The ghost of Maxwell stalks pension funds

PRESS RELEASE: The Rt Hon Frank Field MP

Immediate Release: 25 January 2010

The ghost of Maxwell stalks pension funds

Frank Field MP has tabled an amendment to the Financial Services Bill which aims to safeguard funds which are at risk from short selling.

Frank Field's blog can be found here: http://www.frankfield.co.uk/blog/q/date/2010/01/18/being-pulled-up-short/

As the 2009 Turner Review noted ‘short selling can contribute to a self-fulfilling downward cycle of falling confidence, particularly in financial stocks, as interconnected movements in equity prices, CDS spreads, and ratings drive increased funding costs which in turn drive further falls'.

The new amendment seeks to ensure that, before funds are lent for short selling, the beneficial owners of the funds (ie the pension fund depositors) have given their permission at an AGM for the funds to be lent for the purposes of short selling.

The MP has laid the amendment in response to his contact with pension fund trustees with a clear lack of understanding as to how their funds are being used when they are lent.

The amendment coincides with guidance issued by the Pensions Regulator indicating that fund trustees need to be more vigilant in identifying and controlling the risks involved in securities lending. That guidance only underlines the severity of the risks funds are being put to. Frank Field has been lobbying the Pensions Regulator for a year to review their guidance.

Frank Field said "I am staggered by the amount of money at risk, particularly from pension funds, from short selling practices. Financial service workers should surely not be allowed to sell shares they do not own without the prior permission of their owners. I call on the Government to support the amendment when debated in the House later today".

ENDS

Notes to Editors

On 23.03.09 Frank Field introduced the Short Selling and Bank Accounts Bill as a Private Members Bill to the House of Commons. 

Frank Field's blog can be found here:
http://www.frankfield.co.uk/blog/q/date/2010/01/18/being-pulled-up-short/

The Turner Review can be found here:
http://www.fsa.gov.uk/pubs/other/turner_review.pdf

The new amendment (New Clause 8) can be found here:
http://www.publications.parliament.uk/pa/cm200910/cmbills/049/amend/pbc0492501m.423-429.html

Date added: Monday 25th January 2010
Latest updated: Friday 5th March 2010