Mr.
Hoban: I wondered about that as well, but proposed new
section 63B(2) states that a
“warning notice
must state the amount of the
penalty”. For
the FSA to have issued a warning notice, it would have had to have gone
some way through the investigation process with some certainty that the
person had breached the rules, and that a penalty should be imposed for
that. Is there a better way of giving the same flexibility to pursue
such matters if there is time-wasting? A more generous limitation
period does not seem quite the right way in which to tackle that
potential mischief. I apologise for giving the hon. Member for
Wolverhampton, South-West more legal expertise than perhaps he is ready
to profess on this occasion.
Rob
Marris: On this
occasion.
Mr.
Hoban: Yes. Perhaps we should debate the timing. I am not
comfortable that the mechanism is right although I accept the objective
that the Minister is hoping to achieve, so I beg to ask leave to
withdraw the
amendment. Amendment,
by leave,
withdrawn.
Mr.
Hoban: I beg to move amendment 7, in clause 16,
page 21, line 18, leave out subsection
(5).
The
Chairman: With this it will be convenient to discuss
amendment 8, in
clause 16, page 21, line 23, leave
out subsection
(7).
Mr.
Hoban: Amendments 7 and 8 are fundamentally probing
amendments to understand why the subsections must be in the Bill.
Subsection (5) of proposed new section 63C
states: “The
Authority must, without delay, give the Treasury a copy of any
statement which it publishes under this section.”
I wonder why the
authority has to give the Treasury a copy of the notice, given that it
was on the FSA website. Everybody else has to rely on the FSA website
to find that information. Why should the Treasury be treated in a
special way, compared with other people interested in that statement?
Why should the authority be able to charge a fee for the provision of
that statement? Will the FSA now try to impose a charge for content,
going down the same lines as some national newspapers, as people access
its statements on the website? I am not sure why the two subsections
are at all
necessary.
Ian
Pearson: The subsections are entirely consistent with the
provisions for other policy statements in the Financial Services and
Markets Act 2000; for example, policy statements on fines imposed on
approved persons in section 69 of the Act, statements on fines imposed
on those that breach the listing rules in section 93, and statements on
fines imposed for market abuse in section 124. Therefore,
the provisions in clause 16 simply ensure that the requirements that
are in place for other penalties policy statements issued by the FSA,
also apply to policy statements on penalties imposed on non-approved
persons performing controlled
functions. Moreover,
I cannot see the rationale behind the view of the hon. Member for
Fareham that those should be removed. To my mind, it is natural that
the regulator should inform the Government how it proposes to use a
particular power conferred on it by Parliament. Similarly, I do not
think it unreasonable for the FSA to be able to recover the cost of
printing its policy statements by charging a reasonable fee to those
who wish to receive hard copies. Of course, in practice, the vast
majority who wish to read statements and policy can download electronic
copies from the FSA’s website for free. Logically, subsection
(7) of new section 63C does not enable the FSA to charge for them. I do
not believe that those amendments are necessary and I hope that with
those few words of clarification, the hon. Gentleman will seek leave to
withdraw his amendments.
Mr.
Hoban: I am still not convinced why the Treasury should be
singled out for special treatment—being sent a copy—when
the people who are regulated by the FSA, the people who foot the bill,
will not necessarily be sent one of those statements automatically.
However, it is not an issue that I am prepared or particularly want to
press; it is a point of interest. Having had my curiosity assuaged, I
beg to ask leave to withdraw the amendment.
Amendment,
by leave,
withdrawn.
Mr.
Hoban: I beg to move amendment 13, in clause 16,
page 21, line 26, leave out from
‘must’ to ‘any’ in line 27 and insert
‘comply
with’. This
is another amendment that has been tabled in order to seek
clarification. Subsection (8)
states: “In
exercising, or deciding whether to exercise, its power under section
63A in the case of any particular person, the Authority must have
regard to any statement of policy published under this
section”. We
see this happen elsewhere in FSMA, where the FSA has to “have
regard to” in various aspects of policy. There is what a number
of people refer to as the “have regard to” factor in part
1 of the policy in section 2(3) of FSMA, where (a) to (g)
refer to various things that
the authority must “have regard to”. It is not bound to
comply with those, but it must bear those factors in mind when trying
to discharge its general functions, which are set out elsewhere in that
section. If the FSA has gone to the trouble of having a policy to deal
with people who undertake controlled functions without approval, and we
believe that there are sufficient safeguards in that section to prevent
people suffering enforcement action when they have a reasonable
defence, why should the FSA simply “have regard to”? Why
does it not simply comply with the policy statement that it has
published? It is very straightforward. If there is to be a policy, let
it comply with it rather than say, “We will just think about
it” and not always
comply. Ian
Pearson: We could obviously have a wider debate about
“comply with” and “have regard to”.
Amendment 13 refers to the need to “comply with”, rather
than “have regard to”, the statement of policy in
relation to the level of fines imposed on non-approved persons
performing controlled functions. I appreciate the sentiment behind the
amendment expressed by the hon. Member for Fareham, which is to ensure
that the FSA applies the standards set out in its statement of policy.
However, again referring to a point I made earlier, the language he
proposes would not be consistent with that of other policy statements
on penalties that the FSA is required to produce, as set out in FSMA.
Again I would refer him to sections 69, 124 and 210 of FSMA, all of
which refer to the need for the FSA to have regard to its policy
statements.
The current
language fulfils a specific purpose. Policy statements are intended as
guidance and the term “have regard” is the usual way in
which public authorities are required to take guidance into account.
There may be exceptional circumstances where it is appropriate for the
FSA to depart from its policy and the expression “have
regard” enables it to do that. The FSA would, however, need a
good reason for doing so. In practice, the amendment would achieve very
little. In order to ensure that it could in all cases comply with its
statement, the FSA would almost certainly resort to publishing a very
high-level statement, which would be of little use to the entities it
regulates. That would have the result of making the FSA’s
published policy less clear. I want to reassure the Committee that
drawing attention to the FSA’s duty to act reasonably and
proportionately in all cases provides additional safeguards to how that
is interpreted. Put simply, that is common practice when agencies are
producing policy statements. They would have regard to them and only
depart from them with very good reason. It is established that this is
the right sort of expression to use and I hope that the hon. Member for
Fareham will be persuaded of the appropriate
terminology.
Mr.
Hoban: If it is written like this elsewhere in FSMA, it is
a good idea to write it like this in the Bill. If I had realised that
consistency was such a virtue, I might have tabled amendments to change
other bits of FSMA to bring them in line with my amendment. I am not
sure that either I or the Committee would want to spend time doing
that, Mr. Gale, so I beg to ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Question
proposed, That the clause stand part of the
Bill.
Mr.
Hoban: I want to probe the Minister a little further on
the need for these powers and to get a better understanding of the
circumstances in which they might be used. I am concerned about a
recent example that I have seen: a company can be subject to
enforcement action by the FSA that results in the company going into
administration; the administrator is able to sell the company’s
list of clients and transfer the employees to another company. The
reason why the first company has been subject to enforcement action is
that the activities it undertakes are clearly in breach of the rules,
and some quite serious offences—or breach of the
rules—has occurred. However, it then appears that the same type
of operation is re-established under a different name, with broadly the
same people, not long after the first company has been wound up. I
think such companies are described on the FSA’s website as
phoenix companies. People are familiar with such a situation occurring
with double glazing and in a range of other areas, but it has also
happened in relation to the sale of securities to
individuals.
4.30
pm Before
lunch, I tried to get the name of the company and the particular set of
circumstances, but unfortunately I failed. However, I know that it has
happened. In such a situation where there are relatively senior
employees who are not approved people, yet who appear to be integral to
the operation of that business, there seems to be no limit to their
being able to move into another company and carry out exactly the same
practices. Another set of consumers will then be fleeced by that
company and the FSA will have to start the whole enforcement process
again.
Will the
powers that the FSA will get in the Bill be sufficient to take out that
level below approved persons, who are fundamental to the business, to
stop them from setting up another business in the same guise when their
principals have perhaps been barred from working in the
City?
Ian
Pearson: I got slightly lost part of the way through the
hon. Gentleman’s example, but I began to understand it again at
the end. Certainly, on the issue of phoenix companies, which he raised,
what he describes is an unacceptable practice. In the past, some
companies have sought to operate in such a way. One company will close
and another that looks virtually identical will be set up the next day.
That is not something that the Government support, and the FSA will
always want to look closely at that
issue. On
what clause 16 does, as the hon. Gentleman is aware, a company already
has to show reasonable care when it comes to appointing individuals to
a control function. Through clause 16, we are also putting in place an
individual responsibility, which is a helpful way of ensuring that
there is a credible deterrent. The measure is not necessarily in itself
designed to solve the sort of situation that the hon. Gentleman
describes, where, in effect, all or most of the senior members of the
company are acting in a way that they should not. However, if
individuals are not fit and proper, they can be prohibited and thereby
excluded from the industry. That applies both to people performing
control functions and to other people within the firm.
Through clause
16, we are closing a loophole. It is important to ensure that control
functions are performed by people who are fit and proper to do so.
Taking a belt-and-braces approach—focusing on both the
individual and the firm—but also having the safeguards I
mentioned earlier, is the right way to proceed. I hope that the
Committee will feel able to support clause
16. Question
put and agreed
to. Clause
16 accordingly ordered to stand part of the
Bill. Clause
17 ordered to stand part of the
Bill.
Clause
27Restrictions
on provision of credit card
cheques Question
proposed, That the clause stand part of the
Bill.
Mr.
Hoban: I hoped that the Minister might say a few words
about clause 27, but given that I am quicker on my feet than him or any
other member of the Committee, I will say a few words, because the
clause is a useful
provision.
The
Chairman: Order. Just to set the record straight, it is
customary for the Opposition to speak first on a clause stand part
debate. The Minister can then
respond.
Mr.
Hoban: Thank you for that guidance, Mr. Gale.
That is not something I had divined from the pattern followed on Bill
Committees that I have served on since I came to the House, but there
we are. There is always an opportunity to learn from the wisdom of the
Chairman on such occasions. The only problem with that situation,
Mr. Gale, is that we are not quite sure what the Minister
will say, but sometimes I find that I end up saying it for
him—or her, depending on which Minister it
is. Clause
27 tackles quite a serious problem relating to the availability of
credit to households in this country. We need to remember that British
consumers have a personal debt equal to the personal debt in France and
Germany combined. I am told that there are more credit cards than
people in the UK. I came across someone last week who had 13 credit
cards, which I thought was quite a lot.
Mr.
Mark Todd (South Derbyshire) (Lab): The average is five
per
adult.
Mr.
Hoban: That is a phenomenal number. I think we would all
accept that access to credit is a good thing; it helps even out some of
the ebbs and flows in income and expenditure. However, a situation can
arise where the access to credit is too easy, and it leads people who
perhaps are not fully conversant with their finances to a situation in
which they increase their take-up of consumer credit. The area that has
always bemused me is credit card cheques, which are the subject of
clause 27. I have to confess that it took me a long time to realise
that they were cheques. When I received them through the post, I
assumed that they were simply a marketing device. I now know that they
are not just a marketing device but
access to credit. I assumed that the cheques were just a marketing
gimmick, and I do not think that I am alone in having thought
that.
I suspect
that there has been a reasonably high degree of fraud as a consequence
of some of those marketing devices. The cheques are seen as another
cheap and easy way for people to get credit. In its written submission
to the Committee, Which? said on credit card
cheques: “These
tend to have higher APRs and handling fees, offer less favourable
repayment conditions, are unpopular with consumers and have been blamed
for increasing fraud. We believe it is right that consumers should only
receive credit card cheques if they have specifically requested
them”. It
went on to say that it welcomes
“the measures to
achieve
this.” I
suspect that the measure in the Bill has support from across the House.
It is interesting that even the publication of the Bill and the clear
intention of the Government to legislate on the issue has not stopped
credit card companies sending out credit card cheques. In fact, my wife
received some at the weekend, which we duly
shredded. Mr.
Charles Walker (Broxbourne) (Con): Just in time for
Christmas.
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