Financial Services Regulation Literature Review

Financial Services Regulation Literature Review Literature review on financial services regulation Consider whether flexibility in implementation of financial services regulation can undermine legal certainty. Does a move towards principles-based regulation of financial services presage a regulatory creep without a statutory grounding or does it allow regulators to keep pace with the financial services market? Introduction Regulation is often unpopular, and may be viewed as unnecessary. However, the existence of market failure is a reality in certain markets that needs to be corrected by some form of government intervention. In the financial services industry, for example, there is clearly a need for some kind of regulation as demonstrated by, for example, the Nick Leeson affair or the Enron scandal. Yet such cases also demonstrate the failure of regulation – the regulatory systems in place did not succeed in preventing these two debacles. Hodgson (2006:247) takes a positive view of regulation, or at least of the right kind of regulation, arguing that ‘[r]egulation can and should be a necessary, proportional and beneficial approach to the organisation of society. It lets us police the supply of goods and services and maintain standards and resolve complaints within a properly established legal framework, but without inappropriate political involvement or, in most cases, resort to the court s.’ Financial services regulation in the UK – objectives In the UK, the Financial Services Authority (FSA) has four statutory objectives: market confidence (maintaining confidence in the financial system); public awareness (promoting public understanding of the financial system); consumer protection (securing the appropriate degree of protection for consumers); and reduction of financial crime (reducing the extent to which it is possible for a business carried on by a regulated person to be used for a purpose connected with financial crime). In addition, the FSA is guided by a set of principles to which it must adhere. For example, it must use its resources efficiently, and any restrictions it imposes on an industry must be proportionate to the expected benefits of the restrictions. Furthermore it should avoid stifling innovation where possible. This means that the FSA must allow for different means of compliance in order not to unduly restrict firms and industries from launching new products and services. In addition, the FSA should help to maintain the competitive position of the UK internationally. In order to promote competition among the firms that it regulates, the FSA should avoid creating any unnecessary regulatory barriers to entry or expansion in any of the markets it regulates. Hodgson (2006:251) explains that the ‘FSA was set up to do rather a lot of things: to promote market confidence and public awareness of financial services (meaning encourage savings), protect consumers and reduce financial crime. It is also required to maintain the international success of Britain’s financial sector, promote competition whilst minimizing any adverse effects, and weight the costs and benefits of its own actions. Plenty of scope for conflicts of interest there.’ An assessment of the move to more principles-based regulation must examine how such a move is likely to impact on all of the objectives of the FSA. Principles-based regulation and rules-based regulation Cunningham (2007) explains that since the Enron scandal and other debacles in the financial services industry, there has been a trend to categorise rules-based regulatory systems as bad, and principles-based regulatory systems as good. However, he argues that the distinction being made between â€Å"rules-based† and â€Å"principles-based† systems is false and misleading. Cunningham (2007:3) claims that while an individual provision in a regulatory system may be â€Å"rules-based† or â€Å"principles-based†, these ‘classifications are too crude to describe or guide the design of corporate law, securities regulation or accounting systems.’ That is to say the terms are not scalable to the level of an entire system. Instead, Cunningham (2007:4) points to ‘the necessity and value of combining rules and principles and the difficulty of designing systems warranting classification as rules-based or principles-based.’ While it may be the case that any regulatory system is necessarily a hybrid made up of a mixture of â€Å"rules-based† and â€Å"principles-based† individual provisions, that does not mean that some systems are not â€Å"more rules-based† or â€Å"more principles-based† than others. Indeed this notion ties in with the reality of the UK financial services regulatory system. As will be seen below, the system is already a hybrid of â€Å"rules-based† and â€Å"principles-based† approaches, and it is moving towards â€Å"more principles-based† regulation. Regulatory creep There are various definitions of regulatory creep. The Better Regulation Task Force (2004:3) define it as ‘the process by which regulation is developed or enforced in a less than transparent fashion and not in accordance with our five Principles of Good Regulation.’ The BRTF (2004:5) goes on to identify four examples of how regulatory creep may occur when regulation takes place without transparency. In the first place, ‘a lack of clarity about the intention of regulation, particularly goal-based regulation, both on the part of regulators and those being regulated, can lead to unnecessary compliance burdens.’ Secondly, the way that guidance ‘is developed and used can influence enforcement activity and compliance, again leading to unnecessary burdens that bring little benefit to those the original regulation was designed to protect’. Thirdly, it is argued that ‘enforcement activity can induce over compliance in those being regulated’ and finally, ‘ombudsmen’s rulings can have wider regulatory implications’. Jones (2004:6), on the other hand, points out that ‘there is a positive aspect to creep. Formal responsibilities may leave gaps in enforcement. Shifting priorities and creative interpretation of a regulator’s brief may be necessary to tackle newly emergent issues.’ Moving towards more principles-based regulation: the case of the UK The first point to make is that in the UK, Principles-based regulation has existed since 1990, and the eleven high-level Principles for firms (see box 1) have been in place since 2001 (FSA 2007a:4). The FSA is now talking about a ‘more Principles-based approach’. This shift is based on a move towards broad-based standards instead of detailed rules together with an increased focus on outcomes-based regulation and an increase in senior management responsibility. According to the FSA (2007a:4), ‘Principles-based regulation means, where possible, moving away from dictating through detailed, prescriptive rules and supervisory actions how firms should operate their business. We want to give firms the responsibility to decide how best to align their business objectives and processes with the regulatory outcomes we have specified.’ Moving towards more principles-based regulation: pros and cons There are clear advantages to a principles-based approach to regulation, but such an approach also carries certain risks (of which regulatory creep is just one). The challenge is to achieve the right balance between principles and rules. As the BRTF (2004:6) explains, ‘part of the attraction of goal-setting regulation is its flexibility and we do not want to discourage this. Nor do we want to discourage the use of guidance as a useful alternative to regulation for driving up standards. But where does guidance as a useful alternative in driving up standards end, and regulatory creep begin?’ In this section, I will review the pros of a move towards more principles-based regulation, and I will then outline the various risks or cons associated with such a move. One major advantage of more principles-based approaches to regulation is increased flexibility and responsiveness to innovation and market developments. de Serres et al (2006:32) find that ‘financial system regulation has a statistically significant influence on output and productivity growth as well as on firm entry, via the impact on industrial sectors relying more heavily on external sources of funding. The economic impact is also found to be substantial enough to matter, yet sufficiently small to remain credible.’ This highlights the need for financial system regulation to minimise unnecessary regulatory barriers to entry or expansion in the financial services market. According to the FSA (2007a:5), a principles-based system is likely to be more durable than a rules-based system precisely because of its flexibility. ‘Financial markets are constantly changing. Continuous innovation and new product development are important ways in which the financial services industry generates benefits for consumers and markets. It is important that regulation can respond rapidly to the pace of change in markets and so allow them to continue to develop for the benefit of their users. We believe regulation that focuses on outcomes rather than prescription is more likely to support this development and innovation. Any set of prescriptive rules is unable to address changing market circumstances and practices at all times, and it inevitably delays, and in some instances prevents, innovation.’ Another benefit of more principles-based regulation is that it should provide greater freedom for firms to develop their own approach to compliance. According to the FSA (2007a:7), a more principled-based approach does in practice mean ‘giving firms increased flexibility to decide more often for themselves what business processes and controls they should operate.’ In addition, a move to principles implies less need for detailed rules which leads to a simplification of the rules or handbook. The FSA (2007a:8) views a simplified handbook as a side benefit of a move to more principles-based regulation, rather than a key driver behind the move, additionally arguing that, ‘reducing the overall size of the Handbook, however desirable, does not in itself deliver principles-based regulation. Even a substantially reduced Handbook will still be regarded by many as a daunting prospect. We should therefore not measure our success in achieving principles-based regulation by the number of Handbook pages or the number of rules they contain, but by the effect that the Handbook review, together with other initiatives, achieves over time.’ Perhaps one of the most important potential advantages of a move to more principles-based regulation, if properly implemented, is a greater degree of substantive compliance as individuals and firms come to comply with outcomes and the general principles rather than on the detailed rules – as the spirit of the law is prioritised over the letter of the law. Another key advantage is the increased engagement of senior management. The FSA (2007a:12) explains that ‘Moving towards principles-based regulation has significant implications for how we work with firms on a day-to-day basis We are looking for firms to take greater responsibility for how they meet their regulatory obligations. This responsibility in many cases will be taken on at senior management and Board level, using the various materials that will be available and, where necessary, conversations with us†¦ Firms will see a difference in how we behave towards them. We will give greater recognition to firms’ own management and controls and this will be reflected in areas such as capital requirements and supervisory intensity. Well controlled and managed firms that engage positively and openly with us should expect to experience real benefits from our more principles-based approach in the form of a regulatory dividend, for example relatively lower levels of regula tory capital, less frequent risk assessments, greater reliance on firms’ senior management or a less intensive risk mitigation programme.’ Finally, proponents of a more principles-based approach argue that it should lead to more efficient solutions to regulatory problems. This, however, depends on the system for the resolution of any such problems and could in fact be more or less efficient with a more principles-based approach, depending on how that system is designed and implemented. A major risk associated with a move to principles-based regulation is the lack of certainty or predictability. This is a risk that needs to be managed carefully in order to ensure that firms and individuals understand their obligations in the absence of specific rules as to how they should act. The FSA (2007a:12) acknowledges the need to address this risk and explains that ‘with a less prescriptive Handbook we are convinced that we must go further than we have been inclined to in the past in responding to firms’ queries. We will need to work with firms and the practitioner panels to find the right balance in achieving this.’ Accountability issues are, arguably, also more likely to arise in the absence of detailed rules. Wilson (2007) explains that the FSA approach to accountability and governance issues has always been principles-based, explaining that ‘we take a strong interest in how firms govern and organise their affairs because we take the view that if you get this right, much else follows. In doing this, our approach is generally to ask for explanations as to why the structure put in place offers the necessary challenge and level of control, and where such explanations are unconvincing, to seek change that achieves a better outcome.’ There may also be certain legal obstacles to a more principles-based approach to regulation. Obviously any regulatory body needs to remain within the law, and in the case of the UK FSA this includes, for example, EU law. It is important to recap at this stage that a move to more principles-based regulation does not mean the abolition of all detailed rules. Indeed the FSA (2007a:20) cites European legislation as one of the challenges or constraints that will remain as they move in the direction of a more principles-based system of regulation. Finally, and most pertinent to this review, is the increased risk of regulatory creep with a move to a more principles-based system of regulation. The BRTF (2004:11) identify two principal means through which a principles-based approach may lead to regulatory creep. The first of these is through a possible proliferation of guidance and overzealous enforcement. ‘High level goal-setting objectives may need further clarification. Goalsetting regulation can leave a vacuum that Government, regulators and industry will seek to fill with guidance. The guidance may stray beyond the original intention and/or it may be applied prescriptively by regulators and those being regulated.’ The second occurs if insufficient thought is given to how firms will demonstrate compliance with the principles, or if compliance staff lack adequate skills. ‘Regulators argue that it is their job to prove noncompliance and that there is no legal requirement for duty holders to demonstrate compli ance. However, compliance should not be a guessing game. Those being regulated do need to understand what is required of them in practice.’ Conclusion Clearly there are some advantages to Principles-based regulation of financial services, but there are also some risks. There will always be a place for rules in regulation, and the key to successful Principles-based regulation is to know when it is appropriate to rely on Principles, and when to specify detailed rules. Reliance on principles requires the provision of consistent advice to firms, and a commitment to ensure the regulator’s accountability mechanisms are not bypassed. These requirements in turn point to the need to ensure that compliance staff are sufficiently skilled and trained. The OECD (2005:4) highlights the need to pay ‘close attention to the institutional setting, with a view towards fostering accountability, transparency and trust’ in order to achieve high quality regulation. This is the case whether a more rules-based or a more principles-based approach is taken. As the BRTF (2004:14) points out, ‘[i]t is not only goal-setting regulation that can lead to regulatory creep. A lack of clarity about the scope of any type of regulation can lead to regulatory creep.’ A move to more principles-based regulation has the potential to presage a regulatory creep without a statutory grounding as well as the potential to allow regulators to keep pace with the financial services market. The aim of any such move must be to realise this latter potential whilst avoiding the former. Bibliography Better Regulation Task Force (2004) Avoiding Regulatory Creep. October 2004. London: Better Regulation Task Force. Cunningham, L. (2007) A Prescription to Retire the Rhetoric of â€Å"Principles-Based Systems† in Corporate Law, Securities Regulation and Accounting. Boston College Law School Legal Studies Research Paper Series, Research Paper 127, 13 March 2007. de Serres, A. et al. (2006) Regulation of Financial Systems and Economic Growth, OECD Economics Department Working Papers, No. 506. Paris: OECD Publishing. FSA (2007a) Principles-based regulation: Focusing on the outcomes that matter. April 2007. London: FSA. FSA (2007b) FSA Handbook, Release 065, May 2007 Hodgson, P. (2006) The Rise and Rise of the Regulatory State. The Political Quarterly 77(2) April-June 2006. pp247-254 Jones, C. (2004) ‘Regulatory Creep: Myths and Misunderstandings’, in Risk and Regulation, No 8 Winter 2004 p.6 OECD (2005) Designing independent and accountable regulatory authorities for high quality regulation. Proceedings of an Expert Meeting in London, United Kingdom, 10-11 January 2005. Paris: OECD. Wilson, S. (2007) Supervision in a Principles Based World. Speech given to the FSA Retail Firms Division Conference, London, 27 February 2007 (available from http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2007/0227_sw.shtml)

Educating Rita and the Allegory of the Cave Essay

The film â€Å"Educating Rita† and the essay â€Å"the Allegory of the Cave† are based on philosophical ideas and problems connected with personal development, education and understanding of the good life. ‘Educating Rita† and the essay â€Å"the Allegory of the Cave’ portray personal development of people and importance of education, persistence and hard work crucial for success and self-determination. Thesis Both works portrays that only self-improvements and education combined with personal values will create a unique personality able to obtain social status and understand the world. Educating Rita’ and ‘the Allegory of the Cave’ discuss the role of persistence and hard work in education and learning. In the film, the main heroin would not be able to achieve success and change her personality without diligence and great desire to archive this success. Similar to the film, Plato portrays that persistence and desire to learn something new drive the personality. Thus, both works show that learning differences arise from different motives and personal traits, different goals and life expectations of the characters. Socrates questions: â€Å"And when he remembered his old habitation, and the wisdom of the cave and his fellow-prisoners, do you not suppose that he would felicitate himself on the change, and pity them? (Plato). In this case, thinking and analysis are the main tools which help the student to learn and develop new knowledge. For learners, one of the first and most basic steps to master new knowledge is to develop strong skills through practice and cramming. The works portray that a unique personality is coined by education and learning, knowledge sharing and continuous practice. ‘Educating Rita’ portrays that learning ensures that the knowledge is generated and perceived currently. ‘Educating Rita’ portrays that every person can improve her knowledge and receives good education in spite of her class location and background. Similar to the film’s theme, Plato says: â€Å"Whereas our argument shows that the power and capacity of learning exists in the soul already† (Plato). It is important to note that in contrast to many other students who work hard for many years but fail to achieve their dream, the film and Plato’s essay describe that learning can shape any personality in a short period of time, but he/she needs long-life learning and education in order to to keep abreast of time and expend his/her knowledge. Both works, â€Å"Educating Rita† and â€Å"the Allegory of the Cave† discuss the important role of teacher and mentor in education and self-development. The role of the teacher is to motivate and inspire his pupil. In general terms, motivation in the pupil can be described as the direction and persistence of action. It is concerned with why people choose a particular course of action in preference to others, and why they continue with a chosen action, often over a long period, and in the face of difficulties and problems. The process of learning is closely connected with self-regulated learning. Plato comments: â€Å"He will then proceed to argue that this is he who gives the season and the years, and is the guardian of all that is in the visible world, and in a certain way the cause of all things which he and his fellows have been accustomed to behold? (Plato). In the film, this process is supported by strong personal commitment to work, life goals and hopes which have not come true. In contrast to ‘the Allegory of the Cave’ in the film motivation is concerned, basically, with why Rita behaves in a certain way. Personal motivation and life goals have a direct and positive impact on her self-direct learning. Her motivation can be describes as urges, aspirations, drives and needs of human beings direct or control or explain their behavior. Symbolically, for prisoners ‘light’ symbolizes ‘truth’ while for Rita ‘education’ becomes the light in her life. In sum, both works describe that our world views depend upon education, learning, and a teacher who supports and guides his pupil. Education is the first major step that increases personal values of everyone and creates new opportunities to succeed on the workplace. Learning is typical for people, because they see persistence and diligence as important qualities of a character and personal traits. Character Sketches Rita (Susan) Rita is a young (about twenty) working class girl (hairdresser) who wants to improve her life and continue education. She is marriage but her husband is constantly against her education. From the start it is clear from her bad grammar that she has a less polished education than the other students. At the start she is simply the instrument of Frank. Later she seems to have some pity for him. One sign of Rita’s development is her growing realization of how Frank cares about her. She is smart, brave and courageous to start a new life. To be so clear about one’s upbringing is a step in overcoming it. At the end of the film she becomes persistent, diligent and hard-working students. A diligent attitude to learning is the best way to prove that hard work and persistence can result in social recognition and high social status. Dr Frank Bryant Frank is a middle aged academician who achieved nothing in his life. He lack money and decides to teach working class students to earn for living. Frank combines the moral and social qualities of a gentleman. He is patient, sympathetic and kind. He inherits honesty; he is a reliable and sensitive, clumsy and inaccurate person. In his love for Rita, he shows that he has none of snobbery or egoism. His tact is evident in his treatment of Rita and in the delicate way he corrects her manners. Frank is, above all, a loyal friend who actively helps Rita in her attempt to change herself. Knowing how to work and motivate his pupils is one of the marks of a true teacher. Frank conforms to this ideal. His fine manners show that he is a gentleman at heart.

The Economic Argument For Trade - 1594 Words

What is the Economic Argument for Trade? What Factors can Enforce Fair Trade? What Factors also hinder it? Trade refers to the activities of different parties that involve voluntary negotiations and exchange of goods and services between them . Trade has existed traditional with an evolution of the conventions of exchange through that different period. Initially, people exchanged goods to receive others or to gain a service from another person. The name for this strategy of business is barter trade, but it has faded considerably in the modern markets . The traditions have changed since the advent of money and currencies that now serve as the central medium for trade. Despite the evolution of the mediums of exchange, the principles of trade have remained the same where different parties offer some commodities in return for others. The theory opens up to the idea of the international trade that refers to the exchange of goods and services between the borders of two or more countries . The argument behind the establishment of trade is to ensure that the commodities get a way of distribution around the market so that different people can access them. The technique gives an opportunity to people to satisfy the demand that others have in different regions and gain other goods or services from them. It enables people to substitute the products they have in surplus for those they do not have. Among the modern concepts in trade is Fair Trade between different regions andShow MoreRelatedThe Economic Argument For Trade1468 Words   |  6 PagesWhat is the economic argument for trade? Trade is generally known as the buying and selling of goods from one person to another, â€Å"international trade would involve at minimum two countries and can go up to however many want to participate in the trade†1 and have something to offer that the there corresponding countries are willing to accept. Trade involves a lot of protection backed by the governments of the countries trading; hence, there are a number of common arguments in favor of protection.Read MoreFree Trade And Open Markets1747 Words   |  7 PagesTraditionally heralded as the defender of free trade and open markets, most people would assume that the United States rarely, if ever, participates in protectionist trade measures. Yet, while the US has presented an increasing willingness to engage in open, international trade in recent years, the history of the country is decorated with countless protectionist measures. Why would any country, especially the bastion of free trade, opt to enact such measures? For numerous reasons, in fact. TypicallyRead MoreFree Trade s Defence : The Ricardian Theory Of Trade1670 Words   |  7 PagesTrade’s defence. The Ricardian theory of trade states that â€Å"Trade is a positive-sum game and therefore there are no losers across or within countries† (dowling). On the contrary, Paul Krugman questions the necessity of free trade and the notion presented by this theory. Asserting that even though free trade agreements seem to provide a win-win outcome for countries, one country is guaranteed to benefit much more; establishing a winner and loser (Krugman free trade passe). These different ideologies areRead MorePA 315 Final study guide Essay1288 Words   |  6 Pagesfollowing arguments states that a country should restrict trade to protect industries that provide social usefulness, such as domestic RD? Spillover effects Question 2 World Bank primarily loans money to countries that need short-term credit to shore-up their economies. False Question 3 One form of protectionism is to place limit on the amount of an incoming product. This is called Import quota Question 4 Neoliberalism refers to a political movement that espouses economic liberalismRead MoreSanctions And Free Trade Sanctions1459 Words   |  6 PagesTrade sanctions are often associated with a retaliatory action in a trade dispute. Earlier, we looked at the case involving the US and the EU. The WTO had authorized the US to impose sanctions against the EU’s resulting from its ban on hormone beef imports from the US. The WTO is the body set up to promote free trade, and thus, it is strange to see the WTO supporting trade sanctions. However, in this particular case, the WTO judged the best action to be trade sanctions. Then, along with the negativeRead MoreMarket Entropy: The Effects Of Brexit On The Uk Economy.1574 Words   |  7 Pagesreferendum held on June 23, 2016, on whether to leave the European Union (EU) or to remain a part of it. The lead up to the referendum saw divisive sides formed, those adamant that Brexit would only lead to an economic disaster, and those who view ed a Brexit as an opportunity for economic freedom. The outcome of the referendum, Britain voting to leave the EU, was a shock to many, and has resulted in much speculation on the future of Britain’s economy and as such, the flow of goods. This speculationRead MorePolitical Arguments and Rationale Behind Trade Intervention1319 Words   |  6 Pagespolitical arguments for trade intervention and the rationale behind this. Firstly, what should be noted here is that international trade has been providing different benefits for firms as they may expand in different new markets and raise productivity by adopting different approaches. Given that nowadays marketplace is more dynamic and characterized by an interdependent economy, the volume of international trade has grown substantially in recent years, reducing the barriers to international trade. HoweverRead MoreIs Free Trade Passà ©? Essay1172 Words   |  5 Pages â€Å"Free trade is not passà ©, but is an idea that has irretrievably lost its innocence† (Krugman, 1987, p.132). In his article, Is Free Trade Passà ©, Paul Krugman writes that the classical trade theory has been replaced with a new trade theory. The classical trade theory is based on constant returns to scale and perfect competition, is driven by comparative advantage, and endorses free trade. This classical theory emphasized the idea that trade was brought about by differences in tastesRead MoreWhat ´s International Trade1442 Words   |  6 PagesIntroduction International trade is to explain why countries to import and export cargo, and barriers to trade and many different steps and trade barriers have been taken down and explain some economic factors must be protected trade. When foreign trade is not strongly change, government spending and taxes, like most of the headlines, it aroused some peoples blood in economics. Both exports and imports will affect the livelihood and way of life. These people are very anxious, but those who worryRead MoreAnalysis of Arguments For and Against U.S. Trade Protection Essay1039 Words   |  5 PagesIn this paper I will summarize the arguments for and against trade protection for United States industries. Among the measures that can be used to restrict foreign trade are tariffs and trade quotas. Industries can also get nontariff barriers, miscellaneous legislation which give domestic products an advantage. In general, experts agree that restricted foreign trade benefits workers and domestic businesses, while under free trade consumers have a greater quantity and quality of choices available

Profile of Serial Rapist and Torturer David Parker Ray

David Parker Ray, also known as the Toy-Box Killer, was a serial rapist and torturer and suspected serial killer. Police in Arizona and New Mexico suspect that Ray was responsible for the murders of at least 60 people, based on accusations by his accomplices. Ray earned the moniker the Toy-Box Killer because he spent $100,000 sound-proofing and stocking a truck trailer with devices used to torture his victims. He referred to the trailer as the toy box. Early Years Ray was born in Belen, New Mexico, on November 6, 1939. His parents, Cecil and Nettie Ray, were poor and lived with Netties parents on a small ranch where they raised David and his younger sister Peggy. Cecil was an abusive drunk who lashed out at his wife and children. He eventually left Nettie and the children when David was 10 years old. After Cecil divorced Nettie, the decision was made to send David and Peggy to live with their grandparents on their rural ranch in Mountainair, New Mexico. Life for David and Peggy took a dramatic turn. Their grandfather, Ethan Ray, was nearing 70 years old and lived with strict standards which he expected the grandchildren to follow. Failure to follow his rules would often result in the children being physically disciplined. At school David, who was tall, shy and awkward, had a hard time fitting in and was often bullied by his classmates. Much of his spare time was spent alone drinking and using drugs. It was during this time that David Ray began to develop his secret fascination of sadomasochism. David Rays sister discovered his collection of erotic photographs of acts of bondage and sadomasochistic drawings. After high school, he worked as an auto mechanic before joining the Army, where he again worked as a mechanic. He received an honorable discharge from the Army. Years later, he told his fiancà © that his first victim was a woman he tied to a tree and tortured and murdered when he had just become a teenager. Whether this was true or materialized out of his constant fantasies of bondage and torture is unknown. The Escape On March 22, 1999, in Elephant Butte, New Mexico, 22-year-old Cynthia Vigil, covered in blood, naked and with a metal choker collar padlocked around her neck, was running for her life. She had no idea where she was and desperate to find help before her captors caught up with her, she spotted a mobile home with the front door opened. Cynthia ran inside, pleading for help from the shocked homeowner. The police arrived shortly afterward and listened as Cynthia told her terrifying story of kidnap and torture. Held as a Sex Slave She told them that a man and a woman had kidnapped her and held her as a sex slave for three days. There she was raped and tortured with whips, medical instruments, electric shock, and other sexual instruments until she managed to escape. The bruises, burns and puncture wounds that covered her body backed up her story. According to Cynthia, she met her captors in  Albuquerque  while working as a prostitute. The man had offered her $20 in exchange for oral sex and they went to his RV. Inside there was a woman who helped the man tie and gag her, along with placing a metal collar around her neck. They drove for over an hour before stopping and dragged Cynthia inside a trailer where she was chained to a bedpost. She then listened to an audiotape describing what would be happening to her while she was there. On the tape, a man she assumed was David Ray, explained that she was now a sex slave and she was to refer to him only as master and the woman with him as mistress and never to speak unless spoken to first. She would be naked and chained up, fed, and cared for like a dog. She would be tortured, raped, perform for friends while having sex with animals, subjected to anal penetration with large dildos and placed in various positions which exposed the private areas of her body. She was also warned that she was one of many slaves that had been held captive and many of those who did not cooperate, died. Fighting For Her Life A FBI team investigates the toy box trailer. Joe Raedle / Getty Images By the third day of her captivity, Cynthia had been exposed to electric shocks, endured being cattle prodded, whipped, and had medical instruments and large dildos inserted into her vagina and rectum. She was hung up and raped repeatedly by David Ray. Cynthia was certain that soon she was going to be killed. She managed to escape after Ray left the trailer and she got a hold of the keys and unlocked herself from the chain. She tried to call 9-1-1 but was interrupted by her female captor. The two fought and Cynthia managed to grab an ice pick and stab the woman in the neck. She then ran from the house and kept running until she found the mobile home. Cynthia provided the police with the location of the trailer, but they were already at the home after the 9-1-1 call abruptly ended. Inside The Toy Box David Parker Ray and his girlfriend, Cindy Lea Hendy were apprehended. During questioning the two stuck to the same story — that Cynthia was a heroin addict and they were trying to help her detoxify. A search of Rays property told another story. Inside Rays mobile home the police found evidence that backed up Cynthias story, including the audiotape. Inside another trailer that sat next to the mobile home was what detectives assumed was the Toy Box as Ray called it. Inside were various instruments of torture, drawn pictures of how Ray would torture his victims and various restraints, pulleys, whips, and sexual devices. However, the most shocking piece of evidence was a videotape of a woman being tortured by the couple. Ray and Hendy were arrested and charged with multiple counts including kidnapping. As the investigation continued, additional evidence revealed that there had been many more victims and more than just Ray and Hendy involved in the crimes. Investigators also suspected that along with Ray being a serial rapist, he was also likely a serial killer. Angelica Montano The problem that the authorities faced was Cynthias credibility. She was an admitted prostitute and there was no way to prove that she was not there willingly. But then, after the newspapers ran the story about the couples arrest, another victim came forward. Angelica Montano told police that she had also been kidnapped, raped and tortured by Ray and Hendy for three days, then drugged and left by a highway out in the desert. She was found by the police, but for unknown reasons, her complaint against the couple was never followed up. She decided to pursue it again after she saw that the two had been arrested. Kelly Garrett Investigators also found the woman that was on the videotape after they identified a tattoo on her ankle. Kelly Garrett, who was found in Colorado, had been married just a few days before she was held captive by Ray and his daughter, Jesse Ray. Jesse Ray, who was friends with Garrett, took her to a bar and drugged the beer that she was drinking. As Garrett struggled to leave the bar, Ray hit her on the head from behind. She was subjected to torture and rape for three days, then drugged and left on the side of the road near her in-laws home. Garretts in-laws assumed she had been on a drug binge, and she was still too confused to recall exactly what had happened. As a result, she was asked to leave and she returned to Colorado. As time went on she remembered more about her ordeal, but she still suffered from amnesia. Cindy Hendy: A Quick Turnaround Once in custody, Cindy Hendy was quick to turn on Ray in a plea deal that included a reduced sentence. She told investigators that Ray told her about 14 murders that he had committed and where some of the bodies had been dumped. She also told of some of the different ways Ray would torture his victims which included using a mirror which was mounted in the ceiling, above the gynecologist-type  table  he used to strap his victims to so that they would have to watch was being done to them. Ray would also put his victims in wooden contraptions that bent them over and immobilized them while he had his dogs rape them and sometimes other friends.   She also gave the names of other accomplices, which included Rays daughter, Glenda Jesse Ray and Dennis Roy Yancy. According to Hendy, Jesse and Dennis had participated in the murder of Dennis ex-girlfriend, 22-year-old Marie Parker. Dennis Roy Yancy: The Fear Factor Yancy was brought in for questioning and eventually admitted to being present when Ray and his daughter Jesse kidnapped Parker and took her to the Toy Box. After three days of torture, Ray and Jesse told Yancy to kill her, which he did by strangling her with a rope. Yancy said Ray threatened to kill him if he ever told anyone about it. Glenda Jean Jesse Ray: Complete Denial Jesse Ray denied having anything to do with her father, the abductions, or with the murder of Marie Parker. Sentencing Joe Raedle / Getty Images Cindy Hendy was sentenced to 36 years as agreed to in the plea bargain. She also testified against Ray during his trials. Dennis Roy Yancy received two 15-year sentences for second-degree murder and conspiracy to commit first-degree murder. He was released after serving 11 years, but returned to custody until 2021, after violating his parole. Jesse Ray was found guilty of kidnapping women for sexual torture and was sentenced to nine years in prison, six of which could be served out of prison and on parole. It was decided that David Parker Ray would be tried separately for each victim — Cynthia Vigil, Angelica Montano, and Kelly Garrett. He later agreed to a plea deal and he was sentenced to 224 years. Death On May 28, 2002, Ray died of a heart attack while on his way to an interrogation by state police at Lea County Correctional Facility.