THE regulation of financial brokers has been a game of pass the parcel for years. The Central Bank does not want to do it, and the Department of Enterprise and Employment has been content to leave the main work to industry groups.

The Tony Taylor affair shows, however that from time to time the music stops and nobody has removed enough layers to know what is in the package. The Minister, Mr Rabbitte, needs to come up with a plan for more pro active policing in his review now underway.

Most other parts of the financial industry are subject to fairly strict monitoring. But insurance brokers and many other financial middlemen are not.

This part of the industry is still largely based on self regulation, where the main responsibility lies with industry bodies, particularly the Irish Brokers' Association. In a world where money can be transferred across the world electronically in an instant, a much more active system of regulation is needed.

Of course, no system can provide a cast iron guarantee that investors' cash will never be at risk. Those with money to invest will always be attracted by the salesman offering a return a bit higher than the rest. And those with access to other people's money will always be open to temptation.

But investors have the right to expect some basic level of regulation by the State of those handling their money. In many areas of the financial system such regulation is in place, generally under the control of the Central Bank.

However, in the case of insurance brokers and investment advisers, the Central Bank has resisted taking on the task, probably realising the huge amount of work involved in policing a sector which includes thousands of small operators.

This has left the Department of Enterprise and Employment in the driving seat and it, in turn, leaves much of the groundwork to bodies such as the Irish Brokers' Association (IBA).

In the wake of the Tony Taylor affair, some finger pointing is going on between the Department and the IBA. But whatever the specifics, serious questions have been raised about the regulation of the industry.

Mr Rabbitte can justifiably point to swift action by his Department once the problem came to light. Questions remain, though, about how a firm which had not filed accounts for a couple of years, with a managing director who was clearly not handling funds in a proper manner could fail to attract the attention of any regulator.

The Irish Brokers' Association still has questions to answer as to its role in the whole affair. Specifically, the IBA must urgently clarify what it now sees as its powers when it receives a complaint by an investor.

A recent court case in which a defamation award of over £500,000 was made against the IBA because of a statement made in a circular about one of its members - has led the industry association to tread carefully in the Taylor case. The award, which the IBA says it is appealing, has made the association wary of moving against other brokers on foot of complaints.

The two investors who complained to the IBA were told to pass their complaints to the Department. The IBA's own procedure, they were told, would involve the association putting the questions to the broker involved and, if necessary, calling the broker to appear before a council meeting.

It is the sort of regulation by peers which used to characterise large parts of the financial sector.

But in recent years, most financial markets have become the subject of more active regulation by statutory bodies.

Clearly, a large and well resourced body is needed to bring the same level of monitoring to financial advisers and insurance brokers. The industry bodies such as the IBA may still have a role, but the main responsibility for regulation must lie elsewhere.

In the short term, the Government must address the IBA's belief that it is legally hamstrung in dealing with complaints.

If the main self regulatory body feels unable to pass on complaints to the Department of Enterprise and Employment for legal reasons, then there is a problem.

In the longer term, there would appear to be two options. One is to get the Central Bank to do the job and give it the resources to do it.

The bank has long resisted taking such a role. Back in 1991, the then governor, Mr Maurice Doyle, said that in his view regulation of investment advisers "would not seem to be appropriate to the Central Bank". However, the bank is now the regulator of most of the financial industry.

THE OTHER option is to follow the British example and set up a new statutory body to regulate the sector, together with a proper compensation fund paid for by the industry itself.

The wider issue of the treatment of white collar crime is also raised.

Whatever new regime is in place, an element of "investor beware" will remain. Traditionally in Ireland, some investors have been keen to find "confidential" havens for their funds, often to avoid the glare of the Revenue Commissioners.

People who move funds offshore for such purposes, or who are lured by brokers offering enormous returns, must bear some of the blame if their funds are lost.

But the authorities must do more to protect those who give their money in good faith to a broker or investment adviser to invest. At least a cursory look inside the parcel from time to time would help to protect the investing public.