The British financial nanny has her uses Earlier this week the American operator of a long-running Ponzi scheme in Berwyn, a quiet little town in Chester County, Pennsylvania, went down for a 33-year stretch. Robert Stinson Jr had been found to have defrauded at least 263 investors out of more than $17m over a six-year period. A series of investment funds run by Stinson, called Life's Good, were supposedly generating returns of up to 16 per cent each year trading in commercial mortgage loans, but in reality earlier investors were being paid off with money from new mug punters. Stinson was clearly not operating on the same scale as Bernie Madoff, although he has received a similarly swingeing jail term. This particular Ponzi operator may well die inside. And yet, despite such penalties being handed out with some regularity in the US, the flow of Ponzi schemes uncovered by the Securities and Exchange Commission never seems to slow - year in, year out. Contrast that with the UK, where such scandals seem to be the exception, rather than the rule. Yes, one Knightsbridge operator, Kautilya Pruthi, was recently jailed for 14 years after the discovery of a £38m scheme, and there have been numerous other smaller examples. But one has to go all the way back to the infamous Roger Levitt and his crooked Levitt Group empire in 1990 for a genuinely colourful British Ponzi scandal. Why this is so is not immediately clear. Perhaps multiple schemers are still operating, undetected. Or perhaps the typical British investor is too canny to be caught out in this way, properly understanding the rule that if something sounds too good to be true, then it almost certainly is. Or maybe instead it can be at least partly explained by a simple and rarely discussed regulatory requirement: "prospective future investment returns." Routinely, just about every purveyor of financial products to the unwashed British public is required by the Financial Services Authority to use standard, pre-set illustrative rates of return for pensions, life funds and other retail investment products. The use of such illustrations is now so commonplace that we barely notice them, other than perhaps in the context of worrying how small our projected pension pots are looking on current assumptions. Yet a side effect seems to be that educated Brits generally understand that safe financial investments typically tend to grow by single figure percentages each year, and that when the promised returns suddenly grow into double figures, either something dodgy is going on or the investor is being asked to take unusual risks. The current "intermediate projection rate" stipulated by the authorities in Britain is 7 per cent, although just this week the FSA released research carried out by accountants PwC into whether the 7 per cent figure is still suitable. Such a review is carried out every four years or so, and the FSA is now consulting on whether the projection rate should be cut to 6 per cent. It also wants to know whether PwC's advice should be followed in diversifying the mix of assets used to produce this projected rate of return: from two-thirds equities/one-third bonds, to a broader mix of equities, gilts, property and corporate bonds. Contrast the relative sophistication of this British approach to illustrative projections with US practice, where it seems that none of the relevant financial authorities use standardised projection rates for any kind of investment. Maybe such British-style financial nannying is considered un-American. But the downside in the US is that people do not necessarily have a baseline sense of typical investment returns, despite there being a couple of hundred years" worth of data on the matter. And from there it follows that shady operators of Ponzi schemes are less likely to be met with looks of incredulity when making outsized claims for future financial reports. Clearly, financial regulation here does have some unexpected consequences that are positive. In relative terms at least, Britain should continue to be a Ponzi-free zone.