Private Investor: Where is the regulator when the rain comes?

As you might have guessed, during my absence from these pages I managed to flog my Northern Rock shares. A few weeks ago, when the Northern Rock rumbling started, but before things got heavy, I'd bought the shares at 655p, believing that, no matter what their problems were, they'd be looked after by the regulators and the main clearing banks. Almost right. A week ago, I off-loaded them for whatever I could get, which turned out to be 470p a share. You can see the loss for yourself, though fortunately I didn't have a big punt.

Nasty as that loss was, though, it represented a lucky escape, seeing as the shares were hovering unsteadily around 180p last time I looked. I always try not to panic at the first sign of trouble (usually reserving that reaction for the second sign of trouble) and just dump shares on the market for whatever they'll fetch, but this time I did just that.

I ought to apologise at this point for ever having seemed to suggest to readers that, at 655p a share, Northern Rock was a good idea. It wasn't, and you ought not to heed me, but learn from my costly error.

However, while I do not put myself up as any kind of investment adviser, I do have to mention that my continued promotion of India as an investment destination has been a much happier cause.

The exceptional circumstances of robust growth in emerging markets, with their economies sailing serenely by the wreckage in the West, has come into focus recently, and rightly. I do think that India makes a much better case for itself than China, as the Chinese markets do seem ever more bubbly – and, let us not forget, China is that much more reliant on the US economy for sales of its toys, dog food and toothpaste. China also has a bit of an exposure to sub-prime, so some say, so its serene journey may soon become a little more choppy.

But India remains a fine long-term prospect, even though its short-term performance recently has been fairly startling and has kept the old portfolio in the money. My chosen vehicle is the JP Morgan Indian Investment Trust, but there are others. It's a volatile scene, so regular monthly drip-feeding of funds is usually recommended by those who best understand these matters.

Returning to Northern Rock, I do wonder what the Financial Services Authority was doing allowing this bank to pursue what others are now describing, in euphemistic terms, as a "flawed business model". But then, I'm not at all sure the FSA can be trusted to safeguard one's interests when it comes to possibly even riskier investments.

Last week, for example, I received a letter from an outfit by the name of Bridge Hall Stockbrokers Limited, operating from an address in Altrincham, Cheshire. There, proudly displayed at the bottom of the document, were the words: "Bridge Hall Stockbrokers Ltd are authorised and regulated by the Financial Services Authority".

Ah! Regulated by the FSA. It must be OK, then? No. The letter was inviting me to take part in a "Pre IPO" offer for subscription in shares in "Bridge Bioresearch International Limited". The shares may or may not wind up on the AIM, and they may, or may not, lose me money. Apparently, the company is "targeting obesity and type 2 diabetes". Targeting me, more like, as the letter was unsolicited, and they had obviously found me on a share register somewhere. There was a low minimum subscription of £1,650, suitable for a small investor. I'll stick to GSK.

The letter contains all the usual caveats about risk in "non-readily realisable" investments, but my point is this: should the FSA even be allowing this sort of fishing expedition for investors' money to take place at all? Should the FSA permit a stockbroker to tell me that, "in our opinion the company offers an excellent opportunity to invest in a portfolio of drug targets", especially when they may have a (declared but not quantified) financial interest in the shares they're pushing? Or state, ludicrously, that the letter "does not form... a solicitation to buy or subscribe for any securities" when it and the accompanying glossy leaflets apparently do just that? I think not.

The FSA's boss, Hector Sants, has a lot on his mind, but this sort of activity does his reputation no good at all.

s.ogrady@independent.co.uk

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