§ Mr. Ioan Evansasked the Secretary of State for Prices and Consumer Protection when he expects to implement the Monopolies and Mergers Commission's Report on the Supply of Stockbroker's Services in Relation to Restrictions on Advertising; and whether he will make a statement.
§ Mr. John FraserFollowing the discussions which have taken place, at my right hon. Friend's request, between the Director General of Fair Trading and the Stock Exchange in the light of the Monopolies and Mergers Commission's report, I understand that the Stock Exchange's Council has passed a new rule which will give member firms much more freedom to advertise their services. In accord-370W ance with normal Stock Exchange procedure, the rule should become absolute in two weeks' time.
In its report the Monopolies and Mergers Commission noted that the Stock Exchange's rules and regulations prevented stockbroking firms from using certain forms of advertising at all—e.g., radio and television, severely limited the content and the extent to which any Press advertising might be used to obtain business; and prohibited altogether the use of circulars—other than to existing clients—as a means of attracting business from investors.
The Commission recommended that the Stock Exchange's existing rules on advertising should be terminated and should be replaced by a rule which, subject to any material statutory provisions, would permit any stockbroking firm of the Stock Exchange in the United Kingdom to use such methods of publicity as it thought fit, subject to certain constraints in respect of claims of superiority, inaccuracies, breaches of good taste and recommendations about particular securities.
Under the Stock Exchange's new rule and associated code of conduct, which adopt almost all aspects of the Commission's recommendations and suggestions, member firms will be free to advertise their services through any of the media, including broadcasting, subject to the general constraints recommended by the Commission. They will, however, be required to seek approval from the Stock Exchange before issuing publicity material to persons other than their own clients, and there will be no change in the existing policy that no recommendations of individual securities may be made to non-clients.
It is made clear to stockbroking firms that they will be expected to observe the British Code of Advertising Practice operated by the Advertising Standards Authority. Similarly, those who wish to advertise their services on radio and television will be expected to observe the Independent Broadcasting Authority (IBA) Code of Advertising Standards and Practice. At present the IBA code prohibits member firms of the Stock Exchange from advertising on radio and television. However, the IBA is in the process of 371W altering its code to take into account the changes which have been made by the Stock Exchange.
I am pleased that the Stock Exchange has been ready to amend its rule and code of conduct on advertising in this way, and I am satisfied that the new arrangements properly reflect the spirit of the Commission's report.