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Clause 18
Lords amendment: No. 10, in page 8, line 19, leave out subsection (2) and insert--
("(2) The contravention does not--
(a) make a person guilty of an offence;
(b) make any transaction void or unenforceable; or
(c) (subject to subsection (3)) give rise to any right of action for breach of statutory duty.
(3) In prescribed cases the contravention is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.")
Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 25 to 29, 33, 35 to 44, 78, 89, 178, 179, 250 and 251.
5 pm
Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
In the light of points made in this House, particularly by the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell), and in the other place, the Government have reconsidered the different provisions in the Bill dealing with rights of action and enforcement of agreements.
The amendments on rights of action fulfil the Government's commitment given in Committee and on Report in this House to review and align the provisions on rights of action. The aim of the Government's amendments is to enable the current pattern of rights of action for rule breaches, as provided for under clauses 62 and 62A of the Financial Services Act 1986, to be reproduced as far as it is possible to do so given the different structure of the Bill in relation to contraventions of requirements imposed under parts IV, X and XIII.
The amendments will enable the Treasury, subject to Parliament, to give rights of action to private persons if an authorised person has handled client money without the appropriate part IV permission, but not for a breach of a capital requirement or premium income limit imposed under that part. The Treasury will also be able to extend rights of action to non-private persons acting in a fiduciary capacity for a private person.
Amendments Nos. 89 and 179 are technical improvements that relate to the transfer of the competent authority for listing function from the London stock exchange to the FSA. They ensure that the wording of the Bill properly reflects the fact that the transfer has taken place, but do not alter the basic position that clauses 141 and 142, which deal with rights of action for FSA rules made under part X, do not apply to listing rules.
The amendments on enforcement of agreements meet Opposition concerns raised in Committee and on Report in this House about the grounds on which agreements entered into in the course of, or as a result of, an unauthorised regulated activity or illegal financial promotion will be enforced.
As we said we would, we have reflected on those concerns and have tabled amendments that meet directly the points made by the right hon. and learned Member for North-East Bedfordshire and his colleagues. In particular, amendments Nos. 25 to 29, 33 and 38 to 44 introduce a single test for the court to determine whether an agreement is enforceable by considering whether it is just and equitable for it to be enforced.
The other amendments make technical and drafting improvements. I commend the amendments to the House.
Clause 19
Lords amendment: No. 11 in, page 8, line 38, at end insert--
("(5A) An order under subsection (5) may, in particular, provide that subsection (1) does not apply in relation to communications--
(a) of a specified description;
(b) originating in a specified country or territory outside the United Kingdom;
(c) originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or
(d) originating outside the United Kingdom.
(5B) The Treasury may by order repeal subsection (3).")
Mr. Timms: I beg to move, That this House agrees with the Lords in the said amendment.
Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 12 to 18, 172 to 174, 272 and 296.
Mr. Timms: Clause 19 prohibits financial promotion unless the communicator is an authorised person or the promotion is approved by an authorised person. Clause 231 prohibits promotion by authorised persons of collective investment schemes unless the scheme is either authorised or recognised. Both clauses were extensively debated during the Committee stage in this House. The amendments debated in the other place were largely technical, tidying-up amendments made in response to concerns expressed by hon. Members in Committee.
Amendments to clauses 19 and 231 allow for some exemptions to be made, including exemptions dealing with the territorial scope of each prohibition. Amendments to clause 137(1) on financial promotion rules ensure that the limits of this rule-making power are consistent with the limits on promotions by unauthorised persons. There are also some technical and consequential amendments to clause 19. I commend these amendments to the House.
Mr. Flight: There were two big issues in this territory. One arose from clause 19 and the issue of the FSA being empowered to regulate cyberspace and anything that could affect a UK person. Our understanding is that the exemptions that have been published achieve what we felt was appropriate to be dealt with in clause 19.
Secondly, we were particularly concerned that managers of UK-based collective investment schemes who were seeking to market those schemes outside the UK but within EU jurisdiction would be subject to competing regulatory jurisdictions. As the Bill was drafted, they would have been obliged to conform with the FSA's regulations and with those in the jurisdiction in which they were marketing the scheme. Again, we understand that the Government have addressed the issue satisfactorily. I merely ask for confirmation that that is so in both cases.
Mr. Timms: It is certainly my view that all those concerns have been addressed satisfactorily. I hope that the House agrees.
Lords amendments Nos. 12 to 18 agreed to.
Clause 24
Lords amendment: No. 19, in page 10, line 34, leave out ("("the purchaser")")
Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 20 to 24, 30 to 32, 34, 46 to 48, 53 to 56, 88, 98, 100, 106, 110, 113 to 119, 121, 122, 160 to 167, 190, 191, 260 to 264, 349, 375, 397, 405, 433, 435, 444, 446 to 456, 462 to 484, 536 to 539, 555, 560, 563, 564, 616, 617, 632, 637 to 649, 661, 663, 664 and 672.
Miss Johnson: This large group of amendments provides a good illustration of the way in which the Bill's drafting has been improved and consistency achieved through technical refinement in another place. It is also an example of the fact that a minor drafting change to improve clarity in a Bill of this complexity can involve dozens of amendments representing absolutely no change in policy.
I am sad to see that the right hon. Member for Bromley and Chislehurst (Mr. Forth) is no longer present, but I hope that Opposition Members will not be too disappointed if I deal with the amendments fairly briefly. They achieve a number of things. First, they standardise the references in the Bill to the acceptance of deposits. Secondly, they rationalise the references to insurance. Certain amendments correct grammatical errors that we have noticed, insert, correct and delete defined terms, and correct references to other provisions that have somehow become inaccurate. I am happy to acknowledge that some of the amendments reflect points made by the Opposition, who have identified potential shortcomings in the Bill's drafting.
I am sure that hon. Members do not want me to deal with the amendments individually, despite the exhortations of the right hon. Member for Bromley and Chislehurst. The explanatory notes produced by the Treasury before the recess explain each of them for the benefit of those who are particularly curious.
Lords amendments Nos. 20 to 56 agreed to.
Clause 49
Lords amendment: No. 57, in page 22, line 28, after ("may") insert ("reasonably").
Mr. Timms: I beg to move, That this House agrees with the Lords in the said amendment.
Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 58, 74, 187, 188, 234, 235, 273, 304, 335, 372, 373, 430.
Mr. Timms: I will not push my luck too far: I will say a few words on this group.
The amendments were tabled in response to discussion in Committee and on Report in the House of Commons, where some inconsistencies were identified in the circumstances in which the Bill uses express concepts of reasonableness, for example, in relation to powers of the FSA. We have had some discussion on that point already this afternoon.
As a matter of administrative law, it is well understood that a body exercising public functions under statute must act "reasonably". That requirement will apply to the FSA, just as it does to other bodies such as the Treasury or the Secretary of State. If the FSA were to act in a way in which no reasonable authority would, that would give rise to a risk of challenge by judicial review.
Imposing express requirements for the authority to act reasonably in exercising certain powers under the Bill might therefore make little real difference in the way in which the authority was required to act under those clauses, but, at the same time, it might cast doubt on the need for the authority, or indeed other public bodies, to act reasonably in other cases where the requirement to act reasonably was not made explicit.
We have not sought to impose requirements in the Bill for the FSA to act reasonably in every particular circumstance, but we have tabled amendments to ensure that the Bill contains an express "reasonableness" element in identifying information that the authority may require a person to provide in support of an application. In such cases, it is appropriate to include such express provision because it qualifies the information that the authority can require a person to provide, as opposed to the way in which the authority is required to act.
Amendment No. 430 differs from the other reasonableness amendments only in that it concerns the powers of an appointed auditor or actuary under clause 331 to require information and explanations from the officers of an authorised person, rather than the powers of the FSA.
Amendments Nos. 187, 188, 372 and 373 amend clauses 301 and 152. At present, those clauses provide that the Director General of Fair Trading may require a person to produce documents only where they relate to a matter that is relevant to his investigation, but they do not make it clear that the same relevance test applies to a requirement to supply information. The amendments remedy that by applying the same relevance test to both documents and information.
I believe that the House will see that the Bill as thus amended is consistent in the way that I have described. I commend the amendments to the House.
Lords amendment. No. 58 agreed to.
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