Seventh Standing Committee on Delegated Legislation
Thursday 13 July 2000
[Mrs Irene Adams in the Chair]
Draft Insider Dealing (Securities and Regulated Markets) (Amendment)Order 2000
Motion made, and Question proposed,
That the Committee has considered the draft Insider Dealing (Securities and Regulated Markets) (Amendment) Order 2000[Miss Melanie Johnson.]
Mr. Howard Flight (Arundel and South Downs): I rise not to oppose the order but to ask one or two questions about it and the changing background to which it relates.
The order updates the 1996 order, which in turn updated the 1994 order, and adds the Ofex, Coredeal and EASDAQthe European Association of Securities Dealers Automated Quotationsmarkets. I am keen to understand how the civil offence of market abuse and the criminal offence of insider dealing will interact. There was general concern during the debate on the 1996 updating of the order that there should be a civil offence of market abuse and that is now being introduced, but who will decide whether the civil or criminal route is taken when there is so much overlap between them?
When the criminal offence is committed, it is implicit that the offender is in the United Kingdom, but the order covers various United Kingdom markets. I presume that the offence will be covered by our jurisdiction, even if the offender is not in the United Kingdom when the offence is committed. Is there a difference between the civil offence of market abuse and the criminal act of insider dealing in terms of where they bite?
The order adds Ofex, which is not a recognised investment exchange, but it is not clear from the order and the background information whether Ofex is included as a specific exception because it is not a recognised market. I understand that the order deals with recognised markets that are regulated, so it seems that an exception is being made with Ofex. That raises the wider issue of how the growth of e-commerce markets, which are not recognised, will be dealt with in relation to the serious matters covered by the order and whether we can expect regular reviews and further orders as other markets are introduced in a fast-changing global financial services market.
The order deletes Iceland. The 1996 order added the Iceland stock exchange, but the securities exchange of Iceland was not admitted at that time. It would be interesting to know and to have on the record what is happening in Iceland and whether its stock exchange now covers all relevant markets in Iceland.
The most important issue raised by the order is the distinction between the new civil offence of market abuse, which will be covered by the Financial Services Authority, and the criminal offence of insider dealing. Who will determine for which crime offenders will be prosecuted?
The Economic Secretary to the Treasury (Miss Melanie Johnson): I am grateful to the hon. Gentleman for his comments and his support for the order. He asked whether the civil or criminal route would be taken when prosecuting offenders. The FSA will determine at the beginning of any investigation which route is most appropriate. There will be no desire to take the civil route for serious cases which criminal justice legislation defines as a criminal offence of insider dealing. The FSA will decide the route to be taken.
It is important to understand that existing legislation defines the specific securities that are covered and that the order extends the securities covered to those in domestic markets and the EASDAQ market.
As for the territorial scope of the offence of insider dealing, if the market is in the United Kingdom, the offence may be committed wherever the conduct occurs. If the market is not in the UK, as EASDAQ is not, the offence will be committed only when the relevant conduct occurs in the UK. EASDAQ is regulated in Europe and covered by provisions elsewhere.
It was a simple error to include both exchanges in Iceland. The hon. Gentleman asked whether there would be more reviews of the legislation as markets were established. We must keep in mind whether other issues arise, particularly with the growth of Ofex. There was an opportunity in 1996, when a revising order was introduced, to consider whether Ofex should be included, but the scope of its activities then was not wide. It is a growing market and, to ensure that coverage remains appropriate, it is sensible to include it now.
Question put and agreed to.
That the Committee has considered the draft Insider Dealing (Securities and Regulated Markets) (Amendment) Order 2000.
Committee rose at three minutes past Ten o'clock.
The following Members attended the Committee:
Adams, Mrs. Irene (Chairman)
Clarke, Mr. Tony
Field, Mr. Frank
Johnson, Miss Melanie
Simpson, Mr. Keith