Outlook: Imro/Keith Percy

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KEITH PERCY used to be one of the stars of the investment management scene. Under his watch, Morgan Grenfell Asset Management became one of the largest and best-performing money managers in the City, attracting tens of billions of pounds in new funds. Then along came Peter Young and destroyed Mr Percy's career, as well as profoundly damaging his company.

Few people in the City feel anything but sympathy for what happened to Mr Percy. "There but for the grace of God go I," many said privately. Mr Percy had faith in Mr Young, and he trusted the procedures he had established to ensure compliance. He was mistaken on both counts. But neither Mr Percy's undoubted talents nor any sympathy we might feel for the blameless skipper absolve him from responsibility for what happened.

Mr Percy makes some good points in the statement he released after accepting Imro's official reprimand. Chief among these is that but for the fact that he is a relatively rich man, able to afford the legal costs of fighting the regulators, he would be facing much tougher disciplinary action - including a fine and prolonged ban. This is plainly unfair on those unable to fight their corner, as some of his more heavily punished colleagues were. As it is, he has had to bear some of Imro's disciplinary costs.

But Mr Percy surely protests too much about the oppressive powers of financial regulators and the blamelessness of his position. Curiously, many commentators have come to accept what he says, forgetting that the proper function of regulation is not to safeguard the rights of practitioners but to protect the interests of investors.

Let's just remind ourselves of the facts of this case. The Peter Young affair cost MGAM's parent company, Deutsche Bank, more than pounds 400m. Were it not for the largess of the German parent, investors in Mr Young's trusts would have suffered catastrophic loss.

The most important part of a fund manager's job, it might reasonably be thought, is to ensure that his clients' money does not go walkabout. This Mr Percy obviously failed to do. Worse, he failed to show adequate cognisance of the warnings he received of Mr Young's untoward behaviour, preferring instead to delegate responsibility to his compliance department.

Mr Percy offers plenty of excuses for this and many of them are good ones. On the other hand, you do not allow the skipper whose ship goes down with all hands to sale again, do you, even if he was not directly responsible for failing adequately to batten down the hatches. Mr Percy has fought a good campaign and everyone wishes him well in his new job at SG Asset Management, but it is not in the best interests of the City to allow negligence of this sort to be swept under the carpet.