§ 5.28 p.m.
§ Lord Bach rose to move, That the draft order laid before the House on 22nd June be approved [23rd Report from the Joint Committee].
§ The noble Lord said: My Lords, the purpose of the order is to make a limited number of amendments to the list of securities markets to which insider dealing legislation applies.
§ Insider dealing is a serious crime which taints the integrity and efficiency of any financial market. London is indisputably a leading international financial centre, and attracts institutions from all over the globe to invest and set up their operations here. 551 Being, and being seen to be a clean place in which to do business is a key part of London's success and one which we are determined to maintain.
§ Your Lordships will be aware that the criminal offence of insider dealing is governed by the provisions of the Criminal Justice Act 1993. These provisions enable the Treasury to specify the securities to which the criminal offence of insider dealing applies. The Insider Dealing (Securities and Regulated Markets) Order 1994 specifies those securities and was last amended four years ago. This order amends that order again to add three more markets and thereby bring the securities traded on these markets under the jurisdiction of the Criminal Justice Act for the purposes of insider dealing.
§ The first of these three markets is OFEX. This is an off-exchange share matching and trading facility operated by J P Jenkins Limited, a firm authorised by the Financial Services Authority. When the order was last amended, OFEX was a relatively small operation but its growth as a tertiary market in London has been significant. We judge that it is now appropriate for the securities traded on OFEX to be covered by the criminal offence of insider dealing.
§ I am grateful to the noble Lord, Lord Northbrook, for giving me notice of a question about whether OFEX will be covered by the civil market abuse regime under the Financial Services and Markets Act. The scope of the civil regime will be determined by the prescribed markets order. This was published for consultation in June 1999. It made clear that any market capable of meeting the recognition criteria for recognised investment exchanges is likely to be the kind of market that will be covered by the new regime. However, it also made clear that the new regime was not coterminous with recognition and so its scope can extend beyond the recognised investment exchanges. The responses to the consultation document are being considered. The question of whether the civil regime should apply to OFEX is part of the process of consideration. We will be talking to the relevant interested parties over the coming months.
§ The second market to be included in the order is COREDEAL. This is an over-the-counter, electronic exchange for international, debt-related securities. The market for these securities is a major source of medium to long-term funding for governments, international financial institutions, development banks and corporations. COREDEAL was recognised by the FSA in May of this year as an investment exchange.
§ The third market to be added is EASDAQ, the European Association of Securities Dealers Automated Quotations. This is a Brussels-based, pan-European stock market which was set up in 1996. The existing order already specifies a large number of regulated markets across the European economic area. It would therefore be inconsistent not to bring EASDAQ within the scope of the order.552
§ Finally, we would like to remove the Securities Exchange of Iceland from the order because it refers to the same body already on the list; namely, the Iceland Stock Exchange. The duplicate inclusion was a simple error when the order was last changed in 1996.
§ It is important that the order is amended to include OFEX, COREDEAL and EASDAQ. By doing so, it deters would-be perpetrators who might otherwise take advantage of an unregulated market. These markets are significant in their own right as part of our financial sector and it is important that they should be covered by the insider dealing regime. I beg to move.
§ Moved, That the draft order laid before the House on 22nd June be approved [23rd Report from the Joint Committed].—(Lord Bach.)
§ Lord Northbrook
My Lords, we on these Benches approve the order. We note that, unlike the other orders before us today, it consists of only one page. I declare an interest as an investment fund manager, and on behalf of Members on these Benches I thoroughly approve of the tightening up of insider dealing as applying to the additional markets of EASDAQ, OFEX and COREDEAL. I am grateful to the Minister for replying to my question about the civil regime applying to OFEX. We are in favour of the order.
§ On Question, Motion agreed to.