Britain's Securities Board Chief Defends Self-Regulatory Plan; Disputes Parliament's Allegation That 'Cozy Club' Will Run Agency
O'Connor, James H., American Banker
LONDON -- The board charged with supervising Britain's investment industry will be more like the Securities and Exchange Commission than some people think, according to the government-appointed watchdog.
Sir Kenneth Berrill, chairman of the Securities and Investment Board, or SIB, must soon begin to authorize a long list of companies that want to conduct an investment business in Britain. Many of them will be American banks and stock brokerages.
The effective deadline is Oct. 27, "big bang" day, when single capacity and fixed commissions will be abolished.
Sir Kenneth, at 65, is former chief economic adviser to the British treasury and former chairman of Vickers da Costa, a major stock brokerage, since acquired by Citibank.
He told a recent Financial Times conference on regulation that the first draft of rules -- including capital adequacy levels and a ban on "cold calling" -- will be published later this month.
"We shall of course be ready to discuss our proposals with the markets concerned," Sir Kenneth said. "But no one should be in any doubt of our intention to promulgate rules that will provide a real measure of protection to investors of all kinds."
Meanwhile, backers of the financial services bill are fighting allegations in Parliament that a "cozy club" will be left to regulate the City's investment industry. Some opposition members, and some bankers, prefer a wholly statutory regulatory body. Amendments are likely to appear before the bill becomes law next year.
Sir Kenneth defends the proposed self-regulatory organization, or SRO, approach, which will have a "practitioner-based board" answer to the secretary of state.
"The bill is very clear as to the criteria that self-regulatory bodies have to meet in order to be and remain recognized, and cozines is certainly not one of them," he said.
The board would operate in the same way even if it were a statutory body, Sir Kenneth said. He pointed out that the SEC operates through self-regulatory organizations and "engages in direct regulation as little as possible."
He said that his concern is not policy intervention by government but bureaucratic hampering of efficiency. For example, government restraints would determine how much his staff was paid.
"It is not that I want to pay my staff at Eurobond dealer rates," he said. "But I do want to bring in bright accountants and lawyers as well as people with experience of overseas systems, particularly the United States."
A Securities and Investment Board spokesman said that one American has already been hired: William Kantor, who worked for the National Association of Securities Dealers in Denver. Others are being sought.
Said the spokesman, "People ignore that the SIB has very wide statutory powers."
"We're not looking for substantial changes [by Parliament]," the spokesman said. "There will be changes, but we will not want to see power diminished. On the contrary, we would like powers enlarged."
The Securities and Investment Board would like to have statutory power to tell self-regulatory organizations when their rules must be changed. A formal request to this effect will be made, the spokesman said.
There will be five self-regulatory organizations, Sir Kenneth said: The London Stock Exchange, covering dealers in securities; the International Securities Regulatory Organization, or ISRO, covering major nonstock exchange dealers in securities, mostly internationally oriented; the Association of Futures Brokers and Dealers, or AFBD, covering those who deal in commodity and financial futures; and two other groups to cover various pooled investment products such as life insurance and unit trusts.
Many Americans will find themselves registering with more than one regulatory organization -- including the Bank of England in respect to banking activities. …