Stock Exchange Transactions (Protection of Investors)

Oral Answers to Questions — Trade and Commerce – in the House of Commons at 12:00 am on 23rd July 1959.

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Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby 12:00 am, 23rd July 1959

asked the President of the Board of Trade (1) whether he will, by regulation or otherwise, ensure that the Council of Associated Stock Exchanges indicate on their official notepaper not only the names of associated stock exchanges but which of them have compensation funds;

(2) which stock exchanges are recognised by his Department; which have established compensation funds; and what steps he is taking to encourage those stock exchanges without compensation funds to set them up;

(3) how many cases there have been in the last 10 years in which investors have suffered losses through the bankruptcy or defalcations of members of stock exchanges recognised by his Department; and in how many cases the losses of investors were made good out of compensation funds established by the stock exchanges concerned.

Photo of Mr David Eccles Mr David Eccles , Chippenham

As the information requested contains many facts and names, I will, with permission, circulate it in the OFFICIAL REPORT.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

I thank the right hon. Gentleman for that reply, which I have not seen. Is he aware of two exceptionally bad cases in which my constituents suffered losses, that of Robinson of Halifax and Andrew of Southport, both of whom were found guilty of fraudulent conversion with no protection at all for the investing public? Ought he not now to take steps to safeguard the public from the depredations of these sharks, who have the custody of public money, when there is apparently no protection whatever for losses incurred in particular stock exchanges? Does he not regard the matter more seriously now in view of the Government's encouragement to small investors to go in for stocks and shares floated on stock exchanges?

Photo of Mr David Eccles Mr David Eccles , Chippenham

The hon. Gentleman will see from the Answer that some stock exchanges have compensation funds. I have no doubt that the Answer will encourage others to take the same action.

Following is the information:It is for the Council of the Associated Stock Exchanges to decide whether to show on their notepaper which of their members have compensation schemes, and it is for the individual stock exchanges to decide whether or not to establish compensation funds.The London Stock Exchange is a recognised stock exchange by virtue of the Prevention of Fraud (Investments) Act, 1939. The stock exchanges subsequently recognised by the Board of Trade for the purposes of the Act are the following: Aberdeen, Birmingham, Bradford, Bristol, Cardiff, Dundee, Edinburgh, Glasgow, Greenock, Halifax, Huddersfield, Leeds, Liverpool, Manchester, Mincing Lane, Newcastle - upon - Tyne, Newport (Mon.). Nottingham. Oldham, Sheffield and Swansea.I am informed that the following have established compensation funds: the London Stock Exchange and the stock exchanges of Birmingham, Edinburgh, Glasgow and Manchester.The Provincial Brokers Stock Exchange has been recognised by the Board of Trade under the Act as an association of dealers in securities. This body established a guarantee fund in 1950.I have no information as to defalcations of members of recognised stock exchanges but there have been in the last ten years eight bankruptcies of persons described as stockbrokers or jobbers. I do not know in how many cases investors' losses became the subject of payments from compensation funds.