SIB seeks big increase in powers: Andrew Large wants tough fines and authority to investigate insider dealing and market manipulation

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The Independent Online
A SHOPPING list of tough new fines and investigative powers for tackling City malpractice was put to the Government yesterday by Andrew Large, chairman of the Securities and Investments Board.

In a lecture to the Chancery Bar Association, Mr Large asked for the SIB to be given powers to investigate insider dealing and market manipulation, to levy fines and to become involved in plea bargaining with criminal prosecutors.

He said Britain had much to learn from the relationship between the US Securities and Exchange Commission and the criminal authorities. The SEC was not a 'model for our whole approach to regulation', but it had 60 years of experience compared with six years for the SIB, so it was 'well worth looking across the Atlantic to see what we can learn'.

Mr Large also confirmed that broad agreement had been reached in principle with the Serious Fraud Office on areas where civil regulatory penalties could be imposed in place of criminal prosecutions.

The agreement concerned the 'sort of cases which in future might be better dealt with by the civil regulators and those which must be regarded as cases for the criminal courts'. He added that the SIB was now taking the initiative forward with others closely concerned.

The issue of direct fines by the SIB has been a controversial one because although the junior regulators that report to it can fine rule- breakers, the senior body has no such powers. This weakens its position in discussions with criminal prosecutors over borderline cases that could be dealt with by fines or disciplinary procedures.

Mr Large extended his call for a statutory power for the SIB to levy fines in dealing with market abuse to the Stock Exchange, which can now fine its members but cannot fine companies for breaches of the listing rules.

He said: 'Clearly, a power to fine would need to be balanced by safeguards for those against whom it was used, including a right of appeal. There must be a satisfactory way of achieving this.'

Mr Large said he was concerned by ministerial fragmentation in handling cases of market abuse and in particular insider dealing, where the Department of Trade and Industry was in charge of prosecution, the Treasury of the legislation and many others had an interest.

He called for an amendment to the Financial Services Act to provide a power to investigate allegations of market manipulation - in the same way as insider dealing is now investigated.

More significantly, he said these powers to investigate insider dealing and market manipulation should be available to the SIB as well as the DTI.

Mr Large said: 'Where the main focus of a case was the conduct of those in the regulated community, we regulators would be well placed to get to the bottom of it and to take effective civil enforcement action where appropriate.'

He added he was not advocating powers for the SIB to act as criminal prosecutor for insider dealing and market manipulation, but suggested there could be much greater reliance on the regulators to deal with some types of City case.

Mr Large backed plea bargaining. This would allow defendants to plead guilty to lesser criminal charges in return for acceptance of regulatory penalties such as fines and disqualification.

He said: 'It cannot be beyond the combined brain power of our best legal minds to devise a fair and open system of plea negotiation.'

Other changes on the shopping list include powers for the SIB to seek winding-up orders against unauthorised companies and partnerships and to petition for bankruptcy, even when it is not a creditor.

Mr Large also registered his objections to pressure for regulators to defer investigations while the targets of the inquiry defend private civil proceedings.

Although the SIB has offered a number of proposals for improving regulation, this is the first time Mr Large has made a firm public request for new legislation.