City watchdog steps up investigations

The Securities and Futures Authority, the main City watchdog, is reinforcing its investigative and punitive powers in an effort to head off growing political scepticism about the effectiveness of self-regulatory bodies in financial services.

The moves include recruiting more staff for the SFA's investigations and disciplinary unit to speed up prosecutions.

Fearing a shift in thinking, notably inside the Labour Party, towards favouring a single, centralised regulator - probably built on the existing umbrella organisation, the Securities and Investment Board - the SFA is pushing through internal changes to streamline procedures and improve efficiency.

"We are not convinced that a single, monolithic regulatory organisation is the right answer at all," said Christopher Sharples, chairman of the SFA. However, in case there is a radical shake-up of regulatory structures, the moves outlined in an internal memorandum from SFA chief executive Richard Farrant, are designed strategically to reinforce the authority. "We are positioning the SFA so it is the natural organisation, should changes come along in the future, to carry forward the job it is doing today, without the need to do away with it or replace it with anything more bureaucratic," Mr Sharples said. He is concerned that self-regulatory bodies have a bad name as being ineffective and too much in the pockets of the City establishment. "We know self-regulation is under pressure, and we need to counter this public misconception."

The SFA is focusing on speedier internal handling of investigations and censure of stockbrokers and investment banks. "We have to demonstrate we can deliver the right results in terms of convictions and in a timely manner," Mr Sharples said.