As with most compromises, the result satisfies none of the parties involved. But to be fair to the exchange, it was always on a hiding to nothing in this case, sandwiched as it was in an almighty row between its ultimate regulator, the Treasury, and its biggest customer, Prudential. To complicate matters further, its own chief executive, Michael Lawrence, is the former finance director of the Pru, which he left after falling out with Mr Newmarch.
The issues were simple. Did Mr Newmarch breach the model code by dealing when in possession of price-sensitive information? And were the company and its chairman, Sir Brian Corby, wrong to authorise the transaction?
On the first count, Mr Newmarch has been cleared. So far, so fair. The logical corollary is that therefore the company is cleared also. Er, not quite. In a transparent attempt to look tough, the exchange gives the Pru a light rap over the knuckles for not having the right procedures in place to arrive at a decision about whether Mr Newmarch could deal or not. This is dreadful, defensive nonsense. It is a bit like saying to a motorist: "The tyres on your car are not bald, but if they had been you would not have got your MoT."
If, as the exchange decided, Mr Newmarch was not in possession of price- sensitive information and was perfectly free to deal, how could it possibly be concluded that the company was at fault?
The whole affair once again highlights the glaring deficiencies of self- regulation in the the City as currently practised. What, for instance, are we to make of the relationship between the Treasury and the exchange? The Treasury started the ball rolling by telling the exchange to mount an investigation. But it was also an interested party for two signifcant reasons. The first is that it was in effect the prosecution's star witness, as officials testified that Mr Newmarch had told the Chancellor of the Exchequer no less than that the SIB report would hit the Pru's share price. The second is that the Treasury had an axe to grind as it clearly found Mr Newmarch, with his outspoken views on regulation and the whole pensions mis-selling scandal, a thorn in its side.
Nobody emerges with credit from this whole murky episode. Mr Newmarch, although cleared, has lost his job and, rightly or wrongly, will continue to be seen by many as a victim of his own hubris and greed. The Pru hardly emerges any better. As Britain's biggest institutional investor it will find it difficult to harangue others over corporate governance with quite the same authority as in the past. The Treasury, which pushed hard for Mr Newmarch to be publicly flogged, has failed to get its way; as a consequence its "get tough on regulation" policy has had a further blow. And the Stock Exchange has taken almost six months to conclude that a single, uncomplicated transaction was alright after all. Another fine regulatory mess the City has got itself into. Hey ho.Reuse content