Insider Dealing (Hansard, 21 February 1990)

§ The Minister of State, Department of Trade and Industry (Lord Trefgarne)
My Lords, this Government brought forward the first law making insider dealing illegal: the Companies Act 1980. We also brought forward the Financial Services Act 1986, enabling the Secretary of State to appoint inspectors with wide-ranging powers. From today, the Secretary of State can consent to the Stock Exchange prosecuting insider dealers, and he can also investigate on behalf of overseas regulators. We have recently published a consultative document proposing further changes.

§ Lord Donoughue
My Lords, I thank the Minister for that reply and the additional information which it contains. However, I believe that of the relatively few people charged under the two Acts, comfortably over a half have been acquitted. Bearing that in mind, are the Government and the Minister satisfied with the battle against insider dealing? Do we not need changes in the law, or further changes in the 272 prosecuting agencies, or perhaps more commercially-minded judges? Does the recent EC directive on insider trading give an opportunity for even further examination of the situation and tightening of the procedures?

§ Lord Trefgarne
My Lords, the Government certainly agree that there may be scope for further changes to the relevant legislation. That is why we have brought forward the consultative document which deals with that point. I dare say that the noble Lord has seen it. We look forward to hearing the views of relevant people on the proposals and to taking the matter forward in due course.
On the Government's enforcement record, the figures I have relate to 19 recent cases decided. The convictions were 10, there was one acquittal where the judge's interpretation of the law was subsequently reversed in favour of the prosecution. I am told that a total of 17 people have been prosecuted since the end of 1986 and four more are awaiting trial. Sixteen inspections are taking place at present.

§ Lord Williams of Elvel
My Lords, the House will be interested in the news that the noble Lord has given us about the possibility of the Stock Exchange mounting prosecutions. Does he recognise, however, that, from anecdotal evidence—and I agree that the evidence is difficult to prove in a court of law—insider dealing is believed to be widespread? Wherever there is a merger or takeover or a proposed merger or takeover, strange movements in shares frequently seem to occur. Are the Government serious about their ambitions to stamp out this iniquitous offence?

§ Lord Trefgarne
My Lords, I believe that our record shows that we are. As for the Stock Exchange, which now has power, with the Secretary of State's permission, to carry out prosecutions of its own, that power was contained in the Companies Act 1989 which the noble Lord and I had a little to do with. That power comes into effect today, as ever is. I dare say that the Stock Exchange will wish to take account of it. It is important that we should have an adequate legal framework to govern this difficulty which would have the result of making prosecutions more effective. I hope that it will also have a deterrent effect.

§ Lord Williams of Elvel
My Lords, I am grateful for that response. I wonder whether I could press the noble Lord a little further. There has been a great deal of discussion about whether the Securities and Investments Board should be given the responsibility for investigating and prosecuting these offences. What is the Government's position on that?

§ Lord Trefgarne
My Lords, we have not formed a final position on what further legislative changes may be necessary. That is why we have brought forward the consultative document to which I have referred, and upon which we look forward to receiving the views of interested parties. We shall form our view thereafter.

§ Lord Taylor of Blackburn
My Lords, may I seek information on this subject, as I was directed to do yesterday by the noble Lord the Leader of the House? It concerns the training of judges and whether judges have sufficient know-how in commercial activities to give a good judgment on these cases.

§ Lord Trefgarne
My Lords, my own view is that we have a most distinguished body of judges in this country whose intellectual capacity seems to be equal to almost any of the problems with which they are confronted.

Lord Morris
My Lords, does my noble friend agree that many would be concerned if we went down the route suggested by the noble Lord, Lord Williams of Elvel; namely, that the SIB should be both the investigating authority and the prosecuting authority in these types of offence?

§ Lord Trefgarne
My Lords, I am interested to hear the views of my noble friend. If he wishes to convey his views formally on the consultative document, they will be fully taken into account.

§ Lord Monkswell
My Lords, can the Government advise on whether the prosecutions liable to be brought by the Stock Exchange will be of a civil nature or will be criminal prosecutions? If they are to be criminal prosecutions, does this indicate a departure from previous practice whereby the state or the Executive, if I may put it that way, was responsible for criminal actions and private prosecutions were brought on the civil side?

§ Lord Trefgarne
My Lords, I am sorry that I do not know the answer to that question. I shall rapidly find it out and let the noble Lord know.

§ Lord Molloy
My Lords, when the Minister made his flattering remarks about the judges of England was he not aware that there are some judges who have made rude remarks about their superiors and have had to be brought to heel because of their vulgar behaviour? Will the Minister exclude those judges from his generous remarks?

§ Lord Trefgarne
My Lords, I shall stand by the general observations that I made.

§ Lord Williams of Elvel
My Lords, perhaps I can help the noble Lord on the matter of Stock Exchange prosecutions. Is it not the case that those prosecutions must be criminal prosecutions? There is no such thing as a civil prosecution in that area. If the Stock Exchange is to bring to bear powers under legislation it must bring to bear powers of criminal prosecution.

§ Lord Trefgarne
My Lords, I bow to the superior knowledge of the noble Lord in these matters. If he is correct, as I daresay he is, I shall hasten to confirm that fact.