Palmer tells MPs that he misled them: Large on the defensive as Sedgemore questions competence of PIA boss

JOE PALMER, chairman of the new body intended to raise standards of investor protection, has admitted misleading a committee of MPs during questioning on the regulatory deficiencies of Legal & General, his former company.

The disclosure yesterday prompted Brian Sedgemore, a Labour member of the Treasury select committee, to mount an angry challenge to Mr Palmer's suitability to head the Personal Investment Authority.

He asked Andrew Large, chairman of the Securities and Investments Board, the senior financial regulator: 'This man, who has the effrontery to come before this parliamentary committee, and forget and forget and forget and forget and forget, he's a man in whom you have confidence?'

Mr Large defended Mr Palmer, saying that he himself might have forgotten a particular document. He did not agree with Mr Sedgemore's allegations about Mr Palmer's incompetence.

When Mr Palmer appeared before the committee last week, he was questioned at length about a Legal & General memorandum that detailed widespread regulatory breaches at the life insurer. Mr Palmer, who was L&G's chief executive, said he had not seen the 1990 memo and did not ask Legal & General about it, since he had retired.

Yet the next day, Mr Palmer wrote to John Watts, the committee's Conservative chairman, to apologise for inadvertently misleading the MPs. On further study of the memo, he realised he had seen it and had spoken to L&G about it. Mr Palmer said that 'under the pressure of the moment' he had jumped to the wrong conclusion that the memo was dealing with a separate incident.

Mr Sedgemore said Mr Palmer had misled the committee for half- an-hour. 'It suggests an inability to cope. It may suggest senility. It may suggest stupidity.'

Mr Sedgemore added: 'I thought he was lying through his teeth. Whether he was lying or not, he was not telling the truth.'

He queried why Mr Large had chosen Mr Palmer to head the PIA. 'There are plenty of other people who can do the job and don't have these problems in their background.'

Mr Palmer's long career at Legal & General has made him the target of much criticism. The insurer was recently fined pounds 180,000 for regulatory deficiencies dating back to the last months of Mr Palmer's tenure as chief executive.

Mr Large said the fine need not undermine public confidence in Mr Palmer.

'Public confidence is a matter of seeing how people actually do the job and I am confident that he can actually do the job.'

Mr Large had earlier conceded the PIA's board 'technically' failed to meet the requirement he had set for it to have a majority of public interest directors. These include Mr Palmer. The SIB was satisfied by the totality of the PIA board, Mr Large said.

Mr Large said SIB's confidence in the PIA 'builds every day'. The PIA was close to attracting the critical mass of financial services firms that would allow SIB to recognise it as a regulator for the personal investment market.

It has received applications from two-thirds of life insurers and from 40 per cent of the financial advisers currently regulated by Fimbra.