§ Mr. John Townendasked the Minister for Trade when he expects to publish new rules for licensed dealers in securities; and if he will make a statement.
§ Dr. VaughanI have today laid new rules and regulations before Parliament. They will come into force on 1 June and will I believe make it more difficult for any dishonest dealer in securities to cheat or mislead his clients. The previous rules and regulations were made many years ago. Their replacement is an important step forward in bringing the regulatory framework up to date. However, although improving investor protection against non-commercial risks, they do not obviate the necessity of investors themselves weighing up carefully the nature and degree of risk involved in an investment before parting with their money.
Their main features are that licensed dealers will be required:
To keep client money and investment separate from their own, so that clients are protected if the dealer becomes insolvent. Client money will be kept in a separate trust account.To give written notice to new clients, telling them how the dealer will handle client money and investments. Dealers undertaking investment management for clients must enter into formal contracts covering a range of matters laid down in the rules.To tell clients of the insurance or other arrangements they have to protect clients in the event of their failing to account to clients.To disclose to clients any material interest they may have in a transaction. (Certain transactions where a conflict of interest is inherent may not be entered into without the client's agreement.To keep more detailed books and records about his transactions involving client money and investments. Clients are entitled to obtain extracts of entries in the dealers' records about their transactions.To provide more detailed information on their annual application for licences and to keep the Department informed of relevant events, such as changes in directors.To submit independently verified returns to the Department about their handling of clients' money and investments.