1. This evidence is directed principally to
the first question referred to in the Press Notice No. 2 of 2
March 1999 "Proposed arrangements for the accountability
of the FSA".
2. Accountability: The lack of accountability
by the Financial regulatorsFSA, SIB, and most especially
the ICS, continues to be the chief cause for complaints from private
investors. Whereas of course it is recognised that the ICS is
not a financial regulator per se, because of its seamless join
with the FSA it attracts an equal share of the criticisms which
3.1 Accountability of KWIAG: It is relevant
to the integrity of this evidence that the Joint Committee (especially
those members who are among the "new entry" of May 1997)
may be fully aware of the credentials of KWIAG members.
We are mostly in our 70s and 80s; some are older.
In the 1940s and thereabouts many of us in what should have been
our "salad days" were variously engaged in the Armed
Services, in Industry, and in Agriculture, in fighting for democracy
and natural justice. In what should be our "tranquil twilight
days" we find ourselves tired, mentally and physically, with
having once again to fight for democracy and natural justicethis
time against the very organisations which we had been given to
understand were formed to protect our interests.
3.2 KWIAG has no political affiliation. We are
the only genuinely voluntary action group to have been invited
by a Minister of HM Treasury to give our views (September 1995),
4.1 Accountability of Government: On
18 April 1994 Mr Anthony Nelson (MP), the then Economic Secretary
to Her Majesty's Treasury, in a letter to Sir Anthony Grant (MP)
wrote, inter alia, "The chief concern of the Government
in drafting the Financial Services Act was to provide a high standard
of protection for investors". I and my KWIAG colleagues
took that unequivocal statement by the Minister absolutely at
its face value.
4.2 We also note that, "the detailed
ways in which the system is operated are matters for the regulators".
(See Addendum ONE).
4.3 Had the 1986 Financial Services Act functioned
as the then Government intended"to provide a high
standard of protection for investors"there would never
have been the need for the formation of the Knight Williams' Investors
Action Group. (Anyone who still thinks otherwise is palpably ignorant
of what has happened in financial regulations over the past decade).
4.4 So what went wrong? This is a question which
needs to be answered in the past as well as the present tensethe
past tense referring to matters of regulation under the 1986 FSA,
and the present tense in relation to the draft Financial Services
and Markets Bill.
4.5 It is important to remember that the undertaking
that "the chief concern . . . was to provide a high standard
of protection for investors" has never been repudiated by
the previous Government, nor by the present Government.
5.2 To answer first 4.4 above, this is what
went wrong with the operation of the 1986 FSA by the Regulators:
5.3 In rapid order, the Boards of Directors
of, certainly, SIB, PIA, ICS, and especially the FSA, were infiltrated
(with the consent of HM Treasury) and thus dominated by representatives
from the boards of City organisations. As a consequence the FSA
Board's impartiality in the matter of protection for investors
5.4 To its credit, the present Government has
identified the needprior to the Draft Bill being debated
by Parliamentfor matters to be scrutinised by an unprecedented
5.5 In a letter to the London Evening Standard
on Monday 22 March 1999 Mr Michael Blair QC, General Counsel to
the Board of the FSA, hastened to put the FSA interpretation of
ACCOUNTABILITY. (See Addendum TWO).1
5.6 Had Mr Blair seen Mr Anthony Nelson's letter
to Sir Anthony Grant (referred to in paragraphs 4.1-4.2 above),
heMr Blairmight have modified the optimism expressed
in the final paragraph of his letter to the Evening Standard.
In this connection Mr Nelson, himself, underlined the weazel words
5.7 So in 1994 even a Treasury Minister was
having problems with the lack of accountability shown by the then
Chairman of the Government's Chief Financial Regulator. Nothing
6.1 ACCOUNTABILITY OF FSA AND ICS: It has been
the experience of KWIAG members that the ICS, in particular, frequently
adopts an adversarial posture when posed with a challenge which
it finds difficult to defend. Invariably, it reminds private investors
that they have a remedy in the Courts or that they can apply for
a "judicial review". As the ICS knows full well both
of those options are denied to most private investors because
of the cost of litigation and the excessive time involved.
6.2 On the other hand, when KWIAG has invited
Sir John Wickerson (the ICS Chairman) to put the ICS manipulation
of the Quantification Date to a test case in Court, he has backed
off from doing so.
6.3 Last year Sir John Wickerson was asked the
perfectly legitimate question as to who, on the Board of the FSA,
nominated and seconded Ms Foster-Back for a directorship of the
ICS. (The response to the simple request for information may be
read in Addendum THREE).1
6.4 If one could only choose a single example
of the FSA's total opposition to the concept of accountability,
then one need look no further than the final sentence of Mr Michael
Blair's letter of 10 March 1998 (see Addendum FOUR)1 in response
to Kenneth Jordan's letter of 3 March to the Chairman of the FSA
(see Addendum FIVE).1 (Mr Jordan's letter of 12 March 1998Addendum
SIX1concluded that particular correspondence).
6.5 Therefore, I would earnestly ask that the
recommendation contained in the Third Report Volume 1 of the Report
and Proceedings of the Treasury Committee (page vi, paragraph
(r)) be enforced forthwith. It reads: "We recommend that
minutes of FSA board meetings should be published, with the minimum
of deletions for reason of confidentiality". It is something
we in KWIAG have asked for on many occasions.
7.1 In Conclusion: Lord Acton, a Liberal
MP and friend of Gladstone, would have understood the problems
private investors have with the Regulators, who use their unprecedented
immunity from prosecution for damages by reason of their private
limited company status. I am certain he would have condemned the
use of secrecy by the ICS and the FSA as a means of denying even-handed
justice to private investors.
7.2 Lord Acton said: "The nation that
keeps its archives secret has its history written by its enemies".
7.3 On behalf of the members of KWIAG and other
private investors I do hope that the Joint Committee will endorse
the spirit of the sentiment expressed in Mr Anthony Nelson's letter
of 18 April 1994 and will seek to ensure that the flaws which
have arisen from the 1986 FSA will not be repeated in the Financial
Services and Markets Bill.
7.4 Above all, I would urge that the status
of private limited company for Regulators (see paragraph 3 of
which does nothing in the way of protection for private investors
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