SIB 'undermines other regulators'

NIC CICUTTI

Phillip Thorpe, chief executive of the Investment Management Regulatory Organisation, is poised to launch a devastating attack on the Securities and Investments Board, the City's top watchdog, at a meeting of MPs today.

Mr Thorpe will accuse the SIB of "undermining" the activities of frontline financial regulators, including Imro, because of its own wish to intervene in all areas of their activities.

MPs on the Treasury and Civil Service select committee are expected to question Mr Thorpe on the effectiveness of the existing regulatory system.

Imro's submission will say that, despite an attempt by the SIB to re- define its role two years ago in the wake of the Maxwell pensions disaster, "many of the old criticisms still stand".

"The prospect of the work we are doing being undermined by these shortcomings is unacceptable to the frontline regulators and staff working for them," the submission states.

"Furthermore, the role of SIB in closely supervising frontline regulators is becoming increasingly untenable."

Whatever changes are brought to the existing system, the Securities and Investments Board should "concentrate on its roles as co-ordinator and on policing the perimeter", leaving the responsibility for achieving investor protection to Imro and other watchdogs.

The Imro submission to MPs is the harshest criticism yet of its nominal superior. It comes amid increasing uncertainty over the future of self- regulation of the financial services industry.

Failures, including the long-running pensions transfer scandal and other examples of fraud and bad advice, have convinced many MPs that self-regulation is no longer a viable option for the industry.

Alistair Darling, Labour's City spokesman, has repeatedly made it clear that statutory regulation is the only way forward, a view shared by some of the biggest life insurance companies, including Standard Life and Prudential.

Imro's document argues that it does not believe an integration of frontline watchdogs into a new "super-regulator" incorporating the SIB would work.

"[This argument] fails to recognise that there are substantial differences in the task of regulating institutional business and retail business, where we believe SIB should be concentrating its efforts."

Mike O'Brien, a Labour MP who sits on the select committee, said yesterday: "These are serious concerns that are being expressed. Even if one does not agree with everything that Mr Thorpe says, his comments about the public's lack of confidence in the existing regulatory regime deserve serious attention."

Mr Thorpe's comments mirror those of Christopher Sharples, chairman of the Securities and Futures Authority, which regulates stockbroking. Both are known to be keen to decouple themselves from the SIB.