The report by Andrew Large, the SIB chairman, admits to 'some concerns on SIB's part at initial recognition in 1988 about the quality of Imro's monitoring resources and its regulatory style'.
Furthermore, considerable work by the SIB's central monitoring unit 'identified areas of weakness in Imro's monitoring procedures and productivity and grounds for concern about Imro's regulatory sharpness'.
Despite these concerns, and the close working relationship that existed between Imro and SIB, the senior regulator failed to diagnose the shortfall in standards at Imro.
Mr Large's review also says the SIB had early concerns about London Fox, the futures market whose management improperly colluded with traders to help to establish a new property futures contract.
The report says: 'SIB was aware of the limitations of Fox's regulatory resources and the distaste for the regulatory regime established under the (Financial Services) Act of many of its board and membership.
'Yet SIB did not anticipate . . . that Fox's management and systems were so weak, its compliance function and monitoring systems so ineffective, that the exchange itself could engage in misconduct without its systems picking this up or SIB becoming aware of it.'
The report says Imro has responded to last year's criticism by assessing the risks posed by each of the fund managers that it regulates according to potential abuses, their culture and controls. About 150 firms are subject to 'enhanced monitoring', involving more frequent inspection visits. Monitoring teams have been beefed up.
The other failure of investor protection considered by Mr Large is home income plans, where many elderly investors suffered after re-mortgaging their homes to release funds to invest in insurance bonds.Reuse content