Imro hits back over 'scalp-hunting' claims

Chairman Douglas McDougall responds to Anthony Hilton's criticism of the self-regulatory body's operating methods

ANTHONY HILTON'S article (Justice in the City - Imro style, 25 March) is irresponsible journalism. His central allegations are, to put it bluntly, that Imro operates its enforcement process through bullying and the threat of spiralling costs, against which its appeal processes provide an inadequate safeguard.

Mr Hilton extracts these allegations from an application by Mr Owen to the European Court of Human Rights. Since this application is before the court, it is not proper for me to respond in detail to it. But your readers should be clear that you have published extracts from a submission, not a judgment. I do, however, wish to respond to Mr Hilton's allegations about Imro's process and procedures, which are a slur on the professionalism of its staff and board. The guiding principles of Imro disciplinary policy derive from its mission to protect investors. Its fundamental principles are to secure compensation for investors for losses resulting from breaches of its rules, to achieve effective punishment and deterrence, to be fair and timely and to publicise its decisions. Its disciplinary procedures have been subject to extensive review and full public consultation. First, the allegation of bullying tactics. Investigations and settlement discussions are supervised by committees of the board, which consist of experienced practitioners and public interest representatives. It is these board committees which decide whether a firm or individual has a case to answer, monitor progress and give directions on appropriate penalties. The objective of this process is not, as Mr Hilton alleges to "collect scalps", but to pursue the principles set out above. It provides industry wrongdoers with the judgment of their peers, who in my experience are rigorous in demanding high standards. No firm or individual is obliged to settle. They can proceed directly to an independent tribunal, and need not incur the expense of instructing counsel to represent them. Imro matches its level of representation to that instructed by the other party. Despite Mr Hilton's allegations, tribunals operate independently and have been known to find against Imro. If parties have doubts about the impartiality of any member of the tribunal, they have the right to challenge the appointment. Mr Hilton alleges that Imro uses "the threat of ever-rising legal costs to force people to choose between confession or bankruptcy". Imro is a self-regulatory organisation funded by its members. It seeks to recover its costs from firms and individuals, providing its case is settled or proven, on an "ability to pay" basis. Essentially we believe the vast majority of Imro firms and individuals who comply with our rules should not be required to finance the investigation and disciplining of those who do not. Imro always stands ready to explain its costs in detail to those from whom they are sought. Individuals are specifically invited to make submissions about their ability to pay, and all submissions are taken into account, even to the extent of waiving the right to costs altogether. Finally, the allegation that Imro has a policy of concealing its costs is absurd. In the case of the individuals referred to in your newspaper, one individual had been concerned that the Press might wrongly interpret the amount of costs as a fine where none was being levied. After considering his representations, Imro agreed to partial disclosure of costs, and offered a similar formula in subsequent settlements with other individuals. Underlying Mr Hilton's one-sided analysis is the implication that failure to supervise one's staff, leading to massive investor losses, is not a serious matter. We trust that no investor, nor any professional in the investment management industry, would share this view.

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