My post about Capital + Merchant Finance hitch-hiking on Lloyds’ good name did not predict their collapse, though being cute or cunning in advertising is on my very short list of tips for knowing when not to invest.

Lloyds should be worried. If I was one of the 7000 investors who might have been mislead by the appearance of Lloyds’ support I’d be looking for a way to draw them in. Their pockets are deep. 

The big fat law about to be unleashed to regulate investment advisers is a waste of time. I had not heard solid rumours about C + M but there are now claims that ‘everyone knew they were in trouble”.

The government should be asking pointedly why, if that is the case.  Is the market too scared to speak openly, so that rumour benefits only the insiders?  Markets are supposed to process imperfect information.  They impound rumour and opinion into prices.  That is the main claim for the superiority of market systems.

Have our naive laws around market information nobbled them in their main function?  Is it defamation law’s gagging effect?  The law is supposed to exempt statements of opinion, but the huge costs in successful defence may be suppressing free speech.

I suspect that the investment adviser law that the the Hon Lianne Dalziel is just about to pass will make the problem worse, by sending the message that it is legally risky to talk about investment matters at all.

The Ministry of Economic Development has become a Beckham of own goals in Securities Law matches.

Anyone can get 70% of the value an ordinary investment adviser adds by following 3 simple rules – spread your risks, spread your risks, and spread your risks.

Another 20% comes from remembering:

•  high return = higher risk;
• long reputations are usually better than short ones. 

On the other hand there are a few investment advisers who are worth more than you’ll ever pay them. Who they are is hard to know in advance, just like lottery tickets. Nothing in the new law proposals is likely to help you win lotteries.