View from City Road: PIA prospectus pie in the sky

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The Independent Online
The Personal Investment Authority prospectus is full of apple-pie declarations of determination to ensure high standards of integrity, fair dealing and competence. All highly commendable. A single regulator for the private savings market is eminently sensible.

But the prospectus does not address the real problem: this is a clumsy, two-tier system, lacking proper accountability, in which the PIA reports to the Securities and Investments Board.

Some of the largest life insurers want a statutory agency to replace the SIB and its satellites. If Prudential has its way, it would kick backsides, but not get too much involved in the detail, which will be left to the market. In the personal savings business, that will not work, either.

What is needed is a single-tier body with statutory powers, clearly run as an agency of government, with industry represented in an advisory role and accountability redefined - perhaps through a system of reporting to Parliament. That way we will know who is responsible, which is not the case now.

The accompanying upheaval would be less drastic than is often claimed. Much of the existing machinery and personnel could be adopted en masse. We could even call the new body the Personal Investment Authority.

That requires legislation, which the Government does not want, and won't admit to even contemplating because it would encourage the rebels against the PIA. But even if the Treasury merely declared such a statutory body to be a misty objective, it might win over some critics. That way the PIA would not be an interim body to be discarded later, but a practical step to something better.

The PIA is committed to delivering the 'step change' in regulatory standards that has been demanded by Andrew Large, the SIB's chairman. Yet PIA staff will mostly be drawn from the existing regulators, applying much the same rules to the same firms. And they will be vetting 6,000 for entry in less than five months, or 270 a week, a herculean task.

In truth, higher standards will come only gradually, through the consistent application of training and competence requirements - measures already in place - and the enforcement of discipline.