View from City Road: Questions that need an answer

SHAREHOLDERS of S G Warburg, its 75 per cent subsidiary Mercury Asset Management and Jupiter Tyndall all deserve explanations in what is becoming an affair with fast multiplying questions.

The tale begins with Mercury Asset Management's decision in the autumn of last year to underwrite the share issue that enabled the then Jupiter Tarbutt to buy Tyndall and form today's investment management and banking group.

That deal has left Mercury with 24 per cent of Jupiter, a stake which has been written down in value from pounds 7m to pounds 3m in the last report and accounts. It also may have caused Mercury and Warburg inadvertently to break the Bank of England rule on controlling shareholdings in banks.

That rule requires a buyer to notify the Old Lady before a stake of 15 per cent or more is taken.

Jupiter, on the contrary, has emerged rather better. The merger created a new force in financial services with pounds 1.3bn in funds under management and cash deposits.

Jupiter then poached Leonard Licht, Mercury's pounds 610,000-a-year vice-chairman and star fund manager.

This is where the first question arises. Was there a conflict of interest? Mr Licht is a senior director of Mercury. Was he one of those involved in the decision to underwrite the Jupiter share issue?

He is reputed to have gone to Jupiter for a pounds 1m 'golden hello' and options which could net him more than 6 per cent of Jupiter's shares.

This is an added factor which means that Warburg and Mercury shareholders should be told how far he was involved in the underwriting decision.

The Warburg camp should also reveal whether it inadvertently breached Bank of England regulations and whether it told the Bank before being left with the stake in Tyndall. So far it has been notably reticent.

Jupiter, for its part, should give its shareholders details of exactly how much business Mr Licht has to attract for his options to be triggered. It has not done so in the circular letter to shareholders.

Without this information shareholders should vote the options package down at the meeting on 12 November.