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"( ) The Authority's policy in determining what the amount of a penalty should be must include having regard to--
(a) the seriousness of the misconduct in question in relation to the nature of the principle or requirement concerned;
(b) the extent to which that misconduct was deliberate or reckless; and
(c) whether the person on whom the penalty is to be imposed is an individual.".
Mr. Deputy Speaker: With this it will be convenient to discuss Government amendment No. 278.
Mr. Timms: Amendment No. 271 is a response to the committee chaired by Lord Burns. In the Standing
Committee, we introduced amendments to equivalent provisions in clause 67 in order to set out several specific factors that the FSA should take into account when deciding on the level of penalty to be imposed. Amendment No. 271 sets out those factors for clause 67, and they mirror those in clause 185.
Amendment No. 278 introduces consistency with the equivalent provisions for discipline under part VI on official listing, part VII on market abuse and part XIII on disciplinary measures for authorised persons. The amendment imposes an obligation on the FSA to have regard to published policy in force at the time when the misconduct took place. These are points of consistency to standardise clause 67 with equivalent provisions elsewhere in the Bill.
Amendment agreed to.
Amendments made: No. 272, in page 31, line 12, leave out "any material published" and insert--
No. 273, in page 31, line 14, leave out from "If" to end of line and insert--
No. 274, in page 31, line 15, leave out subsection (5) and insert--
No. 275, in page 31, line 17, leave out subsection (6) and insert--
No. 276, in page 31, line 19, at end insert--
No. 277, in page 31, line 20, leave out subsection (7).
No. 278, in page 31, line 25, leave out subsection (8) and insert--
No. 279, in page 31, line 28, leave out subsection (9).--[Miss Melanie Johnson.]
Mr. Timms:
I beg to move amendment No. 408, in page 33, line 5, leave out "company" and insert "body".
Mr. Deputy Speaker:
With this it will be convenient to discuss Government amendments Nos. 409 to 417.
Mr. Timms:
As hon. Members will have realised, we are not yet able to introduce amendments to part VI and
The amendments make relatively minor changes to part VI, largely in response to points raised by the Law Society, to which we are grateful. The exceptions are the changes to clauses 80 and 90, which change coverage of criminal offences to ensure equal treatment of all who might breach the prohibitions of those clauses. I hope that the amendments will be widely welcomed.
Mr. Flight:
The Opposition welcome the amendments in the main, but we wonder why the Government felt it right to follow the Law Society's recommendation to make breaches by authorised firms a criminal offence, like breaches by anyone else. That contrasts with the present position, and breaks the general rule that contraventions of regulatory rules by authorised firms are not criminal offences. It would be desirable to have the Government's thinking on that point on the record.
Mr. Tim Loughton (East Worthing and Shoreham):
I, too, should make a couple of points because I am slightly alarmed that we have before us only a few technical amendments when we were promised in Committee that there would be more substantial and detailed amendments, particularly to clause 87 and the listing details. I too would like an answer on why amendment No. 410 provides that authorised firms should face criminal charges if they fail to publish a prospectus.
In Committee, we raised serious problems concerning the Chinese walls between the FSA's roles as a competent authority and as a regulator. The balance seems not to be right. If the FSA fails to act on listing particulars in a listing application within six months, the application will be deemed to have failed, regardless of the fact that that may be entirely down to the incompetence of officials acting for the FSA.
The amendment seems to swing the scales the other way, in that criminal charges can be brought against authorised firms which issue prospectuses, while incompetence from the FSA is subject to full immunity. I refer the House to the questions that we put in Standing Committee A on the listing particulars; they are recorded in my contribution to the Committee's proceedings on 28 October 1999, in Hansard, from column 607 onwards. The Minister promised us further details, and we assumed that we would have received them by this stage.
We need further information as to how the fine income from listing abuse will be used. Will it be rebated against fees or against the legal aid scheme? In France, for example, that income goes straight to the Treasury rather than to the equivalent of the FSA. How will the Chinese walls work, between the competent authority bringing in more revenue in its role as rule maker and enforcing the rule book? There will be a temptation to relax the rules in order that more companies should be in the listing, thus providing more listing revenue for the FSA in its role as competent authority.
That raises the issue that, currently, the stock exchange, as the competent authority, is effectively monitored by the regulator--the FSA. Who will monitor the FSA when it acts
as the competent authority? Those additional powers are open to abuse. How will those additional roles be resourced? As we shall see when we discuss later clauses, that is a most important question, given the extra functions that the FSA is apparently taking on.
What happens if the FSA loses its role as the competent authority? There are many questions. It has been many months since the late summer, when it was announced that the role of the stock exchange as competent authority was to be given over to the FSA. It is disappointing that we can consider only a few technical amendments at present, when much more meat should have been provided for us on Report. I very much want an answer to the questions that we have raised on amendment No. 410.
Mr. Timms:
The whole House welcomes the moves towards competition in this matter. We welcome NASDAQ's announcement that it wants to establish its European base in London. We also welcome other initiatives.
Some far-reaching amendments will be needed to allow us to introduce competition. In Committee, my hon. Friend the Economic Secretary to the Treasury pointed out that we should table such amendments in due course. As I said earlier, we cannot yet do that, but we shall be able to do so in another place.
The hon. Members for Arundel and South Downs (Mr. Flight) and for East Worthing and Shoreham (Mr. Loughton) asked questions about amendment No. 410 and clause 80. Clause 80 provides that it is unlawful to offer securities to the public in the UK, prior to the publication of a prospectus, in circumstances where clause 79 requires such a prospectus. It sets out the consequences of such an unlawful action, dealing differently with authorised persons and all other people.
If an authorised person engages in an unlawful offer of that sort, he is treated as having contravened rules, and may be subject to disciplinary action by the FSA. If any other person takes similar action, he will be guilty of a criminal offence and will be liable to a fine or to imprisonment.
We reviewed the case for that stark difference in treatment and concluded that we should not continue to distinguish between the authorised and the unauthorised in that way. The amendments subject all persons to the same offence and to the same penalties. That outcome could have been achieved by providing that both should be regarded as contravening FSA rules--that too would have been consistent.
However, it is a fundamental principle that only those persons who want to undertake financial services business should be the subject of FSA rules. It is hard to see how the system could work in any other way. How would the FSA discipline people breaking its rules who were not authorised? It would obviously not be able to withdraw authorisation.
In answer to the question, "Why introduce a criminal offence?", we are primarily driven by consistency. There is a lack of clarity as to whether the offence, when committed by an authorised person, would be regarded as a criminal matter under the European convention on human rights. As I noted, it is difficult to understand why behaviour committed by unregulated persons should be criminal, but when committed by regulated persons--who should be more expert--it is not. The amendments make matters more consistent.
"or replace a statement issued".
"a statement issued under this section is altered or replaced, the Authority must issue the altered or replacement statement.".
"(5) The Authority must, without delay, give the Treasury a copy of any statement which it publishes under this section.".
"(6) A statement issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public.".
"( ) The Authority may charge a reasonable fee for providing a person with a copy of the statement.".
"(8) In exercising, or deciding whether to exercise, its power under section 63 in the case of any particular misconduct, the Authority must have regard to any statement of policy published under this section and in force at the time when the misconduct in question occurred.".
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