Blogs MU - modderators cant create group

I have yes selected and saved for "Do you want to allowed only admin and moderators to create group?"
in the theme's options, under buddypress

but when I try with a mod account it redirects me to index.php.. Is there a fix for this? or which is the file where this is defined as I will just correct it but cant seem to find it, also I might want to add diff user roles to it aswell so knowing the location would be best.

Regards

My install wp 3.0
bp 1.2.5.2