Financial Services Bill
The Committee consisted of the following Members:
James Rhys, Marek Kubala, Committee Clerks
† attended the Committee
Mr Hoban: I am sorry that my hon. Friend the Member for West Suffolk is not here to listen to my response to his intervention. He was right that prohibition is both a punishment and a deterrent, and that the risk of being deprived of one’s livelihood is a deterrent to those who transgress.
Let me deal with amendment 145. In her remarks, the hon. Member for Kilmarnock and Loudoun recognised the fact that the FSA already publishes a public record of various matters, including all individuals subject to a prohibition order. It does that on a website, setting out the reason why the order has been given and the contact information for anyone who needs further information. We expect the PRA and FCA to do likewise.
Given that the information is in the public domain, I do not agree that we need to duplicate it on the Treasury website. There is a risk of information being fragmented and people not knowing who is responsible for what. I should have thought that the best answer is to ensure that it is in one place, and that we recognise and know where it is. Moving it to the Treasury website would serve no purpose whatever.
With amendment 146, the hon. Lady wants to ensure that, if the FCA changes its policy towards designating controlled functions, it must report to Parliament on the reasons for any changes. The designation of controlled functions is done using rules, and the PRA and FCA will be required to consult publicly on all rules, including those. It would be a little odd to require regulatory reports specifically to Parliament on that set of rules, as opposed to any others. The Treasury does not need to maintain an extra website. It would be odd to single out one set of rules from others in respect of what should be reported specifically to Parliament, so I ask her not to press the amendments.
Cathy Jamieson: It is an absolute pleasure to be back here this evening. [Hon. Members: “Hear, hear.] Hopefully, we can make the Minister happy once again—although perhaps that will not apply to all the members of the Committee who have to remain with us.
On a serious point, I wish to refer the comments of the hon. Member for West Suffolk who promoted me to the Whips Office during his contribution to the debate. I always hold the Whips in the highest esteem wherever
I recognise the argument about publishing on only one website, but I am slightly bemused why the Minister believes that the Treasury website is not perhaps an ideal place to hold such information. If people were looking for information, they would want to know from a Government website exactly what it is. Surely that would be one of the places that people would look rather than trying to find the information elsewhere. If the hon. Gentleman can assure me that there will be enough publicity or information to highlight where the list of prohibited people will be held so that people can obtain that information, I shall withdraw the amendment. I am not quite sure that I received such an assurance.
Amendment 146 is consistent with what we have been trying to achieve throughout our proceedings. If that aim has not been registered by now, I will explain. At every opportunity, we want to emphasise the importance of Parliament not only in scrutinising the processes, but to have the opportunity to receive reports at a later stage and be able to comment on them. However, given that the hon. Gentleman said that there will be public consultation on the rules, at this moment in the evening it would probably be wise of me to take his word. If we consider at a later date that it is not a reasonable way in which to proceed, no doubt we will come back to it. However, for the purposes of this debate, I am happy not to press the amendments.
Cathy Jamieson: Again, I will try to be as brief as possible. In general, we agree with most of the changes made in respect of prohibition orders but, as I said in the context of earlier amendments, we are keen to ensure that accountability and transparency are in place for those changes. We have heard about the importance of information being available to people and ensuring that information about those who are prohibited— if not quite named and shamed; I do not like that terminology—is at least made available to the public. On the basis of the assurances that I have received from the Minister, I do not intend to oppose the clause.
We tabled amendment 146, which I have not pressed, in order to ensure transparency and accountability for any changes. I still think there are some issues with the dual regulated firms. The Minister has given me some assurances, but we are keen to ensure that there will be absolute clarity in the approved persons regime, given the split in the redrawn responsibility for control functions between the PRA and the FCA in line with their objectives.
The Minister said quite a lot about that, but the question for us concerns the fact that some individuals may hold multiple control functions, meaning that under the proposed process they will have to apply to both regulators, which again seems somewhat unwieldy.
We have considered some of the issues of the approval process in the memorandum of understanding and the associated annexe, but I still think there is an issue, and I hope the Minister can explain simply what will happen if one regulator approves and the other does not. Will the rejecting regulator be required to issue a report, and what will happen in such circumstances?
I put it to the Minister that it would perhaps be a more efficient and an equally effective way to have the FCA carry out all the processes. Can he explain why, in section 64 of FSMA, there is no requirement for the two regulators to have the same or similar statements of principle about what constitutes a “fit and proper person”? That will be important for the public to understand.
I could read out at length about some of the problems and potential difficulties with this clause, but I hope that the Minister gets the drift of the areas about which I have concerns, so I will not detain the Committee any further at this point.
Mr Hoban: The hon. Lady raises some important points. This is where we get into the fine detail of how we deal with a situation where an institution is dual regulated, with both the PRA and the FCA. New section 59A requires the FCA to monitor the situation with a view to ensuring that there is no overlap between the functions it has specified as control functions, and the functions specified by the PRA as control functions, and where the FCA does identify such an overlap, the new section will require it to address it. In most cases,
There are processes in place. I appreciate that this is a complicated area, but it is right that, where a function is relevant to a prudentially regulated, or PRA-regulated, firm, given the particular interest that the PRA has in the safety and soundness of individual firms, it has the opportunity to approve individuals and specify “significant- influence functions”.
It may be the case that the PRA would recognise the finance director’s role as a significant-influence function, but because that role is not necessarily customer-facing, the FCA might not designate it as such a function if a firm is dual-regulated. We must recognise that people have different roles and responsibilities in different entities. A finance director might be a head of risk, for example, and would need to understand the complexity of balance sheet. The PRA will have insight into what is needed in such situations in a way that the FCA will not. We must follow through in the detail of regulation the two different responsibilities of the PRA and the FCA, but we also seek to minimise duplication where that is possible and appropriate. I hope that that reassures the hon. Lady that we have sensible arrangements in place that recognise the two bodies’ different roles.
Cathy Jamieson: Again, I hope that I can cover the points of concern fairly briefly. The clause introduces schedule 5, which amends part 5 of the FSMA, consequential on replacement of the FSA by the new regulators. Part 5 of the FSMA is entitled “Performance of Regulated Activities”, and relates to prohibition orders, approvals, disciplinary actions, penalties, statements of policy and procedure and the statement of principle on conduct codes.
In discussions on previous amendments, I outlined some of the concerns about the FCA and PRA time frames for approving persons holding control functions. The FCA and PRA are each meant to issue statements or codes of practice governing approved persons. I have some questions for the Minister. First, if we wade through the changes, we see that it appears that the process for approving a person to hold a control function can be extended to six months if it is related to a new firm seeking authorisation for its business. The worry is that that might lead to an unnecessarily long time being taken in approving an individual. Such individuals might have left their previous jobs and be waiting for the regulator to decide whether to approve them. Does he agree that it may be better for people to know sooner rather than later, so that if, for whatever reason, they were not approved, they could look for another role? People have asked whether the provision would impede the creation of new firms and employment in the city.
Secondly, does the Minister agree that it would be more efficient for firms if the regulators were required to issue joint statements and codes of practice? There will probably be a significant degree of overlap and room for inconsistency if they continue to work separately.
Thirdly, a key point is that although the regulators must publish statements and codes of practice, again, there does not appear to be real accountability to or oversight by the Treasury or Parliament on the codes’ content. For example, the regulators appear to be able to change them at will. Will the Minister explain why he believes that there should be no accountability to the Treasury in relation to codes of practice?
Mr Hoban: On the hon. Lady’s final question, there comes a point when the regulators need to design their own codes of practice. They do not need to be accountable to the Treasury for those. In the Bill, the Government have set broad frameworks around the perimeter on the types of powers and processes we expect to see, and we have set statutory deadlines. Once the framework is established, it will be important to allow the regulators to get on with their job within it.
The hon. Lady has raised some helpful points. She identified the risk of a process being delayed or logjammed, particularly if both regulators have to agree every significant-influence function. The reality is that the PRA and the FCA are under a duty to co-ordinate, which covers all their functions, so the Government expect the two authorities to be in a single administrative process for the significant-influence function applications, taking into account the statutory deadline within which they have to work. The Bank and the FSA have published a draft MOU that provides additional details about how regulators will co-ordinate their activities to achieve their distinct objectives. The MOU also reassures firms that the new regulators will set up efficient processes to manage the input of both authorities where that is required, and will work together to minimise any unnecessary duplication or logjams.
On the point about unnecessary duplication, what constitutes a fit and proper person will be slightly different from each regulator’s perspective. For a dual-regulated firm, the FCA is interested in the firm’s relationship with customers and its awareness of customer issues from a conduct perspective, but the PRA will look at the firm from a prudential perspective, so the regulators will have different views. It is important for them to have not only a common core to avoid unnecessary overlap, but sufficient distinction to enable both regulators to fulfil their duties, which is why clause 12(4) provides for each regulator to have its own code.
Mr Hoban: That is why co-operation between the PRA and the FCA is important. They are under a duty to co-operate and co-ordinate, and it is in their interests to make the application process as painless as possible
Cathy Jamieson: That clarification has been helpful, although I still have concerns about the crossover of core functions and how that core will be agreed. One difficulty, when people are under a duty to co-operate, is to ensure that there is oversight of that co-operation and that there is a productive outcome. People who have separate rulebooks could co-operate, but they might eventually agree to disagree, which is my concern.
Mr Hoban: The hon. Lady makes an important point, but we should reflect on the need for balance, particularly in relation to a new business. That time scale is a subset of a longer set of other processes for the authorisation of a new firm. It is important that regulators carry out proper due diligence, particular when a new firm is established, to make sure that it meets the codes of the PRA and the FCA. We need to ensure that we do not get the cart before the horse, so that we do not have a situation where the regulator is required to determine an application for approval before it has determined an application for authorisation. I agree it creates some uncertainty, but I suspect the uncertainty about whether a firm would be authorised is probably greater than whether a person would be approved.
Cathy Jamieson: I am grateful for that clarification. The final issue I want to put on record is our concern about the oversight by either the Treasury or Parliament. On every occasion that we have tried to increase transparency, or give Parliament the opportunity in the Bill to oversee a process or have a report, the Minister’s view has been that it is in the Bill, it has already been done or we do not need it. I am concerned that it seems the regulators can change at will some of the statements in the code of practice without there necessarily being any oversight. I have heard what the Minister has said and I am sure we will come back to the matter.
Mr Hoban: This array of amendments are grouped together for convenience. They make a number of minor technical changes to the Bill. The first two relate to clause 14. We have spent a huge amount of time ensuring that the legislation dovetails with FSMA and, given the complexity of the Bill, we have made significant progress on that. Inevitably, where there is external scrutiny, people pick up on the odd tweak that needs to be made. The amendments in this group fall into that category.
Chris Leslie: I apologise for having been delayed; the Consumer Insurance (Disclosure and Representations) Bill is having its Report stage and Third Reading on the Floor of the House. I am glad to see that sufficient progress has been made on the Bill—progress of the kind that I suppose the usual channels normally want to make. We are past schedule 5 and are starting to discuss clause 14. These are important provisions, particularly those relating to official listing—that is, maintaining official lists of securities admitted to trading on a regulated market.
I am surprised that we have started discussion on this set of Government amendments. It is a shame that we are getting into this level of detail at this hour, especially as the sitting started at 4 o’clock. It might be important to spend time scrutinising the detail of these Government amendments.
Mr Howarth, you will be aware of the importance of trying to proceed with the Bill, but progress ought to be by consent. Debating a complex and technical series of Government amendments at this time of night poses the challenge of whether we can examine carefully their necessity and merit. The amendments may or may not have merit, but the Committee’s duty is to spend an appropriate amount of time scrutinising them.
We see that in amendment 92, the Minister seeks to insert “or ‘the Authority’” after “the authority” in line 38 on page 63. Will the Minister explain why that amendment is necessary? As I read it, it would change the relevant bit of part 6 of the Financial Services and Markets Act 2000, as referred to in subsection (3)(b), so that it reads: “‘the authority’ or ‘the Authority’”. I cannot see the logic of that amendment.
Chris Leslie: I will give way to the Minister in a moment; I just want to make my point. That line in the Bill obviously already contains a provision about “the authority” with a lower-case a. The Minister would insert a reference to “the Authority” with an upper-case A. I am not sure why that is necessary, but I will allow the Minister to explain.
Mr Hoban: This is clearly a crucial issue. The reality is that “authority” is used with both a lower-case and upper-case A in the parts of the 2000 Act that we are amending, so inserting “the Authority” provides some clarity.
Chris Leslie: I am not sure that the necessity of the amendment is as clear as the Minister thinks. Some would interpret the legislation in a way that does not necessarily require that level of change. It is perfectly plausible that the clause, as written, is sufficient.
David Rutley (Macclesfield) (Con): Is the hon. Gentleman aware that these proceedings are being broadcast and will be available for people to view in due course? Is this really the best way to scrutinise the Bill? We made good progress earlier on, and I think that all members of the Committee are keen to make similar progress in the rest of the evening.
Chris Leslie: I am very sorry that the hon. Gentleman does not think this an important matter. We have to ensure that the letter of the legislation, literally, is correct. Quite frankly, he may think that this is a good way to scrutinise a Bill—it is some five hours since the commencement of the arrangement that was made; I think there has been a short break—but I do not think it is a good or consensual way to proceed. If the Government want to play games with the Bill’s programming, it is important that, instead of being helpful, we do our diligent duty and properly scrutinise the legislation. If the hon. Member for West Sussex—[ Interruption. ] My apologies; the hon. Member for West Suffolk. If he wants us to have a good, long sitting this evening and take more time to scrutinise the Bill, I am more than happy to do that.
I think I am right in saying—this might be a point of order, Mr Howarth—that it is difficult for the Government Whip to move a closure motion until an individual has finished speaking. In theory, therefore, it may not be possible for Government Members, if they wish to play that game, to make changes until hon. Members have stopped speaking.
The Chair: If the hon. Gentleman is making a point of order, he should say it is a point of order, rather than speculating on whether it is. However, to be helpful, if somebody wanted to move a closure motion, the proper thing would be to wait until the hon. Gentleman who is speaking resumes his seat.
Chris Leslie: I am grateful for clarification on that important point. In some circumstances, we might want to make rapid progress, skirting over some of the drafting anomalies that the Bill is clearly littered with, but at other times, we perhaps need to ensure that we spend sufficient time looking at these details. However, time marches on. It is 9 o’clock and I have barely touched on the provisions in Government amendment 92. I still do not see why we need legislation that says “‘the authority’ or ‘the Authority’”. That seems bizarre drafting, but perhaps we can return to that point.
Government amendment 93 would make another bizarre change, this time on line 6, page 64—overleaf from the page we have just discussed. It seems that the Minister wants to insert “‘( ) section 103(1).’” Will he
Chris Leslie: That is helpful, but I do not understand why the Minister has not inserted the “i” in the amendment. The amendment makes a change that may need further amendment down the line. I understand that in some circumstances, provisions are included because minor supplemental or consequential amendments can be made to ease the flow of the drafting of legislation that Ministers can make by order. Perhaps the amendment covers that situation, or perhaps it relates to another arcane piece of parliamentary magic whereby, through the wonders of parliamentary counsel, provisions can be inserted without having to come anywhere near a Committee debate or the Floor of the House. If that is the rationale behind the change, I accept the Minister’s point.
I will not be too pedantic, but I would be grateful if the Minister explained what “section 103(1)” refers to. We are adding to provisions relating to clause 14, on the Financial Conduct Authority exercising functions under part 6 of FSMA, and if there is another provision that makes similar changes with regard to “the authority”, “the Authority’”, and the “competent authority”, it would be interesting to find out where that is.
The Chair: Order. It might be helpful if I add to what I have already said to the Minister. I am not sure whether it is of great import to him or anyone else, but just so that we get it absolutely correct, it is open to any member of the Committee to claim to move a closure motion at any point in the proceedings, including while the hon. Gentleman or anyone else is on his feet. The decision to accept that motion, however, rests with me. As matters stand, I judge that the hon. Gentleman is speaking relevantly to the amendments. It would depend on the circumstances, but I would be disinclined to accept a closure motion at this point in time.
Chris Leslie: That is very helpful guidance from you, Mr Howarth. Clearly, we want to ensure that we conduct the Committee appropriately at all times and that we stay in order. There are certain proceedings that have to take place formally in this Committee, where we can discuss these matters openly and focus on the substance. [ Interruption. ] Bless you. I hope that the hon. Member
Amendment 95, which relates to page 85, makes a considerable change to the Bill. It deletes lines 40 to 47 on that page, which relate to recovery plans and resolution plans and the restriction on the duty of confidence. It is an amendment to clause 22, which we have not started discussing yet, so I will not open that box too wide. Given the grouping, it is difficult to look at the context of that amendment without understanding the nature of clause 22 and how it is changed by the amendment. The rule-making powers and the rules and guidance for the Financial Conduct Authority and the Prudential Regulation Authority are considerable, and clause 22 makes serious and significant changes to existing legislation, although, in many ways, there are respects in which provisions on the Financial Services Authority are being carried forward. In a sense, those provisions are cut and pasted into the Bill.
Amendment 95 changes the arrangements relating to “a skilled person” and the requirements imposed on them by the regulator in relation to the persons appointed by the skilled person. The amendment deletes a considerable chunk of the Bill, which currently reads:
For some reason, the Government want to replace that with the brief phrase “in accordance with section 166A”. Section 166A may not even be part of the Bill; I probably need to refer to the consolidated version of the Bill that incorporates the Financial Services and Markets Act 2000, a copy of which is available for the Committee. Perhaps one of my hon. Friends will pass me a copy. Section 166A is not explained or described—
Chris Leslie: I am grateful to the Minister. In my version, that relates to section 195—[ Interruption. ] Oh, in the Bill. The Minister did not make that clear. I was talking about the consolidated document incorporating the Financial Services and Markets Act 2000. Schedule 12 to the Bill provides for the appointment of a skilled person to collect and update information. It is useful that the Minister pointed out that provision, because it seems to cover similar arrangements, although at much greater length, to those in proposed new section 137L of FSMA. Why is the Minister expanding on the point in Government amendment 95? The jury is out on that amendment.
The Minister seeks the Committee’s permission to delete that provision. I assume that that is because Government amendment 95 would delete the references to “relevant requirement”; in that case, a consequential amendment would be relatively sensible.
I am not sure, however, whether the Minister can say for certain that there are no other references to “relevant requirement” elsewhere in the Bill. If there are, it might be necessary to retain that definition; the Minister must assure us that we can do without it. If the Minister wants to explain why we can helpfully and happily leave out the definition of “relevant requirement”, that would be useful. I will give way to him if he wants to explain that. He does not seem to want to; he seems quite happy to delete the definition of “relevant requirement” from the Bill.
Government amendment 111 is perhaps more significant than the smaller drafting changes to which the Minister referred. In relation to the auditing of accounts of those involved with the consumer financial education body, otherwise known as the Money Advice Service, in schedule 15, on page 270 of the 313 pages of the Bill, at line 37, the Minister seeks to remove the phrase “to the Treasury”. Lines 36 to 38 currently state:
For some reason, the Minister wants the Bill henceforth to read simply that the Comptroller and Auditor General must “examine, certify and report on accounts received under this paragraph”. This is a bit of a mystery. To whom does the Minister think that the Money Advice Service should report on accounts? Does it make its report to Parliament? Does it make it to thin air? Does it make it to the Crown? I would be grateful if the Minister could help me.
Mr Hoban: Currently, the Bill states that the Comptroller and Auditor General reports to the Treasury, but of course we all know that the CAG actually reports to Parliament, not to the Treasury. This amendment corrects that error.
Chris Leslie: It is helpful to have that point on the record. What the Minister says is true. The hon. Member for West Suffolk knew the answer to that question. He uttered the word “Indeed” when the Minister gave the explanation, which is to his credit. He is a member of the Public Accounts Committee—the Committee of Public Accounts, to give it its proper title. The Comptroller and Auditor General—a rather antiquated description of a very important office of state—does indeed make that report, although I think that it is made typically to the House of Commons, rather than to the House of Lords. I do not think that the CAG makes reports to Parliament as a whole. I suppose it would be possible to accept “Parliament” as a shorthand, although it might be useful to have “House of Commons” specified in the Bill.
That raises the question of who the accounting officer is for the Money Advice Service. If we do not know who the accounting officer is, we do not know whom the CAG will hold to account. It would be useful if the Minister could tell us who the accounting officer is. Is it the chief executive of the Money Advice Service? Is it the chief executive of the Financial Conduct Authority? I am happy to give way if the Minister can clarify that point. I do not think that he can, which is quite worrying, because I would have thought it quite important that we understand who has legal responsibility for making those representations to Parliament. Let us say that the PAC wanted to hold an evidence session to make inquiries about the accounts of the Money Advice Service. We should know which individual would be brought before that Committee. Can the Minister clarify that point?
Mr Hoban: Let me provide clarification for the hon. Gentleman. As he should know, I would have thought, where it is a public body, the CEO is normally appointed the accounting officer by the Treasury.
Chris Leslie: It is true that that is normally the case, but I am not sure that it is the case with the Money Advice Service. Even though one would expect the chief executive of the Money Advice Service to be the accounting officer, the Minister did not quite go that far. He said, “Normally that would be the case, so, hopefully, it is the case and the chief executive of the Money Advice Service is indeed the accounting officer.” I think that was his point, but he cloaked his comments on the duties of that particular office holder in the usual obfuscation.
Amendment 111 opens up a series of questions. Where does the buck stop with the Money Advice Service? Who will be responsible if, for example, the Money Advice Service spends inordinate amounts of money on pay, remuneration and bonuses, as we have already seen in some of the coverage? Quite honestly, in some ways I wish that the Comptroller and Auditor General did report to the Treasury on such matters, because the Treasury perhaps needs a direct understanding of the accounts and provisions of the Money Advice Service, otherwise known as the Consumer Financial Education Body.
Having clarity and transparency on the work of the Money Advice Service is important, and I would be grateful if the Minister was specific and certain that the chief executive of the Money Advice Service will indeed be the accounting officer. I have heard it suggested that the chief executive of the FCA, the overarching body with responsibility for some of those questions, might take that role. After all, there are a number of smaller sub-organisations that fall under that umbrella.
Matthew Hancock: On a point of order, Mr Howarth. Is that relevant to the amendment? The identity of the senior responsible owner in any body is not set out in statute, and, therefore, it is not relevant to discuss it pursuant to the Bill.
The Chair: That is not really a matter for the Chair. My interpretation is that, as matters stand, the hon. Member for Nottingham East is still in order. He is still relevantly addressing the Government’s amendments, although I am listening very carefully.
Chris Leslie: And quite right, too. I do not blame the hon. Member for West Suffolk for wanting to ensure that we are always in order. After all, our proceedings are being broadcast. We are being watched, so it is important that we do not stray from the topic at hand.
We are debating Government amendment 111, and I think that auditing the accounts of the Money Advice Service is an important matter. Normally, we would want the Comptroller and Auditor General to be thorough in his examination and certification of such arrangements and to report them in the right way. Clearly, the amendment, which would leave out the phrase “to the Treasury”, raises the question of who would receive such a report.
Do the Government intend the Comptroller and Auditor General to make such reports frequently? I do not know how frequently the Comptroller and Auditor General and the National Audit Office might want to inquire into the accounts of the Money Advice Service. They might wish to do so on a six-monthly basis, a 12-monthly basis, a 24-monthly basis or once in a Parliament. The reports might be very frequent or very infrequent. I am not sure how frequently the Comptroller and Auditor General might wish to report such matters to Parliament.
Government amendment 120—there are a few Government amendments to address in this group—starts with one of those peculiar empty parentheses arrangements. After paragraph 9(3)(b) of schedule 18, which reads
I assume that amendment 120 adds a further sub-paragraph, which, presumably, will be sub-paragraph (3)(c). It sounds as though that could be a drafting amendment to make it clearer that responsibilities that fall, presumably, on the shoulders of the Financial Services Authority will instead fall on to the shoulders of the Financial Conduct Authority.
Schedule 18 clearly deals with largely minor and consequential amendments, predominantly to FSMA 2000. Although they are minor and consequential, it is impressive that the Minister and his team of talented and vigilant officials have spotted a potential drafting error in the Bill. These references—this little wiring in between the interstices of these clauses and schedules—are quite baffling to many, certainly to those who are watching these provisions. You have to take your hat off to those officials, Mr Howarth, many of whom on normal occasions would be at home, possibly tucked up with a cup of Horlicks, by 9.25 of an evening—
Chris Leslie: My intention was that we would finish the sitting at about 8 o’clock by agreement with the usual channels, but something seemed to go awry. I do not know what that was. Governments make decisions on these things and the consequences flow from that. It is important to reflect on the fact that it is not simply hon. Members who have to be detained in Committee for quite a considerable time, but servants of the Crown—civil servants—who have a difficult enough job as it is and really—
Chris Leslie: I will in a moment. Given the need for proceedings on the Bill to be conducted at the proper pace and with proper scrutiny, we need to make sure that, as far as possible, agreements with the usual channels can be made.
The Chair: Order. Before we take the intervention, I refer the hon. Gentleman to the General Committee Handbook 2011 edition, which refers to persons in the Public Gallery and references to them. I think he might find it useful to consult that document before he goes much further with some of his observations.
David Rutley: The hon. Gentleman sounds increasingly like Eeyore. All of us are used to working until 10 o’clock on a Tuesday night. He should take lessons from Tigger: get more invigorated by this and move forward.
Chris Leslie: That is a very important intervention and it is useful that the hon. Gentleman has invigorated me so as to move forward. It is important that we stop talking about those who might be detained in Committee. That is not the issue at hand. It is important that we focus firmly on the Government amendments. Suffice it to say, Mr Howarth, I would never want to refer to any individuals in Committee. That would not be in order, but I think it would be in order to say generally that Committees such as this rely not just on the hard and diligent work of Ministers, but on the support staff in their Departments.
Chris Leslie: I am happy to do so, Mr Howarth. We are looking at minor and consequential amendments to part I of the Financial Services and Markets Act 2000 and schedule 18 of the Bill. The amendments relate to the need to make sure that we refer to the Financial Conduct Authority rather than the Financial Services Authority in statute. That is probably a change that we could consider going along with, except that there was a lack of context in the Minister’s description of the Government amendment in question that I find disturbing. The fact that he simply says to the Committee, “These are drafting issues,” without telling us in what way the Government failed to draft the provision correctly in the first place, makes me less than inclined to accept his amendment.
After all, my hon. Friends will know that the Minister has been particularly pedantic when it comes to amendments tabled by Her Majesty’s loyal Opposition. We have tried our best to improve the Bill, but at all times, we have been rebuffed. The Minister’s resistance to a number of changes, no matter how small, is most unfortunate. It is tempting, in a spirit of reciprocity, to take a similarly point-picking attitude to the amendments that he seeks to make. I am not yet persuaded that Government amendment 120 is necessary.
Jesse Norman: I have a slightly more general question: what is the hon. Gentleman’s argumentative strategy designed to achieve? We are sitting now to make up the time spent on his laboriously slow examination of previous amendments. He is seeking to prevent us from taking advantage of that time. I would be grateful for some explanation of why that is wise or in the public interest.
Chris Leslie: I am not sure that it would be in order to digress from Government amendment 120; it is important that we stick to the matter at hand. If the hon. Gentleman is fair—it is difficult to see that happening—he will have to accept that the Opposition have been reasonably efficient in how we have dealt with a number of important amendments to the Bill. He may disagree with those amendments, but we have managed to deal with many amendments in our sittings, and certainly today. However, when the Minister decides to take on his shoulders responsibility for whipping, and decides to plough ahead—
The Chair: Order. I understand that the hon. Gentleman is responding to an intervention, but he really needs to stick to the subject of the amendments. We are in danger of drifting out of order. The amount of time that he is taking on this group of amendments is perhaps excessive. If he continues, he must relate his remarks to the amendments.
Chris Leslie: I am grateful for your guidance, Mr Howarth; what you say is important. I shall not talk about proceedings in general; others can read between the lines and see the state of affairs for themselves.
Government amendment 122 relates to schedule 18, “Further minor and consequential amendments”, happily, as that means that I do not have to flick too much further on in the Bill. The Minister suggests that on page 285, line 26, we leave out from ‘Part IV’—interestingly, the IV is in Roman numerals—to the end of line 27, and insert “substitute ‘Part 4A’”.
Mark Garnier: I am delighted that the hon. Gentleman has given way. I just wanted to draw his attention to the fact that we will be here until 11.15 pm because of business in the main Chamber, and I am pleased that that he will have so much time to get into the nuts and bolts of each parenthesis and exclamation mark.
Government amendment 122 is confusing, and hon. Gentlemen need to listen carefully and make sure that they are following my argument because such matters can be quite technical. If the amendment were implemented,
Why has he framed the amendment in such a bizarre way? He does not seem to be able to explain why. Perhaps inspiration will strike him in a moment. If the decision were to insert “part 4A”, I would understand the reason behind the amendment, but the hon. Gentleman is choosing to table an amendment that includes the words
It is important that, when drafting amendments to a Bill, they are accurate. I do not know whether the hon. Gentleman himself signed off that particular amendment. It is important that he reads such provisions, but it would be embarrassing for him if, having made an amendment to a Bill, he then had to correct it with a further drafting amendment. It would not be a good way to acquit himself in such proceedings. Making sure that the Bill is amended properly is something that he has been at pains to say to Opposition Members for the past eight sittings so, without being too harsh on him, it is important that he also listens to his own advice and makes changes to the Bill in a way that would make sense.
If implemented as it is currently framed, amendment 122 would render the Bill less readable and less clear than if it were not made. The hon. Gentleman must explain urgently why has chose such wording. If he wishes to withdraw the amendment, which is flawed in its drafting, I would be happy to entertain that suggestion but, as matters currently stand, we could not accept it as it is drafted.
Chris Leslie: I apologise. I mean Government amendment 113, which is a change that the Minister wants to make to the provisions on Gibraltar. I have never been there. I do not know whether the Minister, the Government Whip or any member of the Committee has.
Chris Leslie: My hon. Friend has been to Gibraltar, so perhaps we should ask his advice on amendment 113 to the “Further minor and consequential amendments” in schedule 18. Will the Minister explain what will happen to Gibraltar and how it will be treated by the amended provision? Will that be positive for Gibraltarians or might they not wish to have it fall on their shoulders, because such regulatory changes are significant?
Cathy Jamieson: Some Committee members are looking askance at my hon. Friend’s concentration on Gibraltar. Does he agree that it is crucial to consider such details, exactly as he is doing? Some years ago, an error in the then Scotland Bill accidentally led to issues concerning Antarctica being devolved to Scotland, and that has had to be fixed in the Scotland Bill that is currently going through Parliament.
Fabian Hamilton: They are, indeed, Gibraltarians; I have been to Gibraltar seven or eight times. As my hon. Friend will know, it is a self-governing Crown dependency, which is why legislation passed here has an effect there. It is important that we have regard to Gibraltar’s constitution and ensure that the Bill does not conflict with any of the regulations within it.
Chris Leslie: I am sure that my hon. Friend will want to make his own speech. I do not want to detain the Committee for too long, but it is important that he and any other hon. Members who are inspired by our debate have the opportunity to speak.
Has the Minister consulted the Government of Gibraltar about the provision? Have they made any representations about an amendment that is being foisted on the Bill at the last minute? Although the Gibraltarians may have thought that it was coming their way, the change was not originally in the Bill; it comes from an eagle-eyed official. I put on the record my appreciation of the hard and diligent work of the officials, who may serve a future Labour Government. I hope that there has been a full and comprehensive consultation with the people of Gibraltar about the amendment.
Many of the Government amendments will change only a few words in legislation and they look as though they are minor or consequential, but they may be very significant. As we have discovered, the role of the Comptroller and Auditor General in relation to the Money Advice Service and to whom that august office holder ought to report his findings is not precise. We have uncovered a serious error in one of the drafts of the Government’s supposed improvements. Government amendment 122 would leave the Bill reading
Therefore, I am not convinced by this set of amendments. It would have been more useful if the Government had had offline conversations with the Opposition about what ought to be simple drafting changes. We could have accepted those changes; we do not necessarily need to detain the Committee in an onerous way on these points. The Government decided to take a particular approach to conducting business unilaterally. As a consequence, I feel we sometimes have no option, as we
I have spoken for 45 minutes, which is probably long enough for a set of fairly obscure but important Government amendments. The night is young, so I urge my colleagues to consider voting against these Government amendments. We should possibly vote against Government amendment 92; certainly against Government amendment 93; if necessary against Government amendment 95. I am not convinced by Government amendment 96, although the Minister might be able to persuade me on that point.
Government amendment 111 again relates to the sloppy drafting about to whom the Comptroller and Auditor General ought to report. The Minister has resisted a lot of our amendments; we need to resist that one. It may also be necessary to resist further amendments, though I can see the logic in making the substitution included in Government amendment 120.
The Government amendment I object to most in this group is Government amendment 122. I am surprised and saddened that the Minister should have brought such a sloppy Government amendment to the attention of the Committee. It is rather embarrassing and he should withdraw that amendment. It is not worthy of a Minister of his calibre. He should come back when he has got it right and the language correct. For the time being, I would like to listen to the Minister’s response to my initial comments on this set of Government amendments and perhaps he could persuade me one way or the other.
Mr Hoban: Let me pick up on one of those, Government amendment 122. I do not think the hon. Gentleman is in a position to lecture anyone on drafting, but I can assure him that it has been correctly drafted. It now ensures that section 405 subsection (1)(a) simply refers to “Part 4A” rather than to “Part IV”, as the Bill repeals part 4 and replaces it with part 4A. It is elegantly and corrected drafted.
The Chair: The procedure, for the edification of the Committee, is that we take the first Government amendment in the series and then each one that the hon. Gentleman wishes to oppose will be moved formally subsequently.
Chris Leslie: I did ask the Minister to clarify a number of points on these Government amendments and he chose not to do so. I do not think the Minister has adequately addressed the important points that I raised about the amendments. Perhaps I should repeat some of those salient points so that if the Minister wishes to intervene, he would be allowed to do so. His reading of amendment 122 is strange. My hon. Friends may have their own opinions about these matters, but as far as I see it, inserting “substitute part 4A” into the provision—
The Chair: Order. If I am misrepresenting the hon. Gentleman I apologise, but I get the distinct impression that he intends to go through a series of arguments on each amendment, or several of them, in the same terms. I remind him that tedious repetition is not permissible.
Chris Leslie: Quite right, Mr Howarth. I hope not to fall into that category, which would be most unfortunate. If I did so, hon. Members would ask themselves, “Why are we here, at 10 minutes to 10 at night, when our Whip and our Minister ought to be conducting the Bill in an efficient and consensual manner?”
The Chair: Order. I did not invite the hon. Gentleman to speculate on what I was saying. I have reminded him—so far, in a gentle manner—that first, he should refer to the amendments, and secondly, he should not repeat what he has already said about them. If he does so, others might consider what action might be appropriate.
Chris Leslie: You are completely correct, Mr Howarth. I take your point. I was trying to respond to the speech that the Minister made in answer to the points I made from approximately 9 o’clock to three or four minutes ago. I am slightly shocked that his speech was so dismissive of my important points, particularly in relation to amendment 122. I do not wish to go over old ground, but he simply asserted that the amendment was drafted reasonably.
Chris Leslie: On a point of order, Mr Howarth. From your experience of chairing a Standing Committee for a Bill of such importance as this, have you known of a debate in which Opposition Members were still speaking to be curtailed in that manner? The Government Whip stood up to curtail the rights of the Opposition to make the points that we wanted to make.
The Chair: I would not have allowed it to be put if it was not in order. I will not comment on any other experience that I have had, but I can tell the hon. Gentleman that I would not do anything that was not in order.
Matthew Hancock: As a relatively new Member of Parliament, can you advise me on whether it is in order in a Standing Committee to filibuster and debate whether an “a” should be capitalised or lower case when issues of importance and substance are still to be debated?
The Chair: That is not a point of order. The hon. Member for Nottingham East is quite entitled to question the amendments, and whether a capital or lower-case letter is used is irrelevant. The fact is that that is what the amendment said. Filibustering is not allowed, and, had he been doing so, I would have pulled him up on it. However, there is a limit, and I did accept a closure motion, so it is best if we leave it at that.
‘() section 103(1).’—(Mr Hoban.)
Chris Leslie: We come now to the stand part debate. In normal circumstances, the clause would be relatively uncontroversial and we could have progressed relatively rapidly, but it is important that we dwell on it for a moment. It relates to the FCA’s responsibility for taking over the maintenance of the official list of securities admitted to trading on a regulated market in the UK.
On the face of it, that might appear to be a relatively uncontroversial provision, but it raises significant issues. For example, the provisions appear to be relatively impenetrable. They make a series of changes to the FSMA 2000, which included an arrangement under which listing rules were delegated to the Financial Services Authority to oversee. There was, however, also an option for the Treasury to allocate the listing arrangements to an authority other than the FSA. The decision was taken at the time to ensure that the FSA took responsibility for the listing arrangements under the guise of the UK Listing Authority. For some time, the Treasury has had the discretion to amend UKLA’s responsibilities and to transfer them to another body.
Under the changes being made in the clause, the Treasury will remove its discretion to confer responsibility for official listings on another body—possibly a different or, indeed, a new regulator. The crux of the issue is the extent to which listings policy needs to be delegated to the FCA or whether the Treasury might wish to take responsibility for such things out of the FCA’s remit and give it to another body. It would be most helpful if the Minister explained why the Treasury no longer feels it necessary to be able to reallocate the power over listing securities admitted to normal trading on regulated markets, and why that power might no longer need to be moved to a different authority.
The Treasury will retain other direction-making powers on listings, but the one it does not wish to have any further is the one that gives it the ability to vary the regulatory body responsible for the listing arrangements. It is peculiar that the Treasury wants to retain certain arrangements, but that the competent authority with responsibility for the listings arrangements should no longer be in limbo, in the sense that it might be allocated elsewhere.
Will the Minister explain the history behind the decision to describe the relevant authority not as the FSA—perhaps a sub-committee or some other sub-body—but specifically as the UKLA? Is that essentially the same as a local authority describing itself as a local education authority? For many years, I found it quite peculiar that people referring to a local education authority were also talking about the local authority—it was one and the same organisation. In days gone by, I suppose local council education committees were a subset of the local authority. Similarly, are we talking about a subset of the FSA or about a distinct body, separately described in other legislation? One would naturally assume from past references to the UKLA that it was a separate, free-standing entity, but as I understand it, it is pretty much one and the same as the FSA. It may occupy a particular corridor or set of rooms in the FSA, but it is essentially made up of individuals who are employed by the FSA, under the FSA’s terms and conditions, and given the nomenclature of the UKLA.
Perhaps the Minister is taking the opportunity to clarify the arrangements, but I am not aware that he has removed the description of the UKLA. That description
The Committee is not aware that there have been any problems with the maintenance of an official list; that is not apparent. Some people might feel that the official list is inadequate in some way, but no representations have been made to me that the UKLA—otherwise known as the FSA—has encountered particular difficulties, and I have no strong criticisms of it. Those charged with the important duty of maintaining an official list of securities admitted to trading on a regulated market seem to be doing their job relatively well. It is a tricky and testing occupation, because presumably an assessment must be made of the bona fides of firms that seek to join the official list. Will the Minister outline whether the UKLA has sole control over the determination of the criteria—or criterion, if it is singular—that companies on the official list must maintain? Does a quality control threshold have to be reached? Will there be a review of the conditions and criteria for the official list? Will he outline what problems there are with the criteria used by the UKLA?
This country is a world leader—indeed, a world beater—in clearing and listing arrangements. Although some—those less informed—might lump organisations such as London Stock Exchange together with others and accuse all players in the financial services sector of being somehow responsible for the global financial crisis, they would be wrong to do that.
It is important to point out that some of the basic market management mechanisms listing those activities undertaken by the stock exchange—now, of course, a company, but at the time part of the listing arrangements originally set out—are undertaken with particular skill and dedication. From time to time problems will emerge, and companies that may want to float, and to raise capital and equity in a manner that might require admission to the official list of securities to be traded, might feel that onerous conditions are put on them. The rules have evolved relatively positively, in several ways, to allow small companies to gain access to the market, and mid-cap companies to do something similar.
Most people will be familiar with the stock exchange arrangements, listing the FTSE 100 and FTSE 250 companies in a way that makes it possible for ordinary investors, whether they are large asset managers or investors with small sums of money, to keep track of their investments. Those are visible on the stock exchange and the stock markets because they have managed to meet the tests to be admitted to the official lists.
I would be grateful if the Minister said whether he feels that the listing arrangements are adequate. Is there a need to review them? If so, would the task fall under
My view is that there is an imbalance in finance for many companies in the UK. It is a pity that the Chancellor has not fulfilled some of his promises from before the election about finding a way to review the imbalance between debt finance in a corporate context and equity finance. That is an important balance, which I hope the Treasury will address. The hurdles and obstacles before companies in getting admitted to the official list are clearly, in some respects, interpreted as barriers to the relevant arrangements.
Where are the Government in their review of access to equity finance? That is relevant to the clause. Do they feel that equity finance opportunities are held back only, perhaps, by the administrative requirements of listings arrangements, or might they consider tax changes to incentivise equity finance opportunities for companies large and small?
The competent authority functions were transferred to the FSA shortly before FSMA was enacted—that is, of course, the competent authority for listing. However, it was unclear at the time whether the FSA would undertake those functions on a permanent basis. As a result, part 6 of FSMA was prepared as a self-contained part of the Act and included some provisions, for example those relating to fees and penalties, that were included elsewhere in FSMA and applied to the FSA in its general capacity. FSMA also includes provision for the possible transfer of the competent authority functions to another organisation.
The Government considered at an early stage of the work on the Financial Services Bill the appropriate future home for the UKLA. We spent some time thinking about that. We consulted on whether the UKLA should be merged with the Financial Reporting Council. However, we have decided, in the light of the clear views of the vast majority of respondents, that the UKLA should be transferred to the FCA, so the FCA will be its permanent home.
Clause 14 gives effect to that decision. It changes the references to the competent authority to references to the FCA. It removes those part 6 provisions that conferred powers or imposed requirements on the UKLA that had applied to the FSA generally, and that will be conferred or imposed on the FCA in the future. Clause 14 also removes the FSMA provisions that allowed for part 6 functions to be transferred.
The UKLA is part of the FSA. It is known commonly by those who issue securities as the UKLA; that is the brand name that it has always gone under. It has no separate legal personality from the FSA and no chief executive, in response to—
Mr Hoban: Let me just deal with the questions. Will the FCA maintain the official list? Yes, it will. Will there be a review of the criteria for listing? No, there will not. The hon. Member for Nottingham East asked whether the Prudential Regulation Authority should have a role in looking at some of the issues. The answer is no, of course, because the PRA’s role is to deal with the prudential soundness of banks and insurance companies. It does not have a role to play in looking at listing issues or the state of listed companies. The hon. Gentleman also wanted to broaden the debate to include issues relating to debt and equity. Given that the Budget is coming up on 21 March, those questions are better deferred until then. I am keen to continue making rapid progress.
Chris Leslie: I am grateful to the Minister for some clarification on those points. It is surprising that he feels that the issues are solely within the ambit of the Financial Conduct Authority, although I suppose, given the oddity of splitting the Financial Services Authority in the way that the Government have chosen to, those issues had to fall on one side of the divide or the other. However, systemic issues may arise, albeit indirectly, from the nature of listing of securities.
The Minister says that there is no chief executive of the UK Listing Authority. I am surprised by that. I presume that there is a senior official, managing director or other individual who is a figurehead and the principal director responsible for listing arrangements. It would have been useful to know who that individual was. I am not clear that there has been sufficient public scrutiny of the calibre of the UKLA. That is not to say that I have any particular criticisms of it; I just think that it is perhaps taken for granted as part of the warp and weft of the transaction of securities business in the United Kingdom. It would be helpful if we had more information on that.
The Minister says that the official list will be maintained by the FCA. I do not know how much it costs to administer an official list. Presumably, checks and administrative arrangements need to be put in place. I do not know whether those costs are borne fully by the companies admitted to that list, or by the companies that pay the levy for the FCA. It would be rather strange if organisations seeking to be listed by the UK Listing Authority, which is to be known as the Financial Conduct Authority in future, had those costs defrayed by those other levy payers, who will be subsidising the FCA. Will those other firms feel it appropriate to cover some of those arrangements? I do not know whether the Minister knows the answer. It would be preferable if maintenance of the official list was paid for explicitly and totally by those seeking admission to the list. I imagine that is the sensible way to proceed.
The FCA will continue to be based at Canary Wharf, albeit with a number of empty floors above it, because it will no longer be housed in the same building as the Prudential Regulation Authority. That will leave those in the UKLA with an interesting set of choices. Does it expand? Will there be opportunities to remove any constraints that it felt it had shouldered for a long time?
Can the Minister tell us whether the UKLA produces an annual report and accounts? If it does, are the annual report and accounts lodged in the Library? That would be the natural place for them. I did not realise,
If there is not sufficient scrutiny of the UKLA, we might want to encourage it to produce an annual report and accounts. We certainly might want the FCA to take that up because, as the new organisation with responsibility for the listing of securities, it might feel that this is an opportunity to turn over the page, have a new broom sweep away any old untested orthodoxies, and have greater transparency of its work. I would be content if the FCA wanted to lodge more information about listing activities on its website. It would be reasonable to have that information in the public domain in that manner. It would also be reasonable if the FCA wrote to members of the Committee, who have shown considerable interest in the work of the UKLA. After all, we have spent a considerable period of time discussing clause 14. It might not realise that there was so much interest in the matter, although that interest is needed.
The Minister usefully started this debate about the UKLA’s work, but when we start to delve into the clause, we see that he has done little more than simply transfer some arrangements between the FSA and the FCA. He has decided to delete a number of provisions in clause 14(13), including provisions on the fees that the UKLA can charge, the penalties that organisations need to pay, the exercise of powers, and the support of overseas regulators, which prompts me to ask him a question. Given that we live in a global economy, and that many securities are traded internationally and are bought and sold across regulatory jurisdictions, from time to time consultation with other jurisdictions, internationally, may be needed about the listing rules in this country. Has the Minister or his officials recently discussed that set of changes with the European Commission? I understand that he is going to Brussels in the morning to meet Commissioner Barnier, whom I have also met. I do not want to detain him for too long this evening, because the journey is quite long. When he meets the commissioner—
The Chair: Order. The hon. Gentleman is straying a little far from clause 14. Frankly, I am not anxious to get into a discussion about the Minister’s diary for tomorrow or any other day, unless it directly concerns this Committee. Perhaps the hon. Gentleman can return to clause 14.
Chris Leslie: You are quite right, Mr Howarth. The Minister’s diary is his own affair. There was a plan for him to go to the ECOFIN meeting next Tuesday, but that might be in doubt if we do not make enough progress in this Committee.
The Chair: Order. The hon. Gentleman has not listened to what I have said, whereas I am listening very carefully to what he is saying. I have said that the Minister’s diary is not relevant to clause 14. If he intends to relate his comments on the Minister’s diary to clause 14, I hope that he does so very soon.
Chris Leslie: I am grateful to you, Mr Howarth; you are completely correct. I was asking the Minister about clause 14 and whether the provisions of the UK Listing Authority were subject to consultation with European supervisory authorities. You may not be aware, Mr Howarth, that many of the rules governing the regulation of a number of financial services activities are actually set out by the European Union. From time to time, they are agreed at the meetings of ECOFIN or wherever. For the Government Whip to try to curtail debate on these issues, having got himself into a mess already in the handling of this Bill, does not bode well for his future career, but that is by the bye.
It would be better if we were able to proceed with this Committee efficiently, by consensus and agreement. The fact that the Whip tried to stop this debate on clause 14 and the UK Listing Authority—it is an incredibly important provision—shows that the Government’s attempt to allow proper scrutiny in the House of Commons may have reached a very difficult and parlous state. One can only hope that when this Bill gets to the other place, the Cross Benchers and Members who take a more expert look at these provisions will recognise that there has been some difficulty scrutinising this Bill by consensus. I hope that the Bill does not encounter a serious number of amendments there; that might have been avoided if only the Minister and the Whip had worked more sensibly.
The Chair: Order. The hon. Gentleman is again straying off clause 14. I remind him that the extent to which some of these issues have already been debated in Committee will weigh in the mind of Mr Speaker when he decides what can and cannot be considered on Report. I am sure that the hon. Gentleman does not want to exhaust all good will before we get to that point.
Chris Leslie: I do not wish to exhaust good will. There are always different ways of proceeding in these cases: we can take the rocky path or the sensible path. It is always preferable to take the sensible path. Her Majesty’s Opposition sometimes have very little option but to make our views known in particular ways. I digress, Mr Howarth. I was talking about clause 14. Given that there are unlikely to be any Divisions in the House tonight, hon. Members might want to recognise that we can roll up our sleeves and make some progress.
The listing rules for securities admitted for trading on regulated markets are incredibly important. The European Union recently began looking, in a number of directives, at whether there are single market regulations across the EU in respect of listing arrangements. I do not know enough of the detail on whether there are impediments to listing securities from countries both within the European Union or beyond, but tomorrow the Minister is talking
The Chair: The hon. Gentleman has made his point of order. I am mindful of what is happening. The hon. Member for Nottingham East should restrict his remarks to clause 14. He must also be very careful not to be either irrelevant or repetitious.
Chris Leslie: I was talking about the need for listings rules to be properly understood in the context of the international circumstances in which securities are traded on a cross-border, global basis. We sometimes talk about clause 14 as though all the arrangements were purely domestic, but I do not believe that that is the case. If the FCA, as the new listing authority, were to take unilateral decisions on how to admit securities to the trading market but found difficulties internationally, I doubt whether it would have the freedom and latitude to make any changes to arrangements without common European agreement. We have to ask serious questions about whether the FCA has the right degree of latitude, or whether it is constrained to the correct degree by the European arrangements.
The Chair: Order. I hope that the hon. Gentleman will not go too far with this. I refer him to the notes on clauses, which relate directly back to the Bill. He will find that his questions are addressed there. I should also point out that he is in danger of becoming repetitious and irrelevant.
Chris Leslie: You are very kind, Mr Howarth. I appreciate your words and I will not detain the Committee any longer. I am sure others want to make their own observations about the clause. It is a matter for them. Clearly these are important questions. The explanatory notes to the Bill, although not often very helpfully framed, talk about some of the parameters under which the listings arrangements take place. Indeed, it is important to note that a large part of the clause is being changed as a result of a number of developments in European law. There are ways in which the functions of the UK Listing Authority are adding to, for example, disclosure and transparency rules in relation to the listing of securities, as a result of a number of European directives. Those include EU directive 2003/71/EC, relating to the publication of prospectuses on securities, and EU directive 2003/6/EC, which Members will be intimately familiar
Going beyond Europe, I have to ask the Minister about other international market constraints. There may be circumstances in which securities admitted to lists in the United States of America, Hong Kong, Singapore, or other jurisdictions are also relevant to the rules that we are pursuing. Those rules are not being written in isolation; they are written in the context of other international circumstances.
Chris Leslie: It relates to clause 14 because we are talking about handing a series of powers on listings and the admission of securities to the list to the FCA, and about its freedom, in reality, pragmatically to amend those particular listings. My view is that it is not possible, as with many other parts of the Bill, to judge the freedoms of the FCA purely in isolation, because they are relative to powers that exist in other regulators elsewhere in the world, given the fact that we are discussing the global movement of capital. It is necessary to recognise that the FCA—while it could make changes to the securities listings arrangements—may find that there are consequences if it were to do so, because of retaliatory or protectionist reactions from other jurisdictions.
Ultimately, we need a free and transparent market in securities trading. It is necessary that there is—if I can put it like this—proper consensus on a global basis, so that those jurisdictions talk to one another and try to conduct business in an efficient, reasonable and effective way. If they do not communicate, progress might break down and the ability of those activities to advance, and for the right courses to be chosen, could be inhibited. It might feel tempting to one jurisdiction to make a unilateral decision on how it should proceed, but there would then simply be opposite and equal reactions from other jurisdictions, teaching us the clear lesson that not much can be done in society globally, if one party takes unilateral action and other parties simply have to take equal and opposite actions in exchange. There is a relevant lesson in that situation, and it is something that the Minister should take to heart. It would be regrettable but understandable if those other jurisdictions were to consider it necessary to react to a spurious reaction by a jurisdiction such as the Financial Conduct Authority, as set out under clause 15.
The Chair: Order. The hon. Gentleman is speculating and, given the lateness of the hour and the busy day that he has had, he might even be fantasising a little. I suggest that he tries to bring his remarks to a close because he is straying a bit far from clause 14.
Chris Leslie: You are quite right, Mr Howarth. I notice on the monitor that the House has adjourned. It is important that we recognise that other hon. Members will have gone home by now. They might have made progress on what was happening in the Chamber, but we are discussing clause 14.
It is not necessary to labour the clause. It is important that we recognise that it is relatively uncontroversial, and I do not really object to the provisions within it. I am happy to support clause 14, should it be pressed to a Division
Mr Hoban: Let me say some brief words appropriately on discontinuation and suspension, given that we are discussing clause 15. Part 6 of FSMA provides for the official listing of securities. Section 77 of the Act provides that the FSA—[ Interruption. ]
The Chair: Order. Frankly, the Front Bench should know better, as in fact should all members of the Committee. It is not either proper or in order to banter across the Room while the Minister or anyone else is on their feet. If the two hon. Gentlemen want to have an argument, I suggest that they step outside and have it. Otherwise, they should keep their words to themselves.
Mr Hoban: As I was saying, the FSA may also suspend listings. Naturally, the procedure to be followed in such cases is as set in section 78 of FSMA. The clause makes technical amendments to section 78A, which sets out the procedure to be followed when the issuer of security applies for a listing to be discontinued or suspended. The main change to the provision is to enable the FCA in future to give notice in writing or orally when it decides to take the action requested by the issuer. That will simplify the procedure and enable the FCA to act more quickly in such cases.
At present, the FCA must give detailed, written notice to the issuer even when it is agreeing to the request that the issuer has itself made. That can be burdensome in practice, waste everyone’s time and even irritate or confuse. The FCA will also have more flexibility to specify listing rules that some of the information and certification to the issuer might contain. At present, there is no flexibility as section 78 sets out what must be contained in the written notice. Of course, there will be no change in procedure if the FCA decides not to agree to the issuer’s request nor will there be change in the procedure or safeguards in cases when the FCA wishes on its own initiative to discontinue or suspend a listing.