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.

News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features playground gun massacre
News
Two giraffes pictured on Garsfontein Road, Centurion, South Africa.
i100
PROMOTED VIDEO
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Travel
travel
News
Kenny Ireland, pictured in 2010.
peopleBenidorm, actor was just 68
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
arts + entsBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
News
i100
Arts and Entertainment
arts + ents
News
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Morrissey pictured in 2013
people
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
News
i100This Instagram photo does not prove Russian army is in Ukraine
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

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices