The business - Patrick Hosking on the lessons of M&S and its shares

So far, the Financial Services Authority has few significant insider-dealing scalps. But can it real

The Financial Services Authority has injected fresh drama into what was already the most gripping City story of the year, the Marks & Spencer bid battle. The FSA is investigating share-buying ahead of the announcement of Philip Green's original £8bn bid in late May. The question is: was there insider dealing? Has anyone profited because they were tipped off about the bid in advance?

For once, the punters under the FSA spotlight include some big beasts. Stuart Rose, now chief executive of M&S, bought 100,000 M&S shares a few hours after receiving a phone call from Green, an erstwhile friend. Tom Hunter, another retailing giant, a big philanthropist in his native Scotland and a close friend of Green, bought 375,000 shares for his children's trust six weeks before the bid was announced. Michael Spencer, one of the City's richest men and the creator of the Icap money-broking empire, bought two million M&S contracts-for-difference - bets on the shares rising - a day after meeting Rose.

All three emphatically deny knowing a bid was coming when they dealt, though Rose says he regrets buying the shares, and there is no suggestion of a conspiracy. But the system has changed since Jeffrey Archer's notorious purchase of Anglia TV shares. Then, insider dealing was a criminal offence only. The prosecution had to prove wrongdoing beyond reasonable doubt.

Because it was possible that Archer didn't know of an imminent bid, even though his wife Mary was an Anglia director, a prosecution wasn't even attempted.

Now the FSA can bring civil proceedings, which demand a much lower burden of proof. Judgment depends on whether a reasonable person would consider the behaviour acceptable in the circumstances. The FSA can mete out unlimited fines and City bans.

It has not so far secured significant insider-dealing scalps beyond a few small fry. Yet can it really be a coincidence that a rise in the share price precedes almost every takeover bid?

Nothing would do more to help encourage honest behaviour in future than the successful nailing of a big businessman. Equally, nothing would do more to reinforce the view that insider dealers are untouchable than the investigation fizzling out - even if, as is quite possible in the M&S case, everyone is completely innocent.

By announcing a formal investigation, the FSA has upped the stakes.

As I suggested might happen two weeks ago, the laudable stand made by the W H Smith pension-fund trustees has derailed the £940m takeover bid for the company by the private equity group Permira. For now, at least.

The trustees were not prepared to countenance a highly leveraged bid without an accompanying top-up to the pension scheme, which has a deficit of between £200m and 250m. Permira was not willing to shoulder the extra costs.

What nobody has pointed out is that the robust wording of the pension fund's trust deed - which gave the trustees the ammunition they needed - was drafted in 1894, when the Smith family set up the pioneering scheme for their clerks.

How extraordinary that tomorrow's Smith pensioners have to rely on the paternalistic drafting of a late-Victorian employer to defend their rights today. We hadn't long stopped sending children up chimneys at the time.

About 100,000 people run their own pension funds. I'm one of them. The vehicles are called Self-Invested Personal Pensions. Sipps allow people to make their own investment decisions. They used to be the preserve of the wealthy, but the costs have fallen dramatically. Now anyone with a bit of financial nous - and/or a deep suspicion of the savings industry - can run their own fund.

Under new rules that come into force in April 2006, "sippers" will be able to invest in virtually any asset they choose - from residential property to fine art to vintage wine. Rightly, the government is giving us a wider choice of places to put our retirement savings. Why should we have to rely on the stock market when so many listed companies have let their shareholders down? MPs - with their final-salary pensions underwritten by tomorrow's taxpayers - don't have to worry about falling stock-market returns. The rest of us do.

But there is scope for abuse. People will be able to use the untaxed income in personal pension funds to buy holiday retreats, Picassos and even yachts - in effect, at a 40-per-cent discount. There are safeguards: any use of the assets will be taxed as a benefit and any transaction between individuals and their funds will have to be done at commercial rates.

But who is going to police all this? Who decides what commercial rates are for someone, say, leasing his yacht back from his pension fund for a month every year? Sipps have been free of scandal until now. It would be a shame if the tax breaks were exploited by the wealthy to indulge their hobbies on the cheap.