City ethics watchdog clears HBOS/Lloyds TSB talks leak

Share this article

A LEADING City watchdog has clashed with an influential pressure group for UK retail investors, maintaining there was little wrong with last week's leak of advanced talks between Lloyds TSB and HBOS.

That leak on the BBC website last Wednesday sent shares soaring in the target, HBOS, hours before the talks were confirmed by the bank.

Thousands of small shareholders in the company have been upset by the revelation, coming ahead of an official announcement.

But Simon Culhane, chief executive of the Securities & Investment Institute, the City's leading ethics body, told The Scotsman yesterday that he felt there was "not too much" wrong with what had happened.

Culhane, whose organisation has worked closely before with Britain's financial regulator, the Financial Services Authority, said he was reasonably relaxed about the way the merger became public "because of the pretty unique circumstances".

He said: "The story was announced on the BBC website at 9am. If the journalist had just told a few friends but not put it on a widely read website then that would have been more a case of creating a false market and opening the way to insider trading."

Culhane said the government's involvement by that stage meant a lot more people than normal knew about major merger talks.

"If nothing was put on the website in these pretty unique circumstances we could easily have had a false market for most of the day anyway."

"No 10 knew, and there was potential for a worse scenario. You could argue it did everybody a favour by the news going out in the way it did," he added.

Culhane said he "could understand where small shareholder groups are coming from" in their concerns about being disadvantaged in the stock market by such a big announcement not being made on the Stock Exchange regulatory news service.

"But, in the modern world, it was probably the best thing that could have been done in the circumstances," he said.

However, the UK Shareholders' Association yesterday took a diametrically opposite view to that of the SII boss.

UKSA's director Roger Lawson said it was "farcical" the Lloyds/HBOS talks announcement came only "several hours" after being leaked.

Lawson said: "The shares rose dramatically just before the BBC website had the story and also in the hours in between the story and the confirmation.

"It just cannot be right that insiders in the City, with or without the media, know more than private investors do. That is why we have an RNS announcement system that can come out for everybody an hour or so before the stock market opens."

The Association of British Investors, representing some of Britain's biggest institutional investors, said it understood there were "issues" about the leak.

But an ABI spokesman said: "We think price-sensitive information should be released at the same time (to everybody].

"There were unusual circumstances in this case and our members are not up in arms about it.

"We do not feel, therefore, it is one for us to champion or push."

Archie Kane, chairman of the ABI, is also chief executive of Scottish Widows, the insurance and fund management arm of Lloyds TSB.