Newmarch chickens come home to roost

The Mick Newmarch resignation from the Prudential is rapidly becoming a cause clbre for the financial services industry, and is raising new questions by the day about what is going on behind the scenes.

A man who was a thorn in the side of the regulators, because he constantly criticised and needled them, has been brought down - at least in part - by a complaint to the Stock Exchange by the very Treasury officials whose investor protection policy he was attacking.

At a meeting with the Chancellor at which the officials were present, Mr Newmarch showed awareness of the contents of a then unpublished Securities and Investments Board report on the £3bn compensation plan for personal pension investors. The price-sensitive report was eventually published the day after Mr Newmarch exercised some of his options on shares in the Pru.

It would be stretching credibility to the limit to suggest a conspiracy to bring down Mr Newmarch. Indeed, the Treasury officials, who are to present evidence about the meeting to the Stock Exchange tomorrow, would have been failing in their duty if they had sat on their suspicions rather than passed them on to the proper authorities.

But this is no longer a simple matter of a company falling foul of stock exchange procedures. It is becoming entangled in the whole question of regulatory reform.

Whether he was right or wrong to exercise the options, or misguided to deny that the Pru had problems with the personal pensions regulator, Mr Newmarch talked sense about investor protection. His analysis of the faults of a system in which the financial industry has too great a say in the detail of regulation rattled the Treasury and the SIB and bedevilled the setting up of the new Personal Investment Authority. The Treasury was determined not to be drawn into the new investor protection legislation that would have been required for the statutory regulation Mr Newmarch favoured. It would be a minefield for a government with a small majority.

Instead, the Treasury has simply told the regulators to act tough, for example by encouraging the SIB's stance in dealing with the personal pensions scandal. Anthony Nelson, the minister in charge of regulation, constantly exhorts the investor protection regulators to use their existing powers as firmly as they can.

The determination with which the Pru investigation is being pursued might conceivably be one result of the new climate of opinion this has created among the regulators. We might be seeing another in the way Swiss Bank Corporation's option dealings in the Northern Electric bid were criticised yesterday not by the Securities and Futures Authority but by the great panjandrum himself, Andrew Large, chairman of the senior regulator, SIB.

Indeed, as gadfly of the regulators, Mr Newmarch may perversely be due some of the credit for the new aggressive tactics that are causing him and others so much anxiety.