§ Mr. Warren
To ask the Secretary of State for Trade and Industry if he will list for each of the regulatory bodies to which copies of the inspectors' report on House of Fraser were sent prior to, or at the time of, publication, and the conclusions each body has reported to him on that report.
§ Mr. Lilley
[holding answer 6 February 1992]: My predecessor sent copies of the inspectors' report to the following regulatory bodies: the Bank of England, the takeover panel, the Law Society, the Securities and 556W Investments Board, the Securities Association and FIMBRA. Copies were disclosed to the Bank of England and the takeover panel prior to publication of the report. The remaining bodies were passed copies on publication.
My Department's memoranda of November and December 1990 to the Trade and Industry Committee gave information on action taken at that time by regulatory bodies following their consideration of the House of Fraser report. These were published in March 1991. Subsequently the following further information has become available.
For the Bank of England the Governor gave evidence to the Committee in 1991. FIMBRA has informed the Department that it has nothing to add to the evidence given to the Committee by the Bank of England, which is the lead regulator for Harrods Bank.
As for the Solicitors Complaints Bureau, as set out in my Department's December 1990 memorandum the report of the solicitors instructed by the Law Society to consider the part played by Herbert Smith in the matters dealt with in the inspectors' report was considered by the adjudication committee in November 1990. The adjudication committee considered that there was no evidence of professional misconduct by Herbert Smith.
The same report was considered in January 1991 by the standards and guidance committee of the Law Society, responsible for setting professional standards. That Committee considered that there was no evidence to justify changes to the solicitors' practice rules or to the principles contained in the Guide to the Professional Conduct of Solicitors. The committee was of the view that any guidance on the issues raised by the House of Fraser case should be by way of "best practice", and as such was a matter for the relevant specialist committee, that is the company law committee.
The company law committee, which is composed of specialist practitioners engaged in private practice, commerce and industry, has set out its views on the company law issues raised by the inspectors' report in the Law Society's memorandum submitted to the Trade and Industry Committee in April 1990. The company law committee had no comments to make on the conduct or regulatory issues raised by the case. The Committee is of the view that professional conduct guidance on such a technical area of practice would be inappropriate. In practice the lessons to be learnt from cases such as House of Fraser will have been incorporated into the internal practice procedures adopted by the large City firms involved in such takeovers and mergers. On that basis, the committee was therefore content to let the matter rest.
The takeover panel has informed my Department that on 23 January 1992 the High Court dismissed the Fayed brothers' application for leave for judicial review of the decisions of the panel and its appeal committee in December 1991 not to grant an adjournment of the hearing of disciplinary charges being brought against the Fayed brothers by the panel executive. The decision of the High Court is subject to an appeal by the Fayeds.