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Joint Committee on Financial Services and Markets Minutes of Evidence

Examination of witnesses (Questions 377 - 399)




  377.  Good afternoon and thank you very much for coming. I am sorry it is a bit of crush but I am afraid that the geography of the room, means that we have only so much space. Some of you were present during the previous session. Today we are trying to major on the subject of accountability and to have the views both of the regulated community and of those who have responsibilities towards the consumer side as well. There are a number of issues that we want to cover. I would like to give you the opportunity first of all of introducing yourselves and to make any introductory comments you would like about the subject we are dealing with today. There may be other comments you would like to make about other subjects that may be on your minds but we do want to, as far as possible, deal with the issues of accountability. Mr Challen?
  (Mr Challen)  I am David Challen and I am the Chairman of the London Investment Bank within the Schroders Group but I am here really as Chairman of what is now called the Practitioners Forum so you may find me using that term as well as the one you have become accustomed to using. I think the issue of accountability as far as practitioners are concerned really raises two pretty different questions. One is does the FSA conduct itself so as to take account of the views of practitioners in arriving at its policies and in the manner in which it handles day-to-day business and, second, the rather different question, and one I know you have spent a lot of time looking at, which is is the FSA properly accountable for the way in which it exercises over practitioners its potentially very great powers of discipline and punishment? Because you have looked at that second one I do not propose to spend any time on it although I would not want to give the impression that it was not a matter of intense importance and interest to practitioners. So let me turn to the first of those questions and perhaps answer it in the light of early practical experience of the operation of the Practitioners Forum. We were established last November, we comprise senior representatives from the businesses which are regulated by the FSA, and we regard it as our role to make representations to the FSA on any matter which we believe is causing concern amongst practitioners about the way the FSA's operations are conducted in practice. We also expect to respond with a practitioners' view on issues which the FSA will come to us with and we aim to play a role in helping the FSA to formulate its policies and develop its appropriate response to issues which are raised during the standard consultation procedures it engages in. All of this we know we should do and wish to do having regard to the statutory duties of the FSA but with particular regard of course to the fact that the Bill also requires them to take into account considerations such as their efficiency, the need to ensure that the regulatory burden produces commensurate benefits and the need to ensure that the innovation and competitiveness of the British financial services industry is safeguarded and not impaired. I would say that our early experience of working with the FSA suggests to me that with the current management we are making good progress in establishing an open and responsive relationship. Frankly, we ask ourselves what power do we have to enforce accountability in terms of the question we are addressing? The answer of course is none except the threat of public dissent. As things currently stand, however, I think we will exercise real influence. The trouble of course is that arrangements have to be inspected for their durability not just in relation to the present incumbents in the job. In that light I am glad that the Practitioners Panel is to be a requirement of the Act. However, until we see what, if any, duty the FSA will be given to take any notice of it, it is quite difficult to assess the degree to which there is constitutional accountability to practitioners. This means, as far as I can see, that the power of practitioners to exercise influence over the FSA could be limited to their ability to kick up a fuss in the right quarters. With people of goodwill trying to make the regulatory system work fairly I think that is probably enough. If the Government ever appointed the wrong people to the top jobs of the FSA, the FSA might well, I think, be able to ignore balanced representation from practitioners with impunity. In that event the accountability of a rather potentially freewheeling FSA to Parliament will assume great importance because dissatisfied practitioners would have to make the grounds for their dissatisfaction known to the legislators who may have to take action. I think one has to conclude, in other words, that there will be adequate accountability of the FSA in the sense of the question that I first asked if the FSA wants there to be and, if not, not.
  (Mr Herrington)  I am Tim Herrington, a partner in the London office of Clifford Chance, a leading international law firm. I head up my firm's financial services regulatory practice. I am here today in my capacity as Chairman of the Law Society's Company Law Committee. My Committee is one of the Law Society's specialist standing committees whose work is undertaken in the public interest with the object of maintaining and improving the quality of law and the practice of law. The Company Law Committee consists of specialists in the field of company and financial services law and regulation from both the solicitors and the barristers professions and is, therefore, usually able to speak on behalf of the whole of the practising profession on matters within its province. Our approach is to comment in great detail on legislative proposals which affect our area of expertise and in that context we have submitted to the Treasury an 80 page memorandum containing many detailed comments on the draft Bill. We are undertaking a similar exercise in relation to the recent Treasury consultation papers on regulated activities and financial promotion, although we do regret the very short period of consultation that has been given in respect of those very important papers. I am pleased to have this opportunity to address the issue of the accountability of the Financial Services Authority and in particular its accountability to the regulated community. We have made the point that the legal structure chosen for the FSA creates challenges in establishing clear accountability arrangements. It is a hybrid; a private body exercising public functions. We have expressed concerns that its private status and the operational independence of the board, coupled with the fact that, unlike the existing system, the FSA does not exercise its powers as a delegate of the Treasury could weaken political accountability. Parliament will clearly need to be vigilant to ensure that does not turn out to be the case. On the other hand, the conventional arrangements for accountability of a board of directors present in a traditional company are absent; there are no shareholders whose views the board needs to have regard to. The draft Bill, as proposed to be strengthened through the measures set out in the Progress Report, seeks to address these issues particularly through the creation of specific roles for the non-executive committee, the establishment of the Consumer and Practitioner Panels, the arrangements for the investigation of complaints and the power to commission periodic independent reports on the FSA's operations. My Committee believes that the improvements to the accountability arrangements set out in the Progress Report do go a long way to address the concerns we have previously raised that arise out of the Authority's legal status. There is, however, one other very important aspect of accountability, namely accountability under the law. We continue to have concerns about the FSA's accountability in this respect and in particular the continuation of its statutory immunity. In paragraph 3.10 of the Progress Report the Government justifies the continuation of the immunity on the grounds that without it "the regulator's staff would be unable to go about their business without being unduly hampered by concerns about legal action". As lawyers, we find that a worrying statement. Accountability under the law is vitally important for any public authority and we do not believe that the case for the continuation of the immunity has been clearly made in the light of the increased powers of the FSA. We are particularly concerned that negligent action taken by the Authority in the execution of its powers could have serious financial effects on a firm's business. These concerns would perhaps be lessened if there was a further strengthening of the arrangements for the independent investigation of complaints and in particular if the investigator had power to award compensation in cases of maladministration. There is of course a good precedent for this in the form of the Parliamentary Commissioner for Administration whose jurisdiction has recently been extended to cover a large number of quangos; the extension of the Parliamentary Commissioner's jurisdiction in this area therefore merits serious consideration. He does, of course, have power to recommend payment of compensation in serious cases of maladministration, as you will remember from the Barlow Clowes case. I would of course be pleased to elaborate on these points in the course of the afternoon.

  378.  Thank you very much. Mr Farrow?
  (Mr Farrow)  Thank you, my Lord Chairman. My name is Kit Farrow, I am the Director General of the London Investment Banking Association which is the trade association of the investment banking industry in London whose membership includes most of the world scale financial institutions whose presence in London makes London the international financial centre that it is. The principal concern which I shall be speaking from is for the competitive position of London as a financial centre as it is affected by the Bill. I would like to remind the Committee how different a market that is from the retail market that was being discussed with the consumer representatives earlier. The wholesale markets are a world where buyers and sellers are both well informed and both well resourced. They neither need nor want protection from their professional counterparties. If the competitive position of London is to be preserved it needs to be a cost-competitive market and it is very important indeed that the regulatory approach to the protection of retail consumers is so organised that it does not impinge on the competitiveness of a wholesale interprofessional market to which it is of very, very limited relevance. That is not to say that there is any conflict between the two, it is simply that each should be appropriate to the particular circumstances that it is addressing. I had the opportunity to give evidence to you earlier about the enforcement regime and I promised you a supplementary note which I shall be addressing to you tomorrow, so I will not go into that, if I may, today

  379.  Thank you.
  (Mr Farrow)  I should like on the issue of today's agenda of accountability essentially to support very, very briefly the remarks which Tim Herrington and David Challen have already made in relation to consultation. Undoubtedly the announcements in the Progress Report take us a considerable way in the right direction but there are further improvements to be made. I think it is very important to be clear on the distinction between the role of the Practitioner Panel, which David Challen chairs, and which, given the breadth of responsibilities of the FSA, cannot possibly be, as it were, the source of detailed advice about the detail of regulation, about particular facets of the market, it has to deal and it is appropriately equipped to deal with broad, high level issues and the arrangements for consultation about detail, which are also important, need to exist side by side with it. I would like also to endorse very strongly what Tim Herrington said about investigation of complaints. The constitution of the FSA gives it enormous powers over the livelihoods of all who work in the City. Those powers may be necessary but it is important to ensure that this organisation, as other organisations of wide responsibility, is subject to arrangements which can ensure that it handles its own affairs properly. The particular issue of accountability that I would like to repeat concerns the power of investigation of the FSA, particularly in its capacity as the controller of the ability to do their job of all the people who work in the City. Those are immensely wide powers. At the moment the consultative proposals provide for the FSA to make its own arrangements for the investigation of complaints into it. That seems to me to be inappropriate given the breadth of its powers and I am very clear that the Bill should be more specific in establishing the arrangements for thoroughly independent investigations whether by the Parliamentary Commissioner for Administration or by another individual whose responsibilities and whose own appointment are subject to similar arrangements.

  380.  Thank you very much.
  (Ms Knight)  My name is Angela Knight and I am Chief Executive of the Association of Private Clients, Investment Managers and Stockbrokers. So anyone in this room who has bought or sold some shares recently has probably done so through one of our members. We, too, have been heavily engaged in responding to the welter of consultation documents which have come out and requests for information over these last few months. We have already sent to this Committee two documents and I have a have third with me, if you wish Chairman, and can also send each member our clause by clause response to the draft Bill if so requested. However, I would like to concentrate, if I may, specifically on accountability issues which we believe are particularly important to the practitioners who, after all, are going to be paying for it all. We believe that there needs to be far greater emphasis placed upon the requirement for on-going consultation with the regulated community. The FSA does have a duty to consult but there is no such requirement to put the responses into the public domain and if they ignore some of the proposals that have been made to give the reasons why they have so done. It is of interest to note that of the 21 consultation papers issued so far by the FSA they have given a feedback statement on one. We appreciate that they are very busy but even so this is a matter which needs to have very considerable attention paid to it in future. We also think that accountability would be strengthened if the so-called FSA principles on which they are currently consulting were seen as a two-way charter so that principles govern the regulators as well as the regulated community. Just as we have to deal fairly and openly with the regulators and staff up our firms properly so the same should be a requirement of the regulators themselves. There is a widespread concern about the variety of rule interpretation that currently takes place and, of course, if a rule is interpreted in one direction in one way by the visiting body one year and then the regulators interpret it differently next year it can be very costly for firms. We believe that the opportunity should be taken with the FSA being set up to ensure that there is a record of interpretation in the public domain which is accessible by the regulated community. As with LIBA we believe that the international competitiveness of the UK is of fundamental importance. As a committee of non-executive members the board of the FSA is proposed to have certain responsibilities given to it, we would suggest this is perhaps a third responsibility that should be given to that committee that it has to report either separately on an annual basis or as one of the specified contents of the Annual Report. As Clifford Chance, we have great concern about the issue of statutory immunity and find it rather difficult to understand why the FSA can be empowered to inadvertently but negligently remove the livelihood from a firm or from an individual and that firm or individual has no redress. The disciplinary process is of course very important. That has been covered elsewhere. I will conclude, if I may, by raising our last point which relates to the reasonable exercise of powers which we do think should be incorporated as a requirement of the FSA. We do understand that the Government has responded that all public authorities have to act reasonably. I am not a lawyer but our lawyers have advised us that the law in this instance is based upon something called the Wednesbury decision which says that as long as the public authority has taken into account all relevant matters, even if it reaches an unreasonable decision, it can be believed to have acted reasonably. That sounds to us rather an unfortunate interpretation. If that is an interpretation of the law then we do believe that it is essential that the FSA has reasonable exercise of its powers as laymen understand that expression "reasonable" to be.

  381.  Thank you very much. Derek?
  (Mr Wanless)  My name is Derek Wanless and I am Group Chief Executive of NatWest and I am also here as a member of David Challen's Practitioners Panel. I would echo everything that David has said. The fact that the FSA set up the Forum, as they call it, was a very positive step and I think it is a very important step in terms of how consultation should happen and picks up some of the points that previous speakers have made. I think the important issue is that there is openness in the process and the panel has the opportunity to report publicly each year. I believe that one of the panel's important roles will be to ensure that the consultation process is working especially in these early days of the setting up of the FSA. The Practitioners Forum in no way whatsoever takes away the need to consult normal industry channels, normal bodies, but we are there, I think, if the FSA takes a view that is contrary to some of the advice that has been given for them to explain to us why they have taken that view and for us to make further comments. I think that is a particularly important role to play. As in all the rest of this it depends how well-meaning individuals put that into practice as to whether it works well. I think the ability to report is a particularly important aspect of how we will proceed. As far as NatWest is concerned we welcome the opportunity to comment on the Bill and already have done so. We acknowledge and welcome the Treasury proposals that have been made to increase accountability thus far. We have concerns about the way some of the debates have seemed to be formed, like for example the issue of Chairman and Chief Executive and are they two roles, because it seem to us in that particular case people have picked up Cadbury there. Cadbury is there for public companies who have got shareholders and I personally have a view that the separation of Chairman and Chief Executive, particularly if we are talking about a non-executive Chairman of the FSA, will complicate the issue of accountability rather than clarify it. The important thing is the totality of the checks and balances that work. We expressed a view in our evidence that the National Audit Office might have a role in terms of looking at the FSA, important issues being transparency of information that would then be available and I think transparency of information, both the reports of ourselves, the consumers body, and potentially the NAO, would be important in this. We do also have the belief that the system can be improved if there is a proper appeals system and a proper structure within the FSA (which is probably a matter for the legislation) where those who are responsible for bringing disciplinary proceedings and those who are responsible for adjudicating are kept separate. The issue of the accountability of the FSA needs to be seen in a wider context. We do believe also that the focus they have placed on consumer education is important and will be helpful in terms of them as a body overall being able to carry out the very many responsibilities that they have.
  (Mr Boleat)  I am Mark Boleat and I am Director-General of the Association of British Insurers. I will be brief, Chairman, because most of the points I wanted to make have been made several times already and I endorse them. I think our concern is not so much accountability to the regulated community but accountability more generally. I do not think you can look at an aspect of it. I very much endorse what Mr Challen said on that. We would like to see stronger accountability to the Government and to Parliament. For example, the Treasury should have a right to comment on rule changes and not merely to be notified of them. We would like to see a power of direction and we would certainly like to see a report to Parliament. As you know, a report to Parliament can in its effect vary from totally nothing to very substantial. It is quite significant how this Committee has probably provided the most valuable forum of debate on these issues because there is actually debate. You can question the officials and they have to answer this on the public record. The rest of the consultation consists of large amounts of paper flowing and while the officials are very happy to have discussions, and these things are argued, I think that public debate you are having is very important and I would like to see that continue when the Bill comes into effect. What the mechanism is, whether it is a Committee like this or whether it is the Treasury Select Committee, matters less but there needs to be a body of Parliament that is able to challenge in a meaningful way the FSA. As far as industry is concerned, I very much endorse what has been said. The Practitioner Forum has a role but most of the consultation has to be through the usual channels, through the markets, the trade associations, through individual companies. The FSA should be obliged to follow Government best practice on how to consult, which it does not in every respect at present. There is a Cabinet Office document on this. That would also include regulatory impact assessments. Others have said that where a strong industry view is rejected then this should be justified and not simply "we reject the view". There needs to be a reasoned argument. The final point is what matters at the end of the day is not what is in the legislation but actually the attitude of the FSA and the attitude of the regulated community. At the moment I think those attitudes are absolutely correct but that may not continue for all time and if things go wrong that is when the legislation is important and that is where Parliament is important because no quango can ignore Parliament. If it so wishes it can ignore the regulated community, even if it would be unwise to do so, and I am sure the FSA would have no wish to do so.

  382.  In a moment I would like to move on to the questions of complaints and immunity and the whole question of consultation. It would be helpful for the Committee if we could have responses from each of you on the group of questions that we spent quite some time putting to the previous panel. This would simply get them out of way, for those of you who have not expressed a view. What do you feel about the issue of the governance of the FSA in terms of the chairman and chief executive, the composition of the board, present roles that are given to the non-executives as a separate committee rather than as part of the board as a whole? Do you think the position which the Treasury has taken in the Progress Report largely takes care of these issues of governance and the structure of the board or are there other changes that you would like to see?
  (Mr Challen)  For my part I do think so. I think it is okay.
  (Mr Herrington)  As I said, I think we are broadly content with the way it has come out. I do not think we would have ideally liked to have seen the body start in its current form. There is a lot of history here and the FSA has inherited the legal structure under the old regime. I think if you were to start with a clean sheet of paper you would not form this vehicle as a private company limited by guarantee, that is not really an appropriate vehicle which has all the corporate law which is then really stripped away from it. The Government had to be quite clever, I think, in actually devising a structure which is going to backtrack from that and also to give it a structure that is going to work and we will have to wait and see whether it does. I think the ingredients are there for a system that can work with goodwill on all sides.
  (Mr Farrow)  We are happy with the board structure arrangements that the Government has chosen. One small point of detail is that I would think it appropriate that the non- executive board members choose their own chairman rather than for the Treasury to decide who should be their chairman.
  (Ms Knight)  Again, very similar to that of LIBA. Yes, we do agree that what is being proposed is not unreasonable. As I said in my opening statement, we would like to see an extra responsibility given to the non-executive committee and I think they should choose their chairman, and indeed in the case of the practitioner panel and the consumer panel they should be seen to be independent and so have an independent right to choose which chairman they wish.
  (Mr Wanless)  Yes.
  (Mr Boleat)  Yes.

Mr Sheerman

  383.  That means not one of you really questions the principle of having an FSA, that all of you are perfectly happy with one body?
  (Mr Wanless)  As a practitioner what we have got to put into context is what was there before. There were so many things wrong with what was there before that all of us within NatWest think this has got a very good chance as long as the structure is right. Of course, the wrong people doing the wrong things could kill it. Yes, it is a lot better than what was there before. The process that we are going through of consultation is capable of making it a very good regulator.
  (Ms Knight)  I think we have to accept that the policy decision has been made and therefore what we have to do as practitioners is to ensure that we get the best result rather than put up our hands and say "no, we do not want it". One fights the winnable wars, not the ones which there is not any point in fighting.


  384.  Are there any more points on governance of the FSA? Could we move on then to the question of the practitioner panel and ask the general question of each of you to what extent you are now content with the way that is? How far would you like to get some more safeguards built into the Bill? We understand that there is a reluctance to try and legislate for everything. At the same time we have heard that there is some desire in one or two parts to strengthen the position of the panels. It would be helpful to the Committee if you could put to us any suggestions that you would like to make about how that might be tweaked.
  (Mr Challen)  Can I just perhaps repeat a little bit of the comment I made in my opening remarks and develop it a bit. It depends, of course, how the existence of the Practitioner Panel is to be put into the Bill. It is not in the draft Bill.

  385.  How would you like it to be?
  (Mr Challen)  If it simply says "there should be a Practitioner Panel" then, as I said in my opening remarks, it is not clear that gives any obligation to what I describe as a freewheeling FSA perhaps run by different people from the people who run it now to actually take notice of it. That would not be satisfactory. I am quite confident that is not how it will operate at the moment. Therefore, it is for consideration whether in including it in the Bill some words should be used to explain in what way it is to perform its function for the FSA or indeed perhaps in what way the FSA is to report where it has been unable to accept the recommendations which the Practitioner Panel has made to it on certain matters of intense interest to practitioners.

Lord Poole:  Might it be helpful if we ask for something in writing from the Practitioner Panel and the Consumer Panel on their thoughts on this rather than to try and develop it now?


  386.  If you would like to do that I am certainly happy for you to do that. We have seen the Treasury's proposal that these should now be statutory, the question is would either of the groups who are responsible or involved with the panels like to put to us any particular suggestions of how to strengthen this when it comes to the legislation or should it just be left in the loosest form? This is an opportunity for you to put your thoughts to us.
  (Mr Challen)  I would like to take up the suggestion that we come back to you. I am not a parliamentary draftsman even when I have got time to do it, certainly not on the hoof. I think it would be more sensible for us to try to think how it might be done in the Bill and let you have something in writing.

Mr Sheerman

  387.  Could we have a quick word from the FSA on the question of the 21 Consultation Documents and there being only one response. Is that true and, if so, why?
  (Mr Whittaker)  Thank you very much.


  388.  This is the result of a rest over the holidays!
  (Mr Whittaker)  Thank you for the opportunity to respond to that. I think I would probably need to respond to you on that in writing. We have issued a programme indicating when we expect to respond on different documents and it may be that we are only part way through that programme at the moment. If I might I would like to give you some more detail separately.

Mr Sheerman:  That was not meant to be aggressive, Chairman.


  389.  Do any witnesses want to comment on this question of the Practitioners Panel and the extent to which they would like to see anything built into the legislation about it?
  (Ms Knight)  Certainly our group who considered this were rather inclined by the explicit requirement mentioned within the questions we have here of the FSA to consult the panels when making rules or broad policy statements otherwise we wondered what was the point of the Practitioners Panel. There you have a group of people, an expert resource on guidance and policy and rules and you can do your reality checks with them. So we thought that that was a good idea. We also, as I say, believe that the panels should appoint their own chairmen, possibly for a three-year period only, as that would again be a check on the system. Finally, we would expect regular reports coming out for publication where FSA money was being spent, for example with the Consumer Panel, which was discussed earlier, we would expect to see a report on what that money was spent on and how it was spent because, as I said at the start, it is the regulated firms who will be paying for it.
  (Mr Wanless)  The practitioners will certainly be expected to do research amongst regulated firms and use that research as the basis of a report which is produced annually. The issue about resources for that sort of research is obviously an important issue. Again the attitudes of the FSA so far are rather positive in that respect because they themselves see the benefits they get from it.

Lord Montague of Oxford

  390.  Has the Practitioners Panel anticipated any relationship with the Ombudsman scheme and the operation of that scheme?
  (Mr Challen)  To be honest with you, no we have not but that does not mean we should not.

  391.  Do you think that might warrant a further letter?
  (Mr Challen)  I am in danger of committing myself to an extended correspondence.

Chairman:  And I may say that any correspondence has to be in very quickly if it is to be of any use because we have a deadline to meet!

Mr Loughton

  392.  In the Progress Report what it actually says is that the FSA is to be required by law to maintain Consumer and Practitioner Panels, fine. "The panels will have a role in assessing the performance of the FSA against its statutory objectives." That is pretty woolly stuff. What if the Practitioners Panel with its not generous budget, as we have heard, commissions research (which is one of the plus points David has touted) amongst practitioners and practitioners come back to say that our fees are 50 per cent too high in our view. What practically do we think the result of that is going to be vis-a-vis the role of the Practitioners Panel with the FSA? Do you need to have more teeth written into the primary legislation so that the FSA have to take some degree of note and action on that or is it purely going through the motions of being seen to consult and commission research which will not actually come to anything at the end of the day?
  (Mr Challen)  Your particular example may not be an especially practical one to achieve real movement on because the costs of the FSA are going to be subject to an irreducible minimum. One of the prime responsibilities which the Practitioners Panel feels it has, and indeed I think so do the FSA, is to scrutinise the budget annually and to raise objections if the budget appears to be getting out of hand. The point you make is really the point I made earlier on that unless there is something in the Bill (which I am now committed to trying to draft for you) that says more than it should be a panel and it should be consulted, such as in the case of if we do not take any notice of it then we have to give reasons why, then I think the powers of the Practitioners Panel, with people who are not trying to make this system work, will be very limited.

  393.  Where do you get the irreducible minimum from?
  (Mr Challen)  Canary Wharf—I mean the building.

  394.  Howard Davies would have us believe that if it has been a particularly good year for the FSA fining people then the flip side of that is that the fees to members will be diminished accordingly. That was the whole basis of the fine income going to the FSA rather than going to a central pot in the Treasury.
  (Mr Challen)  I do not contemplate misdemeanours on such a scale, I must say.
  (Mr Farrow)  Could I suggest that the two critical ways of ensuring the strength of the panel are a) the calibre of the individuals who are on it and b) an obligation for the FSA to come out in public if they have rejected the advice of those distinguished individuals. If there is then a public issue that will see that the issue is properly debated.
  (Ms Knight)  Practitioners are not normally shy, retiring souls, Chairman, and if they come across a situation where they feel they are being charged unnecessarily or there is an erroneous rule or something like that, I suspect they would shout very loudly indeed. That does not mean I do not want to ensure that the Practitioners Panel's role is properly strengthened and its views are properly represented to the FSA board, but equally we must be aware that much of the debate will continue to take place in the public domain and if the FSA is seen to act in an incorrect, erroneous or unreasonable manner then that will be very well known and comments will be made.


  395.  What you are saying is that the obligation should be upon the FSA to respond ——
  (Ms Knight)  Yes, very much so.

  396.  —— To the points that are being made to them and this should not become a one-way conversation if this is to work.
  (Ms Knight)  Yes.

Chairman:  Could we move on to the question of statutory immunity and complaints.

Mr Kidney

  397.  Tim Herrington, that was an excellent exposition of your view of statutory immunity for the FSA. Your group thinks that statutory immunity is unjustified but you recognise that different people might have a different view?
  (Mr Herrington)  Of course. It is a very difficult balancing act here and we have to face the fact that it has been in the legislation, albeit we would say in a rather different context. Those of you, like me, who still have the war wounds from 1986 will remember that there was great debate about statutory immunity at that time and the initial draft of that Bill did not have it for the SROs, for example, it was something that was built into the Bill as it went through. The reason it was felt to be important was because there was great practitioner involvement at that stage and practitioners were not wanting to serve on a body where they might be laying themselves open to personal liabilities. I think it is different now with a body which I regard as purely a public body. We are into the realms of a public body here even though it is considered a private body and there are not many public bodies that actually have an immunity of this kind. It has to be very clearly justified to continue on that basis when one bears in mind the extended powers it has. The sort of example I give——


  398.  The Bank of England has these powers.
  (Mr Herrington)  The Bank of England has these powers, yes, it is there but that is not to say that it should continue. I am not saying that.

  399.  It was just you were saying it was unusual for a public body and I made the point that in the case——
  (Mr Herrington)  The police, for example, I believe do not have statutory immunity. This body will have prosecuting powers similar to the police in some respects so there is a debate here about whether it is appropriate for a body of this type to have this immunity.

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