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in BUS 4027W - Actuarial Risk Management by

What is the difference between voluntary codes of conduct and self regulation. It seems that when a financial services industry draws up voluntary codes of conduct, that is the definition of self regulation. 

2 Answers

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by (1.1k points)

I understand what you mean. Perhaps self regulation is more the case when even a code of conduct is not needed? If everyone in the market is well-informed, there is no need for regulation at all (to reduce information asymmetry)?

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by (680 points)
According to the notes:

Voluntary codes of conduct – drawn up by industry - lack of public confidence and can be destroyed by a few rogue operators
Self-regulation – organised and operated by the participants in a particular market without government intervention – greatest knowledge of market and wants to keep consumer confidence – too close to industry, consumers may feel they are exploited, may prevent new participants.

My interpretation is that self-regulation is more prescriptive in that the industry puts in place professional bodies and imposes their own type of disciplinary actions on those who break the rules. I think of it like ASSA taking away the qualifications from actuaries who are grossly negligent. So it is not as voluntary as if you do not follow them, there will be industry imposed disciple.

Voluntary codes of conduct are more of a free for all. Companies draw up guidelines together and hope everyone follows it.

Hope that helps.