§ Mr. Ioan Evansasked the Secretary of State for Trade whether he is now in a position to report the conclusion of his Department's review of the arrangements for supervising the securities market; and if he will make a statement.
§ Mr. DellIn June 1974 my predecessor announced in the House that my Department would carry out a review of present arrangements for supervision of the securities market. This review has shown that early action is needed in certain areas. The recent decision to appoint a committee of inquiry to review the functioning of financial institutions, which will among other things examine arrangements for the supervision of these institutions, does not remove the need to make a number of improvements in the existing system as quickly as possible.
In the course of my Department's review we have consulted a wide range of representative bodies, and I would like to take this opportunity to thank them for their co-operation in providing helpful analysis and comment. We have also studied the system of supervision in other countries, particularly in North America; my hon. Friend the Under-Secretary of State with special responsibility for companies, aviation and shipping, recently visited the United States and Canada to make a firsthand study of the supervision arrangements in those countries.
522WThe review has shown that our present combination of statutory and self-regulatory control, although, perhaps, a good deal more effective than its critics admit, could with advantage be improved in a number of respects.
I have, therefore, decided that, without pre-empting the study to be undertaken by the committee of inquiry, a number of limited measures need to be taken to improve the supervision and functioning of the present system. In addition, I have had discussions with the accountancy profession, which has now decided to set up an independent committee to review its investigatory and disciplinary procedures.
The measures are as follows: (a) A joint review body should be set up by my Department and the Bank of England. This would keep the working of the present system under review and would bring to light any gaps in the statutory and non-statutory areas.
(b) The Bank of England should develop its surveillance of the securities industry, with a view to improving the effectiveness of the existing self-regulatory machinery. This should also help to increase effectiveness of the new review body.
(c) Legislation should be introduced as soon as opportunity permits to bring abuses such as insider trading within the scope of the law and to impose tighter restrictions on loans by companies to their directors.
(d) Again as soon as opportunity permits, the Prevention of Fraud (Investments) Act should be amended in order to bring up to date my Department's regulation of the statutory part of the securities system. This would include, for example, more effective and flexible powers to supervise licensed dealers in securities and, possibly, to provide for the licensing of investment advisers.
Consistent with the need for detailed consultations with interested bodies on proposed changes in legislation we intend to press ahead with these measures as quickly as possible.