City: Bad dog

WHAT hope for self-regulation in the City now? Not much, judging by the latest turn of events in the Maxwell affair. Last week the Securities and Investments Board admitted grave deficiencies in Imro's handling of the Maxwell pension funds. Well fancy that. It has been obvious since we first learnt of the enormity of the Maxwell scandal that Imro's handling of the pension funds fell a long way short of what might reasonably be expected of a watchdog organisation.

Sure, this was a wholly exceptional case, and, sure, there are shortcomings in the law which need correcting, as the Chancellor was quick to point out. But neither of these factors can explain away Imro's failings.

It is often said in defence of self- regulation when things go wrong that the Government could not have done any better in similar circumstances. Of that there can be little doubt. Experience tells us that if anything, governments tend to be rather worse.

For the ordinary Maxwell pensioner, however, the notion that fully-fledged statutory regulation of pension fund management might not have protected their funds from theft either is entirely irrelevant. The point is that if the Government had been directly responsible for the regulation of pension fund management, it would also have been accountable and liable for the grand theft that occurred. As it is there is nobody prepared to pick up the tab - neither the Government nor the City.

The failure of self-regulation in this case is not so much that Imro was deficient in preventing Maxwell from plundering the funds but that apparently no one can be held liable for it. The Government's response thus far has been lamentable. Unprepared to accept any responsibility for what went wrong it has resorted to asking Sir John Cuckney to go around the City, cap in hand, asking its various institutions to accept a 'moral responsibility' and make a charitable donation. It's not surprising that no one takes the initiative too seriously. Certainly the City doesn't.

The City fought tooth and nail against statutory regulation and with a sympathetic government in power eventually won the argument. With the Maxwell affair, the self-regulatory organisations that were set up as an alternative messed up on a gigantic scale. But is the City prepared to clean up the mess by providing adequate compensation? You bet it's not.