Previous Section Back to Table of Contents Lords Hansard Home Page

Lord McIntosh of Haringey moved Amendment No. 88:

(a) who are consumers for the purposes of section 129; or
(b) who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.").

On Question, amendment agreed to.

Clause 12, as amended, agreed to.

Clause 13 agreed to.

20 Mar 2000 : Column 102

Clause 14 [Powers of appointed person and procedure]:

Lord McIntosh of Haringey moved Amendment No. 89:

    Page 7, line 8, leave out subsection (4).

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 226, 234, 236, 237, 244, 245, 252, 258 and 277, as well as addressing the question as to whether Clause 401 (privileged communications) should stand part of the Bill. These amendments bring the definition of "legal professional privilege" in the Bill into line with the Police and Criminal Evidence Act 1984. At the same time they provide a consolidation, in a single clause, of existing provisions in the Bill that prevent powers being used to require a person to disclose or permit the inspection of material that is subject to legal professional privilege.

The new clause will ensure that no powers under the Bill can be used to require disclosure or access to privileged material. Adopting the PACE definition also makes it clear that privilege attaches not just to legal advice but also to documents and other material enclosed with legal advice where those were brought into existence for the purposes of legal proceedings and are in the hands of someone who is entitled to possession of them. I beg to move.

On Question, amendment agreed to.

Clause 14, as amended, agreed to.

Clause 15 [Conclusion of inquiry]:

[Amendments Nos. 90 to 93 not moved.]

Clause 15 agreed to.

Clauses 16 to 18 agreed to.

Clause 19 [Restrictions on financial promotion]:

Lord Kingsland had given notice of his intention to move Amendment No. 93A:

    Page 8, leave out line 24 and insert--

("(a) an invitation to engage in investment activity; or
(b) any other information with the purpose of inducing another person to engage in investment activity")

The noble Lord said: I must apologise to the Committee for having introduced into today's proceedings some manuscript amendments which I trust noble Lords have to hand. In any event, I understand that under the rules of this House I am obliged to read out these amendments verbatim. Those noble Lords who do not have the amendments before them therefore will not be inconvenienced or prejudiced in any way. I shall not move Amendment No. 93A.

[Amendment No. 93A not moved.]

Clause 19 [Restrictions on financial promotion]:

Lord Kingsland moved Amendment No. 94:

    Page 8, line 24, leave out ("or inducement to engage in investment activity") and insert ("to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so").

20 Mar 2000 : Column 103

The noble Lord said: This amendment seeks to excise the expression,

    "or inducement to engage in investment activity",

and insert the expression,

    "to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so".

Clause 19 prohibits companies which are not authorised under the Act from issuing communications which constitute invitations or inducements. As the Committee is undoubtedly aware, the trouble with inducements is that they look only to the effect on the recipient of the communication. Thus good news about a company may persuade someone to invest even if there was no intention to induce that person to do so. The term "inducement" is unsatisfactory since a communication could operate as an inducement whether or not the person making the communication intended it to do so. The term "inducement", in short, would reinstate much of the confusion which has surrounded the 1986 Act's definition of "investment advertisement", but in a wider sphere, given that the new law will apply to a much wider group of communications.

I shall not move or speak to Amendment No. 94A. I now turn to Amendment No. 95, which states,

    "Page 8, line 30, leave out from ('(1)') to ('in') in line 31 and insert ('does not apply unless the communication is intended or might reasonably be presumed to be intended to be acted on by a person')",

in the United Kingdom. Clause 19(3) extends the prohibition to communications from outside the United Kingdom if they are capable of having an effect in the United Kingdom. This is far too wide, as it covers, for example, any communication relating to shares registered or quoted in the United Kingdom. In addition, Clause 19(3) does not reflect either host or home country control, which is all the Treasury, as I understand it, has said that it wanted to achieve.

The Government have tabled an amendment to this clause which would introduce a new subsection (5A). The amendment is helpful in that it enables the Treasury to switch to a country of origin approach, in circumstances such as the proposed e-commerce directive, where the Government consider that another state's requirements provide sufficient protection to United Kingdom customers both to allow mutual recognition of home state control and to disapply control over promotions originating from that state, even though they may be capable of having effect in, or be directed at, the United Kingdom.

Nevertheless the application of the general prohibition to both outgoing and incoming promotions still exposes United Kingdom firms to the possibility of overlapping and potentially contradictory requirements in respect of countries where a subsection (5A) order does not apply. The Government have partially recognised this problem by the provision in Article 15 of the draft exemptions order that "foreign source" communications are saved from being illegal--because they are capable of having an effect in the UK--if they are not directed at the UK.

20 Mar 2000 : Column 104

However, this exemption applies only to investment business activity and not to foreign-source deposit or insurance advertisements. The "capable of having an effect" wording is widely regarded as unclear and could cover all foreign banks and insurance companies using the Internet since, in theory at least, someone in the UK could act on the information in those websites. It is in order to avoid uncertainty and the possibility that promotions might need to comply with more than one regime that Amendment No. 95 has been tabled.

I now turn to manuscript Amendments Nos. 96A to 96E. Amendment No. 96A reads:

    "Page 9, line 1, leave out ("an") and insert ("a specified")".

Amendment No. 96B reads:

    ldquo;Page 9, line 2, leave out ("an") and insert ("a specified")".

Amendment No. 96C reads:

    "Page 9, line 8, after ("of") insert ("subsection (6)(b) and")".

Amendment No. 96D reads:

    "Page 9, line 9, leave out ("that subsection") and insert ("those subsections")".

Amendment No. 96E reads:

    "Page 9, line 11, after ("by") insert "subsection (6)(b) or")".

The purpose of these amendments is as follows. Under Clause 19(6)(b), "Engaging in investment activity" is defined as including,

    "exercising any rights conferred by an investment to acquire, dispose of, underwrite or convert an investment".

Under Clause 19(11), "Investment" is defined to include "any asset, right or interest". This could clearly extend to assets, rights and interests which are beyond the field of financial services. The legislation should therefore contain a power for the Treasury to limit its application by order.

These are manuscript amendments. The next one is Amendment No. 116A. I am not sure whether I should deal with the remaining manuscript amendments in this group or wait until we come to deal with Clause 28. I shall not deal with them now. I beg to move Amendment No. 94. I have spoken to the other amendments in the group.

9.30 p.m.

Lord McIntosh of Haringey: I shall do my best to keep up. The noble Lord has introduced manuscript amendments and then not moved them; he has brought Amendment No. 95 from a different group into this one and I am struggling to keep the argument together. Perhaps I may be excused from giving a general introduction on financial promotion and, with some diffidence, speak to Amendments Nos. 93A and 94, even though Amendment No. 93A has not been moved. They concern alternative approaches and I have to discuss them both in order to enable the Committee to understand them.

Lord Kingsland: I thank the Minister for giving way so generously. I can only say, on this occasion, mea maxima culpa.

Lord McIntosh of Haringey: We all do our best. No doubt I shall have to do the same at some stage.

20 Mar 2000 : Column 105

Opposition Amendments Nos. 93A and 94 propose two alternative strategies to Clause 19 on financial promotion. Amendment No. 93A proposes to limit the prohibition to,

    "an invitation to engage in investment activity; or ... any other information with the purpose of inducing another person to engage in investment activity".

Amendment No. 94 proposes to limit the prohibition to invitations "to engage in investment activity", or to,

    "information which is intended or might reasonably be presumed to be intended to induce any person to do so".

I thought that Amendment No. 93A would be the preferred approach, but I was wrong.

The Government have reiterated the policy behind Clause 19(1) on several occasions. In their consultation paper, Financial Promotion--Second Consultation Document, issued last October, they indicated that the prohibition now applies only to those communications containing a degree of "incitement"--invitation, inducement, incitement--and not to communications comprising purely factual information where the facts are presented in such a way that they do not amount to an invitation or inducement. The Economic Secretary said in Committee in another place that Clause 19 is intended to catch "promotional" communications, which is the common-sense way in which one would understand the clause.

However, we should appreciate a further opportunity to review whether the policy behind the clause could be clarified. We may possibly bring forward amendments at Report stage. The provision in the Bill as drafted is the best way of tackling these issues; however, we shall take the noble Lord's points away in a constructive spirit, perhaps talk to him between now and Report, and see what there is of value in his amendments. I am by no means saying that there is nothing of value in what is proposed.

Manuscript Amendments Nos. 96A to 96E relate to subsection (6)(b) and related subsections in Clause 19, as well as Clause 98, limiting engagement in investment activity in Clause 19(1) to activities in relation to investments which are specified in secondary legislation.

Amendment No. 116A, which amends Clause 28, is consequential upon this amendment. I am sorry that I said that the noble Lord should not speak to it. If I thank him for the amendments and agree to consider them, perhaps he will not feel too bad about my telling him not to debate them now.

I do not know whether the noble Lord has spoken to Amendment No. 104. I understood that it was included in this grouping as printed. I wonder whether I may respond--

Next Section Back to Table of Contents Lords Hansard Home Page