| Previous Section | Index | Home Page |
Mr. Flight: Under Lords amendment No. 180, the last word rests with the FSA in relation to market abuse, except for the specific territory covered by the code. Any other area in which market abuse might be committed, or where the FSA might sniff out market abuse, is entirely a role for the FSA--even while a bid is taking place.
Miss Johnson: The hon. Gentleman has made exactly the same point as me, although his "except" is the important point. That is the difference. It is not a big difference, but it is important to realise that we have set up a regime that is supposed to have a single definition of market abuse, to be accountable, to be statutorily underpinned and to have reference to an independent tribunal. The hon. Gentleman, with his "except", would transfer some things into an arena where none of that provision was in place.
If amendment No. 180 were allowed to remain part of the Bill--I will encourage the House to remove it--I believe that there would be important consequences, particularly in terms of the European convention on human rights, that were not appreciated by those who drafted the amendment. Giving the panel a determinative role in the question whether particular behaviour amounted to market abuse would, in effect, give it statutory functions. These functions would involve the determination of civil rights and even, possibly, criminal charges under the convention.
Throughout the passage of the Bill, Opposition Members have insisted, rightly, that in exercising such functions the FSA should be subject to comprehensive accountability arrangements, and that there should be the safeguard of full access to an independent tribunal for those accused of market abuse. We have ensured that the market abuse regime is fair, transparent and certain, with appropriate safeguards set out in the Bill. These include those safeguards to ensure compliance with the European convention on human rights that are needed where a body has a role in determining civil rights and criminal liabilities.
That does not mean that we are questioning the arrangements for the accountability of the panel in the usual context in which it operates. It simply means that those arrangements are not appropriate in this context. They were never designed to deal with the determination of whether market abuse has occurred in terms of part VIII of the Bill. Against that background, I am pleased that the Opposition appear to have had second thoughts, although, for reasons that I will explain, we cannot agree to their proposed substitute.
I refer now to Government amendment (a). If the problems which people have argued might arise do arise, the Government amendment in lieu of amendment No. 180 provides a proper and adequate mechanism for dealing with them. The FSA will, with the approval of the Treasury, be able to provide for safe harbours for all or
part of the City code produced by the panel. In giving such approval, the Treasury would, of course, be answerable to Parliament.Our amendment is very similar to the amendment that Lord McIntosh tabled in another place on Third Reading, and which Lord Donaldson described as achieving "all that is necessary". However, we have given careful thought to concerns expressed about it in another place by both Conservatives and Liberal Democrats.
We have listened to those concerns and, as a result, the amendment has been further improved. As my noble friend Lord McIntosh said in another place:
- Given . . . the nature of the code and the panel's role in interpreting and applying it, I would naturally expect the FSA to take the panel's view before it decided whether behaviour fell within the safe harbour which the Government amendment would enable it to provide. It would be very foolish if it did not . . . I would expect the tribunal and, if the matter came before them, the higher courts, to attach due weight to the panel's views in accordance with established case law.--[Official Report, House of Lords, 18 May 2000; Vol. 613, c. 403.]
The FSA will have arrangements for ensuring that the panel's views on whether behaviour is in conformity with the City code are sought and listened to. The panel's views will not be--and, for reasons I have explained, cannot be--determinative in law. However, they will be highly persuasive. Subsection (4) underlines this and, I hope, provides additional reassurance.
The FSA will be under a statutory duty to keep itself informed of the way in which the panel interprets and administers the relevant provisions of the code and, it follows, fully reflect that in its decisions about whether to act in cases of possible market abuse arising in a takeover.
That is the right result. To go further would be to go too far in terms of making the panel the final arbiter as regards market abuse in this area. Our amendment will ensure that if problems do arise in this area--we are confident they will not--adequate and effective safe harbours can be provided without compromising the position of the panel or the single statutory regulator, the FSA.
8 pm
We cannot accept amendment (b) in lieu of Lords amendment No. 180. It is based closely on the so-called gatekeeper amendment which Lord McIntosh described in another place as
- the worst of all the amendments before us.--[Official Report, House of Lords, 18 May 2000; Vol. 613, c. 414.]
I also note that a new provision has been added requiring the panel to co-operate with the FSA in the ensuing period, although I doubt whether that adds much, since--
Sir Nicholas Lyell: On a point of order, Mr. Deputy Speaker. I apologise for asking again. I seek clarification. To which amendment are we referring?
Mr. Deputy Speaker: It is not for the Chair to advise the right hon. and learned Gentleman which amendment is being referred to. I have called Lords amendment No. 127, and we are discussing it along with all the other amendments that are grouped with it on the selection list. It is not for the Chair to advise on what amendments are under discussion. The Chair is confused enough as it is.
Miss Johnson: I hesitate to disagree with you, Mr. Deputy Speaker, but I am not confused at all. I am completely clear about what we are discussing. Having said that, however, I seem to have lost my place in my notes.
I note the new provision requiring the panel to co-operate with the FSA in the ensuing period, but I doubt whether that will add much, because that is the kind of behaviour that one would expect of a body in the panel's position when dealing with a statutory regulator.
On the other hand, I note the blanket nature of the prohibition. It would apply to each and every one of the FSA's powers, not just those in relation to market abuse. It would apply to market abuse of all kinds, no matter how trivial or how serious, and to any action instigated during the course of a takeover, regardless of whether it was likely to disrupt the timetable of the bid. I cannot believe that the Conservative party really wants the FSA to be hamstrung in that way.
I believe that it would be a mistake for the Bill to contain a provision that hands over the powers of the statutory regulator in the area of market abuse to a non-statutory regulator that is not subject to the same checks and balances. We expect the FSA to adopt a general policy of not intervening in a way that could disrupt the course of a takeover bid. That will be part of the sensible administrative arrangements to be put in place with the panel. However, it is not impossible to imagine circumstances in which an exception might need to be made--for example, if the regulator became aware of serious market manipulation that it, but not the panel, was in a position to do something about.
As a matter of principle, it would be wrong to fetter the discretion of the statutory regulator in the way contemplated by amendment (b). I commend Government amendment (a) in lieu of Lords amendment No. 180 to the House and urge the House to reject amendment (b).
Mr. Heathcoat-Amory: This is a very large group of amendments and has inevitably caused some confusion. It may be of assistance if I speak only to the issues concerning the takeover panel, and my hon. Friend the Member for Arundel and South Downs (Mr. Flight) deals with the other amendments.
The key issue concerns the possible conflict--and certainly overlap--between the jurisdictions of the Financial Services Authority and the takeover panel,
which the Government have not satisfactorily addressed. One of the City of London's great advantages is that it offers certainty, speed and flexibility in dealing with takeovers and mergers. In a previous debate, we discussed whether the United Kingdom, and London in particular, can hold its own in an international market. I believe that it can if it holds on to its traditional flexibilities in dealing with mergers and bids. That is important internationally and for the dynamism of the United Kingdom market. We have here something very precious.The FSA is charged with dealing with market abuse and the takeover panel regulates mergers and bids. The Economic Secretary praised the takeover panel and said that she did not want to do anything to damage it. It has indeed been a success story. It was established in 1968 and is widely admired. The panel itself has raised directly with the Treasury serious concerns about the Bill, and I do not believe that she gave an adequate response.
The danger of overlap occurs in several areas. It must be objectionable in principle for someone to be vulnerable to double jeopardy. Someone abiding by one set of rules, published by the takeover panel, should not be vulnerable in relation to a second set of rules, published by a second regulator.
It must be bad for the market for uncertainties to develop about which regulator is responsible in each individual case. For instance, it would be dangerous if the FSA said that certain behaviour during a bid was abusive and the takeover panel said that it was not. Who would decide the outcome? If the matter went to appeal, it would certainly be very embarrassing if the court had to arbitrate between two different regulatory bodies. It is bad for the City and for the regulatory regime itself to have the possibility of conflict and overlap.
It must be recognised that parties to a bid can themselves seek to manipulate the regulatory process. Tactical litigation can be launched by the object of a bid in order to frustrate the whole process. The scope for that will be immeasurably greater if that party can appeal to the FSA outside the traditional authority of the takeover panel.
The Economic Secretary seemed simply to deny that there was such a problem. She suggested that any involvement of the FSA would not affect the timetable of a bid, and would not delay it because the action would simply be aimed at the market abuse. That view demonstrates ignorance of how bids progress. For instance, under the takeover code, a bidder usually has to complete the process within 60 days, or the bid lapses. So there is a limited time for the bid to be declared unconditional.
One can imagine a situation in which a hostile bidder for another company publishes a document in order to persuade independent shareholders to accept the bid. The hostile bidder might do that just before the expiry of the 60-day period. The target company might complain that the document was misleading in several material respects. At present, that issue would be considered immediately by the takeover panel, which has a reputation for dealing with such matters efficiently and swiftly, so the bid could proceed if the allegation were groundless.
However, under the Bill, the target company would be able to bring in the FSA to determine whether the behaviour in question was market abusive, and that would introduce a most unwelcome delay. Indeed, if that
happened, the takeover panel might have to agree to extend the bid deadline, or, even more damagingly, one of the companies concerned could apply for judicial review, if the FSA refused to examine the issues and the particulars of the case. If that led to an injunction, it would cause unwelcome delay as well as introducing new and expensive litigation into a process that, until now, has always been dealt with swiftly and efficiently.The Minister has not dealt with the point about delay and expense. However, she did recognise that the problem might exist. That is why, in the other place, my noble Friends succeeded in passing amendment No. 180, which would provide a safe harbour. It would provide that, in a bid situation, if those concerned conformed to the City code as published by the takeover panel, that would be a safe harbour against allegations of market abuse. It is also important to recognise that, despite that provision, the FSA would remain the lead regulator and would be able to include conditions and limitations on the effect of that safe harbour. It would be the FSA that would issue a statement, modified as necessary, indicating conformity with the City code that would be a safe harbour against market abuse.
| Next Section
| Index | Home Page |