View from City Road: Lobbying on behalf of lunch

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THE CITY is appalled by government plans to clamp down on brokers' lunches and tighten insider dealing legislation. But stockbrokers, merchant bankers and others do not know what to do about it. They realise lobbying politicians could be counter-productive as they are open to accusations of self-interest.

There is huge political pressure to clean up the Square Mile, particularly in the wake of the Maxwell fraud. At the same time European legislation requires the Government to revise insider dealing rules.

Critics say brokers' lunches - or any private meeting between companies and investors - are merely a conduit for passing price-sensitive information that by rights ought to be announced publicly. But advocates say they are a useful way of bridging the gap between City and industry and, more importantly, of helping to make supportive shareholders out of those who might otherwise be short-term dealers. They are part of the mechanism for improving the City's understanding of industry.

Fund management firms that see companies most often, such as Prudential and Legal & General, are often praised not just in the City but by industrialists for their greater understanding of their business. Companies appreciate the ability to feed information into the market, for example, to lower profit expectations, and spend a huge amount of time and money on private presentations to investors, suggesting they think there are benefits.

Industrialists who feel the system is worth keeping are likely to find themselves under pressure to lobby against proposed rule changes. The City would appreciate their help.

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