Dáil Éireann debate -
Tuesday, 5 Feb 1991

Vol. 404 No. 6

Ceisteanna — Questions. Oral Answers. - Leaking of CSO Inflation Figures.

Pat Rabbitte

Question:

1 Mr. Rabbitte asked the Taoiseach if he will outline the findings of the investigation into the alleged leaking of Central Statistics Office inflation figures on 14 December 1990, and the consequent damage to this country's reputation internationally by the apparent use of the information by a number of dealers to make a speculative killing in deals on Government stocks; if it is intended to publish the report; if any new procedures are to be introduced to prevent further such leaks; if the Garda were asked to investigate the matter; and if he will make a statement on the matter.

The Taoiseach

As the House is aware, I ordered an immediate investigation, by the Director of the CSO and the Secretary of the Department of Finance, of allegations that the mid-November Consumer Price Index figures had been leaked in advance of publication. The findings of their investigations have been published in a statement issued last Friday, 25 January, copies of which have been placed before both Houses of the Oireachtas.

Briefly, the Stock Exchange authorities informed the Secretary of the Department of Finance that there was no indication that any part of the market was particularly or unusually active on the day in question and that there was nothing which would allow them to conclude that there was evidence that advantage was taken of the information in question. It must be concluded that no significant use, if any, was made of the information in question.

I reject the suggestion that this country's reputation internationally has been damaged by this incident but Deputies who propagate that idea are themselves more likely to cause damage to our reputation.

I did not consider that it would be possible for the Garda to add to the investigation already conducted.

The premature disclosure of such sensitive official information is most regrettable. I have, therefore, taken action to prevent any possibility of its recurrence by having sensitive periodic economic statistics calculated and published in future only after the Stock Exchange has closed at 5 p.m. This will mean that there cannot be a recurrence of the events of last December. This new procedure will operate henceforth.

Mr. Rabbitte

May I ask the Taoiseach, in the context of the statement by his Chief Whip on 25 January to the effect that it was conceded that this information was available to some persons on the stock market as early as 2 p.m. on the day in question and to the market generally at 4 p.m., how can we reasonably be expected to believe that an organisation that functions on the basis of information would have made no use of that information? Is it not a fact, Sir, that the dogs in the street, especially the dogs in Anglesea Street, know that advantage was taken of it and in effect what we have here is a whitewash? In his reply the Taoiseach relies——

An Ceann Comhairle

Deputy Rabbitte, brevity, please.

The Taoiseach

Questions.

Mr. Rabbitte

Why does the Taoiseach rely on what the Stock Exchange told the secretary of the Department of Finance? Does he not agree that——

An Ceann Comhairle

I think the Deputy has made his point, There is no need to elaborate now.

The Taoiseach

I want to confess to the House that I had a bet with my advisers that, no matter what report we brought out on his matter, it would be described by Deputy Pat Rabbitte as a whitewash and a cover up. Today he has only used the "whitewash" one.

I would like to give the Deputy some information about what happened on the Stock Exchange that day. Perhaps it will help him to come to a conclusion about it. The main factor influencing the gilt price on that day was the US bond prices that week. Interest rates had been lowered the previous week in the US and there was an expectation that there would be a further reduction in interest rates that week. US bond prices rose in the expectation of this further reduction but these hopes were dashed on Friday when retail sales and producer price figures published that day showed that the American economy was stronger than expected and a further reduction in interest rates was not warranted. The rise in US bond prices that week, therefore, influenced the rise in our gilt prices which fell back on Friday when US bond prices fell.

That is just a summary of the events as they have been described to me. The general information and picture that has been painted for me is that the bond prices, gilt prices, that week were in fact influenced by international events and not by anything that happened here.

Mr. Rabbitte

Is it not a fact that the trading on the secondary market alone on the day in question reached £95 million, only £26 million of which was traded before this information became available? Will the Taoiseach tell the House to what extent his investigation relied on the Stock Exchange's own investigation? His reply and the reply of the Minister of State time and again refer to the Secretary of the Department having been advised by the Stock Exchange authorities. Finally, does the Taoiseach not agree that asking the Stock Exchange to investigate this kind of leak is like asking brothel keepers to investigate prostitution?

The Taoiseach

No, I do not agree because the Stock Exchange are the authority, the regulatory body. The Secretary of the Department of Finance pursued with that organisation all the inquiries he felt it proper to make and he came to a conclusion on the basis of that information. It is not that the Secretary of the Department of Finance went to any one member of the Stock Exchange. He went to the body, the regulatory authority and secured information from them. We have no reason to suggest the Stock Exchange authority would attempt to conceal this information in any way. It is just as much in their interests as in anybody else's to ensure that there are no practices on the Stock Exchange which would be dishonest or not in keeping with the highest standards.

Mr. J. Bruton

Would the Taoiseach not agree that he, and the Government, are in an inherently weak position in this matter in view of that fact that they had to rely on a private body to investigate their members in a matter of this kind? Would he not agree that there is a need — and that this case highlights the need — for the State to acquire resources as the State, to investigate insider dealing or any other conflicts of this kind rather than have circumstances obtain in which those who are potentially involved are those who are investigating the alleged offences?

The Taoiseach

I think Deputy Bruton knows that all over the world it is the regulatory body to which Government authorities go to seek information in these matters. I understand the situation in all international financial markets is that the controlling body — whether it be the Stock Exchange or whoever else — are the body on which the public authority rely to ensure that practices are proper, correct and adhered to. I do not know whether there is any additional mechanism we should establish. I would like to point out to Deputy Bruton that fortunately incidents of this kind are very rare indeed on our Stock Exchange. I do not know that we would be justified in going to the expense of setting up a whole new regulatory or investigative authority to investigate such happenings.

Mr. J. Bruton

May I ask the Taoiseach——

An Ceann Comhairle

It must be a very brief question. The House will appreciate that we cannot remain unduly long on any one question. Clearly that would be to the disadvantage of all other questions and Deputies interested therein. I will call on Deputy Quinn and ask for brevity.

Mr. Quinn

Would the Taoiseach not agree that what concerns this House is the abuse to which insider information may have been put? Can he indicate whether, in the course of the discussions his Department had with the Stock Exchange authorities, they were able to identify any clear beneficiaries of this premature leakage of information since all transactions are recorded? Is he in a position to state whether such insider information was manifestly abused to the benefit of clearly identifiable people?

The Taoiseach

On the best information available to the Secretary of the Department of Finance, who carried out the investigation, the answer is "no". In fact I have a lot of other subsidiary information here about the sort of trading that took place that day all of which would seem to indicate that there was nothing particularly abnormal about it. That nobody seemed to have used any private information of this kind. By and large, movements on the Stock Exchange that day and on previous days — both on the main market and on what is called the secondary market — indicate in both these cases the bond market here was reacting to international events. In fact on Friday the price of gilts fell on our Stock Exchange because of the change in the international situation.

I will give the House the gist of that information if it would be helpful to Members. Very largely this is the sort of information I have already given the House but I suppose the more information I give the House the better. On foot of rising international markets the Irish Gilt Market began to rise on Wednesday, 12 December 1990. For example, on the primary market, that is sales from the Exchequer to the market, the main stock being sold was 9¾ per cent Capital Stock, 1998. The price of this stock on Wednesday, 12 December 1990 rose from 98.15 in the morning to close at 98.35. It opened on Thursday, 13 December 1990 at 98.50 and rose progressively, in active selling, to close at 99.45, that was Thursday the day in question, up 95 pence on the day. Dealing in the secondary market, that is investors dealing between themselves, broadly mirrored the rise in the primary market and continued to rise on Friday morning to a high of 99.75 on the 9¾ per cent Capital Stock, 1988, before falling back in line with a weakening in the international market. This pattern confirms that the market was influenced by international factors and moved in line with international trends. This is the normal pattern. There is no evidence that other factors, such as price-sensitive information, had any impact on the market on 13-14 December 1990.

Mr. J. Bruton

Is the Taoiseach aware that, during the debate on Committee Stage of the Companies (No. 2) Bill, 1987 Fine Gael Members put forward proposals which would have provided ministerial oversight of the self-regulatory activities of the Stock Exchange in regard to insider dealing? Is the Taoiseach aware that these amendments were rejected by the Minister for Industry and Commerce? Would the Taoiseach agree to take up this matter with the Minister for Industry and Commerce with a view to ascertaining whether there should be some public interest oversight of the self-regulatory activities of the Stock Exchange in regard to their internal business?

The Taoiseach

Yes, I think we would be quite prepared to agree to look at that matter again though I would not like there to be any inference that we were not satisfied with the full bona fides of the Stock Exchange as a regulatory body.

Mr. Rabbitte

May I ask the Taoiseach whether, in respect of the statements that the investigation identified 33 civil servants who had possession of this information between 2 p.m. and 4 p.m. on the day in question, the investigation established how many politicians were in possession of the information? Can the Taoiseach assure the House that the fears in financial circles that there are some favoured dealers on the Stock Exchange are unjustified and that that practice has been eliminated?

The Taoiseach

First of all, on the question of civil servants who had access to the information, it is quite clear from the fact that there were so many nobody was taking this information particularly seriously. I, and my officials, were in Rome on the evening of Thursday, 13 December 1990 when we heard the figures at approximately 6 o'clock in the evening. Our reaction was that this was very good news for our economy, for the people. Not any one of us had the slightest thought that it might affect the financial markets in any way. I think Deputy Rabbitte would agree with me that, up to that point, nobody in this House or anywhere else would ever have suspected that some of our public statistics — whether in regard to unemployment or whatever — would cause those people down there in their exotic realms to do one thing——

Mr. Rabbitte

I do.

The Taoiseach

I am quite certain that had I asked Deputy Rabbitte, before that Thursday, whether the publication of the CPI figures would influence the financial markets——

Mr. Rabbitte

I would because——

The Taoiseach

I bet he would have said no. My own best estimate on this is that if there was a disclosure — which apparently there was somewhere — it was inadvertent or accidental and that any sensible, reasonable person, looking at the overall position, would have come to that conclusion.