Financial Services and Markets Appendices to the Minutes of Evidence


Memorandum by Denton Hall

  We wish to make a submission to the Joint Committee as set out below and in the attached Annex.

  Denton Hall is a leading international law firm, based in the City of London but with over 120 partners in more than a dozen offices around the world. In addition to an active financial markets and regulatory law practice in London, we have advised governments and securities regulators and exchanges in many overseas countries, on capital markets development in general and in particular on the drafting of securities laws and regulations.

  We did not respond directly to HM Treasury on last July's Consultation Document on the Financial Services and Markets Bill, but rather were very active in industry and professional groups in preparing their submissions. However, we now wish to pursue a number of specific points which we feel have been inadequately addressed despite the various submissions.

  We would draw the Joint Committee's attention to the following five points, each of which is developed further in the Annex to this memorandum.


  The response of Treasury and the FSA has so far missed the point, which is that a "no action" letter procedure is needed to deal with problems in the Act (as finally passed) and related statutory instruments. FSA guidance may not help, and FSA is clearly incompetent to waive legislative provisions.

  A formal, open and transparent procedure should be enshrined in statute.


  All rules, guidance, policy statements, and general decisions should be published and be readily accessible except where confidential to a particular firm. The Bill should require this of FSA, and Treasury's standards for the recognition of exchanges should require this of exchanges.

  Everyone working with the regime has a right to know as much as possible about the regulators' attitude and thinking on issues, at least once it is being implemented in practice. All too often policy and other decisions affecting particular descriptions or categories of firm, or even all the members of an exchange, are not published but circulated only to the firms which the regulator knows to be affected.


  The key elements of enforcement policy should be specified in the Bill, or perhaps in a statutory instrument subject to prior consultation and to the affirmative resolution procedure. Even if FSA is required to consult on and publish such policy, it is not right that it should have as broad discretion to determine (and change) it as is currently proposed.


  The position of professional firms, such as solicitors, accountants and actuaries, has not been adequately addressed. The Treasury has expressed its intention that such firms should not generally require authorisation but the draft primary and secondary legislation would not significantly alter the current position.


  There is still scope for much improvement in the form of presentation of and clarity of language in the draft Bill (for example in relation to market abuse) and draft statutory instruments (especially that on regulated activities).


  FSA must be required or encouraged to have transitional periods for all changes, since even basic changes like the proposed new set of principles for business can have important organisational, systems and training implications.

  We trust that this outline together with the attached Annex are sufficiently clear. We should be happy to elaborate further any particular point.

16 April 1999

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