Takeover Panel thinks it can hold back the tide

COMMENT

There has always been a strong Eurosceptic tendency within the City. Anything that comes out of Brussels or Europe tends to get treated with the utmost suspicion, even among those now answerable to German and French masters. This might seem natural enough for a community of self interest whose allegiance even to its own country is open to doubt, let alone anywhere else. But there is more to it than that. The fact of the matter is that if there is one thing where Britain reigns supreme in Europe, it is in wholesale financial markets. On the whole, the rest of Europe is not only no good at it, but in many respects it is culturally and institutionally averse to it. Nasty Anglo-Saxon speculators - that's the general Continental view of the City. And it's mainly jealousy.

The Takeover Panel's fiercely protective reaction to the proposed European directive on takeovers is therefore an entirely predictable and to some extent justified one. Contested takeovers are uncommon on the Continent and in some countries they are virtually unheard of. Where they do occur - and you have to think here mainly of Italy - there is often widespread abuse. Britain, on the other hand, has long experience of them, and although its system of non statutory regulation leaves a lot to be desired, it doesn't seem to work too badly. The idea that Brussels has anything to teach Britain about the regulation of takeovers, is plainly nonesense.

The directive itself is on the face of it a pretty innocuous one, the product of so much fudge, compromise and redrafting that it seems scarcely worth the paper it is written on. Many of its main elements and principles are borrowed from the British Takeover code anyway; it is also so vague that the ordinary business of the Panel probably won't be affected. Why then is the Panel so worked up about it?

The Panel's concern boils down to two issues. The first is that the directive would require statutory enactment (only in Britain, you understand, because nobody else is going to bother) which in turn would create legal rights. The Panel's decisions could thus be more easily challenged through the courts. Rulings in other countries would have to be accomodated within the British regulatory framework, however inappropriate to it they might be. The second is that provision would have to be made for compensation against cases of regulatory failure.

Most people wouldn't find much difficulty with either of these concepts but to the Panel they are anathma. According to the Panel, the first would greatly increase the cost and slow the process of takeovers. In some cases prolonged litigation would halt them entirely to the detriment of shareholder interests. Speed, flexibility and certainty, the strengths of the present system, would be lost. As for compensation, the idea that the Panel could itself be held negligent and liable is plainly too much to take for the gentlemen who run it.

The Panel is probably right about this directive; it looks like another piece of unnecessary meddling from Brussels. The problem is that in kicking up a fuss about it, the Panel has refocused the spot light on its own less than exemplary record. Self regulation is in many respects a fine thing, but is suffers from some obvious failings. Self regulation also tends to be self interested regulation. And here, it is the interests of City practictioners, and the lucrative source of revenue that takeovers provide them with, as much as those of shareholders, that the Panel is designed to protect.

Self interested regulation is often another way of saying lax regulation. It was the Panel, don't forget, which rehabilitated the ghastly Jim Raper. When he for a second time ran off with the loot, there was no compensation for those that had relied on the Panel's stamp of approval. More seriously, it was the Panel that lorded it over an unparalleled period of sharp practice and abuse in the mid-1980s, culminating finally in the Guinness scandal. There was compensation paid out on this occassion, but, to turn the Panel's arguements against it, only because of the threat of prolonged litigation. It wasn't the Panel as such which secured it. More recently, the Panel gave its blessing to a lucrative little corporate finance wheeze that another regulator, the SIB, later found to be tantamount to insider dealing.

It is the eternal lot of regulators that you see only the failures; the great raft of successes go largely unnoticed. Nonetheless, the Panel is being a little like King Canute in believing it can hold back the tide of international and statutory regulation. Today's markets are global, and today's takeovers, increasingly cross border. By defending its own little system against foreign encroachment, the City risks irrelevance and impotence. The Takeover Panel gains nothing by burying its head in the sand. Much better to ensure that the codes and practices so painstakingly evolved in Britain over the past thirty years become the standard for Europe. Our Continental partners are certainly in need of them.

The Securities and Investments Board has moved with commendable speed to review the London Metal Exchange, its trading and regulation. But anybody expecting a Barings or BCCI style attempt to tell the whole story in all its gory detail is advised not to hold their breath. The probe is limited in the sense that it is not setting out to identify what went wrong in the Sumitomo, Codelco or Citic scandals, all incidents in which large companies have lost a great deal of money on unauthorised copper trading in recent years.

We can therefore expect a worthy tome that will set out a new blueprint for the metal markets generally. It will also attempt to bring some regulatory control to the over the counter copper markets, a tall order since this is a world wide business. Perhaps most important of all, the review will look at how large customers of member firms of the LME can be brought under some form of regulatory control.

But in other respects, this is likely to prove an unsatisfactory exercise. Some of the people it most needs to talk to are under no obligation to talk at all. Sumitomo has made clear it will cooperate, but that will be voluntary and there will be nothing to stop it walking away if it is offended. If this had been a domestic scandal, there would by now be powerful calls for an independent inquiry not just into the lessons of what happened but into the causes. An attempt at full post mortem would already be under way.

The problem is that until it is known why Sumitomo lost so much and how the market rigging went on unchecked for so long, it will be hard for anybody to be really confident that the solutions are appropriate. Whether a wider inquiry is possible given the international nature of this affair, is open to question. The murkiest secrets of the whole affair may well be found in Japan rather than New York or London, and the Japanese are not going to open their books to the world unless it suits them. Any criminal actions will take years in the courts. The sad truth is that what actually happened here is likely to remain the subject of speculation and hearsay.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee