But the Exchange found the company guilty of breaching the Exchange's listing rules and criticised it and Mr Newmarch for the way in which they "approached their consideration of the dealings and the information available".
Prudential, Britain's biggest insurer, breached listing rule 16.18, which says that a company must take "all proper and reasonable steps to secure compliance" with dealing codes, the Exchange said.
Separately, it emerged that Alan Whiting, the Treasury's top official in charge of financial services regulation, was instrumental in encouraging the Stock Exchange to mount an investigation into Mr Newmarch's share- dealing.
Some observers have suggested that the Treasury was determined to hound Mr Newmarch because of his uncompromising and outspoken stand on financial services regulation. It is known that the Treasury was angry with the Pru's refusal to join the Personal Investment Authority, the new regulator for retail financial services. Mr Newmarch resigned abruptly from the Pru in January, saying he was fed up with the structure of financial services regulation.
Yesterday's verdict was widely seen in the City as a defeat for the Treasury and as a blow to the Stock Exchange's credibility as a regulator. The listing department of the Exchange wanted to censure Mr Newmarch and the company, a decision that was upheld on appeal to the listing executive. But yesterday's verdict came after two days of meetings of the quotations committee, which is composed of market practitioners and is the Exchange's final court of appeal. One City source said the light rap over the knuckles for the company was a face-saving device for the Exchange, which did not want to be seen to have done nothing.
The investigation began in October, shortly after Mr Newmarch exercised and sold 208,000 share options in the Pru, netting a profit of more than £200,000. The deal was carried out just hours before a report by the Securities and Investments Board on pensions mis-selling by the insurance industry.
The question at the heart of the Stock Exchange's inquiry was whether the SIB report, which Mr Newmarch had seen, was price-sensitive information. Directors are banned by the Exchange from dealing in their companies' shares while in possession of such information.
The company argued that the SIB report was not price-sensitive as its contents were widely known in advance of publication. It argued that the potential £2bn bill for compensation that the industry would have to pay to those who had been mis-sold pensions had already been discounted in the share price of the leading insurers.
But Treasury officials gave evidence to the inquiry that Mr Newmarch had said the report would hit the Pru's share price at a meeting with the Chancellor of the Exchequer a week before the report was issued.
But the quotations committee, which heard Mr Newmarch's appeal against censure, rejected that evidence after a second official, who had signed some minutes including the disputed remark, admitted that he had not actually heard it, but was relying on the word of a colleague.
The men who cleared Newmarch
The Stock Exchange's quotations commitee
Ian Salter (chairman) SGST (Investment Advisers)
John Aisbitt Goldman Sachs International
Simon Constantine Life Sciences International
John Gregory Beeson Gregory
Graham Kennedy James Capel
William Legg-Bourke Kleinwort Benson Securities
Paul Lewis Tate & Lyle
Ian McIntosh Samuel Montagu
Derek Netherton J Henry Schroder Wagg
Christopher Smith Cazenove
Barry Southcott CIN Management
David Turner GKNReuse content