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Mr. Peter Ainsworth (Surrey, East) : Does the hon. Gentleman think that one reason for the lack of successful convictions might be the fact that the burden of proof required under our criminal justice system is just too great, so the extension of the civil law into these matters might be helpful? That is a far cry from what the hon. Gentleman suggests--even tougher legislation.
Mr. Hoon : That point has already been made. We need a more sophisticated approach and more resources to ensure that insider dealing is investigated. The Government should commit themselves to a body of
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enforcement and investigation along the lines of the SEC, as my hon. Friend the Member for Great Grimsby (Mr. Mitchell) suggested. That sort of body would expose far more cases of insider dealing and would provide the prosecuting authorities with the sort of support and back-up that they enjoy in the United States.I hope that the Minister will agree that this should be the next stage : a more sophisticated system of enforcement. I hope that the Government will state tonight how they intend to ensure that this legislation is properly enforced.
12.3 am
Mr. Paul Flynn (Newport, West) : The hon. Member for
Gloucestershire, West (Mr. Marland) suggested in a courageous speech that "elbow-clutching" has been going on--undue influence exerted. He identified Lord Kimball, the former Member for Gainsborough, as the man he was talking about.
We must look to the reputation of the House and the influences brought to bear on it. It is true that 14 per cent. of Opposition Members have financial interests outside the House, according to the latest survey, but 85 per cent. of Conservative Members have such interests. When votes are taken on matters in which hon. Members have a direct financial interest, we should apply the rules that apply to local authorities whose members have to declare their interests and may not be allowed to vote.
Another group of people have been greatly hurt by the system of self- regulation, the death knell of which will sound from the Chamber at the end of this debate. They are not the hundreds or perhaps thousands at Lloyd's, but the millions who have been robbed by the lack of regulation in the system. Some of those people were identified by my hon. Friend the Member for Edinburgh, Central (Mr. Darling) when he spoke about the 500,000 people who were tempted to transfer from occupational pensions to personal schemes. At least 2 million others were tempted to leave the state earnings -related pension scheme and now have personal pensions that run counter to their financial interests. In 10 or 20 years' time, those people will find that they have been robbed. Those are the real victims, the innocent sheep who have been sheared by the failure of the regulatory system.
I should like the Minister to have sufficient time to answer fully the charges that have been laid. Therefore, I conclude by saying that the system of self-regulation has failed in the City, and its death knell must be sounded.
12.5 am
Mr. Nelson : I passionately believe that all Members are honourable. As a Back Bencher who now sits on the Front Bench, I urge the House to be extremely careful about limiting the voting rights of hon. Members. People with a personal interest often bring experience to our debates and decisions and as long as the interest is transparent and overt, we have nothing to fear. By sectioning ourselves we have a great deal to lose.
Mr. Darling : Will the Minister give way?
Mr. Nelson : Perhaps the hon. Gentleman will forgive me if I do not give way. I have a limited amount of time and I wish to do justice to hon. Members who have spoken. He will have other opportunities. The hon. Members for Newport, West (Mr. Flynn) and for Edinburgh, Central (Mr. Darling) raised the serious
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issue of personal pension plans, and I wish to touch on that. The Life Assurance and Unit Trust Regulatory Organisation reported its concerns to the Securities and Investments Board ; the SIB commissioned a study of the subject ; shortcomings in the marketing of personal pensions were discovered and are being acted upon, and the SIB has presented proposals for the co-ordination of remedial action to those who may have been sold inappropriate personal pensions. That shows that the system is working. One cannot decry as inadequate a system that uncovers and seeks to redress wrongs. It could be criticised if it covered them up or did nothing about them. I am the first to admit that there are shortcomings in our system of regulation. But anybody who suggests that we should switch to a system of total statutory control and that that would in some way be a panacea for all our ills and would change the attitude of the door-to-door salesman with a variety of investment products and would change overnight the practice in individual markets needs his head tested.As the United States and other countries with statutory systems have found, it will always be difficult to ensure absolute, high standards of investor and depositor protection. One must always try to approximate. I can speak with some confidence from the Dispatch Box because people know my background before I became a Minister. I am not wedded to an absolute statutory system. I should like to see our system toughened by evolution, and that is what I have been about.
I can point to many things that have been done in the past two years significantly to improve standards of investor and depositor protection. To engage in revolution rather than evolution of the system would not only visit great uncertainty and cost upon financial services industries, which, at the end of the day, are paid for by the industry's customers, but would lead to a blight of uncertainty that would not be in the interests of that great industry, which provides benefit and employment for our country.
My official advice is not to say anything about Lloyd's because it is a matter for the Department of Trade and Industry, but I shall speak about it, because it concerns the House. I wish to reflect carefully on what has been said by my hon. Friend the Member for Gloucestershire, West (Mr. Marland). He will be aware that I cannot say much about Gooda Walker, which is the subject of a Serious Fraud Office inquiry, or about the affairs of Lloyd's generally, which are for the Department of Trade and Industry. However, I can say that the Government are concerned about the probity and reputation of major financial institutions, including Lloyd's. Of course we shall not stand by and see people ruined and misdeeds going on without taking an interest. That applies to the Treasury in co-operation with the DTI.
As my hon. Friend the Member for Gosport (Mr. Viggers) said, there is much that is good as well as much that is bad. Sir David Walker's inquiry showed that, while much of the internal dealing led to some advantage to professionals within the organisation, it was not necessarily of a massive order above the names outside. It is also a fact that the Neill report significantly increased the
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representation of outside names and their representatives on the council of Lloyd's. That should provide some reassurance.Mr. Darling : Will the hon. Gentleman give way?
Mr. Nelson : I will not, because I shall not be able to comment on the speeches made by hon. Members if I do so. The hon. Gentleman had a good opportunity and made a long speech at the beginning of the debate, and I wish to refer to some other points.
The hon. Member for Londonderry, East (Mr. Ross) asked about analysts' reports of companies, and asked whether if companies issued reports to clients in advance of issuing them to the market they would be liable for insider dealing. The answer is that, assuming that the information supporting the recommendation is in the public domain, by virtue of section 58(2)(d) of the Act, the information will not be insider information, even if it is price sensitive. Further, dealing based on the logic underlying the recommendation will not be prohibited because it would have taken place, regardless of the fact that when the recommendation is published the share price is likely to move. Dealing in such circumstances is, therefore, covered by the third of the general defences set out in the legislation. I hope that when the hon. Gentleman studies those words they will provide him, and thus those who have made representations to him, with the reassurance that he seeks.
I thank my hon. Friends the Members for Ryedale (Mr. Greenway) and for Blackpool, South (Mr. Hawkins) for the measured and sensible contributions that they made to the debate. They recognise that nothing is perfect in the present regime, but that it would be foolish to toss it aside. There is a great deal of benefit in a sensible process of change and toughening up of investor protection where it is necessary. I believe that the proposals promulgated by Andrew Large, the chairman of the SIB, for improving regulation and the interface between the SIB and the self-regulatory organisations and for significantly improving the monitoring and the coming down hard in cases where that is justified will bring a stepped change in the perceptions and the delivery of investor protection. If it does not, the House will have to look at it again. I do not have a closed mind. I am not ignoring the long-term possibilities of what may need to be done because of short-term difficulties in introducing a toughening up of the present situation.
However, many people give of their time and have to be attracted into the difficult process of regulation of our financial markets. I am not about to pull the rug of authorisation from under their feet when they are trying to institute much-needed changes to ensure that we have the standards and reputation that the industry requires, and that reputation requires that we provide free and fair markets. Therefore, I am not opposed to evolution of the system, but it is irresponsible in the extreme to suggest that we toss all that aside while we are trying to deliver significant improvements in investor and depositor protection and lurch into an uncertain statutory future without much greater consideration of the matter.
The problems of delivering such protection to investors and depositors are not just about the regimes that we set up here, whether for Lloyd's or the investment industries. At the end of the day, they are about the people who sell the products and about the efficiency and effectiveness of the
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people who regulate. One does not necessarily get a satisfactory solution in statutory change. Therefore, I welcome what my hon. Friends the Members for Ryedale and for Blackpool, South said in that regard, particularly what my hon. Friend the Member for Rydale said about the importance of adequate surveillance of insider dealing. The stock exchange surveillance market group is significantly improving its surveillance of that matter, and working closely with the SIB to determine how best that can be done.The hon. Member for Ashfield (Mr. Hoon) said that the order was not sufficiently tough and others suggested that the Government had introduced the measure simply to conform with a European directive. However, in 1980 it was a Conservative Government who made insider dealing a criminal offence for the first time and in 1985 consolidated the legislation and changed and improved it. A Conservative Government have again come forward, not just to comply with our European obligations under the directive, but to move beyond the minimum requirements, to conform with existing legislative responsibilities and to move with the times to ensure that certain products that were not included in the previous legislation, such as debt securities and certain derivative products, are covered. We have not been inactive. We are not soft on City law and we abhor and are concerned about the invasion of investor and depositor rights. At the end of the day, the decisions of the courts in such cases as Levitt and Ronson, which have been mentioned tonight, are matters for the courts.
The House knows better than I that the courts have minds of their own. If somebody is given a community service order instead of what the law could provide--up to seven years' imprisonment--it is not for a Minister of the Crown to question the decision of the court. We have provided the penalties for the courts and the mechanisms to ensure that those who are responsible for defrauding others are detected and brought to book. Whether it is the Serious Fraud Office, the SIB or my right hon. Friends the Chancellor of the Exchequer or the President of the Board of Trade--all of whom have prosecution and investigation obligations in that regard--we will not flinch from the responsibility of ensuring that the high standards of investor and depositor protection are maintained.
For all those reasons, I commend the order implementing insider dealing legislation to the House. It will bring improvements and perceptive changes in the free and fair markets for which Britain is well known and we shall ensure that the legislative changes that have taken place in recent years are respected.
I was asked in particular about the number of convictions and prosecutions that have been brought. Some 22 individuals have been convicted of insider dealing, out of a total of 49, but what is much more important is the deterrent message that that sends to a wider audience. [Interruption.] Of course it is. All company law, including regulatory control, is more about the deterrence in the message that it sends than picking up the pieces afterwards. We must have laws and systems in place which ensure, through deterrents and the ability to detect and use those penalties, that we provide high standards of investor and depositor protection. That is what the order and the relevant provisions of the Criminal Justice Act will do and I commend them to the House.
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Question put :--The House divided : Ayes 309, Noes 232.
Division No. 64] [12.17 am
AYES
Ainsworth, Peter (East Surrey)
Aitken, Jonathan
Alexander, Richard
Alison, Rt Hon Michael (Selby)
Allason, Rupert (Torbay)
Amess, David
Arbuthnot, James
Arnold, Jacques (Gravesham)
Arnold, Sir Thomas (Hazel Grv)
Aspinwall, Jack
Atkins, Robert
Atkinson, David (Bour'mouth E)
Atkinson, Peter (Hexham)
Baker, Rt Hon K. (Mole Valley)
Baker, Nicholas (Dorset North)
Baldry, Tony
Banks, Matthew (Southport)
Banks, Robert (Harrogate)
Bates, Michael
Batiste, Spencer
Beggs, Roy
Beith, Rt Hon A. J.
Bellingham, Henry
Bendall, Vivian
Beresford, Sir Paul
Biffen, Rt Hon John
Blackburn, Dr John G.
Bonsor, Sir Nicholas
Booth, Hartley
Boswell, Tim
Bottomley, Peter (Eltham)
Bottomley, Rt Hon Virginia
Bowden, Andrew
Bowis, John
Boyson, Rt Hon Sir Rhodes
Brandreth, Gyles
Brazier, Julian
Bright, Graham
Brown, M. (Brigg & Cl'thorpes)
Browning, Mrs. Angela
Bruce, Ian (S Dorset)
Bruce, Malcolm (Gordon)
Budgen, Nicholas
Burns, Simon
Burt, Alistair
Butcher, John
Butler, Peter
Butterfill, John
Campbell, Menzies (Fife NE)
Carlisle, John (Luton North)
Carlisle, Kenneth (Lincoln)
Carrington, Matthew
Carttiss, Michael
Cash, William
Channon, Rt Hon Paul
Churchill, Mr
Clappison, James
Clark, Dr Michael (Rochford)
Clarke, Rt Hon Kenneth (Ruclif)
Clifton-Brown, Geoffrey
Coe, Sebastian
Colvin, Michael
Congdon, David
Conway, Derek
Coombs, Anthony (Wyre For'st)
Coombs, Simon (Swindon)
Cope, Rt Hon Sir John
Couchman, James
Cran, James
Currie, Mrs Edwina (S D'by'ire)
Curry, David (Skipton & Ripon)
Davies, Quentin (Stamford)
Davis, David (Boothferry)
Day, Stephen
Deva, Nirj Joseph
Devlin, Tim
Dickens, Geoffrey
Dicks, Terry
Dorrell, Stephen
Douglas-Hamilton, Lord James
Dover, Den
Duncan-Smith, Iain
Dunn, Bob
Durant, Sir Anthony
Dykes, Hugh
Eggar, Tim
Elletson, Harold
Evans, David (Welwyn Hatfield)
Evans, Jonathan (Brecon)
Evans, Nigel (Ribble Valley)
Evans, Roger (Monmouth)
Evennett, David
Faber, David
Fabricant, Michael
Fenner, Dame Peggy
Field, Barry (Isle of Wight)
Fishburn, Dudley
Forman, Nigel
Forsyth, Michael (Stirling)
Forth, Eric
Fowler, Rt Hon Sir Norman
Fox, Dr Liam (Woodspring)
Fox, Sir Marcus (Shipley)
Freeman, Rt Hon Roger
French, Douglas
Fry, Sir Peter
Gale, Roger
Gallie, Phil
Gardiner, Sir George
Garel-Jones, Rt Hon Tristan
Garnier, Edward
Gill, Christopher
Gillan, Cheryl
Goodlad, Rt Hon Alastair
Goodson-Wickes, Dr Charles
Gorman, Mrs Teresa
Gorst, John
Grant, Sir A. (Cambs SW)
Greenway, Harry (Ealing N)
Greenway, John (Ryedale)
Griffiths, Peter (Portsmouth, N)
Gummer, Rt Hon John Selwyn
Hague, William
Hamilton, Rt Hon Sir Archie
Hamilton, Neil (Tatton)
Hampson, Dr Keith
Hannam, Sir John
Hargreaves, Andrew
Harris, David
Haselhurst, Alan
Hawkins, Nick
Hawksley, Warren
Hayes, Jerry
Heald, Oliver
Hendry, Charles
Hill, James (Southampton Test)
Hogg, Rt Hon Douglas (G'tham)
Horam, John
Howard, Rt Hon Michael
Howarth, Alan (Strat'rd-on-A)
Howell, Rt Hon David (G'dford)
Howell, Sir Ralph (N Norfolk)
Hughes Robert G. (Harrow W)
Hunt, Rt Hon David (Wirral W)
Hunt, Sir John (Ravensbourne)
Hunter, Andrew
Hurd, Rt Hon Douglas
Jack, Michael
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