HL Deb 04 June 1996 vol 572 cc1206-8

6.4 p.m.

Lord Mackay of Ardbrecknish rose to move, That the draft order laid before the House on 8th May be approved [20th Report from the Joint Committee].

The noble Lord said: My Lords, the order amends Article 10 of, and the schedule to, the Insider Dealing (Securities and Regulated Markets) Order 1994. Article 10 of the 1994 order identifies the regulated markets which are "regulated in the United Kingdom" for the purposes of the territorial scope of the offence of insider dealing. The schedule to the 1994 order identifies which markets are "regulated markets" for the purposes of insider dealing.

The 1994 order now requires amendment to take account of a number of developments in the UK's securities markets and certain overseas markets. Thus the amending order updates Article 10 of the 1994 order to reflect the separation of the London and Irish stock exchanges and the recognition of Tradepoint Financial Networks plc as a UK investment exchange. It also revises the schedule to the 1994 order to take account of the changes to the UK's exchanges and to reflect the creation of two new overseas exchanges—France's Nouveau Marché and the Iceland Stock Exchange. In addition, the amending order deletes seven obsolete overseas trading facilities from the list of regulated markets. I beg to move.

Moved, That the draft order laid before the House on 8th May be approved [20th Report from the Joint Committee]—(Lord Mackay of Ardbrecknish.)

Viscount Chandos: My Lords, I thank the Minister for his introduction to this order. It is an order which both sides of the House will find unexceptionable. It seems that this is a slightly cumbersome way in which to change the list of different regulated markets. I wonder whether there is an easier way in which to achieve that. Must each of the investment exchanges be listed under a new statutory instrument? If somebody has dealt in inside information on, for example, the exchange known as the Nouveau Marché since its creation but before this order came into effect, will he get away with that insider dealing?

The Minister has explained that the Icelandic Stock Exchange is being added to the list of investment exchanges and, hence, regulated markets. Will he confirm that it is therefore correct to leave in the Securities Exchange of Iceland? These Benches acknowledge the manifold virtues of competition but we are certainly impressed that the Icelandic capital markets can support competing securities exchanges. These Benches are not in favour generally of increasing the discretionary powers of the Executive but as I said, we wonder whether it would be possible to add and subtract exchanges other than by means of specific statutory instrument.

At the same time, will the Minister confirm that the proposed pan-European junior stock market, which fashionably should be known as EASDAQ, is covered under this order? Furthermore, in the United Kingdom the junior market, the alternative investment market, has been established under the broad rules of the Stock Exchange but very specifically with the Stock Exchange not taking responsibility for, for example, the accuracy of documents used to support the introduction of a new company to the AIM. That is the responsibility of the nominated adviser or broker. Will the Minister confirm that, notwithstanding that, the Stock Exchange will monitor secondary dealing and hence, potential insider dealing at least as vigorously for companies on the AIM as is done for companies on the main market?

In saying "at least as vigorously", that brings me to the central question which is perhaps not directly addressed by this order. Is the Minister really satisfied with the current level of identification of insider dealing and prosecution of the cases which are identified?

Lord Mackay of Ardbrecknish

My Lords, I am grateful to the noble Viscount, Lord Chandos, for his approval of the order. I shall try to answer the questions that he put to me. The noble Viscount asked initially whether we need to do it this way; indeed, I asked the exact same question myself. Although I did not receive a proper answer, I suspect that a Minister at this Dispatch Box, at some stage in the past when the original Act was going through the House, under pressure from the Benches opposite—and perhaps even from the Benches behind me—conceded that it should be done by this method and not by executive order.

I make that assumption because I have suffered from the same pressures on a number of occasions regarding pieces of legislation that I have put through the House. On such occasions I have one thought. It seems to me that someone in 10 years' time may ask, "What clot of a Minister ever suggested that we should do this by such a laborious method?" Therefore, I have some sympathy with the noble Viscount who rather more delicately asked exactly the same question about the legislation now before us. Nevertheless, we have to do it this way.

That was the way it was framed in the original Act. It was done, presumably, because—and here I am being slightly serious—Parliament took the view at that stage that these were serious matters and that changes ought to come before the House for its approval and not be done at the whim or even in the wisdom of the executive.

So far as concerns Iceland, it is true that the Securities Exchange of Iceland is still there and still operating. I would be content to accompany the noble Viscount to Iceland on a fact finding mission to check the position. However, I suspect that the Treasury would not sanction my expenses in that respect, nor indeed those of the noble Viscount. Therefore, the answer to that question is, yes.

As regards the question about the Stock Exchange vigorously pursuing insider dealing, I can confirm that it certainly does so over the many parts of the exchange for which it is responsible. So far as concerns the oddly named EASDAQ, it has not been included in the list of regulated markets because it has not yet started trading. We understand that it may do so later this year. I am afraid that we cannot add something to the list unless it has actually started.

I believe that that leads me to another of the noble Viscount's questions; namely, what happens in the interim between coming into being and being added to the list? I have to say that I shall have to check the position. However, logic suggests to me that the noble Viscount is probably right. It needs to be added to the list but, of course, any insider dealing on that market would be regulated by that market. Therefore, I do not believe that the problem to which the noble Viscount referred really exists.

All those markets in the EU—and they are, of course, all markets in the EU or the EEA—have their own regulatory system which would operate if anyone was doing insider trading on their markets. That allows us to deal with them almost as one to the effect that we can act against insider traders who are here and doing insider trading on those markets. I believe that I am right in that respect. However, if I am not, I shall certainly write to the noble Viscount on the matter.

Viscount Chandos

My Lords, I believe that the position of EASDAQ is, perhaps, sensitive because it is a pan-European exchange and, therefore, probably not covered by a domestic regulator.

Lord Mackay of Ardbrecknish

My Lords, I shall certainly look into that aspect of the matter. It is supposedly going to be pan-European, but, so far, it has only been approved by Belgium. I understand that EC law assumes that the same competent authority will approve prospectuses intended to be used to make public offers in other member states as it is responsible for admitting the securities to the official list. I do not believe that there is a problem in that respect, but I shall certainly check the position so far as concerns EASDAQ. At present, it is not on the list because it does not yet operate. With those remarks, I hope that the House will accept the order.

On Question, Motion agreed to.