SIB prepares to simplify rules

NIC CICUTTI

The head of Britain's most senior financial watchdog yesterday signalled a move away from heavy-handed regulation in return for greater information disclosure by companies.

Andrew Large, chairman of the Securities and Investments Board, announced a fresh round of talks with the industry's more junior watchdogs to map out a new, simplified approach to regulation.

He also backed moves to end the present system, called polarisation, whereby advisers must either sell the products of just one company or be prepared to choose from the industry's entire range.

Mr Large argued that if more financial information were available, there could be a "disclosure dividend" both for investors and the industry.

But his comments drew a cool response from other regulators last night. One, who refused to be named, said: "I think he is trying to placate some of the insurance companies who have been lobbying for less controls of their sales activities. It all seems like a recipe for even more navel- gazing."

Mr Large, who was speaking at the Britannia Caledonian financial services lecture in Glasgow, said the benefits of financial disclosure were already apparent in the wholesale markets, including Eurobonds and derivatives. As a result, more overseas firms were choosing to base in the UK.

He argued that had more information been available, it might have been possible to forestall recent financial scandals, including the Barings merchant bank collapse in January.

He claimed that long-running problems in the retail financial sector had also been caused by companies' unwillingness to disclose information about their products. "When, sadly, investors were let down by advisers they were entitled to trust there was little prospect they would themselves spot something was amiss. I need hardly tell you what sort of problems the industry faces as a result.

"Some might accuse me in raising these points again of being too far ahead at a time when important issues still need to be addressed. For example, can we realistically alter the regime whilst the pension-transfer issues have yet to be addressed? I acknowledge that is a difficulty. But, we need to start thinking about the future.''

Phillip Thorpe, chief executive of Imro, the investment managers' watchdog, said: "Discloure is ... important but its capacity to be the universal panacea, particularly at the retail end, must be in doubt."

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