FSA catches the minnows

By This Is Money
Updated: 04:53 EST, 17 December 2004

 

THE Financial Services Authority finally appears to be making progress in market abuse cases. Unfortunately, the triumphs tend to be in the lower reaches of the markets.

We are still waiting for it to come to grips with the rapid share price moves that precede the bigger bids, like that for the London Stock Exchange.

In its latest success it caught analyst Robin Hutchings - then at Evolution Beeson Gregory - red handed, trading in the shares of publisher IFG (Holdings) as it was being taken over by Dennis Publishing.

There was a good paper and email trial and the FSA says Hutchings had at no point cleared his dealings with the compliance department. His pal Jason Smith, the finance director of IFG, is the first person to be fined for 'abusive dissemination of information'. He was fined £18,000.

But before we are carried away by the FSA's brilliance it is worth noting that the fines levied are minuscule and hardly likely to deter future wrongdoers.

We are still waiting - however close a settlement may be - for disciplinary action against the alleged wrongdoers in the splits scandal, which goes to the heart of City practice.

Indeed, it was lucky the FSA has something to crow about because the report from Jonathan Bloomer's Financial Services Practitioner Panel does not make for encouraging reading.

The FSA may feel it is on the consumers' side when it develops new regulations such as the 1,000-page manual for approved mortgages. But in the process it is in danger of killing off large chunks of the financial services industry.

Smaller and medium firms, many of which give the kind of personal service not available from the bigger players, simply cannot afford to carry the administrative and cost burden being placed on their shoulders.

As Bloomer's report makes clear, the cost-benefit analysis appears to be flawed. Instead of bringing City efficiency and flexibility to regulation the FSA has brought bureaucratic civil service values. We know what that does to the financial services industry from the Equitable Life experience.

The FSA's chief executive John Tiner naturally defends the performance of the watchdog on protecting consumers. But if competition in the industry is reduced and firms are reluctant to bring products to market because the regulations are so complex, then the system is failing.

Ever wondered why the nation's savings rate is so lamentably low?

Fire sale

BRITISH manufacturing is at a low ebb at present. Recent surveys suggest that after a brief revival over the last year or so it could even be heading back into recession. Despite this overseas interlopers are finding value where our own stock market is not.

Kidde, once part of Williams Holdings, is laying down in the path of America's United Technologies Corporation after what by any accounts is an ineffectual siege. Kidde's only hope is the defence put up by another fire alarm technology group Novar. Pray that competitive instincts of other parties will bring out buyers offering a better price.

Many of the same firms which circled Novar, including Siemens, GEC, Honeywell, are now seen as possible rival bidders for Kidde.

Certainly, the new bid price of 165p a share, plus a small special dividend, does not look overgenerous. It is described as a 34% premium to the pre-bid speculation price - a curious concept based somehow on the idea that market leaks, which discriminate against the less informed private investor, are of no importance.

Putting all that aside in one week the nation seems prepared to give up any competitive advantage it may hold in fire technology and safety, a growth market, to American giants Honeywell and UTC.

It may look hunky-dory on paper but once ownership has moved overseas, so does control, research and development and stewardship of the pension funds.

None of which are issues which have been fully debated in the Kidde or Novar deals.

Brighton booty

THE disposal of DIY chain Wickes to builders merchants Travis-Perkins is another feather in the cap for self-made entrepreneur Bill Archer, who will pick up a further £80m in cash if the £950m deal goes through.

But it will raise few cheers at the Withdean Stadium, the temporary home to Brighton & Hove Albion football club. Archer sold the old Goldstone ground from under the club in 1997 for £7.4m, having paid just £56.25 for his shareholding.

Archer should do the honourable thing and put some of his mounting cash pile into a trust fund to build a new stadium.