Insider Dealing (Securities and Regulated Markets) Order 2023

Debate between Baroness Chapman of Darlington and Lord Sharkey

Tuesday 16th May 2023 Grand Committee

[Lord Sharkey (LD)]

My Lords, this SI seems admirably straightforward and uncomplicated. We support it and I can be brief. I have only a couple of questions and one observation.

The first question relates to paragraph 7.7 in the EM. Why is it necessary to keep NASDAQ and the successor to the SWX Swiss Exchange explicitly in scope, and to add the New York Stock Exchange for that matter? Are they not already brought into scope by this SI’s adoption of the definitions in Article 4? I am sure that there is a good reason but I would be grateful if the Minister can explain what it is.

My observation concerns paragraph 7.8 of the EM. It points out that

“the set of securities to which the criminal offence of insider dealing applies to is narrower than the securities covered … in MAR”.

It goes on to give examples of the missing securities. It lists currency options, credit default swaps and units in collective investment undertakings, such as exchange traded funds—and says that the list is not exhaustive. It rather coyly says that this is “not optimal”. I agree entirely. I understand that this SI corrects that but, given the historical absence of these securities in the list of activities that may be pursued in the criminal courts for insider dealing, today’s SI rather looks like having just noticed that the stable door has been left open for 20 years and hastily closing it. It is good that no more horses will be able to bolt but that invites the question of how many have already bolted and how many, if any, were caught by the civil procedures in MAR. Does the Minister have an assessment of how many criminal cases would or could have been brought had the missing securities categories been within the purview of the Criminal Justice Act and how many were taken forward instead under the MAR provisions?

Finally, why does this instrument not come into force immediately? Does not the 21-day delay provide a further window for possibly unactionable criminal malfeasance? I look forward to the Minister’s reply.

[Baroness Chapman of Darlington (Lab)]

We agree with the Minister’s assertion that there should be serious consequences for those who break the law. We also agree with the comments from the Liberal Democrat Benches and echo the comments about the seriousness of insider dealing. We share the curiosity shown in the other place when this instrument was considered about the length of time it has taken to bring in this measure, given we understand that it came about as a result of a review that took place in 2015. I am not asking this to be facetious, but what assessment have the Government made of the number of criminal offences that would have been caught had this measure been in place sooner, which were treated under the civil regime because this instrument had not yet been brought? We want to highlight the consequences of leaving things quite this late, because we are concerned. That underscores our support for this measure. The Government are right to address this gap between the two regimes and we support this instrument.