The
Committee consisted of the following
Members:
†
Balls,
Ed
(Economic Secretary to the
Treasury)
†
Breed,
Mr. Colin
(South-East Cornwall)
(LD)
†
Brennan,
Kevin
(Lord Commissioner of Her Majesty's
Treasury)
†
Cable,
Dr. Vincent
(Twickenham)
(LD)
†
Clarke,
Mr. Kenneth
(Rushcliffe)
(Con)
†
Clelland,
Mr. David
(Tyne Bridge)
(Lab)
†
Crabb,
Mr. Stephen
(Preseli Pembrokeshire)
(Con)
†
David,
Mr. Wayne
(Caerphilly)
(Lab)
Dorries,
Mrs. Nadine
(Mid-Bedfordshire)
(Con)
†
Evennett,
Mr. David
(Bexleyheath and Crayford)
(Con)
†
Goodman,
Helen
(Bishop Auckland)
(Lab)
†
Hoban,
Mr. Mark
(Fareham)
(Con)
†
James,
Mrs. Siân C.
(Swansea, East)
(Lab)
McDonnell,
John
(Hayes and Harlington)
(Lab)
†
Morgan,
Julie
(Cardiff, North)
(Lab)
†
Osborne,
Sandra
(Ayr, Carrick and Cumnock)
(Lab)
†
Reed,
Mr. Andy
(Loughborough)
(Lab/Co-op)
Glenn
McKee, Committee
Clerk
†
attended the
Committee
The
following also attended, pursuant to Standing Order No.
118(2):
Villiers,
Mrs. Theresa
(Chipping Barnet)
(Con)
Second
Delegated Legislation
Committee
Monday 22
January
2007
[John
Bercow
in the
Chair]
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment No. 3) Order 2006
4.30
pm
The
Economic Secretary to the Treasury (Ed Balls):
I beg to
move,
That the
Committee has considered the Financial Services and Markets Act 2000
(Regulated Activities) (Amendment No. 3) Order 2006 (S.I. 2006, No.
3384).
The
Chairman:
With this it will be convenient to consider the
following: the draft Financial Servicesand Markets Act 2000
(Exemption) (Amendment) Order
2006.
The draft
Financial Services and Markets Act 2000 (Markets in Financial
Instruments) Regulations
2006.
The draft
Uncertificated Securities (Amendment) Regulations
2006.
Ed
Balls:
It is a great pleasure to serve under your
chairmanship for the first time, Mr. Bercow. We are debating
four sets of provisions, which constitute an important part, although
not the entirety, of the UK’s implementation of the EU’s
markets in financial instruments directive, which I shall henceforth
describe as MiFID.
As
hon. Members may know, MiFID is a cornerstone of the EU’s
financial services action plan. It regulates the buying and selling of
shares, bond derivatives and other financial instruments. Through a
mixture of competition between intermediaries and markets, as well as
core investor protection rules, MiFID seeks to increase the depth and
liquidity of European financial markets.
MiFID replaces the existing
investment services directive. The ISD was genuinely considered not to
provide an effective basis for investment in services and for other
activities in the EU in the 21st century. The ISD subjected firms doing
cross-border business to multiple regulatory regimes and allowed member
states to retain anti-competitive arrangements for share trading. The
Government therefore supported the Commission’s desire to
replace the
ISD.
MiFID, which has
now been agreed, and which is to be implemented over the course of this
year, simplifies the regulatory regime for cross-border business. It
opens up share trading in all member states to competition, and we are
already seeing benefits from that change, with new proposals and
schemes being brought into the
marketplace.
There has
been controversy and debate in the City and across Europe. In large
part, that has focusedon getting investor protection right and
on the
transparency regime for share trading. As the responsible commissioner,
Commissioner McCreevy, made clear, developments in those areas were
essential to make progress on the passport element and competition in
securities trading element, which make up the wider single market that
we seek in European financial
services.
The
Commission has sought to create a flexible and proportionate investor
protection regime. In several areas, the directive’s investor
protection rules are less extensive than those that they will replace
in the UK. They afford different levels of protection to different
categories of investor, as is currently the case in the UK, and as one
would expect from a regime that seeks to be risk based and
proportionate. The highest level of protection is reserved for retail
investors. The directive also allows member states to retain additional
protections where those can be justified against strict
criteria.
The
negotiations were tough, and implementation is now important. On
balance, we believe that we have secured a positive outcome from a UK
perspective. The directive will achieve an improved passporting regime
compared with the old regime, which allowed discrimination. The
supportive comments that we have had from many parts of the City attest
to that.
Through the
directive, we have also moved in the direction of more effective
competition between execution venues. The Project Turquoise initiative
is one example of the market responding to that opening up. We have
also achieved a liberalisation of the means of trade and transaction
reporting. Again, a market initiative called Project Boat is evidence
of the market responding to the new opportunities that MiFID is
creating.
Finally, we
have moved in the direction of a more principle-based approach to
implementation through the Lamfalussy process for making policy in this
area. The fact that the detailed rules that the Financial Services
Authority will produce in due course to implement the directive in the
UK will be 300 pages shorter than the rules that they replace is a sign
that such principle-based implementation has allowed us to move in a
deregulatory direction.
The provisions before us give
effect to the directive in the UK. As hon. Members will know,
responsibility for their implementation is split between the Treasury
and the FSA. Given the structure of financial services regulation in
the UK, the FSA will undertake the greater part of the implementation
through changesto its handbook. However, given the split in
responsibilities, we have worked closely with the FSA on implementation
to ensure that the whole hangs together coherently. In addition to the
formalpublic consultation, we and the FSA have, since 2005,
had meetings with the main trade associations approximately every six
weeks, as well as a host of other meetings with trade associations and
firms.
The measures
can be split into two: the regulated activities and exemption amendment
orders deal with the scope of the directive’s implementation,
and the main implementing regulations and the uncertificated securities
amendment regulations deal with other aspects of implementation. We
have had extensive discussions on the scope of UK regulation and the
best approach to revisions through the regulated activities
order. The order implements the scope of several
directives largely using language that has developed domestically
rather than the language in the directives. We considered integrating
language from the directive into the substantive articles of the order,
but much in the regulatory regime, including fees, hangs off the
current structure. We therefore decided to adopt a minimalist approach
that keeps the current structure largely intact in order to minimise
disruption.
The
amendments do three main things: indicate more clearly where exclusions
from UK regulations can be overridden by MiFID; introduce a new
activity—operating a multilateral trading facility, or MTF; and
expand the scope of financial instruments that are caught by
regulation.
As hon.
Members will know, there are concerns that the directive’s
implementation might bring foreign exchange forwards under the scope of
the regulated activities order. We have been in contact with the
Foreign Exchange Joint Standing Committee on this issue, and we believe
that MiFID does not alter the current test for determining whether such
instruments are covered by the order.
The main implementing
regulations cover a wide variety of issues in just over 30 pages of
legislation. Despite their length, however, they do not fundamentally
remake the UK’s regulatory regime under the Financial Services
and Markets Act 2000; they essentially amplify existing requirements.
Some areas still need to be sorted out, in contact withthe
Commission and the industry, in the detailed implementation that will
follow from the regulations, but we have made substantial progress in a
number of areas in a way that has involved consultation with the City.
As a result, the directive is broadly welcomed across the UK financial
services industry.
We
have tried to implement the directive in a practical and proportionate
manner that is liberalising and flexible and that will expand the
single market for financial services in Europe more effectively.
Creating a truly integrated market for financial services depends on
more than legislation, but getting legislation and its implementation
right is necessary to break down national barriers and promote
competition and a better deal for companies and consumers. We believe
that we have achieved that outcome with the regulations, but the devil
will be in the detail of implementation. We will need to monitor and
debate many issues in the coming months, but at this stage I
wholeheartedly commend the provisions to the
House.
4.38
pm
Mr.
Mark Hoban (Fareham) (Con): It is a pleasure to serve
under your chairmanship, Mr. Bercow.
I welcome the opportunity to
debate the statutory instruments prior to the FSA rules being revised
at a board meeting later this week. It is rather unfortunate timing
that we are debating these statutory instruments here today when the
FSA is to ratify, on Friday, changes to its rules that depend on these
measures being approved today. That rather limits the
Committee’s ability to consider and shape the way in which the
FSA implements MiFID.
In principle, we welcome the
measures that will open up Europe’s financial services markets
to UK-based businesses, so long as the benefits of doing so
demonstrably outweigh the costs. We have the strongest financial
services sector in Europe, and a range of businesses based here that
will be well placed to exploit Europe’s financial markets when
they are fully open to cross-border trade and fully integrated. It is
an ironic sign of London’s strength that more German banks are
based here than in
Frankfurt.
I
want to talk about five broad issues on the statutory instruments: the
cost of implementation, progress on transposition and implementation,
scope, passporting, and exchanges and share trading. As the Minister
said, this is not the first attempt that has been made to improve the
openness of financial markets, and the directive supersedes the
investment services directive, which sought to make such improvements
at an earlier stage. It is important to have on record the contribution
of a large number of businesses and trade associations to ensuring that
we have a proper replacement for the investment services directive. We
should not overlook the contribution of my hon. Friend the Member for
Chipping Barnet (Mrs. Villiers), who, as a Member of the
European Parliament, did sterling work in ensuring that the directive
represented and reflected as far as possible the needs of UK-based
businesses.
Let me
refer to the cost-benefit analysis, which is covered by the regulatory
impact assessment of these statutory instruments. There is deep
scepticism about the analysis that has taken place and it is a great
pity that no proper cost-benefit analysis was carried out before we
began the process of revising European directives. In evidence to the
Select Committee on the Treasury given in May last year, Callum
McCarthy, the chairman of the FSA, said:
“It is deeply
unsatisfactory that UK financial services firms face major changes,
with the associated costs, for an initiative which has been subject to
no comprehensive EU cost-benefit analysis to assess the specific
contribution it might make to unlocking the prize of a more integrated
European capital
market.”
He also
said:
“It is
the case that the costs... are likely to fall particularly on the
UK as the major wholesale
market”.
He went on to
express some scepticism:
“Whether the benefits
for Europe as a whole outweigh those costs, it is impossible to say
because no proper exercise has been
done.”
Industry,
regulators and the European Union andthe Commission have
embarked upon the process without undertaking a proper cost-benefit
analysis to demonstrate whether the return from the investment will
outweigh the cost.
In
the regulatory impact assessment, it was suggested that the benefits of
MiFID might be £200 million a year, with second-order benefits
of about £240 million. As the RIA states, there is a
considerable range of uncertainty. Indeed there is, because when the
FSA published its own review of the cost-benefit analysis of the
measures in November last year, its estimate was rather hedged by
caveats and qualifications. It said
that
“broadly, under
particular assumptions, MiFID couldplausibly be estimated to
generate quantifiable benefits of upto £200 million per
year in direct
benefits”,
but it went on
to
say:
“However,
the distribution of these benefits may be unevenly spread among
firms”.
In this debate about benefits,
there is a sense of how difficult it is to quantify them and to see
whether they will be captured. With regard to the £240 million a
year in “second round” effects cited by the RIA, the FSA
said:
“These
benefits, which are contingent on the direct benefits arising and thus
subject to some additional uncertainty, would accrue to the economy
more generally rather than to individual
firms”.
Of
course, it is individual firms that will bear the cost. The FSA
document had this to say about
cost:
“Alongside
these quantifiable ongoing benefits of MiFID, this paper identifies
reported quantifiable one-off cost estimates of some £877
million to £1.17 billion for firms, and estimated additional
ongoing costs of £88 million to £117 million per
year.”
However, the RIA
indicates that the up-front costsof compliance would be
between £490 million and£355 million. I would be
grateful if the Minister explained or reconciled the difference between
the FSA’s figure of up to £1.7 billion and the
Government’s figure of up to £490 million. There is a
significant gap between those figures, and given the difficulty that
exists in quantifying the benefits of the regulations, it is important
that the Minister puts on record his view of what the costs are and
says whether he believes the FSA’s estimates to be
realistic.
On the
transposition and implementation of MiFID, for businesses subject to
MiFID, 31 January is one of two key dates this year. That is the date
by which MiFID should be transposed into law and into the rule books of
regulators throughout the EU. The second important date for business is
the implementation date, 31 October. The transposition and
implementation dates are fixed throughout Europe, which is appropriate
given that the directive applies Europe-wide. Transposition is,
however, the responsibility of member states and of each regulator in
each state.
Will the
Minister advise the Committee as to how many member states will meet
the 31 January deadline? My latest information is that only two states,
ourselves and Bulgaria, will meet it, which leaves another23
states to do so. Based on his discussions with Commissioner McCreevy,
when does the Minister expect all member states to have transposed
MiFID into domestic law and regulation? Has he discussed with
Commissioner McCreevy the sanctions that might apply to ensure that
MiFID is transposed into domestic
law?
There
is a concern that transposition and implementation might be delayed.
Committee members may think that that is unjustified scaremongering,
but in a submission by the Association of Independent Financial
Advisors to the Treasury Committee on its review of financial
regulation, the association said of the MiFID
delay:
“Our
fears are compounded by the recent experience with the implementation
of the Insurance Mediation Directive (IMD) where 14 months after the
official implementation date several member states have still not
implemented the Directive.”
In the financial services sector there is
deep-seated concern about the delays, and also concern that, as the
Commission has agreed a nine-month gap between transposition and
implementation, the implementation
date might slip, too. Will the Minister confirm
whether the Commission is still minded to press ahead with31
October as the date for implementation? Is there any sense from the
Commission that if too few countries meet the 31 January deadline, it
may extend the date for implementation beyond 31 October?
Does the Minister recognise the
importance of transposition, given the potential for differences in
regulatory regimes where MiFID has not been transposed? If there were a
delay in transposition and in implementation, would not it threaten the
competitiveness of UK markets—an issue on which the Minister and
I agree a great deal—if UK businesses complied with MiFID on
business undertaken in the UK, but on business undertaken elsewhere in
the EU, where MiFID had not been fully implemented, they had to comply
with a different regulatory regime?
How will the Treasury and the
Financial Services Authority work together over the next two months
with the Committee of European Securities Regulators to ensure that
firms are not penalised and that market stability is not undermined as
a result of any logistical and administrative delays? How will the
Minister ensure that CESR focuses on promoting supervisory convergence
and that it does not reopen questions about legislative interpretation?
It must focus only on issues in which an understanding between
regulators will help to enable firms to regulate the directive on
time.
For firms in
member states, those issues are important to ensuring that
implementation and transposition take place throughout the EU at the
same time. There is genuine concern. I am sure that the Minister
realises that the financial services sector expects him to work with
the FSA, CESR and the Commission to ensure that no undue delays take
place.
The
Minister knows that there has been considerable debate about the scope
of MiFID and about the activities to which it applies. We should not
get away with the idea that MiFID will apply only to those businesses
selling products that fall under the definitions in the directive.
There is concern in the insurance sector, for example, about the way in
which the directive will apply to it, and in particular about the
directive’s boundaries.
One role that insurance
companies undertake isthat of investment manager. A number of
investment managers that are members of the ABI are concerned about how
market-facing issues will be implemented in relation to them. In
particular, they have concerns about the scope of the best execution
and transaction reporting obligations. In the context of best
execution, they are concerned that insurance companies as investment
managers will not be treated as clients in dealer markets; they will
not get the protection that clients would get, but will be treated on a
par with dealers. As a consequence, they believe, they will not be
subject to any conflict of interest provisions; nor will there be a
requirement on dealers to implement rules that would protect client
assets in the event of insolvency. Perhaps the Minister will outline
whether he believes that to be a valid concern and whether it reflects
a proportionate implementation of MiFID in the
sector.
I want to
mention retail insurance. Insurance products are prima facie outside
the scope of MiFID, but the FSA has adopted a case-by-case approach to
the implementation of MiFID concepts and rules to non-scope business,
including retail business, so in some cases MiFID will be applied to
packaged insurance products, including life policies, units in a
collective investment scheme or an interest in investment trust saving
schemes. The ABI welcomes the case-by-case approach that the FSA has
applied to the application of MiFID rules and in some cases agrees that
it makes sense to apply one set of rules to all investments, whether
they are insurance or non-insurance investments. For example, it is
simpler for advisers selling both types of investment if they have to
operate in accordance with only one set of suitability rules. To
operate with two sets of rules would of course be expensive and impose
additional costs on
business.
There are
other relevant areas, which I shall not detain the Committee by
examining at length, but there is concern that some aspects of the
rules are yet to be clarified. Some of those were dealt with in
consultation paper 06/19. The FSA has noted that it has not been
possible, within the time scales, to consider the application of MiFID
rules to all types of non-MiFID firms and business. The FSA will look
at the issue in the second quarter of 2007, but I am sure that the
Minister will recognise that that creates a degree of uncertainty in
the sector, particularly where there are some activities that the
operators of collective investment schemes might feel fall under the
investment services definition of MiFID but the FSA intends to grant an
exemption to some of those activities. A prompt resolution of those
matters would be to the advantage of operators in the
sector.
I want to
touch on passporting, which the Minister outlined as an important
development in the regulation. It strengthens the rights of businesses
that are authorised in one member state to operate in another. There
are several provisions in the statutory instruments before us today
that tackle that, and I want to begin by discussing the draft Financial
Services and Markets Act 2000 (Markets in Financial Instruments)
Regulations 2006, which are abbreviated as MiFI in the
regulations.
New
section 312A of the 2000 Act, set out in paragraph 15 of schedule 2 to
the regulations, sets out the passporting rights of businesses. As I
understand it, MiFID should make it easier for firms to work
cross-border. It sets out arrangements to enable a company established
in one country to establish a branch in another, without having to be
authorised in the second country. I understand that the procedure is
that the company informs its regulator that it wants to set up a branch
in another member state, and the regulator then informs the regulator
of the branch in question. That seems to be a relatively
straightforward process. There is one notification to be made. However,
may I clarify how that might work in a more complex situation? I can
see clearly how it might work for a UK-operated business that was
setting up a branch in, say, Belgium. However, what would happen if the
branch in Belgium then decided to set up an operation in the
Netherlands? Would the London-based company make the notification to
the FSA about the new operation being set up, or would the Dutch branch
notify the Dutch regulator? It is important, given the growing
complexity of the operation and organisation
of such large businesses that there is clarity about where a branch of a
branch could be set up and structured.
The issue of passporting
relates to implementation. If under the regulations a UK operator set
up a branch in the Netherlands, for example, but the Netherlands did
not transpose or implement MiFID by the agreed deadlines, would the
branch in the Netherlands have to follow the pre-MiFID rules of that
territory, or would it be able to comply with the new MiFID rules that
will have been implemented in the UK? Again, there is the possibility
of a business having to comply with two sets of rules.
Given that people can apply for
a passport, the removal of the right to a passport is inevitable. In
new chapter 3A of the MiFI statutory instrument, new section 312B
enables regulators to remove passport rights. It enables the FSA to
remove from a market operator the right to set up a branch in the UK
when the operator has breached a rule required by MiFID, or by any
other Community legislation in its home state. The measure will also
enable the FSA to make a judgment about the adequacy of enforcement by
the operator’s regulator. It is an extensive power. Can we
assume that after the implementation date, if for whatever reason MiFID
has not been implemented in another member state, the FSA will still be
able to exercise the power in respect of the unimplemented element of
MiFID?
Regulators
have a responsibility under new section 312B(10) to notify the
Commission of their intention to take action. What mechanism is there
forresolving disagreements between regulators in such
circumstances? A Belgian regulator might think that it has done a fine
job regulating an operator, but the FSA might take a contrary view.
What is the mechanism for reconciling a conflict of opinion between
home and host regulators?
I turn to my next concern about
passporting. The regulatory burden of the home regulator—the
person who regulates the location of the operator—and of the
host regulator—the person who regulates the location of the
branch—is important. CESR has produced a full consultation
document, which says:
“To help address the
challenge in supervising branches, under the general division of
responsibilities between home and host regulators, of where the
boundary between 'organisational' and 'conduct of business'
requirements lies, a number of possible options or solutions have been
identified”.
It then
lists at least six different options,
including:
“Regulators
agree as precisely as possible where in practice the line is drawn
between their respective
responsibilities.
Firm
provides a defined set of common information on organisational matters
(that includes the branch) to both home and host
regulator”
and
“Home regulator requests
co-operation in supervisory activity, through delegating or outsourcing
tasks of supervision (but not responsibility) on various organisational
matters to the host
regulator”.
A
menu of options is available to determine howthe boundary
between the branch and its operator will be regulated. That is an
important and complexarea, because if the right balance is not
struck, responsibilities could be duplicated among different regulators
and a gap could open. One might have
expected CESR to come up with concrete guidance on which of the six
options it proposes. However, it has not. It says:
“CESR proposes that the
respective home and host regulators be able to agree among
themselves...on how best to carry out this aspect of branch
supervision and to agree the specific
solutions”.
It will be up
to individual regulators to decide, because it is an example of the
application of the doctrine of subsidiarity.
Does the Minister accept that,
under the directive, regulators could slow down or inhibit cross-border
trade by not agreeing boundaries? Would he be prepared to use his
political capital in Europe to ensure that border disputes are not used
as a block to opening up markets? How would he propose to demonstrate
that to the sector?
I
should now like to move on to the rules on stock exchanges,
multilateral trading facilities and share trading, which have also
benefited under MiFID, as the Minister outlined. I should be grateful
if the Minister could clarify the provisions on the approval of change
of control for stock exchanges, and he may want to do so during my
remarks. He and I co-operated very well to ensure that the Investment
Exchanges and Clearing Houses Bill became law before the Christmas
recess. We did that so that excessive regulations and requirements
could not be imposed on recognised investment exchanges and so that the
UK retained its reputation as a market that is open to investment from
overseas.
The MiFI
regulations give the FSA powers to veto a potential change of control
at an exchange. Is that a new provision? Proposed new section 301B
gives any regulator the power of veto if someone intends to acquire 20
per cent. or more of an exchange’s share capital. On that basis,
NASDAQ would have to have notified the FSA of its intention before
acquiring shares in the London stock exchange, and the FSA could have
vetoed its acquisition if it felt that NASDAQ was unsuitable. How will
that regulation work in practice? Is it coming on top of existing UK
law, or does it replace existing regulations? It is not clear from FSMA
where it fits in.
Transaction reporting is
another issue that arises in connection with the changes under MiFID.
Under existing rules, passported branches are required to report share
trades to their home states. A branch of a UK operator in the
Netherlands, for example, would report any share transactions to the
UK. Under the changes proposed in MiFID, branches will report
transactions to their host state, so a branch based in the Netherlands
will report to the authorities there. What will happen if MiFID is not
properly implemented by November? Will a branch based in a member state
that has not implemented MiFID have to apply to both regimes? Again, a
significant cost would be attached to that.
One of MiFID’s key
provisions, which is being transposed into law today, relates to
establishing multilateral trading facilities. It will allow a group of
market counterparties to establish a facility to trade shares on a
pan-European basis. The Minister referred to Project Turquoise, in
which a consortium of
international banks is seeking to use the flexibility in MiFID to
establish its own trading system. I think that we would all welcome the
flexibility that that brings and the opportunity that it provides,
through competition, to drive down the cost of transactions and capital
in Europe. However, how will that work in practice? To whom, for
example, should share trades on MTFs be reported? How will that
arrangement work within the home-host mechanism?
As the Minister will have seen,
concern was expressed at the weekend about the fragmentation of share
trading between exchanges and MTFs making it more difficult to detect
market abuse. Another concern is that such fragmentation might lead to
a decline in the quality of transparency, particularly as regards
establishing the market price. How will MTFs be regulated if they are
all operating on a pan-European basis? What would happen where an MTF
was headquartered in, say, Luxembourg? Who would regulate trades
undertaken by UK-based businesses trading with a business in Frankfurt?
How would the post-transaction reporting deal with that?
I have covered in some detail
the five key areas on which I wanted to focus, although I hope that I
have not done so in too much detail for the patience and tolerance of
the Committee. However, they are important issues, and this is the last
opportunity that the Committee will have to debate them, unless someone
prays against those statutory instruments that are covered by negative
resolutions. It was therefore important to go through these significant
points in some detail.
Before I conclude, I shall just
make some smaller, but no less important, points. The first concerns
consumer protection. It is a requirement of MiFID that investment firms
and credit institutions should be members of compensation and consumer
protection schemes. In the UK, we have two very well established
schemes for consumer protection: the Financial Ombudsman Service and
the financial services compensation scheme. Would a customer who is
buying products from the UK branch of an Italian market operator be
entitled to use the UK arrangements under FOS and the financial
services compensation scheme, or would they be subject to the
requirements and arrangements in place in Italy? Where UK-based
customers are subject to the complaints and compensation regimes of
another member state, is the Minister content that those regimes give
protection and security equivalent to that found under schemes
operating in the
UK?
The topic of
article 4 notifications does not sound very glamorous, but it is at the
root of the concern people have about the gold-plating of the
implementation of MiFID, where UK rules go beyond what is required by
EU directives. The FSA has a general presumption against retaining or
creating detailed rules unless it is obligated to do so by EU
legislation, or where it has discretion to do so and there are sound
cost-benefit reasons in support of the exercise under article
4.
My understanding
of the process is that the FSA will publish its intentions for making
article 4 notifications and it would be good if that were done at the
earliest possible opportunity in order to give the industry the
opportunity to comment. However, as I understand it,
the Treasury makes formal notifications to the
Commission, but the Commission will not formally grant approval of
article 4 notifications. Rather, the presumption is that additional
rules can be retained or introduced unless the Commission invokes
infraction procedures. It would appear to me that that creates a degree
of uncertainty about whether article 4 notifications are going to be
valid and in place. Will the Minister explain why the Commission is
taking an approach of accepting notifications unless infraction
proceedings have been launched? Some certainty could be introduced into
the regime by setting a limit of six months or a year, during which
period the Commission would have to launch infraction proceedings. That
would create greater certainty in the marketplace about the validity of
article 4 notifications.
In conclusion, we are debating
a significant set of proposals that will have a far-reaching impact on
the strength of London as a global financial centre and on how well
placed it is to compete with New York and other centres outside the EU.
However, as the Financial Times noted in an editorial last year,
sentiment in the City is becoming more hostile towards the EU. A poll
commissioned by the Centre for the Study of Financial Innovation
revealed that respondents in the EU put “too much
regulation” at the top of the list of concerns. In the US,
despite the issues surrounding the Sarbanes-Oxley Act, and the concerns
relating to it, regulation was only the sixth biggest concern, and it
was only the ninth greatest concern in the rest of the world.
There is a concern that the
volume of financial services regulation coming from the
Commissionmay have an impact on the financial services sector.
Certainly, the arguments about the benefits of the initiative have yet
to be made conclusively, but there is greater evidence that the costs
are significant. With that in mind, I conclude my
remarks.
5.9
pm
Dr.
Vincent Cable (Twickenham) (LD): I have little to add to
the general comments of the Minister or the detailed comments of the
hon. Member for Fareham. There have been times during the past few
years when there has been a great deal of foreboding in the City about
the MiFID rules, but it is clear that a great deal of work has been put
in by the Government. The hon. Member for Chipping Barnet has been
mentioned, and my hon. Friend the Member for Eastleigh (Chris Huhne)
was also heavily involved in the discussions. My understanding is that
the proposals have been substantially modified in such a way that the
City institutions are now broadly happy with
them.
I want to raise
a much broader question than the Conservative spokesman
raised—the extent to which the new rules comply with the basic
philosophy of the single market. After all, that is what all this
essentially is about. We hope to get three things from the single
market, the first of which is the removal of barriers overseas,
particularly in relation to discrimination. Clearly that aim will be
achieved, but as he said, we should monitor progress rather than take
it for granted. It would be useful to have regular reports on how far
that has been
achieved.
Secondly, we
hope to get mutual recognition of regulation, so that FSA rules will
apply in London, subject to the complexities of passporting. I believe
that that principle is observed here. Thirdly, we
want the package as a whole to be deregulatory. At the very least, it
should not add to regulation in aggregate. That is broadly the case.
The Commission, in particular, has been rather cavalier about that in
the past, but it is less of a problem now that
the Lamfalussy
principles are being
applied.
To set aside
those three objectives, we have to balance them against the set-up
costs. The Conservative spokesman asked the right question about the
enormous disparities between the estimates made by the Government and
the FSA as to set-up costs. It would be useful to have some
clarification of what the range is and what is plausible.
The Conservative spokesman has
already asked how the new set of rules will interact with the
legislation on the exchanges takeover that the Minister brought to the
House a few weeks ago. My question is simple. When the new legislation
is enacted and the MiFID rules have been introduced in the UK through
the regulations, if Deutsche Börse were to take over one of the
British exchanges, would it be in exactly the same position as an
American exchange trying to effect a takeover? Will such cases be
exactly equivalent or are different principles involved? Is there now a
completely level playing
field?
Overall, as the
Minister said, the devil is in the detail rather than in disagreements
of principle, and I broadly support what is proposed as a liberalising
measure.
5.12
pm
Ed
Balls:
I shall come later to the question askedby
the hon. Member for Twickenham. I ask for his patience in the meantime
as I address the questions posed by the hon. Member for Fareham. It is
encouraging that there is a degree of consensus about the ability of
the measures and the directive, if implemented rightly, to open up the
single market and financial services in a more flexible way. The hon.
Member for Fareham agreed that we can make progress in that regard, but
he asked important questions that need to be addressed.
On the timetable, we have been
moving as speedily as we can within the timetables set out for us to
ensure that we will be able to transpose, and we will try to do so by
the end of January. The regulations come after a lengthy consultation
period, and I published them for the House in December, before
Christmas, to allow time for scrutiny. We have worked closely with the
FSA to ensure that our changes and regulations go hand in hand with its
changes. However, I understand the hon. Gentleman’s point about
wanting more time, and in a moment I shall address the pace of
implementation in other countries. I reiterate that the process has
involved a lot of consultation and that we tried to ensure both that
the regulations were published in draft and that we kept within the
timetables. That will be a competitive advantage for the
UK.
I should have
mentioned, as the hon. Gentleman did, the work of the hon. Member for
Chipping Barnet as a rapporteur. We in the House often underestimate
the important role that rapporteurs play in trying to get the best
outcome in such negotiations. I know that the hon. Lady has had an
important impact on and input into the directive during the years of
discussion on it. I am sure that she will have helped to inform the
hon. Gentleman’s detailed comments.
The hon. Gentleman asks,
rightly, that we are as sure as we can be about whether the costs
exceed the benefits when the regulations and the directive are
implemented. Through the consultative process we have sought to achieve
that. As part of that process we have relied on the FSA’s
published estimates for its costings, the potential benefit year on
year, direct and indirect, and the initial set-up costs; it is clear on
the basis of those numbers that in the long term the reforms will
substantially benefit the UK, but that given the cost of implementing
something so large and important, the set-up costs in the early period
are substantial. As to the estimates that we have included in the RIA,
the FSA produces a number of different estimates, depending on whether
a top-down or bottom-up approach is adopted, but we have used estimates
based on its work, and there is no separate Treasury set of estimates
separate from those of the FSA.
On 18 December, the day on
which we published the regulations, a letter appeared in the
Financial Times from Mr. Ian Mullen, the chief
executive of the British Bankers Association, setting out a belief that
the Markets in Financial Instruments Directive will help open markets
to greater competition, and that that will be good for customers, banks
and the whole of the UK’s financial sector. He said that MiFID
is only one of a number of market-opening initiatives that need to be
seen alongside other moves, such as action on cross-border mergers and
clearing and settlement. I think that Mr. Mullen’s
views reflect a wider view in the City that the benefits will be
substantial if we get the implementation right, and that alongside some
of the other measures that we are pushing forward, including measures
on clearing and settlement, there is potential across the piece for
some of the directives to result in great gain for the
UK.
We need at all
times to keep a close eye on how implementation is being carried out,
however, so that sand is not thrown into the wheels of this
liberalising directive. Some of the detailed points made by the hon.
Member for Fareham relate to exactly the kind of things that we need to
be conscious of in the coming period. He asked about the pace of
implementation, and I have some good news for him. I am told that it is
possible that Romania, as well as Bulgaria, may be joining the UK in
meeting the deadline for transposition at the end of January. I am told
that between February-March and June-July, Norway, Sweden, France,
Belgium, Germany, Portugal, Malta, Greece and Luxembourg are expecting
to meet the January deadline, but that so far there has been no firm
indication from Italy, Spain or the Netherlands. That is a reason for
concern on the part of the member states and other countries that will
be late. The reality is that for firms that do business in the UK or
that are regulated from the UK, the implementation of MiFID on time
will be of substantial benefit. It is our view, following our
consultations, that it will be a competitive advantage to the UK to be
ahead of the game, compared with some other
countries.
The hon.
Member for Fareham asked me what conversations I had had with
Mr. McCreevy. I think that the best thing I can do is quote
public comments
that Mr. McCreevy made in October, which
have been very much reflected in the private conversations that I have
had with him. He has
said:
“The
spotlight is now on the Member States who must transpose
MiFID—and its implementing measures—into their national
law. I am very concerned that some Member States have stated publicly
that they will not be able to transpose MiFID on
time.”
He
added:
“Let me
be perfectly clear about this. The Commission will launch immediate
infringement procedures against any Member State which fails to
transpose on time. There will be no
exceptions.”
He made the
same point to me. We have an interest in the implementation of the
measure on time by other countries. As long as we get things right,
there will be a competitive advantage if others are slow, but we shall
not allow continual delay. The Commissioner has said the same, and he
has a legal power to back that up with action. We shall make sure that
we stay in close consultation with him and other member states. In
discussion with the industry I am willing to use whatever levers I can
to make sure that we implement on time and that there is no competitive
disadvantage to UK
firms.
Mr.
Hoban:
I am grateful to the Minister for his response to
my questions, but does he seriously believe that Commissioner McCreevy
will launch infringement action on 1 February against the 22 member
statesthat will not have transposed MiFID into law
by31
January?
Ed
Balls:
The important question is whether,given
their parliamentary timetables, processes and procedures, member states
are ready to have the directive up and running by the autumn, which is
the timetable that has been set out. We have moved to be ready by the
end of January in order to have the maximum time for detailed
discussion of the rule books and to get systems in place to start on
time.
Mr.
McCreevy has said in public and on the record that he will have no
qualms about taking action and that there will be no exceptions. I have
no reason to doubt his word; if he believes that parliamentary and
consultative processes in other countries mean that they will not be
ready on time to implement the directive, he has made very clear in
public his intention to
act.
Mr.
Hoban:
One of the concerns that I expressed about timing
was the gap between implementation and transposition. If implementation
does not take place in time for the autumn deadline will there be a
risk that UK businesses operating in states that have yet to implement
MiFID will have to operate on pre-MiFID rules, whereas their home
businesses in the UK will operate on MiFID rules? There may be
additional costs in such circumstances. I am not sure that the Minister
has responded to that
point.
Ed
Balls:
The directive is complex, and so was the list of
questions that the shadow Minister put to me. Iwas attempting
to organise my thoughts through a chronological process, and trying to
answer his questions in the order in which he put them to me. That
question came later, so rather than going out of sync, I will stick to
his script and respond to it as I go along.
The hon. Gentleman’s next
point was about scope and discussions with the ABI on the application
of MiFID-style conduct-of-business rules to non-scope businesses. The
FSA has been consulting in two stages. The first was between October
last year and February this year, on retail matters, including
insurance. It will then consult between April and July on wholesale
matters, which will also include the insurers to which the hon.
Gentleman
referred.
Retail
consultation applies MiFID rules to non-scope businesses only where
that is justified by cost-benefit analysis. We will look very carefully
at the replies to the consultation, which the hon. Gentleman quotes,
including those from the ABI. On the wholesale side, we will be looking
to apply more principles regulations to regimes that are already
lighter than the retail regime, and we will consider the issues that he
raised regarding the consultation. There will be opportunities for us
to discuss them in the House and outside in due course. I am grateful
to him for raising those issues. Consultations are taking place at the
moment and we will take them
seriously.
The hon.
Gentleman asked me a series of questions about passporting, and I hope
that I can reassure him. He used the example of a branch that knocked
onto a third-party branch. Under the rules, only a
headquarters can establish a branch, and not a branch of a branch. A
branch further down the line would still refer back to the
headquarters. In his example, we would still require notification from
the UK rather than from the regulatory regime where the branch being
opened is
located.
Branches can
do business without needing a passport where clients based outside the
country of the branch ask to do business with the branch or where the
provision of that service is deemed to have taken place in the member
state where the branch is located. Broadly, in that case the branch
would be subject to UK rules and FSA supervision for
conduct-of-business purposes.
The hon. Gentleman raised
another point about CESR and the six options. Implementation, like the
branches issue, is complex, and the FSA, CESR and the Commission are
continuing to discuss the matter. CESR is trying to find a practical
way in which to ensure the necessary co-operation and proper protection
for consumers and markets. We are tryingto find out which of
the options will work most effectively. That decision has not yet been
made, which is why the options are still open to
consultation.
Mr.
Hoban:
I am again grateful to the Minister for his
generosity in giving
way.
Will the Minister
return to his earlier point about the headquarters and branches? We
both know that the international operations of a number of
international banks in, say, Frankfurt or Paris, have their
headquarters in London. They are run from London, where decisions are
taken. That is how their international operations are structured. Is he
saying that even if a London branch makes decisions about operations
elsewhere in Europe, it will have to go back to its home-state
regulator in order to make a notification to a branch, despite the fact
that its internal organisation is based around the branch, not the
headquarters?
Ed
Balls:
I am happy to look into that issue in greater
detail. As I understand it, the hon. Gentleman described the position
accurately. In the end, the headquarters is the lead regulator for such
purposes and where a business would go for notification. However, I am
happy to look into the matter further. If anything that I have said
today is incorrect or I can offer further clarification, I shall be
happy to write to him with the details. The next set of issues that he
raised concerned stock
exchanges.
Mr.
Hoban:
Before the Minister continues, may I say that he
has not dealt with another of my points, although I made it next in
chronological order, concerning the removal of passporting and the
mechanism for resolving disputes between regulators, such as where the
FSA thought that a home-state regulator had not performed its duties
properly? Resolution of such conflicts is important if we are to have
harmony in European
integration.
Ed
Balls:
I reserve the right to deviate from the
chronological order in a proportionate and risk-based way, but
generally I aim not to do
so.
The hon. Gentleman
raised two points. On differences of view, there are mechanisms in
MiFID for supervisors to raise concerns and try to resolve them.
However, if the difference of view cannot be resolved, the home
regulator has power to take unilateral action, which could then be
tested. In the end, in the event of a difference in view, I am advised
that the home regulator makes the initial
judgment.
Mr.
Hoban:
Will the Minister offer some clarification? I
interpreted proposed section 312B to the 2000 Act to mean that the FSA,
as the host not the regulator, could remove from a market operator the
right to set up a branch in the UK. The host regulator, not home
regulator, can take that action or at least the initial view. I see
some nodding from behind his
shoulder.
The
Chairman:
Order. No such nodding can be discerned in this
Committee, because the people to whom I think that the hon. Gentleman
is referring do not exist for the purposes of these proceedings, or are
not in the room, at any
rate.
Mr.
Hoban:
I apologise, Mr.
Bercow.
Ed
Balls:
Their non-existence is of great importance to me in
an area of such technicality. I shall exercise my right to
ex-chronologically check out the facts before giving an answer in a
moment.
On the hon.
Gentleman’s other point, if a UK firm passported into a country
that had not yet implemented the changes, it would be for the UK firm
to follow the MiFID rules for the UK as home regulator; there would be
no requirement on the company to implement MiFID rules and the
pre-MiFID rules of the other member state just because that member
state had been unable to meet the timetable. There will be no question
of dual regulation under two different systems. If we have implemented
MiFID in this country, MiFID will apply and the company will be
required to follow MiFID
rules.
On the issue of
supervisors and attempts to resolve disputes, the position is as I
described it. When dealing with the branch issue that the hon.
Gentleman raised,
the host regulator will also have the power to blockin
extremis. That is probably the correct reading ofthe provision
that he quoted a moment ago. My explanation of the general way in which
differences between regulators will be reconciled, and my particular
point about branches and the ability of the host regulator to block,
are consistent with each other, and they are provided for in different
parts of directive.
Stock exchanges were
mentioned by the hon. Gentleman, and also the hon. Member for
Twickenham. Is the MiFID requirement new? The answer is yes. Is it a
requirement that we considered last summer in deciding whether to opt
for new primary legislation in the UK? Yes. Was it put to us by some
players in the marketplace that MiFID might provide the FSA with powers
to block regulatory changes and therefore give us the protection that
we sought? Yes. However, we examined that issue and concluded that the
MiFID rules did not provide us with the powers that we required.
Basically, under MiFID a change of control can be blocked only in
limited circumstances in which the new owner is both a threat to the
sound and prudent management of the exchange and not fit for purpose as
manager of the exchange.
The hon. Member for Fareham
knows from our detailed discussions that through legislation we sought
to range considerably wider than the rather narrow fit-for-purpose
regime. Indeed, the FSA has always had the power to take away the
status of regulated investment exchange if it judges that an exchange
is being badly managed and that its management are not fit for purpose.
Our legislation gives it a wider power to block what it considers to be
disproportionate rule changes that will damage London as a financial
centre. We considered the MiFID rule change and judged it insufficient
for our purposes. Independent of MiFID we did what we needed to do
through the original
Bill.
Mr.
Hoban:
I am grateful to the Minister for that response. I
concur that the MiFID changes would not have achieved the same outcome
as has the Investment and Exchanges Clearing Houses Act 2006. However,
I am concerned by the Minister’s response that there are new
powers, but that the FSA has existing powers when there is a change of
control. I am concerned that the regulator will be able to block
somebody acquiring, for example, a 20 per cent. stake in an exchange.
Is that a new power? If it is, it changes the way in which markets
work. Will he clarify that point?
Ed
Balls:
As I understand it, the power is new within a
European context. It is the clarification and extension of a power that
the FSA has under UK legislation. Although MiFID extends the power, it
is not sufficient to give us the comfort that we seek, which is why we
pursued new primary legislation in last December’s
Bill.
Mr.
Hoban:
So let us just say that it is possible for the FSA
to veto the acquisition of a 20 per cent. stake in a stock exchange
under the new powers in MiFID and that a potential acquirer needs to
seek the FSA’s permission before acquiring a stake. That is
quite a significant change, given some of the recent activities
of investors in stock exchanges. Regulators could
have an opportunity to block the acquisition of shares, but that is not
necessarily the direction in which we have been moving in the
past.
Ed
Balls:
It is true that the existing power to de-recognise
exchanges does not have a trigger related to share holdings. It is also
true that MiFID introduces a trigger and therefore allows the FSA to be
notified in advance. In that sense, it is an extension of existing
powers, because it introduces a trigger at the European level, rather
that just a broader power at the UK level, as was the case
before.
Although the
hon. Gentleman is right that the proposals are an extension, that
extension is still in a rather narrow range. The FSA’s ability
to use the trigger depends on its making a serious judgment about the
lack of fit and proper capacity to manage an exchange. In the autumn,
we were talking about a much wider ability to decide whether the rules
that would be introduced as a result of a change of ownership would be
proportionate and support London as a global competitive financial
centre. Here, however, we are talking about a much narrower concern
leading the FSA to use the
trigger.
Mr.
Hoban:
Indeed. The Minister and I concur on that. The
present power is not as effective as the power under the Investment
Exchanges and Clearing Houses Act. However, the point that I am trying
to make relates to the way in which the proposals affect the
acquisition of stakes in stock exchanges, the way in which NASDAQ has
built its stake in the LSE and the interest in Euronext. Under MiFI,
the power in proposed new section 301C gives the authority up to three
months to decide whether a change of control can take place. We want to
ensure that we have efficient markets, in which investors can respond
to trends, but that power seems to slow the effective operation of the
market in shares for investment exchanges. My concern is that it goes
somewhat further and interferes much more closely with the way in which
people can build stakes in investment
exchanges.
Ed
Balls:
I understand the hon. Gentleman’s point.
Although we are talking about a much narrower power, the way in which
the FSA conducted itself in the discussion of our Bill in the autumn
should give hon. Members some comfort that it will use the publication
of detailed rules and guidance to make it absolutely clear that the
power will be used only in the narrowest range of circumstances, in
which a judgment must be made about fitness and properness, and that it
will not be used to put sand in the wheels of takeovers in the broader
context. We will need to look closely at the way in which other
countries go about using the power to ensure that obstacles are not
introduced through the back door.
The issue is particularly
topical because there could be some big changes of ownership in the UK.
Furthermore, our Bill focused on a wider range of issues relating to
protecting the proportionality of the regulatory regime, which is
particular to exchanges because of their listing and rule-making
role.
If one looks
more widely at the financial services sector and, for example,
considers changes in ownership of investment firms, one finds that that
sort of notification process has been in place for some time.
The 20 per cent. trigger and the notification on the “fit and
proper” test extend to exchanges a regime that has existed for
some time for investment firms. I do not think that the way in which it
has operated until now for those firms has been a block on changes in
ownership, although that is another area in which the UK is rather
ahead of the field, so we need to keep a close eye on it, as we do in
all areas. The measures are not being used as a way to re-erect,
through the back door, the barriers that used to undermine the ability
of the investment services directive to promote a single market in
financial
services.
With your
indulgence, Mr. Bercow, I turn to the final set of issues
raised by the hon. Member for Fareham, which concerned MTFs. He asked
where firms would report their share transactions in an MTF world. The
answer is that firms based in the UK, including branches, would report
their trades to the FSA which, where the trades relate to instruments
traded mainly elsewhere in Europe, would pass on the report to the
relevant regulator.
The hon. Gentleman also asked
about the danger of trading fragmentation. Although MiFID aims to open
markets, he was concerned that it may not do so sufficiently or
establish a single source of information. He felt that the information
requirements could lead to fragmentation and, therefore, create
obstacles to open markets and competition. I say to him that MiFID
includes requirements to ensure data can be easily combined, and both
the FSA and CESR are developing guidance measures to promote that
outcome. There are also various commercial providers that are active in
delivering market solutions. We discussed Project Turquoise earlier,
and Project Boat is a system that will allow brokers to make public
data about share trading: a process that has been made possible by
MiFID. Such internationalisation of information following the
internationalisation of trading systems will promote competition and
greater cross-border activity. I hope that I have given the hon.
Gentleman some comfort on that
matter.
The hon.
Gentleman also asked about consumer protection and wanted to know to
whom the consumer would turn if dealing with a UK branch of an Italian
firm. In the case of the financial services compensation scheme, they
would turn to Italy, unless the branch had decided, as is now their
right and ability, to opt into the UK scheme. In the case of FOS, my
instinct is to believe that the matter would fall under the Italian
arrangements, but because I do not have a definitive answer on that
point, I shall consider it in detail and write to him and other
Committee members to clarify it. I do not wish to mislead the
Committee.
Mr.
Hoban:
I am grateful to the Minister for that
clarification and I look forward with interest to his letter. We must
be careful to ensure that consumersare well aware of the
changes that may be made tothe compensation scheme
arrangements and the ombudsman service under the home and host
mechanism. It may be the case that the Italian compensation scheme is
more generous than the UK one, and its financial ombudsman service more
assiduous, although I find that difficult to imagine in either case. We
must ensure that consumers are aware of the difference in arrangements
for complaints and
compensation because if that process is not handled properly, it will
create considerable disquiet and unhappiness among our
constituents.
Ed
Balls:
I understand the hon. Gentleman’s point and
I know that the FSA does too, because it takes those issues very
seriously. As part of my clarification of the position, if appropriate,
I shall write to the chairman of the FSA to raise the hon.
Gentleman’s point in order to ensure that the FSA is clear that
we need answers on that issue and that we are all on board with the
reply.
The hon.
Gentleman’s final point was about gold-plating. I have taken an
interest in the implementation of MiFID in a UK context, and as far as
possible we have avoided gold-plating the directive. There are some
examples where, following consultation, the FSA will want to go beyond
the precise letter of the law in MiFID. For example, MiFID exemptions
are not, in their entirety, going to be transposed in the case of
commodity firms in order to maintain the status quo in the UK. As for
treating third-country firms in the same way as EEA firms, that could
also be an example of gold-plating, although we think that it is a
correct interpretation of the directive. In general, we believe that we
have not gold-plated the directive but the FSA has made it clear that
there will be some notifications under article 4 and it will be
consulting further with the industry before it makes the
notifications.
The
hon. Gentleman was correct to say that the Commission does not have to
approve article 4 rules as such. Its job is to launch infringement
proceedings if countries fail to meet the test set out in article 4.
The same is true in respect of other aspects of implementation of the
directive. It is certainly not our intention to gold-plate
unnecessarily, but when it is the right thing to do in order to protect
the integrity and operation of UK financial markets we are happy
todo
so.
Mr.
Hoban:
One of my comments was about the time scale. Is
there a requirement for the Commission to bring infringement actions
within a defined period of time? My concern is about an article 4
notification made by the Treasury. There is some uncertainty about
whether that notification is valid because the Commission has not
launched an infringement action against the FSA or the Treasury. It is
important to have some certainty when a notification has been
issued.
Ed
Balls:
I believe that the UK is currently the only country
that has so far given any indication of an intention to notify. Our
obligation is to notify by the end of January, which gives the
Commission plenty of time to infract if it chooses to do so before
implementation. Under the statute, there is no time limit for the
Commission, so it could choose to infract at a later stage. If we meet
the timetable, we have every expectation that, if the Commission has
any concerns, it will make decisions in plenty of time for the
implementation of the directive by the end of this year. If there is
any uncertainty about that or any concern in the industry that it is
not specified clearly in the directive, I will ensure that it is
clarified with the Commission, which will not be difficult to
do.
I have tried my best to answer
the detailed questions asked by the hon. Gentleman. There is always a
danger that I may have missed the odd one, although he would probably
have intervened at least four times to point it out. The fact that he
is no longer doing so may mean that I have managed to be comprehensive
in my remarks, and risk-based, too, which means giving the best answers
to the questions that would be most risky not to answer
fully.
I echo the
hon. Gentleman’s congratulations to the hon. Member for Chipping
Barnet on her contribution. If we get this measure right, in
negotiation and in implementation, we will advance the interests of the
UK, the City of London and our financial services industry. We clearly
gain from opening markets and from liberalisation. As the hon.
Gentleman will know, and as I have said many times before, no Member of
the European Parliament or Minister at the table at the centre of the
argument can stand up for the interests of the City unless they are
willing to say no when necessary, to pursue the national interest and
to see the benefit of engagement in European decision making. It is in
the best interests of the UK’s financial services market to
advance the single market, and we will do all we can to ensure that
that is how things turn out, but we can do that only if we are at the
centre of the debate, at the table, and making sure that our voices are
heard. I commend the measures to the Committee.
Question put and agreed
to.
Resolved,
That
the Committee has considered the Financial Services and Markets Act
2000 (Regulated Activities) (Amendment No. 3) Order 2006 (S.I. 2006,
No.
3384).
Resolved,
That
the Committee has considered the draft Financial Services and Markets
Act 2000 (Exemption) (Amendment) Order 2006.—[Ed
Balls.]
Resolved,
That
the Committee has considered the draft Financial Services and Markets
Act 2000 (Markets in Financial Instruments) Regulations
2006.—[Ed
Balls.]
Resolved,
That
the Committee has considered the draft Uncertificated Securities
(Amendment) Regulations 2006.—[Ed
Balls.]
Committee
rose at eight minutes to Six
o’clock.
