DRAFT: Investment Protection

[Charlotte Ryberg]

This is a rough draft to protect people's savings and combat investment fraud.

Investment Protection
A resolution to reduce income inequality and increase basic welfare.

Category: Social Justice | Strength: Mild | Proposed by: Charlotte Ryberg

Description:The World Assembly,

UNDERSTANDING that many people trust a financial institution to safeguard and enhance the value of their investments;

WORRIED that certain financial institutions may take advantage of this situation to make unfair gains at the expense of the investor;

SEEKING to tackle investment fraud and increase the confidence of entrusting investments with financial institutions;

Defines for the purpose of this resolution:
• Financial institution: An institution that accepts and manages deposits or savings and/or provides investment or pension funds for its clients or members;
• Investment fraud: A crime in which the perpetrator uses false information or speculation to lure victim(s) into parting with their money for the perpetrator's gain and at the victim's loss;
• Pyramid scheme: An unsustainable business model where the exchange of money takes place when investors recruit people into the scheme, without any product or service being delivered and where separate investors are paid returns from either their own money or money paid by subsequent investors, rather than the profit earned.

Therefore,

1. OUTLAWS pyramid schemes and investment fraud in all member states and demands all member states to help in bringing perpetrators of investment fraud are brought to justice.

2. MANDATES that financial institutions in member states must regularly publish audited financial reports about its activities and current financial situation.

3. URGES all financial institutions in member states to comply with the following code of conduct:
a) All advertising and promotional literature must have clear information about their products and services and must not be misleading;
b) Clear information about their products and services, how they work, their terms of service and interest rates must be publicly available;
c) Financial institutions must commit to support their customers by providing regular balance statements (where applicable) and inform them of changes to interest rates, charges or terms and conditions;
d) Financial institutions must not tie-in their customers and should help customers that have moved their account(s) from another institution;
e) The issue of credit and loans must be done responsibly;
f) Complaints and assistance by members must be honoured in a just, timely and non-discriminatory manner.
g) All personal information held by financial institutions must be private and confidential; payment/dispensing systems they operate must be secure and reliable; personal information may only be available to the person itself and the government of member states in the interests of investigating criminal activity.

4. URGES member states to legally disqualify persons convicted of investment fraud from acting as, without judicial permission: a director, secretary or liquidator of a company; a receiver or manager of a company's property or in any position, whether directly or indirectly, being concerned or taking part in the promotion, formation or management of a company.

5. ENCOURAGES member states to:
• Compensate (where possible) victims of investment fraud and collapsed pyramid schemes by seizing the assets of the perpetrators convicted of investment fraud;
• Set up a reserve fund to protect part or all of the client's savings in case a financial institution collapses.

---

Comments, criticism and expansions requested.

[Bears Armed]

OOC: Imposing extra regulations on businesses does NOT qualify as a 'Free Trade' measure...

[Charlotte Ryberg]

Modified to consider alternative categories of best fit, honoured ambassador.

[Unibot]

OOC:

I suppose it would be helping to combat income inequality by lessening the grip of capitalistic banks on citzen's money with their income in mind, so I'd go with Social Justice.

I'll have the Stash Kroh ambassador review this draft soon.

[Charlotte Ryberg]

I have also discovered another investment fraud model which should also be banned. Since it is called a Ponzi scheme, although the methods itself is rational, it has to be given an alternative name, for which I decided to make it part of a pyramid scheme.

Anyway, these schemes are to be banned since they are unsustainable investment schemes.

[Bears Armed]

OOC:
1. For the category, given that it's imposing behavioural rules on people within the nations, I'd suggest 'Moral Decency (Mild)' as the most appropriate classification now.
2. Does clause #1 mean that both of the stated conditions must apply, or only that either one of them must do?

[History land]

Social Justice an Idea behind the Morality of Death.

It sickens me who ever belives in Social Justice and Social Enginnering.

Those ideas are dangerous and destructive to individual rights and Free Trade.

[Charlotte Ryberg]

OOC:
1. For the category, given that it's imposing behavioural rules on people within the nations, I'd suggest 'Moral Decency (Mild)' as the most appropriate classification now.
2. Does clause #1 mean that both of the stated conditions must apply, or only that either one of them must do?

Both categories considered for analysis. I am concerned about banning the biggest bits of investment fraud such as pyramid schemes because they are unsustainable and a scam because if it collapses, the people will be left out of pocket and the initiator of the scheme has therefore laundered the money off his victims.

I have identified two major characteristics of the pyramid scheme (which is a generic term). If it carries the characteristics of one of the two, then it's illegal. Corrected.

[Buffett and Colbert]

OOC: I find it odd how you outlaw pyramid schemes and not at least several other financial schemes. That one alone seem rather out of place.

Also,

f) Financial institutions must deal as quickly and sympathetically as possible with complaints and consider all cases of financialdifficulty fairly, sympathetically and positively.

This is unrealistic. And unenforceable [or rather over-enforceable as some little pisser could call the WA (or whoever's in charge) and report that a company "wasn't being nice to me."]

[Yakana]

• The exchange of money takes place when investors recruit people into the scheme, without any product or service being delivered, or;

This is way to broad.. You could say stock markets are included, and other legal trading methods.

[Charlotte Ryberg]

OOC: I find it odd how you outlaw pyramid schemes and not at least several other financial schemes. That one alone seem rather out of place.

Also,

f) Financial institutions must deal as quickly and sympathetically as possible with complaints and consider all cases of financialdifficulty fairly, sympathetically and positively.

This is unrealistic. And unenforceable [or rather over-enforceable as some little pisser could call the WA (or whoever's in charge) and report that a company "wasn't being nice to me."]

Since the business of investment fraud is difficult to describe in terms of the types of fraud involved, I am envisaging on creating a broad definition on investment fraud, where:

"the perpetrator uses falsified information to lure victim(s) into parting with its money, at the perpetrator's gain and at the victim's loss."

Then I would need entice national governments to commit to tackle fraud, using tactics such as freezing of assets of scammers and seeking damages.

[Travancore-Cochin]

Madam, we find it remarkable that, even though this resolution is in its earliest stage of draft, it has not yet incorporated text that would make it mandatory for financial institutions to regularly publish audited financial reports about its activities and current financial state. Therefore, we plead that such a clause be adopted at the earliest.

[Charlotte Ryberg]

Madam, we find it remarkable that, even though this resolution is in its earliest stage of draft, it has not yet incorporated text that would make it mandatory for financial institutions to regularly publish audited financial reports about its activities and current financial state. Therefore, we plead that such a clause be adopted at the earliest.

Considered for inclusion, honoured ambassador.

Member states are now mandated to tackle investment fraud although further elaboration on how they do it is needed. Possible tools of defence could include a global blacklist of people banned from becoming directors of a company as a result of fraud, and possibly some way to encourage member states to compensate victims of fraud.

[Charlotte Ryberg]

16/8/09 Update:

Well now it may not be possible to create a global blacklist due to the concerns of it pushing the fourth wall and meta-gaming, but what can be done for this draft is member states can lawfully DQ convicted fraudsters from taking up positions, in any way, whether directly or indirectly, is concerned or takes part in the promotion, formation or management of a company and similar, for up to 15 years. i have also defined a financial institution in the preamble, and also narrowed the scope of coverage to investment, seeing that it would be appropriate to cover credit and loan protection in a separate resolution.

Also, compensation fund for victims may be retrieved by seizing the assets of convicted perpetrators of fraud and in the case of bank failures, setting up a reserve compensation fund to recover part or all of people's savings. The ambassador has also mandated auditing and considering regulated accounting.

Next, I am expected to focus on refining the proposed code of conduct. Some may be made mandatory, while some may become rules of good thumb.

[Travancore-Cochin]

OOC

Might I suggest that the strength be upgraded to Significant?

IC
------------------------------------------------------------------------------------------------------
Having read the revised draft being circulated in the Assembly, Ambassador Parameswaran Nair rises from his seat.

"We have a couple of suggestions to offer."

"First concerns Section 2, Article b. We propose that a new article be adopted which would urge financial institutions to make their terms of service and interest rate(s) publicly available, rather than "on request", while maintaining the rest of 2.b. intact."

"Our second suggestion is on Section 2, Article f - the so-called "unrealistic" clause. We believe that this can be easily made realistic. We propose that the clause be modified so that it may read, in letter or in spirit, as follows:"

Financial institutions must deal with complaints of its clients in a just, timely and non-discriminatory manner.

"That will be all for now. Thank you for you time."

[Tybra]

On 2.g, we find this clause ought to be edited as such that a government can look into this personal information, when criminal activity is suspected and the information provides vital information regarding the criminal activity. Any required order (court, district attorney, none) should be further defined under national law.

On 3; how would regularly be defined? Would a monthly, annual, 5 year, 10 year or even 15 years suffice? We believe it's best to do this in on an annual bases to harmonize it with annual tax forms, creating a neutral and objective form. We do base this annual publishes on the assumption that the majority of the nations, collect taxes on an annual basis.

On 4; On what ground is 15 years justified? Would it not be best to make this the maximum punishment to then be further defined (mainly the criteria for length of punishment) under national law.

[Travancore-Cochin]

On 2.g, we find this clause ought to be edited as such that a government can look into this personal information, when criminal activity is suspected and the information provides vital information regarding the criminal activity. Any required order (court, district attorney, none) should be further defined under national law.

The Ambassador from Tybra raises a valid point. The resolution can provide for revealment of personal details, in court, as a result of a judicial ruling / court order.

On 3; how would regularly be defined? Would a monthly, annual, 5 year, 10 year or even 15 years suffice? We believe it's best to do this in on an annual bases to harmonize it with annual tax forms, creating a neutral and objective form. We do base this annual publishes on the assumption that the majority of the nations, collect taxes on an annual basis.

This can be left to interpretation by individual nations, respected Ambassador.

[Charlotte Ryberg]

Update, 8.25pm:

The honoured ambassador has taken the possible strength upgrade into consideration and will review this as the development nears completion. It is possible that with strong protections this may appear likely.

Article 2b has been revised to become a mandatory clause, reading: "Clear information about their accounts and services, how they work, their terms of service and interest rate(s) must be publicly available." It should be mandatory since these information needs to be known by the members when they open an investment nest. Article 2f has been revised to become a mandatory clause as well due to trading standards laws that most member states may impose. It now reads: "Complaints and assistance by members must be honoured in a just, timely and non-discriminatory manner."

I also honour the request in regards to section 2g, although the forthcoming Right to Privacy bill may influence the final result of this clause if passed. Currently it will read: "All personal information held by financial institutions must be private and confidential, and payment/dispensing systems they operate must be secure and reliable. Personal information may only be available to the person itself and the government of member states in the interests of investigating criminal activity." How it gets done is under national law.

In section 3, I feel it is best for member states to freely interpret although if there are potential loopholes, honoured ambassadors are welcome to inform us and we will correct it. Although acknowledging that annual reports are very common, some FIs that are keen on high levels of transparency may publish reports every quarter or smaller reports every month to keep all corners of the company updated to the best possible level. As for section 4, also revised to allow member states to consider tougher terms. If it's too strong, then inform us then we will correct it, honoured ambassadors.