View from City Road: SIB should be able to let off real fireworks

In the US, the Securities and Exchange Commission strikes fear into its victims. It can freeze assets, levy big fines - dollars 290m on Salomon Brothers for breaching Treasury bond auction rules - and has tough staff with a penchant for the financial equivalent of a public hanging of individual offenders. In the UK we have . . . the Securities and Investments Board.

The very British aspect of the announcement last week by Imro, the SIB's satellite fund management regulator, of a pounds 750,000 fine against Invesco MIM is not just the modest penalty, about a third of a per cent of the company's market valuation. It was also the absence of a mention of the individuals involved, or of any serious explanation of what went on between the regulators and the fund managers.

Though there were only three Maxwell-related offences among the 55 counts, one of them was that Invesco failed to keep Imro 'regularly, promptly and full informed of its concerns about the way in which pension scheme assets under its management were used'. This alone is of great public interest. But where is the telling detail? Locked up in an unpublished report by the SIB on Imro and the Maxwell affair.

Regulation is largely about the behaviour of people within organisations. There must be sharper retribution than footling fines on organisations. Occasionally a general, or at least an officer, needs to be threatened with the firing squad pour encourager les autres.

But since the announcement of the Invesco fine, the SIB has been silent. So what do we make now of the promises last month in a review of regulation by Andrew Large, chairman of the SIB, that he planned to make more use of his legal powers?

Under the Financial Services Act the SIB has a certain amount of ammunition, though some of it is damp. The SIB is empowered to make public statements criticising individuals, but this is limited to a small number of institutions or people directly authorised by the SIB rather than one of its satellites. Mr Large regretted that he could not use the power, under section 60, to criticise other offenders, particularly in serious cases. Maxwell would certainly fit that bill.

The other possibility is to use section 59, under which the SIB can bar individuals from the financial services industry. This section is also flawed, but Mr Large says he has found a way to use it, though he wants more public discussion before he goes ahead, which appears to rule out any timely follow-up on Invesco MIM.

An alarming possibility would be an indirect use of section 59, under which people are not actually banned. Instead they might receive letters telling them that if they do apply for a certain type of job, the SIB would be 'minded' to oppose it under the section. The technique has been developed to a fine art by the Bank of England, and is a secret blackballing. Openness is what is most missing, and that requires a change in the law to allow the SIB to let off some real fireworks.