he lashed out against the FSC for attempting to bring one unregulated institution under its umbrella. He suggested that investors were being alienated rather than being allowed to take "risks, yield high profits or suffer the consequences of their high risk-taking propensities".

We warned then that Shaw ran the risk of creating a moral hazard should his party become the Government and he, as expected, got the finance portfolio. Happily, the Government, through the prime minister, has made clear that it will not bail out investors in these schemes.

It is not unworthy to ask, though, if some people might have been comforted by Shaw's robust defence of the alternative schemes and persuaded to put their money with them.

We would expect that in the future, Shaw will be far more careful when pronouncing on a sensitive issue, including one which has the potential to impact markets.

But this issue, as is Dr Davies' suggestion for a serious review of financial sector regulations, is not just about the things that immediately consume us.

As the subprime crisis in the United States has shown, ever-evolving financial instruments make the job of the regulator increasingly problematic. Their tools, too, have to evolve - in Jamaica, no less.