Lamont declines to back regulator

NORMAN LAMONT, the Chancellor of the Exchequer, has declined to support publicly the Personal Investment Authority, the proposed regulator for investments sold to the public.

A number of backers of the PIA, including regulators, have asked him to speak in its favour, partly to encourage banks and others to join. Without their membership the PIA will not get off the ground.

The Treasury, which became responsible for City regulation after the election, has not responded in public. Regulators believe this may be because it does not want to be associated with a body that may fail.

In April the Economics Secretary, Anthony Nelson, said plans for the PIA were evidence of the flexibility of the regulatory system.

The Bank of England has adopted a similarly low profile. Members of the PIA formation committee hope both will express their support when the committee produces a consultative document later this month.

The Securities and Investments Board, the chief investment regulator, has also been muted in its support. It does not want to prejudge the PIA as it will be responsible for approving it, a spokeswoman explained.

The new body, if formed, will combine Fimbra and Lautro, two existing regulators. It will also cover a number of firms currently regulated by Imro and the SIB.

As well as simplifying the regulatory structure, the new body would solve the problem of financing Fimbra, which currently regulates independent financial advisers, many of whom cannot afford the costs of regulation.

A number of regulators believe that if the attempt to form the PIA fails, the Government, alarmed about the Maxwell fraud, may impose a wholly statutory system.

The current system is a hybrid, with the SIB deriving its authority from the Financial Services Act 1986 but operating for the most part through self-regulatory bodies for different parts of the industry.

The consultative document will set out proposals but will not give detailed costings. There will be further detail in the prospectus, due a few months later.

Life companies' support for the PIA is conditional on the banks, building societies and other firms selling competing products joining it. But the banks have been reluctant, partly because they do not want to be seen to be regulated alongside small Fimbra firms. They also fear extra cost and disruption.