New Clause 5 - Proceedings under Financial Servicesand Markets Act 2000
Social Security Contributions
12:30 pm
Mr Howard Flight (Arundel and South Downs, Conservative)
I beg to move, That the clause be read a Second time.
The clause raises the issue of market abuse. Again, on Second Reading, I did not communicate the point that I was making clearly enough.
The principle behind all the market abuse legislation—the Financial Services and Markets Act 2000 and the nightmarish regulations yet to come—is that the price of shares should not be capable of being distorted upwards or downwards by misleading information. The simple point here is that any company that does not avail itself of the option to pay the special NIC bill sends a clear signal to markets that people will take negatively. Whatever the underlying reasons, the company is clearly saying that it does do not think that the NIC bill that it may have in the future will be bigger than the current one. It is sending a clearly negative signal to markets about the prospects for the share price.
As we discussed on Second Reading, there may be different reasons for opting not to make the payment: management may want to change the employees substantially, so many options will lapse, or the company may not be able to afford to pay it, and so on. Although it is not clear precisely what will fall within market abuse and what will not until the regulations are available, it is certainly an abuse for companies to send a wrong signal to investors. If the company says that it will not exercise the option and you, Mr. Benton, have some shares and say, ``I don't like the look of that. I'll sell,'' and the subsequent results are wonderful, you will say that the company misled you.