HC Deb 14 February 1939 vol 343 cc1645-57

Amendments made:

In page 21, line 18, leave out "a," and insert "an unincorporated."

In line 28, leave out "purchasing, selling," and insert "acquiring,"

In line 29, after "securities," insert: or lending or depositing money to or with any industrial and provident society or building society.

In line 37, after "stock," insert "or."

In line 37, leave out "or other obligations."

In page 22, line 4, at the end, insert: 'manager of an authorised unit trust scheme' means the person in whom are vested the powers of management relating to property for the time being subject to any trust created in pursuance of such a scheme."—[The Solicitor-General.]

7.48 p.m.

The Solicitor-General

I beg to move, in page 22, line 6, after "London," to insert "the council of a metropolitan borough."

It is necessary to amplify the definition of a municipal corporation, because in the case of a metropolitan borough the council is incorporated and not the inhabitants. This Amendment is consequential on a later Amendment on the Paper to amend the definition of a statutory corporation.

Amendment agreed to.

The Solicitor-General

I beg to move, in page 22, line 35, to leave out paragraph (c), and to insert: (c) Rights (whether actual or contingent) in respect of money lent to, or deposited with, any industrial and provident society or building society, Industrial and provident societies and building societies accept loans and deposits for which the lender sometimes receives no other acknowledgement than an entry in a passbook. In the case of building societies, there are also deposits by builders for excess advances and so on, and therefore, it is necessary to amend the definition here so as to cover all kinds of loans and deposits.

Amendment agreed to.

Further Amendments made:

In page 23, line 2, leave out "or."

In line 2, after "(b)," insert "or paragraph (c)."

In line 9, leave out from "Ireland," to "and," in line 13, and insert: or (b) any other corporation, being a corporation to whom functions in respect of the carrying on of an undertaking are entrusted by such an Act or by an order made under, or confirmed by, such an Act; but, save as is provided in paragraph (b) of this definition, does not include any company within the meaning of the Companies Act, 1929, or of any corresponding enactment of the Parliament of Northern Ireland.

In line 30, after "servant," insert "of, or to a person employed by, any person."

In line 31, leave out "a person being."—[The Solicitor-General.]

Motion made, and Question proposed, "That the Bill be now read the Third time."

7.51 p.m.

Mr. Johnston

I must confess that this Motion comes rather as a surprise to me, since I had no knowledge that the Third Reading was to be taken to-night.

Mr. Stanley

I think the Prime Minister stated at Question Time that one of the purposes for which the Eleven o' Clock Rule was suspended was the Report stage and Third Reading of this Bill.

Mr. Johnston

I was not aware of that, and I was going by the Order Paper, which simply refers to the Report stage being taken. However, after the long discussions on the various Amendments to the Bill, there is no need to take up very much time on the Third Reading of what is, after all, an agreed Measure. If ever again I should revert to the writing of that ephemeral and ill-requited type of literature known as the "blood," I should not go to Chicago for my gangsters, for I could get them among the 170 odd firms which the Bodkin Committee reported to have been operating as sharepushers in the City of London since the end of the War. There have always been sharps and flats, always the skinners and the skinned, but the conscienceless rascality and effrontery with which, year after year, City sharks have operated in sharepushing rubbishy shares upon innocent investors almost passes belief.

We had some difficulty for a time in interesting the House in this matter, partly because many hon. Members in all parts of the House believed that the victims of sharepushing deserved what they got, because they were investing out of greed; and there was very little sympathy for them. Many people also believed that it was only the well-off, the middle class and rich people, who were caught by sharepushers. The right hon. Gentleman the President of the Board of Trade knows that is not so. Many of my hon. Friends believed that it meant very little to the poor whether these gangsters "got away with it" or not, and that there were other more urgent subjects that ought to receive the attention of Parliament. In my view that was not so.

Mr. Hooley, of the Jubilee Mills fraud, has told us that some £10,000,000 was lost in the cotton mills ramp after the War, and the experience which the cotton mill industry went through in those days, when the financial sharks were there, has left the industry in a very stricken position and has been one of the contributing factors—I put it no higher—to the position in which Lancashire finds itself to-day. Then there was Mr. Hatry, who conducted the surgical operation upon Jute Industries, Limited, which left in a parlous condition the city that I once represented in the House. Millions of money dis-disappeared there. Then there were British Glass Industries, the Drapery Trust, and Allied Iron Foundries, Limited, all of which trades and industries were hit by the operations of those financial gangsters. Those companies were blacklisted on the London Stock Exchange.

Then there were Bottomley, Lee Bevan, James White—who called dukes by their pet names—Lowenstein, and Kreuger; and now there are the lesser fry whose activities have caused this Bill to be produced—Jacob Factor, and Spiro—who pretty well skinned my own division through the MacLean and Henderson case; he went up to Stirling, took over under an assumed name that old-established firm of stockbrokers, did not let it be known that he had purchased it, and, using the old name and the old firm's notepaper robbed hundreds of unsuspecting clients, many of whom had been on the firm's books for generations. Then there were Tanfield and Guylee, and many others of whom hon. Members have heard.

I am under no delusions that this Measure will stop absolutely the flat-catcher. In the first place, the Bill does not apply to Northern Ireland. I hope there will be complementary legislation there. Nor does it apply to Eire. Let us be careful that the sharepushers do not emigrate from this country to Cork, and operate from there. Nor will it apply to the Channel Islands, the Isle of Man, or worst of all, to Canada. We have had experience in recent years of sharks who have come from Montreal and operated on the British public. There is a great deal to be done internationally in this matter, and indeed a great deal to be done within the British Empire before we can say that sharepushing is stamped out. Operations have already begun, as the President of the Board of Trade is no doubt aware. I have not asked him any questions on the subject in the House, but I suppose he has received some of the fancy literature that is coming from Jamaica. After the Bill was introduced, the sharks stopped operating in London. They are quiet for the moment, but there is no doubt that they will operate on us, if we permit it, from outside these shores. Here is "Tropical Units, Limited" writing from St. Ann's Bay, Jamaica: Your name has been submitted to us by Somerset House. They go to the list of shareholders in Somerset House and get the name and having thus used the name of Somerset House, they proceed to say: In Jamaica we have more public roads per square mile than any other country in the world."' Why that should be an extra inducement to people to grow bananas I do not know, but you are further informed that if you will only contribute towards this firm's £50,0000 of shares, you may reckon on it as an absolute certainty that in a year and a half all the capital will have been paid off and there will be nothing but profit, "except," to use their own words, "for labour, which is very low." It may be true that people who fall for this kind of thing and send money abroad deserve to lose it. It may also be true that we cannot take any steps through the postal service, but I think that the officials of the right hon. Gentleman's Department might, reasonably, get in touch with the Dominions Office about this matter. The Dominions Office ought to help in stamping out this kind of thing.

Mr. Stanley

The case which the right hon. Gentleman has just quoted is a Colonial case.

Mr. Johnston

The Colonial Office ought to help, and the Dominions Office, too. If the old guard begin to operate again from Montreal or anywhere else, I hope that not only the Board of Trade and Scotland Yard will deal with the matter, but that the whole force of the Governments in the British Empire will be used to stamp out this kind of thing. I have said that the poor suffer in this way. Spinsters, widows, recipients of lump sum compensation, have lost their all, and how have the Government dealt with it? First, we had the Greene Committee presided over by the Master of the Rolls. They sought to stamp out the evil by stopping the hawking of shares from door to door. Under the Companies Act the Government endeavoured to stop share-hawking from house to house, but that, as the Bodkin Committee say, is a dead letter. Lawyers get round it. They ask, what does "door to door" mean? If you miss a door you are safe; if you go to a street in one town to-day and a street in another town to-morrow, you are safe. All sorts of legal dexterities have been devised to enable the hawk and the rogue to get away with it.

I was exceedingly glad when the right hon. Gentleman became President of the Board of Trade, because up to the time of his arrival in that office, we never could get a Government prosecution in London of a share shark. We were always told, "You must get the victims to initiate and pay for the prosecution." What a farce to say to people who had already been robbed of their all that they must pay the expenses of a prosecution. I give the right hon. Gentleman full marks for what he has done in that respect. It was not until he arrived in his present office that we began to "get a move on" in dealing with this matter in the City of London. I will not say to whose credit or to whose discredit it is, but nothing happened even then, until three highly-placed police officers in the City of London had to be removed. It was done quietly and efficiently, but after those steps were taken, observe what happened. About 50 of these groups of rogues were rushed by the police—and very efficiently Scotland Yard did it. A number of them bolted abroad, some to America, some to Mexico, some to France and some to Switzerland, but a number were caught, and I think I am right in saying that at this moment between 20 and 30 of them are languishing in gaol. It is true that we never get the money back. The victims have lost their all and my hon. Friends and I would like to see the Government, instead of introducing only what I may call post-robbery legislation, designed to punish the sharks, also bring forward complementary legislation for a national investment board to make it easy for poor people to place their money where they know it will be used honestly for public purposes—not asking for heavy rates of interest, but asking for safety.

Mr. Deputy-Speaker (Sir Dennis Herbert)

I am afraid that the right hon. Gentleman in proposing those alternatives is talking about things which are not in the Bill, and that is not in order on the Third Reading.

Mr. Johnston

I accept your Ruling, Mr. Deputy-Speaker, and it was only as an aside that I was suggesting that if the right hon. Gentleman had been well-advised, he would have brought in complementary legislation to make it easier for people to invest their money safely, instead of confining himself to spending public time and public money upon what may be highly necessary in itself, the punishment of the rogues after the roguery has been committed. However, I do not wish to appear to be looking a gift-horse in the mouth. My hon. Friends and I welcome this legislation. It is belated, but we give it our blessing. We hope that it will be efficiently administered and that the impulse which the right hon. Gentleman has given in his Department and the aid which has been given to Scotland Yard in this matter, will be continued. We hope that the shame and the scandal of permitting 177 of these known gangs to operate in the city of London, the very citadel of the British Empire, will no longer be permitted. It is a disgrace which has afflicted us for too long, and if this Measure does nothing else but stop it, the time that has been spent upon the Bill by the House will have been well spent.

8.10 p.m.

Mr. White

I entirely agree with the right hon. Gentleman, that although this Bill marks a great advance and is a very useful Measure, it probably will not put an end to the endeavours of rogues to benefit from, and exploit the ignorance and cupidity of, some unfortunate individuals. In fact, the ingenuity of these rogues is such that I never cease to speculate on the heights to which they might attain, if they devoted their energies and intelligence to honest purposes. I think the House may congratulate itself on having accomplished a very difficult piece of work. The right hon. Gentleman the President of the Board of Trade had a difficult task in drafting legislation to deal with these cool and calculated frauds, without trespassing on entirely legitimate enterprise which might be much hampered if brought within the sphere of such legislation. As far as I can judge, the right hon. Gentleman and the House have been successful in that task. Apart from that difficulty, there was also the difficulty that we were called upon to legislate on matters arising out of the two human weaknesses which I have already mentioned, namely, cupidity and ignor- ance. Each is a great misfortune, when an individual suffers from one or other separately, but in combination they provide a magnificent bait for those who seek to exploit human weakness.

The right hon. Gentleman the Member for West Stirling (Mr. Johnston) has reminded the House of some major and also some minor scandals of recent years which he has taken a considerable part in bringing to the notice of the public. This Measure has already had a beneficial effect, if I can judge from my own experience. I get far fewer letters informing me that I am a specially selected investor. The first time I got such a letter I felt flattered by it. It was, I felt, the first time I had been specially selected for anything. But when I realised that I was specially selected because it was assumed that I had some money in my pocket which might be transferred to the writer's pocket, I found I was not being particularly complimented. When this Bill becomes an Act and passes into the field of administration, constant vigilance will be required to see that these frauds do not creep in again.

The right hon. Gentleman said some of these people were beginning to operate from Jamaica. I have had two communications from the City of London which strike me as being very interesting. They reached me a day or two before Christmas and are almost identical in form. The only difference is in the titles. They have two magnificent titles calculated to inspire confidence among the ignorant, namely "The Stock Exchange Joint Securities Corporation, Limited," and "The National Securities Corporation, Limited." These two bodies have the same address and the same telephone number and both are members of the Stockbrokers' Association, that is to say, the body for which this Bill specially provides. The letterpress is identical and the same shares are offered in both letters. About the only difference is that in one case there are three directors and in the other case two, but the directors of one are also directors of the other. This kind of thing will still be possible even under the Measure when it becomes law. Therefore, I say constant vigilance will be necessary if loopholes are not to be found by those whose ingenuity has been so successful in the past. Nevertheless, I congratulate the right hon. Gentleman on his success in producing this Measure. I recognise that it has not been easy. He has had to overcome many difficulties, and I hope this Measure will do away with a great many of the scandals which have arisen, and the frauds which have been perpetrated in recent years.

8.14 p.m.

Mr. R. C. Morrison

I should like to add my tribute to the right hon. Gentleman the President of the Board of Trade for what I think is an excellent piece of work. Compliments have been rightly paid to the right hon. Gentleman, and I think he would be the first to say that praise is also due to my right hon. Friend the Member for West Stirling (Mr. Johnston) and to Members generally for the way in which they have brought the Bill to its present stage. It seems to me that much of the success or otherwise of the Bill, when it becomes an Act, will depend upon the energy with which it is administered, and I hope that, when these people recover from their fright and seek ways and means of trying to evade the new law, if they are clever enough to find the answers to the questions which we are all asking in our own minds, every effort will be made by the police, by the Dominions Office, by the Colonial Office, by the use of the wireless, and in any other way to inform the public whenever a new gang appears on the horizon.

I heard of a case of a special warning on the wireless to beware of share-pushers, and a widow afterwards gave evidence that she was so alarmed by having heard over the wireless that this sort of thing was going on that she came up to London from the West of England to visit the share-pusher's office. She told him that she was concerned about what she had heard on the wireless, and the share-pusher replied that it was he who had "arranged with Sir Thomas Inskip" to put that wireless across in order to warn the public. The net result was that the lady left after investing a yet further sum of money with that gentleman. That indicates the kind of person that Parliament is up against.

The only other point that I wish to make is that I hope the President of the Board of Trade will be encouraged by his success in piloting this Bill through the House, and the co-operation afforded him by Members of all parties in the House in the endeavour to strengthen the Bill, to undertake a general amendment of the Companies Act, which is so very much overdue.

8.18 p.m.

Mr. Bellenger

As one who took part during the proceedings in Committee upstairs in offering what I hope was constructive criticism, I should like to add a few remarks. The sharepushers are, I consider, only a small part of the fraternity who from time to time, in various disguises, make depredations on the funds of investors, and I would remind the House that this Bill deals in a very radical way with more than those people who extract money by this hawking of shares. For instance, if hon. Members will look at the Title of the Bill, they will find that it has to deal with "regulating the business of dealing in securities." Now for the first time we have attempted to tackle a very powerful vested interest, namely, the dealers in stocks and shares, who, as hon. Members will know, have now to be licensed, with the exception of those who can claim exemption by virtue of their membership of recognised and well-run stock exchanges. Secondly, this Bill reconstructs the activities of those societies which have hitherto been registered under the Industrial and Provident Societies Act, and I consider that that feature of the Bill alone will make a radical change in the methods adopted by many of those societies which have been able to get far bigger money from the public than even the swindlers referred to by my right hon. Friend the Member for West Stirling (Mr. Johnston), and to do it under the cheap and easy camouflage of the Industrial and Provident Societies Act.

Let hon. Members cast their minds back to very recent days and consider the effects which have resulted from the actions of far bigger people than these sharepushers. One gentleman who has just been released from gaol almost upset our whole financial system by far bigger operations than those of the gentlemen who have been named by my right hon. Friend, and another gentleman, a late member of another place, by his operations defrauded the public of far bigger sums than those mentioned by the Bodkin Committee. I think the House will realise that this stable in the City of London, a city which is so proud of its reputation, required some cleansing. I will not say how far this Bill will cleanse that stable. I believe it will have certain effects, but, like my right hon. Friend the Member for West Stirling, I am under no delusions in the matter. This Bill will not stop swindling on an extensive scale. Hon. Members can see for themselves the loopholes which will occur, even under the company law, and the right hon. Gentleman the President of the Board of Trade himself possibly knows how, even under the Companies Act of 1929, it is still possible for large-scale operations to take place whereby, even after this Bill becomes law, the investing public can be swindled out of money.

That leads me to my concluding remarks. I endorse entirely what my hon. Friend the Member for North Tottenham (Mr. R. C. Morrison) has said, that this Bill is only a step towards a much wider alteration of the law, namely, an alteration of the company law, and although it would be out of order at this stage to say too much on that feature of our laws, nevertheless I hope the right hon. Gentleman, after this Bill has gone through and he has had some experience of its operation, will bring in those very necessary Amendments which he himself has admitted in this House from time to time to be desirable, if we are going to get a better functioning of our company law and investments. I would like to pay tribute to the right hon. Gentleman the President of the Board of Trade. I think he has met all the points that we of the Opposition have offered very reasonably. From my own experience of him in Committee upstairs, I can say that he has been willing to listen to any constructive suggestions that have been made, from whatever quarter they have come, and I think that he, with his large experience of the City of London, has been able to accept some of the things that were brought to his attention and so to make the Bill a better Bill than it was when it was first introduced. I hope the Bill will effect all that the right hon. Gentleman expects it to effect, but I certainly hope that he can give us an assurance that it is only one step in the direction which the House has been desiring to take for a long time past, namely, the reform of the company law.

8.23 p.m.

Mr. Cross

I would, first of all, explain to the right hon. Gentleman the Member for West Stirling (Mr. Johnston) that I am sorry he should have been taken by surprise at the Third Reading of the Bill being moved at this time. I thought he was fully informed of the course of business this afternoon. Very fortunately, this is not controversial business, and I hope it has not caused hon. Members any inconvenience that they should not have been aware that it was proposed to take the Third Reading right away. The right hon. Gentleman gave us a most interesting list of fraudulent financiers and of the different devices which they have employed in the past. They were a number of examples which he derived from his own unequalled knowledge of the subject, and I should like to take this opportunity of expressing at the same time recognition of the very important part which the right hon. Gentleman has taken in calling public attention to these evils. I call it typical of his appetite and of his zeal in these matters that, no sooner had we approached the Third Reading of this Bill than he was turning his attention to tackling the whole world.

That brings me to the particular point that he raised about the possibility of these activities being transferred from the United Kingdom to countries overseas. The right hon. Gentleman said it is possible that these rogues will transfer their activities to Northern Ireland, the Channel Isles, Canada, Eire, the Isle of Man and elsewhere, and will send circulars to this country. It is difficult to see how one can protect the people of this country from being swindled if they are foolish enough to send their money outside the country merely on the strength of having received circulars. The danger is a small one, and I think the right hon. Gentleman will bear me out because he has had more experience of this than I have. Only to a very small extent, I believe, has money been sent overseas through the medium simply of circulars. The real danger rests, as we have been told a good many times, from the process of touting or following up upon the circular. Without the tout and the follow-up upon the circular there is not really a great danger. This Bill prevents the sending of circulars from the United Kingdom to countries overseas, and it seems to me that the only practical method of preventing the import of literature of this kind is for our friends in other countries to pass parallel prohibitions against the issue of circulars in their countries. The right hon. Gentleman said, and I agree with him, that postal control is not a practical method. My right hon. Friend authorises me to say that he will give the most careful consideration to suggestions which the right hon. Gentleman has made in that connection, and to approach the appropriate Government Departments to see what can be done to further that idea.

This has been a very difficult Measure and a number of hon. Members have said in winding up that it will not stop all swindling. We are fully conscious of that, and, indeed, we have had a narrower aim than that throughout the Bill, but I am not seeking to enter into controversy because I appreciate what the hon. Member for Bassetlaw (Mr. Bellenger) and the hon. Member for East Birkenhead (Mr. White) said on that point. The various stages of the Bill have been marked by an extraordinary and exceptional degree of co-operation between all parties. We have had a common object in suppressing the sharepusher while not interfering with the multitude of honest transactions that take place every day of the week. This general desire to improve the Bill has been productive of many helpful suggestions. We ought to congratulate ourselves on having had the advantage of the help of the right hon. Gentleman the Member for Stirling (Mr. Johnston), who has a knowledge on this subject which none of the rest of us can claim to rival. It will be agreed that my right hon. Friend has given effect to a large number of the suggestions that have been made to him. We may be confident that this Measure has emerged from its different stages more effective in its provisions to ensure the protection of legitimate business. I hope now, with the application of the powers which we shall shortly have gained through this Bill, we shall be able to drive these rogues out of business once and for all.

Question, "That the Bill be now read the Third time," put, and agreed to.

Bill read the Third time, and passed.