Fourth Standing Committee on Delegated Legislation
Monday 24 June 2002
[Mr. Alan Hurst in the Chair]
Draft Insider Dealing (Securities and Regulated Markets) (Amendment) Order 2002
The Financial Secretary to the Treasury (Ruth Kelly): I beg to move,
That the Committee has considered the draft Insider Dealing (Securities and Regulated Markets) (Amendment) Order 2002.
Mr. Hurst, I welcome you to the Chair. I am pleased to be here today. We are debating a limited number of changes to the list of securities markets to which insider dealing legislation applies. Insider dealing is a serious crime that taints the integrity and efficiency of a financial market. Whether it constitutes the passing of information informally between two people or the elaborate, large-scale operation of an offshore syndicate that involves many others, it is a serious matter that threatens confidence in financial markets.
Insider dealing can involve the securities of any company that is publicly quoted. Some investors lose out financially, but the whole of the market can lose out because of the damage to its reputation. The framework on which the market is built can also be compromised. Anyone who invests in our financial markets expects a trading environment that is fair, trustworthy and confidential. It should also be supported by a sound regulatory regime that works towards those goals. A regulatory framework that does not strive to enforce that expectation fails the investor.
London is undisputedly a leading international financial centre and attracts institutions from all over the world to invest and set up their operations here. Being—and being seen to be—a clean place in which to do business is a key part of London's success and one that we are determined to maintain. As the Committee will be aware, the criminal offence of insider dealing is governed by the provisions of the Criminal Justice Act 1993. It enables the Treasury to specify regulated markets in which it is an offence to trade using inside information. The Insider Dealings (Securities and Regulated Markets) Order 1994 specifies the regulated markets as defined under the order.
The order was amended previously in 2000. This order amends the order again to add one overseas market and, thereby, bring the securities traded on that market under the jurisdiction of the Criminal Justice Act for the purposes of insider dealing. The market concerned is the SWX Swiss Exchange. It is a fully electronic trading system which, as part of the SWX group, offers integrated solutions in specific market segments on a cross-border basis.
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Two other changes to the order involve the substitution of names. The first concerns Tradepoint which, following an agreement between itself and SWX Swiss Exchange, formed virt-x. It subsequently restructured and changed its name to virt-x Exchange Ltd. That new name needs to be changed on the list. Secondly, CORDEAL became COREDEALMTS after its alliance with EuroMTS. Again, the list needs amending. Finally, we wish to remove ''operated by J P Jenkins Limited'' from the market known as OFEX, since OFEX plc took over the operation of the OFEX market from J. P. Jenkins in January 2002.
It is important that the order is amended to keep market entries up to date. By doing so, it provides certainty about the scope of the insider dealing regime and deters would-be perpetrators who may otherwise take advantage of an unregulated market. I commend the order to the Committee.
Mr. Howard Flight (Arundel and South Downs): I welcome you to our proceedings, Mr. Hurst. The order is essentially about name changes and adding the new SWX Swiss Exchange market to the list of markets. The only issue that I want to raise is the change of name of a market that is more important than those listed under the order—EASDAQ. It has changed its name to NASDAQ Europe. Will the Minister confirm that that market has been forgotten about and that no order deals with it? If I am correct, the order that we are discussing is defective because it has missed out the most important name change of the markets that are dealt with by the insider dealing order.
Ruth Kelly: The hon. Gentleman has made an interesting point. As he said, the order is relatively uncontroversial. It merely changes names and adds one name to the list of regulated markets in the country. Updating the order is necessary to provide certainty in the market. We have attempted to provide as comprehensive a list as possible. We hope to avoid confusion by making it clear which markets are covered. We have up-to-date information about such names and how they are commonly referred to within the market. Clearly, in attempting to define the list we have taken extensive soundings in the marketplace. We are committed to ensuring that London operates as a financial centre and that it has a reputation for integrity, for dealing efficiently with financial crimes and for being clean.
In the past, people have complained about different markets that do not provide such certainty. It is important to make regular changes to the order to ensure that it is up to date. The order is subject to the affirmative resolution procedure, which is appropriate because that process allows hon. Members to refer to the names of exchanges that they do not consider are covered. The existing reference to EASDAQ will remain valid, however, as it refers to the same legal entity. We will, of course, update that reference at the earliest opportunity and I am grateful to the hon. Gentleman for raising the matter. I do not believe that it renders the order invalid. I ask him and other members of the Committee to support the order.
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Mr. Flight: I thank the Minister for her response. Such matters change so often that one loses track, but I think that EASDAQ has changed its legal name to NASDAQ. We had better consider another order quickly to correct the position. The contents of the order under discussion are entirely correct other than it misses out the market to which I referred. I cannot resist saying that I am delighted that OFEX is included and, as a quid pro quo for not opposing the order, I trust that the hon. Lady will see fit tomorrow to agree
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that OFEX should have the same provisions for not paying stamp on trading books as applies to all other securities markets in the United Kingdom. OFEX is an important market for new businesses and, somehow or other, it has been forgotten.
Question put and agreed to.
Committee rose at twenty-two minutes to Five o'clock.
The following Members attended the Committee:
Hurst, Mr. Alan (Chairman)
Reid, Mr. Alan