The Financial Services Authority does itself no favours when it comes to carving out a reputation as the consumer's friend. Deep in the bones of the organisation, there seems to be a need to act as cheerleader for the financial services industry.
It reminds me of the old Ministry of Agriculture during the BSE crisis - rather too interested in defending farmers, abattoirs and supermarkets; rather too timid about safeguarding the quality of burgers and sausages. Thus, this month, when the FSA finally reported on a particularly shabby form of share-market skulduggery known as "market timing", it somehow managed to present the affair as a triumph of City probity.
Market timing exploits imperfections in the pricing of unit trusts and other collective investments. A small coterie of professionals, often hedge fund managers, wins; millions of small punters who have their nest eggs in unit trusts lose. The practice is not illegal. But it is manifestly unethical. And it is little short of disgraceful that unit trust managers have allowed it to go on and in some cases (according to the City scuttlebutt I hear) actually helped orchestrate it.
The FSA deserves credit for investigating the practice and - glory be! - coming up with firm evidence that it has been taking place. It managed to ferret out instances at a number of fund managers of small punters being diddled out of £5m in total.
Even if £5m was the full extent of the hanky-panky, you'd expect our chief financial regulator to come down hard on the sinners. Surely it would want to stamp on them, if only to encourage better behaviour in future. Surely it would want to trumpet its (all too rare) success in nailing wrongdoers, if only to justify its £234m annual budget and 2,100 staff and to encourage its investigation team? Apparently not. In a four-page announcement, there is not a single word of criticism of the guilty fund managers. The FSA refuses to say who they are. Even the compensation scheme being set up is a voluntary one. And the FSA's managing director Michael Foot says: "The picture we have uncovered is generally quite an encouraging one."
To be fair, the FSA investigated other more serious City malpractices and found no evidence of them. But the overall tone of its report is surely misguided. The normally sure-footed Foot manages to sound complacent.
The City of London is too often like a shearing shed. Members of the public are seen as dumb beasts to be politely and efficiently fleeced. The FSA announcement is bound to be seen as a green light for institutions to wield the clippers even more venally.
The other point is that any wrongdoing actually identified and nailed down is probably only the tip of the iceberg. If the FSA has rooted out proof of £5m of malpractice, how much more lies beneath the surface? Perhaps the problem is that the first and foremost of the four core aims of the FSA is to maintain confidence in the financial system. The temptation therefore is, in public, to play down any wrongdoing. Perhaps that also explains the paucity of the fines the FSA doles out when it finally nabs wrongdoers. Most recently, Allied Dunbar, which had already been found guilty of mis-selling endowment mortgages, was found guilty of trying to wriggle out of compensating its victims. The penalty was a derisory £725,000. The chief executive of any big life company earns more than that. Indeed, Richard Harvey, boss of the Norwich Union's parent company, Aviva, has just been given one and a half times that amount in the form of a top-up to his personal pension pot (£5.6m and rising), in a year when he was slashing bonuses for many of Norwich Union's 1.2 million pension savers.
The FSA's tone is all wrong. Its fines are risible. Foot's successor has just been named as Hector Sants. He is a City man through and through, having served spells at UBS and Credit Suisse First Boston. He certainly knows how the shearing shed works. Whether he has the appetite to curb its worst excesses is another matter.
Shell is like 19th-century China - a vast, inward-looking empire, self-sufficient and, above all, contemptuous of outsiders. The outsiders (institutional investors, stockbroking analysts and the financial press) have been snubbed for decades. Shell, which is under fire for twice misleading the stock market by overstating its reserves, has been incompetent, complacent, leaden-footed and economical with the truth. But - on the evidence so far - no more so than many another long-established bureaucracy. This is also a story about the pedantry of the US Securities and Exchange Commission. Estimating the size of oil and gas fields buried deep underground is never going to be an exact science. But we barbarians, we gweilos, are enjoying our revenge.
Patrick Hosking is deputy city editor of the London Evening Standard
