§ Mr. Austin MitchellTo ask the Secretary of State for Trade and Industry what steps he has introduced since 1982 to protect investors in the unlisted securities market; and if he will make a statement.
§ Mr. RedwoodSince 1 July 1985, the issue of shares other than those to be included on the official list of the stock exchange has been regulated under part III of the Companies Act 1985. Prior to that Act, such issues were primarily regulated by provisions of the Companies Act 1948 of which the 1985 Act provisions are a consolidation. Shares may be offered to the public only by public limited companies, and there must be a prospectus which complies with the requirements set out in schedule 3 to the Act. My Department has recently issued a consultative document on part V of the Financial Services Act 1986 which will complete the replacement of the provisions of the Companies Act relating to the public offers of securities.
The stock exchange, of which the unlisted securities market is part, has been a recognised investment exchange—RIE—within the terms of the Financial Services Act 1986 since the main provisions of that Act came into force in April 1988. Prior to this, the stock exchange was a recognised stock exchange under the terms of the Prevention of Fraud (Investments) Act 1958. Responsibility for RIEs has been transferred to the Securities and Investments Board, including ensuring their compliance with schedule 4 to the 1986 Act, which sets out the safeguards for investors which RIEs must provide.
Since April 1988 those carrying on investment business in the United Kingdom, including advising investors and dealing or arranging deals in securities for them, have had to be authorised or exempt under the terms of the Financial Services Act.