JOE PALMER, chairman of the Personal Investment Authority, the new body set up to oversee the selling of investments to the public, was in charge of Legal & General when it flouted City rules and tried to keep the violations hidden from regulators, according to a Commons motion.
The Early Day Motion accuses Mr Palmer of being chief executive of Legal & General at a time when its sales force was engaging in widespread breaches of industry rules. Senior staff signed off deals made by juniors who were not qualified, and not authorised to sell pension plans and life insurance policies.
Mr Palmer took up his present post last September. The appointment was made by the Securities and Investment Board, which he joined in 1991. His SIB appointment was made by Norman Lamont when he was Chancellor of the Exchequer.
Last month, Legal & General was fined a record pounds 400,000 by Lautro, the life insurance regulator. It was stressed the fine related to breaches occurring from July 1991 to October 1992. Mr Palmer left the company in September 1991 and was not blamed for the lapses.
The motion, tabled by Dale Campbell-Savours, MP for Workington, shows the rules were being broken well before July 1991, that senior executives knew what was occurring and were concerned in case Lautro discovered what was going on.
It first notes 'the extraordinary' appointment of Mr Palmer as head of the PIA, then details extracts from an internal Legal & General memorandum dated 23 November 1990.
The memorandum was sent by the firm's compliance officer to the head of the sales force, following an investigation into Rowab Ullah, a salesman. Mr Ullah had 'managed to carry on for two years without passing any exam during the course of which he was selling quite complicated business', says the compliance officer. The memo says that Mr Ullah earned pounds 80,000 in commissions from 30 deals in one year.
Interviews with Mr Ullah revealed his deals had been passed by senior staff. The memo describes how sales 'consultants' were 'immediately allowed to sell without any licensing or authorisation'.
The compliance officer says it was 'totally impossible to justify doing this for years', and that 'loads of cases have been sold here without anybody who actually did the selling or the authorising having passed any examinations of any sort'.
The memo alerts the company to the possibility of 'disciplinary and possibly even intervention' in the event that Lautro were to 'discover the true situation'.
In a second motion, Mr Campbell-Savours refers to other Legal & General memos which show changes were subsequently made to staff management and monitoring procedures. But, it asks, 'why it was that Mr Joe Palmer was appointed chairman of the PIA when it was himself who presided over the affairs of the Legal & General throughout the period when the Lautro rule book was so comprehensively and regularly breached.' It also asks 'how it is possible for the PIA to have appointed someone whose own record on organising compliance with (self-regulatory organisation) rules is so blemished'.
Tory MPs have also tabled a Commons motion criticising the PIA. It notes that the PIA has cost pounds 6m to set up, 'yet with no tangible benefit to the consumer'. Signed by 20 Conservatives, the motion says that it 'looks increasingly likely to be, in reality, a step down in regulatory standards . . . '
The Tory motion does not name Mr Palmer or the PIA's chief executive, Colette Bowe, the director of information at the Department of Trade and Industry who resigned during the Westland affair, but questions 'whether the PIA has the right leadership to bring about adequate, accountable and cost-effective regulation'.
Ms Bowe said last night: 'The PIA has great confidence in Joe Palmer who is an excellent chairman.' Mr Palmer could not be reached for comment.
Colette Bowe has asked us to point out that she did not resign during the Westland affair.Reuse content