Absolutely no third party governing body, they just don't work and are rarely objective.

I am actually more of the strict rules and guidelines, but only if they can be enforced in an efficient way. Uncontrollable bureaucracy is in noone's interest and just doesn't work. This means that you should attempt to keep the amount of rules and procedures to a responsible but adequate minimum.

Also, I believe any exchange should take more preliminary action when important/controversial things happen (i.e. at the time of Jasper Tizzy massively selling his own share for example): there's noone else who has the power to do anything there and I feel it is the obligation of the exchange to act fast in those cases. It is better to take unnecessary preventive action than end up with a scandal later. First act and then talk, rather than first talk and then act.

The IPO process is also a good compromise to partially let the market police itself, while also keeping a close eye from a distance.

I also strongly believe a close eye should be kept on CEO / company insider trading and especially on the sale of a massive amount of shares. You should have reasonable safety measures in place in case some CEO suddenly dumps a lot of shares and attempts to withdraw all the proceeds. I don't say CEO's aren't allowed to sell their shares. I say it has to happen in a controlled manner.

And generally you can learn a lot about what's going on and what needs your attention by simply reading what people say around here (and not unimportant: who says it). That and common sense should be enough for most situations.

Lastly, you can never make a completely fool proof system, as much about SL investing boils down to trust in the end. Nevertheless you can make many precautions as well as use common sense to prevent against most (obvious) frauds and scam artists.

I want to add under "police itself" that this means the users/investors/CEO do have a say in requesting a change -- to add or strike down any rule. Very little should be "set in stone subject soley to the dicatorial exchange owner".  But what rules there are should be applied evenly and quickly - this makes them fair while they are in force.

Exchanges have to have srtict rules and guidelines, and these rules must be impartially and rigourously enforced.  On some exchanges in SL (not this one, as far as I know)  there has been absence of rules or rules have been 'enforced' in a very random manner that some would regard as favouratism or nepotism.  The market cannot regulate itself - rules should be clear and enforced in a transparent manner.

Thanks everyone for posting, I am going to leave it open for a few more days before I post.

As far as enforcing rules, can it be done without further harming investors ? If the answer is no, then such enforcement should not take place (except if, and ONLY if majority of the shareholders agree that the ceo has to be punished).

I disagree strongly, this is one of the main reason why evident fraudulent stocks and companies can remain around for so long. To give an extreme, but clear example: it is never really in the shareholders interests to take action against scam artists, since their shares will proof to be worth L$0.00 a piece then (while that is actually their only right value).

The lack of adequate action when required is much more of an issue than is protecting shareholder value. If the exchange's actions are going to be taken based on whether it is good for the current shareholders, you'll never get a good system and you'll essentially be deceiving new investors.

Protecting shareholder value is definitely NOT the exchange's main purpose. The exchange's main purpose is to provide a genuine and fraud free investing environment to investors as a whole, without favorism towards old or new shareholders. The exchange should do all it can to prevent wide-spread scandals and take action as fast as possible when dubious situations arise.

Shareholder value should come from the company itself and if a certain CEO makes mistakes or deceives the investor population as a whole, then yes, the current shareholders are punished too. This is not different in RL at all.

You can't expect anyone else to take the loss caused by an inappropiate or fraudulent CEO. It is YOUR decision to invest in a company and if you have a bad feeling about the CEO of the company you should clearly not invest in it at all. The responsibility of your investment is completely yours too and you should not attempt to move that away to the exchange, who has nothing to do with it.

So many people have tried to setup a regulatory entity and it has been a miserable failure, the reason is quite simple:

There are no punishments that you can enforce on offenders.

So I laugh at anyone who tries to impose their will on others, Eliale Moragi tried this with his Rock Insurance, whilst it was a profit concern he was also trying to act like God passing judgement on people. He was stung by Jasper Tizzy and then the banking ban, where is he now??

I think it's up to the stock exchanges and investors themselves to regulate the market. So far the best idea that has come forward to help prevent fraud is Cocky's procedure in that ISE IPOs are voted on and discussed before they they are listed. It's not perfect, but it's a step closer to protecting the investor.

At the end of the day not even RL regulations prevent all fraud and loss (Worldcom, Onetel, Ansett to name a few) so it's up to the individual investor to take measures to protect themselves.

Hi Eliale,

So tell me, what failing business plan are you working on now??

Also, remember how you put all that faith into finding out someones RL address, thinking they have to be "safe". I changed addresses 5 times in 3 different countries, 12,000 miles apart whilst the Rock was opened for business, oh, and I'll be moving address again within the next 6 months. Why you put so much faith into Jasper Tizzy is beyond me, oh well, you paid the price for that.

Sorry to burst your bubble there Eliale but I actually beat you to the punch and recognised long before you the variables and dangers of running an insurance company in SL, especially in banking, that's why I didn't proceed with the venture.

What I found grossly offensive about your conduct was that you would ask for people RL location when, we didn't know who you were, we had no way of verifying your character, and we gained nothing from revealing our RL identities and we opening ourselves up to RL slander that was a path I was not going to go down. When people refused to give you their RL identity you resorted to SL slander and threats. My comfort there was that Jasper Tizzy fleeced you, a mere 1 week after verifying his identity.  Your attempt to "create some order"   was unable to prevent LL banning all banks............................good job, well done. I prefer to just run an honest and ethical business whereby my stakeholders earn a few lindens, that to me is the best way to "create some order" within the SL economy.

And yes I have moved from one side of the planet to the other, and then back again. I lived in 3 different countries in 2007 alone, I moved away from my home country for a period of 4 years. It's was greatest thing I've ever done, it's called life experience, I suggest you get some there's a big world outside of Milan and corrupt football teams that represent your city. Get out more.

Rod, rod, you must be very young to be so impulsive........  oh! btw, I do not like football! 

cheers!

Duke,

Way back in the days where the WSE had just opened (The 8th time, I think, it really did open for real that time), I found myself chairman of an angry mob trying to set up a regulatory body. I lasted 24 hours before throwing the towel in (and thank god I did), the problems were:

- Lack of education in the average SL resident. Let's face it, if you are educated in the regulatory field you're not going to waste your time in SL doing it for free, risking your professional reputation. So we were left with a few people who meant well and tried hard with good ideas, but there were drowned out by other people with no accounting knowledge whatsoever who just argued and bitched about pointless matters. I think at one point we spent 30 minutes on "who was going to be the scribe of the organisation", too bad there wasn't an actual organisation as yet, or organisation direction, mission statement, name, but hey, we had a scribe!!!!
- Very little policing ability, if any
- I also looked at the model of one of "education", rather than enforcement. In other words if a company stepped out of line they we would educate the public. Again no interest, and the problem being the SL public, whilst they have extraordinary building abilities far beyond anything I can do, they could not careless about accounting standards etc. I think the point is made in that I'm an accountant, and I couldn't careless about accounting standards and regulation it bores me senseless, I let others with no life worry about that, and I just read their summarised findings, so what hope did we have of making the average SL resident take notice.

I think our only victory was were managed to destroy Luke Connell regulatory body "SIC", which was obviously a sham, how can an exchange regulate itself??

I think you're right in that a regulatory body, with some policing abilities is possible, but the effort of doing it, it's just not worth it.

To keep debate going, I will now talk about what is obvious.  I have moved to a stance of let the market police itself.  This appears to be in stark contrast to what every other exchange is doing and my own initial beliefs on the subject when I first started out.  The reasons for my change are many.  But the most overwhelming belief to me is that the market has a collective intelligence that is greater than one person or a small group.  The SLEC was an attempt to hand off this regulation to a small group but obviously it didn't work.  Conflicts of interest made the SLEC's existence impossible.  The same conflicts of interest also makes it impossible for one person to do the job.   

My first test of having to regulate the exchange came with Jasper Tizzy.  The truth is I knew something was terribly wrong but there was nothing I could do.  I talked to the people closest to me for advice and felt that even they didn't believe me.  I quickly realized my problem as one individual.  So I started working on developing the tools to put in the hands of the members of the exchange to allow the market to police itself.  I added comments to the press releases, revealed the trades of the CEO, and revealed alt trading.   

The next big piece of the puzzle was the forums.  I didn't want to do forums early on to allow 3rd parties to spring up and fulfill this need.  Instead I linked each company to a 3rd party forum dedicated to SL finance.  I did this so that I would not have to deal with  my own conflicts of interest managing forums.  This was a mistake and one that I corrected with the addition of these forums.

There isn't a right answer but I believe the success of SL finance depends on a collective market intelligence regulating itself.  Instead of taking a heavy handed approach, I have tried to create the software to allow that to happen.  I hope I am succeeding because I feel it is the right path.

I would like someone to prove me wrong that allowing the market to run itself is wrong but to me the empirical evidence suggests it is the best way.

Cocky, I agree mostly with your viewpoint, except that I do believe an exchange needs to intervene at certain times, because they are the only one with any actual power to take action. Investors have no power at all, while scam artists have a lot of power too. Therefore I believe more in a system were rules are relatively loose (like I said: keep them to an adequate minimum), but where the exchange owner does keep a close eye on everything that is posted everywhere, and where he investigates/closely tracks anything that alerts his warning sensors.