Companies warned on selective leaks: Stock Exchange cracks down on exploitation of price-sensitive information

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The Independent Online
COMPANIES were told yesterday by the Stock Exchange to make far more regular public announcements of price-sensitive information, instead of leaking it selectively to analysts and investors.

Martin Hall, head of public policy, spelled out the exchange's new campaign against selective leaking in the wake of the public censure last Friday of London International Group for briefing analysts on its profits.

His remarks came as one of the biggest institutions made clear it was pressing the exchange to set out in detail what companies can tell the market because of confusion caused by the LIG censure.

Mr Hall was speaking in Edinburgh, where Thorold Mackie, a Bell Lawrie White analyst, was convicted of insider trading last month on the basis of information given to him by a company.

Selective disclosure of information and insider dealing were 'hot topics, nowhere more so than here in Edinburgh. They are quite separate abuses, though often linked,' Mr Hall said.

No one could deliver a market where everyone knew everything at once 'but that does not justify the deliberate leaking or exploiting of price-sensitive information. Of course the market does not like disagreeable shocks. In the view of the exchange the best way of avoiding most of them is immediate publication of price-sensitive information.'

There was a reluctance to make statements 'bred of fear that the market will overreact because they are relatively rare events.' But if they were more common the market would receive them with a better sense of proportion, he said.

Public statements could usefully be supplemented by regular dialogue between companies and the market, but that should not be used to 'impart selectively what all the world should be told'. The exchange would continue to take vigorous action, privately and publicly.

Mr Hall also said the Treasury's new draft of the insider dealing provisions of the Criminal Justice Act was an enormous improvement, though there was still a general concern about the obscurity of the market information defence and other areas needed to be improved.

He reiterated pleas by Sir Andrew Hugh Smith, the exchange chairman, for a radical review of the investigation and enforcement of insider dealing law. The exchange wants a single enforcement agency and 'serious consideration' of the use of civil penalties.

'Increasingly insider dealers conduct operations in more than one market, and market regulators need rapid access to the whole range of transactions. Criminal standards of proof are required to secure convictions,' Mr Hall said.

The Stock Exchange yesterday announced a cut in its members' settlement costs of about pounds 7m per year, double the reduction promised last month by the Exchange Board as part of its reaction to the Taurus debacle. Sir Andrew said: 'I hope in coming months to be in a position to give a further rebate.'

Drawing new lines, page 31

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