No-nonsense Cole is a tough act to follow

The outgoing head of enforcement at the Financial Services Authority put bite into the watchdog. She'll be missed – even in the City, says James Moore

Margaret Cole's departure from the Financial Services Authority (FSA) leaves a gaping void at the watchdog as it grapples with a Coalition-instituted shake up that will see many of its functions taken on by a new Financial Conduct Authority.

Many saw her as a lock for the top job at the FCA and she had in effect been its interim chief executive as the transition gathers pace. Instead the job went to Martin Wheatley, most recently the head of Hong Kong's financial watchdog.

When Ms Cole took over as the head of enforcement in 2005, joining from the London office of US law firm White & Case where she oversaw dispute resolution, the FSA's policing function was at a low ebb, dismissed as a Dixon of Dock Green operation when what the City really needed was The Sweeney.

The rules under which the FSA operated – framed under a pro-City Labour Government – meant that it was always going to be hard for Ms Cole to mimic the gun-toting John Thaw's performance as DI Jack Regan.

But the "tough and no nonsense" Ms Cole got about as close as she could within the air-conditioned world of London's financial centre: unfavourable comparisons to America's SEC are now less often heard.

This included taking a hardline approach with the City's besuited corps of crooks and rule breakers, who have been aggressively pursued. Just this week, former Merrill Lynch executive Andrew Osborne was fined £350,000 for disclosing inside information ahead of a fund raising by Punch Taverns, part of the fallout from the £7.2m penalty levied on David Einhorn and Greenlight Capital for trading on it.

There is more to come, with a number of cases working their way through a long and tortuous legal process.

Ms Cole also changed the regulator's tone when it announced it was bringing a miscreant to book. Gone were the rather dry announcements that had predominated, typically wrapped up with a bland quote or two amounting to little more than finger wagging.

Ms Cole didn't mince words.

A change of approach was certainly needed at the FSA when she took over. The watchdog was reeling, having been savaged before the Independent Financial Services & Markets Tribunal when Legal & General (L&G) appealed against a fine issued for alleged mis-selling of endowment mortgages.

It was just about the first time a large organisation had taken on the regulator – companies generally prefer to settle early and take their medicine for fear of damaging relations – and while history records the tribunal as only handing L&G a partial victory, everyone knew who the loser was.

Staff were also losing Andrew Proctor, who had many supporters, and morale was at rock bottom. Looming on the horizon was the collapse of Northern Rock.

Enter Ms Cole.

Says one insider: "It's fair to say that she envigorated the department and gave it a new sense of purpose. She had a lot of support internally. It's no great surprise that she's leaving, but it's still a bad loss."

It's a view that is reflected across the City.

Says Simon Morris, regulation partner at Cameron McKenna: "I think Margaret Cole has done a fantastic job. A regulator exists in supervisory context and the public context. A large chunk of that is how the regulator acts to protect market integrity and investors.

"If you compare the public profile of FSA pre-Cole and post-Cole, she has made a very substantial contribution to raising the profile of the FSA as a credible regulator. But it is probably no bad thing that she leaves at her peak."

The veteran City commentator David Buik, no friend to regulators, is also complementary about Ms Cole: "I thought her to be excellent. She may well have eaten nails for breakfast and spat rust out, but transgressors were in fear of her. She was a great enforcer! The FSA will miss her good counsel."

All this leaves the man who took the job many feel should have been hers with a problem. Ms Cole is just the most recent and senior of a rapid brain drain.

Mr Wheatley's career looked to be on the downward slope after he was passed over as chief executive of the London Stock Exchange in favour of Dame Clara Furse (his role as deputy came to an end in 2001).

But he rose to prominence a second time in Hong Kong where he gained the reputation as something of a hard case himself.

However, he'll need to be more than that to achieve the same combination of effectiveness and respect that Ms Cole managed.