HL Deb 27 October 1981 vol 424 cc1042-4

171 After Clause 73, insert the following new clause—

"International bonds

.—(1) Section 71 of the 1980 Act (exclusion of things done in connection with international bonds from prohibition on insider dealing) shall have effect subject to the following modifications.

(2) In subsection (1)—

  1. (a) after the word "debenture", in the first place where it occurs, there shall be inserted the words "or any right to subscribe for, call for or make delivery of any debenture";
  2. (b) in paragraph (a)(ii) for the words "before the date on which it is decided" there shall be substituted the words "before the decision is taken"; and
  3. (c) in paragraph (b) after the word "debenture", in both places where it occurs, there shall be inserted the words "or right".

(3) The following subsection shall be inserted after subsection (1)— (1A) Where an individual holds unpublished price sensitive information in relation to any securities but by virtue of subsection (1) above he is not prohibited by section 68 above from doing anything in relation to those securities, he shall not be prohibited by virtue of his holding that information by section 70(2) above (prohibition on counselling persons to deal on stock exchanges outside Great Britain, etc.) from doing any other thing in relation to those securities.".

(4) In subsection (2)—

  1. (a) in paragraph (b) of the definition of "international bond issue" for the words "are so offered" 1043 there shall be substituted the words "are or are to be so offered"; and
  2. (b) the following words shall be inserted after the definition of 'issue manager", that is to say, "and 'off-market dealer' has the meaning given by section 70(3) above.".

(5) The following subsections shall be inserted after subsection (2)— (3) The Secretary of State may by regulations made by statutory instrument make provision—

  1. (a) permitting persons of any specified class to be treated as issue managers for the purposes of subsection (1) or (1A) (or both) of this section;
  2. (b) permitting persons of any specified class to be treated as off-market dealers for those purposes;
  3. (c) permitting an issue of international securities of any specified class to be treated as an international bond issue for those purposes;
  4. (d) extending the exemptions conferred by subsection (1) or (1A) above (or both) for things done in relation to other advertised securities or other advertised securities of any specified class;
  5. (e) amending or disapplying paragraph (i) or (ii) (or both) of subsection (1)(a) above in relation to any international bond issue or any international bond issue of a specified class.

(4) In subsection (3) above "international securities" means any securities (whether listed or advertised or other) which are in any way connected with a country outside Great Britain, for example, securities issued by a body which is incorporated or resident outside Great Britain or which are denominated in a currency other than sterling or which are dealt in by bodies incorporated or resident outside Great Britain or by individuals so resident.

(5) Regulations under subsection (3) above—

  1. (a) may make different provision for different cases or classes of case and may contain such incidental and supplementary provisions as the Secretary of State thinks fit;
  2. (b) shall not be made unless a draft of the instrument containing them has been laid before Parliament and approved by resolution of each House of Parliament.".

Lord Lyell

My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 171. Your Lordships will see that this amends Section 71 of the 1980 Act. This excludes certain dealings in the international bond market from the prohibition which we discussed at great length at earlier stages in this particular Bill, and I remember, in 1980, and at earlier stages on the vexed question of insider dealing. The new clause amends Section 71 in two major ways. First of all it puts right certain technical defects in the old section. The result of these defects is that the section as it stands fails to achieve completely the intended objective of providing a defence for certain specified activities in the international bond market.

Secondly, we are amending Section 71 because the clause gives to the Secretary of State power to make certain further amendments to Section 71 by order subject to the affirmative resolution of both Houses of Parliament. I recognise that it is unusual to take powers to make secondary legislation to amend criminal provisions, but the circumstances are very unusual and I hope that your Lordships will permit me to explain briefly why this is so.

Even in the 18 months or so since Section 71 was enacted in the 1980 Act, there have been considerable changes in the way that the international issue market has been operating. This particular market is confined to professionals who are, in almost all cases, large financial institutions who are well aware of the risks that they are taking. There is no danger in this aspect to the unsophisticated saver or small investor.

The market has developed very much in the last 18 months, and seems certain to continue to do so in the future, in new and unpredictable directions. It would be wrong for restrictions which are designed to protect the small investor and saver to prevent large institutions in the City of London from playing a part in a market which began here in London and in which the City is pre-eminent. Equally, it is clear that opportunities for primary legislation will be too infrequent to allow the law to catch up with any rapid commercial developments, especially in this specialised market. Thus, subsection (5) of the new clause enables the Secretary of State to amend the section by regulations in various specified ways. None of the regulations can come into force until it has been approved by affirmative resolution of both Houses.

I wish to stress the limited scope of these powers. We are not seeking to widen our original concept of the international bond market to give complete freedom, complete licence and complete carte blanche to the institutions in the City to deal whenever they hold inside information. Far from it. We are seeking a flexible way of keeping the law in step with detailed developments in the way that the international issues and bond markets operate. I apologise for going at such length into the matter, but this is a very specialised market and I thought the House merited an explanation of why we have taken this step.

Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)

Lord Davies of Leek

My Lords, this demonstrates again what we said earlier today about the importance of this measure. As I see it, the lifting of exchange control has created a completely different situation in the international bond system. It would be remiss of me to delay the House at this late hour, but I should have liked rather more discussion of this whole issue. I do not seek more explanation from the Minister, but we should have had more time to discuss the point. Perhaps at a later time we shall be able to deal with this.

Lord Lyell

I appreciate that this is a very complicated subject, my Lords. I have several pages more of supplementary briefing, but if the noble Lord has further questions to raise, then, apart from the myriad of opportunities he has to question me and my noble friends, if he wishes any aspect of the bond market explained, either formally or informally, I shall be more than happy to write to him.

Lord Davies of Leek

My Lords, I am obliged to the noble Lord for that kind reply.

On Question, Motion agreed to.