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Mr. Ruffley: Is it the hon. Lady's understanding that "reckless" will be defined as it is defined by the criminal courts and criminal case law?
Miss Johnson: Many of the terms in the Bill, as with any law, will be interpreted by the courts.
Amendment No. 476 would require the court, in imposing any penalty for market abuse under clause 104, to take account, first, of any statement of policy that the FSA has issued under section 99, and, secondly, of any penalty that the FSA has already imposed in respect of the same market abuse.
On the first part of the amendment, it would be wrong to impose a legal obligation on the courts to take into account a policy statement prepared by and intended to guide another body--the FSA. However, there may well be occasions when the policy statement is relevant to the issue to be decided by the court, and there is nothing to prevent the person concerned from arguing that before the court. The court will decide the extent to which a policy statement is relevant.
On the second part of the amendment, it should be pointed out that the court can impose a penalty under clause 104 only if the FSA has requested it do so. That is unlikely if the FSA had already imposed a penalty. If that unlikely situation ever materialised, the court could take it into account in deciding whether to impose a penalty, so there is no need for a statutory requirement.
Many of the remarks of the hon. Member for Bury St. Edmunds related to amendment No. 457. Clause 95(1)(c) provides that behaviour can be market abuse only if a person fails to live up to the standards expected by a regular user of the market from someone in his position in relation to the market. The qualification
The new test, which we introduced in Committee, is aimed at filtering out behaviour that may come within the definitions of behaviour in clause 95(2), but which is not abusive because, in the circumstances, it was not a failure to meet standards that the market would reasonably expect of the person in question.
One of those circumstances is clearly the position of the person in relation to the market--for example, whether he is an experienced investor in that market who can be assumed to know the effect of a particular action, or whether he owes duties to the market, possibly as the director of a listed company. Does he deal regularly on the market and can he be expected to know the market rules in detail? Such considerations will influence the view of the regular user in deciding whether the test is met.
Perhaps an example would help. Suppose a person in an overseas country does something in accordance with rules or customs in that country which, nevertheless, affects the relevant market in the UK--for example, by
giving a misleading impression. Has he engaged in market abuse? His position in relation to the market is clearly important in determining whether abuse took place. If he was acting in accordance with customs and rules overseas and had no relationship with the UK market, it seems unlikely that his action would be considered abuse.
A similar case was raised by the hon. Gentleman. It would be difficult to determine whether the commodity trader whom he mentioned had a relationship to the market. I hope that my examples make it clear why I do not consider his arguments in support of the amendment compelling.
Amendment No. 458 would increase the hurdle for proving that misuse of information unavailable to the rest of the market was abusive. That would not be a helpful change. The current test is that the behaviour has to be based on information not generally available, but which a regular market user would consider relevant in deciding the terms on which transactions should be effected.
The phrase "based on" is a high test already. The words "significantly influenced by" would make the test too stringent. If I have privileged information that a company is about to announce far greater than expected profits, is my decision to purchase the shares "significantly influenced" by the privileged information? It would certainly be possible to mount an argument that it was not, and that I thought that the company was a good bet anyway. It would be hard to prove otherwise.
Let us consider amendment No. 459. It is sometimes difficult to know when to raise some issues. I shall begin by commenting on the remarks of the hon. Member for Bury St. Edmunds about Lord Hobhouse and the code of conduct. The hon. Gentleman quoted a section of Lord Hobhouse's remarks, which were also quoted by the right hon. Member for Wells (Mr. Heathcoat-Amory) in Committee. I shall not quote them again, because they will already be on the record. As my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard) said in response to the debate in Committee, the Burns committee had two anxieties about the original drafting of clause 95. We are not considering the original clause on Report. The Burns committee believed that the drafting contained a danger. Its first anxiety was about the European convention on human rights. The revised clause tackles that. The hon. Member for Bury St. Edmunds said that we should consider further anxieties about it.
The hon. Gentleman also referred to market participants. We considered whether it was possible to define market participants in clause 95(1)(c). As I said in Committee, we discussed that not only with the FSA but with the practitioner group, and a group of exchange representatives, which was established to review the code. It became clear that such an approach would not be fruitful. We want to deter many types of abusive behaviour, and it would not make sense to try to limit the provision's scope by including definitions in subsection (1)(c). They would not be meaningful or practical.
Amendment No. 460 would reverse a change that we made in Committee. We made the change to focus on the terms of the transaction, not the decision about whether to enter into the transactions. Amendment No. 461 would make consequent drafting changes. I do not want to address them, except in relation to amendment No. 462, which would replace
I shall comment on the later amendments. If hon. Members want to revert to the earlier amendments, I shall be happy to deal with their points. Several hon. Members spoke to amendment No. 471. Clause 96 requires the FSA to produce a code of market conduct. Clause 97(1) provides that when the code states that behaviour is not market abuse, a person who engages in that behaviour is not engaging in market abuse. The clauses therefore provides a complete defence and the safe harbour that hon. Members seek.
Clause 97(2) provides that, in other circumstances, when people do not comply with the code, or their behaviour is not covered by it, the code
In Committee, we discussed the highway code and the offence of driving without due care and attention. Like the highway code, the FSA code will carry evidential weight. That will provide for greater certainty in the regime, which will help the regulator and market users. I am surprised that Conservative Members want to remove it. If it did not exist, the FSA could give less weight to the code. That is not a desirable consequence.
I come now to the amendments to clauses 344 and 345. Clause 344 grants the court the powers to order, on the FSA's application, that a person who has engaged in market abuse and made a profit or caused others to make a loss should make a restitution. The amendments would change the clauses so that, in assessing the amount of restitution, the court or the FSA should have regard not only to the level of the profits or losses but
As I said earlier, we do not claim that intention or recklessness are irrelevant, but there are degrees of culpability. The fact that someone may have deliberately or recklessly engaged in abuse is relevant. Clause 99 deals with the penalties that can be imposed for abuse, and requires the FSA to take those factors into account in formulating its policy on the amount of the penalty.
"in relation to the market"
is important. By removing it, amendment No. 457 would reduce the clarity of the provision and the protections available for market users.
"supply of, or demand for"
with "market in". I am not sure what we would gain from that change. Despite the attempts of the hon. Member for Bury St. Edmunds to explain it, I did not understand how the amendment would help.
"may be relied on so far as it indicates whether or not that behaviour"
is abusive. That applies only when the code is in force. It would be wrong to be able to apply it retrospectively.
"the extent to which the market abuse was deliberate or reckless".
I cannot accept that. In formulating our policy on market abuse, we made it clear that it should cover not only deliberately or recklessly abusive behaviour, but negligent behaviour. There is a good reason for that. The damaging effects of abuse depend not on the state of the perpetrator's mind, but on the impact on markets and consumers.
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