§ Mr. Gordon Prentice (Pendle)I am grateful to be given the opportunity to raise this issue today. I want to focus specifically on the insider share dealings of Lord Archer, and I do so because he has chosen not to reply to any of the letters that I have sent him about his share dealing activities.
In September, I wrote a fairly lengthy letter to Lord Archer, posing detailed questions; he chose to ignore it. I followed that letter with others, and he also chose to ignore those. He has jumped into the undergrowth and is refusing to answer the questions that have been asked of him, legitimately, by Members of the House. I think that is an absolute disgrace for a Member of Parliament, albeit an unelected Member of Parliament—
§ Madam Deputy Speaker (Dame Janet Fookes)Order. Before the hon. Gentleman continues, I remind him of our very important rule that criticisms are not offered to any Member, either in the House or in the other place, unless on a substantive motion. Such a motion is not before us today, so I must counsel caution in what the hon. Gentleman says.
§ Mr. PrenticeThat puts me in some difficulties, but I shall endeavour to be circumspect and allude to various matters tangentially perhaps rather than directly.
When The Sunday Times broke the news of Lord Archer's share-dealing activities in August, there was astonishment in my constituency—a constituency that was represented, before I came here, by a Conservative Member of Parliament for 13 years. When my constituents read that Lord Archer had made £80,000 in share-dealing transactions in two days, there was outrage.
The very week that Lord Archer made—I say "made", not "earned"—£80,000 in share-dealing activities, a job was advertised in the job centre in Nelson, which is in the heart of my constituency, for a kitchen assistant and cook, with pay of £2.92 an hour. That person would have had to work 27,397 hours or a 40-hour week for 13 years to make what Lord Archer made in his share-dealing activities in the space of four days last January.
As we approach the anniversary of that share-dealing activity, I invite the Minister to reject or perhaps tell the House whether he condones the activity of a man who was very close indeed to becoming chairman of the Conservative party. In fact, he was widely regarded in the press and among Conservative Members as being an heir apparent until that matter blew up.
The right hon. Member for Sutton Coldfield (Sir N. Fowler), who retired as chairman of the Conservative party, was succeeded by the right hon. Member for Richmond and Barnes (Mr. Hanley). He urged Lord Archer to speak out, as I have. In September, the right hon. Gentleman, speaking to the Financial Times, said:
Geoffrey will find it probably better to speak out rather than not.That is what I am urging the noble Lord to do—to speak out.When The Sunday Times broke the story in August, Lord Archer's reaction was astonishing. When the story first reached the public prints alleging that he had bought shares in Anglia Television—a company in which his wife, Mary, was a non-executive director—he said:
It is completely untrue. I did not buy any shares. I am not going to make a statement. That sort of accusation is libellous.1592 I will be guided by you, Madam Deputy Speaker, but there are people who would say that that was just a downright lie.
§ Madam Deputy SpeakerOrder. I am giving guidance. I do not think that that is an appropriate comment to use in this context. I suggest that the hon. Gentleman does not pursue that line at all. I remind him that the topic that I read out before he spoke was simply "Insider Share Dealing". It makes no reference to any named person. I must therefore caution him again.
§ Mr. PrenticeI seek your further guidance, Madam Deputy Speaker, because when I applied for the debate to Madam Speaker, I recall that I linked the share-dealing activities of Lord Archer with insider trading. That was the specific issue that I sought to raise.
§ Madam Deputy SpeakerI am not party to what took place in any guidance that the hon. Gentleman may have received outside the Chamber, but I am very clear about what may or may not take place inside the Chamber now. It is important that he realises that comments that reflect upon the honour or integrity of a Member of the other place are not in order now, except on a substantive motion. I have made that point before, but I make it again. No such substantive motion is before us at this time.
§ Mr. PrenticeI shall try to weave my way through the thickets as best I can, Madam Deputy Speaker, given what you have just said, but is it in order for me to say that the quotation from Lord Archer which was carried in the national press in August was economical with the truth?
§ Madam Deputy SpeakerOrder. As that now has a clear derogatory meaning, I must rule that out of order as well.
§ Mr. PrenticeWell, I have tripped over that particular thicket, Madam Deputy Speaker. I find that the constraints are such that I cannot make the speech that I had intended to make.
I shall, in conclusion, simply say that the country has not received all the answers that it requires about the share-dealing activities of Lord Archer in January. Many national newspapers across the political spectrum have highlighted the gaps where Lord Archer has not been forthcoming.
The editorial from The Guardian on 26 August this year said:
Lord Archer has admitted a 'grave error' in buying shares in Anglia television and in causing 'needless embarrassment' to his wife who is a director of the company. But he strongly denies that the transaction was carried out with the benefit of any insider information.It seems to me that it is virtually impossible to secure any conviction under the Financial Services Act 1986, or the relevant legislation, if the parties to any insider dealing resolutely stick to their story. So if Mary Archer did not say anything to Lord Archer, and if he did not say anything to Mr. Broosk Saib, and Mr. Broosk Saib did not know what time of day it was—he hardly knew of the existence of Anglia Television—I invite the Minister to comment on the point that it is impossible to secure a conviction.The editorial continues:
There must therefore have been other reasons why he"—Lord Archer—didn't use his normal stockbrokers, but chose instead"—
§ Madam Deputy SpeakerOrder. I am concerned that this, too, is, in its own way, reflecting on Lord Archer's conduct in a way that is not suitable for this type of debate. I think that the hon. Gentleman would be wise to follow his own advice of concluding fairly rapidly.
§ Mr. PrenticeI will do so, but with great disappointment, because I thought that, in this forum—of all forums—it would have been possible to discuss in an unemotive way a matter of great controversy, which has triggered a response not just from the Conservative party but from the public prints. It is disappointing that I do not have an opportunity to raise these important issues in this forum, but I shall seek to do so in another way.
§ The Minister of State, Treasury (Mr. Anthony Nelson)I am answering a debate which, in a sense, has not happened, but I make no complaint about that, because my responsibility as a Treasury Minister is with policy relating to insider dealing, whereas the investigation thereof and, indeed, prosecution, is a matter for the Department of Trade and Industry.
It would be wholly improper of me, both in a departmental sense and as a matter of parliamentary privilege, to comment on many of the allegations that the hon. Member for Pendle (Mr. Prentice) has chosen to make this afternoon under the privilege of the House. If the hon. Gentleman had clearly said that the debate related to the noble Lord Archer, there might have been a different Minister at the Dispatch Box seeking to answer his debate, but the title of the hon. Gentleman's debate relates to insider share dealing, which is a serious and very important matter and so is a matter for me to deal with.
Insider dealing is not a victimless crime and the Government have, on a number of occasions, by introducing legislative change and prosecution thereunder, sought to deter, detect and, indeed, penalise wherever possible those activities, which do cause pecuniary loss to some and bring markets into disrepute as well.
With regard to the noble Lord Archer, all I can do this afternoon in response to the points that the hon. Gentleman has chosen to make is to reassert the position that has been put before. My right hon. Friend the President of the Board of Trade and his Department propose to take no further action in the matter, which has been thoroughly investigated by independent inspectors and subject to independent legal advice. As my right hon. Friend has also explained, there is no legal provision for the publication of the inspectors' report, and it would be quite improper for him to publish it. It is just possible, with the consent of all parties and with all the evidence concerned, that disclosure of a report could take place, but the clearest—
§ Mr. Gordon PrenticeWill the Minister give way on that point?
§ Mr. NelsonNo, I will give way later, but it may be helpful if I just explain a few further facts, which are already in the public domain and which may answer the hon. Gentleman's point.
In February of this year, two independent inspectors—a Queen's counsel and a chartered accountant—were appointed to investigate possible insider dealing in the shares of Anglia Television, just before a bid for the 1594 company by MAI plc in January of this year. On 7 July, the Secretary of State confirmed that Lord Archer was one of several people subject to the investigation and also in July the inspectors submitted their report. They concluded that there was no basis on which to prosecute Lord Archer. However, the report was referred to independent counsel who also advised against prosecution.
Accordingly, on 28 July, the President of the Board of Trade announced that, on the basis of the report and departmental and other legal advice, he had concluded that the DTI should take no further action against any of the parties under investigation. In those circumstances, as explained by my right hon. Friend the President of the Board of Trade, I have nothing further to add to the facts that are already in the public domain.
However, I should like take this opportunity to comment a little further on insider dealing, which may be of interest to the hon. Gentleman, although he has not sought to use the precious opportunity afforded by this debate to raise such matters. They were, of course, of great interest to the House during the passage of the Criminal Justice Act 1993, previously during the passage of the consolidating Company Securities (Insider Dealing) Act 1985 and, originally, during that of the insider dealing legislation introduced in 1980. This Government were the first to make insider dealing a criminal offence. Therefore, we are fully aware of the serious consequences that insider dealing can have for the operation of the financial markets.
The markets are the channels for a large proportion of individuals' savings, invested directly or on their behalf by institutions and on which individuals' future well-being depends. In turn, the financial markets channel those savings to companies on which our national prosperity ultimately depends.
To meet the objectives of investors and companies, the markets must operate efficiently and fairly. If market participants feel that there is a risk that they may be disadvantaged by insider dealing, they may be less willing to invest via the capital markets or may demand a higher return from companies for doing so. Either way, market liquidity could be damaged and the cost of raising capital increased. That effect would, of course, be in addition to any loss that an individual investor may suffer if insider dealing were unchecked.
The Government are therefore firmly committed to insider dealing legislation that allows people who take advantage of privileged information to be caught and punished. That is why the Government made insider dealing illegal in 1980 and why we extended the prohibition on 1 March this year to cover a broader range of misconduct than was previously the case. For example, it is now illegal for an employee of a company to sell a competitor's shares on the basis of the inside information that his employer has won an important contract that would prove detrimental to the competitor's business prospects.
The new legislation also covers a wider range of securities and applies to off-market transactions which involve a professional intermediary as well as to business transacted on investment exchanges.
Our approach to insider dealing has been to define in statute what constitutes the offence and what is meant by the terms "inside information" and "insiders". In doing so, we have recognised that there is always something of 1595 a trade-off between the degree of certainty that can be incorporated into the law and the avoidance of loopholes which would allow the real insider dealers to go about their wrecking business within the law.
We believe that the insider dealing provisions contained in the Criminal Justice Act 1993 draw the line in the right place. That should mean that the real insider dealers can be caught while the people engaged in legitimate activities are left to go about their business. The legislation does not, therefore, threaten legitimate communication between companies and their individual institutional shareholders and investment analysts. Nor does it jeopardise properly conducted corporate finance transactions.
Underpinning the legislation are the systems for detecting insider dealing. The Government greatly welcome the improvements in market surveillance which have been brought about through the introduction by the London stock exchange of the integrated monitoring and surveillance system. We also welcome the exchange's decision to consult on ways to curb disorderly markets. Although we recognise the fact that evidence of insider dealing can be difficult to obtain, the ability of the system to monitor the stock market on a real-time basis, stricter legislation and tougher procedures for handling disorderly markets will send a clear message that insider dealing will not be tolerated.
The Government believe that the seriousness of the offence justifies criminal sanctions, as it harms not only individuals' interests but the integrity of the financial markets, and affects the costs to companies of raising capital. We also believe that criminal sanctions have a considerable deterrent effect on would-be insider dealers, which helps to mitigate those harmful effects.
That is not to say, however, that civil sanctions do not exist to punish insider dealing; they certainly do. Civil remedies are available—for example, where there has been a breach of the rules of a self-regulatory organisation or of a contract of employment. In addition, there may be circumstances in which claims for compensation could be made.
The Government accept, of course, that the nature of the offence means that insider dealing can be difficult to establish. That would be true under any system of enforcement, and I assure the hon. Gentleman that the law against insider dealing is kept under review to ensure that it is as effective as possible.
I do not believe that the offence of insider dealing is a matter of bipartisan difference. It is a matter of great concern to those outside and inside the House because it affects the integrity and liquidity of the markets, and the respect for contractual arrangements. When insider dealing occurs there is undoubtedly pecuniary loss to those who may have been taken advantage of by others with inside information.
That is why it was the Conservative Government who made insider dealing a criminal offence. As the Minister responsible, I decided not to take the opportunity offered by the European Community directive to decriminalise the offence. That would have been possible and many, including some in the House, have urged the case for making insider dealing a civil offence because that may carry a lower burden of proof. They have argued that although the offence exists and the penalties are strong— 1596 limitless fines and up to seven years in prison—the number of prosecutions has not been substantial, and nor has the number of individuals convicted.
Nevertheless cases have been brought, people have been convicted and penalties have been imposed. Moreover, we cannot quantify the deterrent effect that that may have on the marketplace, preventing people who would otherwise have been tempted to do so from engaging in insider dealing.
§ Mr. Gordon PrenticeDoes the Minister accept that there would be greater public confidence in the system that he has described if there were greater transparency? He said that it would be possible to release the DTI report on Lord Archer's share dealing if all the parties agreed. Will he urge his noble Friend to agree to that?
§ Mr. NelsonNo I would not, because the President of the Board of Trade has made it clear that not only did he obtain one set of legal advice from a chartered accountant and a Queen's counsel—that was the advice of the inspectors, given to him as the Secretary of State—but he then chose not simply to take that advice but to submit that report to a second opinion, as it were, by putting it to counsel. Both sets of advice were clear: no foundation existed for prosecution in that case.
Although under section 179(1) of the Financial Services Act 1986 the Secretary of State is allowed to disclose information collected by section 177 inspectors, provided that he has the permission of
the person from whom the primary recipient"—that is, the inspectors—obtained the information and if different, the person to whom it relates",the point is that that would require such permission from each separate person who gave a statement to the inspectors. Even if that were practicable, there is no express power for publication in the report itself. I am bound to observe that a more mischievous objective than a desire to ensure the integrity of the law or decisions of the Secretary of State prompts the hon. Gentleman to suggest that the matters have not been properly considered.There was a full debate about the confidentiality of submissions to inspectors in such cases in the House of Lords. Indeed, the ministerial undertakings that section 177 reports would normally never be published were made during the Lords Committee stage of the Financial Services Bill by Lord Lucas of Chilworth. That is the case in this instance. That may not be a decision that the hon. Gentleman likes, but it reflects the proper way of dealing with such cases.
I assure the hon. Gentleman that such matters are considered carefully. I have not seen the report. That is also entirely proper. It is not for me, a Treasury Minister responsible for overall policy and the integrity of the financial markets as a whole, to second-guess reports, proposals and recommendations put to my right hon. Friend the President of the Board of Trade.
My right hon. Friend has made his position clear. The hon. Gentleman is going over history. There is nothing new to elucidate and I have said nothing new in my remarks this afternoon which should encourage him to believe that there will be any change of mind on the matter. The points that he raised were more about pursuing an individual high-profile case and claim than a 1597 genuine attempt to improve the effectiveness of our insider dealing legislation. It is important legislation. It sends broader messages to the financial markets as a whole. Its aim is not served by dwelling on cases and making comments such as the hon. Gentleman has made this afternoon.
If the hon. Gentleman were really concerned about the wider implication of loss through insider dealing, he might have dealt with some of the issues surrounding how the new legislation was working out in practice and the new monitoring and surveillance systems of the London stock exchange. We heard nothing about that from the hon. Gentleman. I have no wish in the last moments of the proceedings of the House before we adjourn for Christmas to take the hon. Gentleman to 1598 task in this season of good will, but the Government attach great importance to the legislation, great seriousness to the crime of insider dealing and great precedence to the legislation and the cases that we have seen through.
The debate was an opportunity to have a more wide-ranging and important debate of interest to people outside the House. Having said that, it has provided me with an opportunity to set out the importance that the Government attach to the subject and some of the legislative history. I hope that that will be of reassurance to a wider audience outside the House, if not to the hon. Gentleman.
It being two minutes to Three o'clock, the motion for the Adjournment of the House lapsed, without Question put, pursuant to resolution [16 December].