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Lord Kingsland: I thank the Minister for his response. There was not perhaps quite as much there for me this time as there was in his response to the previous set of amendments. But, nevertheless, there is sufficient to enable me to say that I will read carefully what the Minister said in Hansard. I hope that between now and the Report stage there will be an opportunity for me to have a discussion with the noble Lord to see whether we can resolve the outstanding difficulties. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 127 and 128 not moved.]
Lord McIntosh of Haringey moved Amendments Nos. 129 and 130:
- Page 234, line 43, at end insert ("in the manner in which it is seeking to carry it on").
- Page 235, line 12, at end insert--
On Question, amendments agreed to.
[Amendment No. 131 not moved.]
Lord McIntosh of Haringey moved Amendment No. 132:
Schedule 4, as amended, agreed to.
Clause 30 [Partnerships and unincorporated associations]:
Lord McIntosh of Haringey moved Amendment No. 133:
The noble Lord said: Clause 30 provides that when an "authorised person" is a partnership it will not lose its authorisation merely because of a change in membership. However, it also provides that authorisation will be lost unless the members of the succeeding firm are substantially the same as those of the former firm and the new firm has taken over substantially the whole of the business of the old firm. This is necessary because, unlike limited companies, partnerships in England and Wales and Northern Ireland do not have a legal personality that is distinct from their members. When a partner joins or leaves the business, the existing partnership is technically terminated and a new partnership formed.
The intention behind the clause is that a partnership should not have to apply for authorisation simply because, for example, it was dissolved and reformed when one of its members retired in the normal course of events and was replaced by a new partner. In contrast to England, Wales and Northern Ireland, partnerships in Scotland have a legal personality distinct from their members. Despite that, a change in the composition of a Scottish partnership can sometimes result in its dissolution and reformation. Therefore, this amendment extends the coverage of the clause to partnerships constituted under the law of Scotland. I beg to move.
On Question, amendment agreed to.
Clause 30, as amended, agreed to.
Clause 31 [Withdrawal of authorisation by the Authority]:
Lord Kingsland moved Amendment No. 134:
In particular, Clause 29(1)(a) provides that,
I turn now to Amendment No. 146, which seeks to amend Clause 42 by replacing the expression,
It is unclear what is intended to be covered by the words,
Amendment No. 148 deals with Clause 45 and seeks to amend it by leaving out the expression "at the request" and inserting the words "on the application". I unashamedly admit that this is a drafting amendment. Clause 45(7) provides:
As far as concerns Amendments Nos. 149 and 150, these are consequential drafting amendments that are intended to make the drafting of Clause 45(4) more consistent with that in Clause 45(3). I beg to move.
Lord McIntosh of Haringey: The effect of the current provisions in Clause 31 is to provide certainty as to
Government Amendment No. 143 does two things. First, it clarifies that the power to specify additional conditions for non-EEA insurance companies is a power for the Treasury to make orders. In practice, it is intended that this will be used in relation to persons who are not covered by the single market directives, including a general requirement on applicants from outside the UK (including EEA applicants), to reproduce existing requirements that they maintain a general representative office here.
Secondly, the amendment enables the Treasury to make orders which vary, remove or add to any of the existing conditions. This will enable the Treasury to ensure that the threshold conditions remain up to date and consistent with any changes to EC law. This is particularly important as many of the existing conditions reflect minimum requirements applicable to authorised persons covered by the directives.
Amendments Nos. 146 and 147, to which the noble Lord, Lord Kingsland, has spoken, are concerned with cases when the FSA has varied a firm's Part IV permission so that there are no longer any regulated activities which it is permitted to carry on. The authority must--I quote again what the noble Lord, Lord Kingsland, quoted--
There is a balance to be struck here. We do not want the FSA to keep a person's permission in force unnecessarily. On the other hand, the FSA's ability to enforce its requirements for the protection of consumers would be seriously undermined if there were no means of dealing with issues such as the ones I have described merely because a person had ceased to be an authorised person permitted to carry on any regulated activities.
The effect of the proposed amendment would be to make it easier for the FSA to keep a permission in force if it thought that there might be a good reason for doing so. However, we think that the question which the FSA should be asking itself is not whether there might be a good reason, but whether, in the light of all the information that it has about the authorised person concerned, it is necessary to continue to be able to exercise control over that person. We think that the existing wording provides the right balance in that it allows the FSA to keep a permission in force if it is not yet satisfied that a person's permission can safely be cancelled. But it does not allow it to rely solely on the possibility that there may be something it might regard as a "good reason" for keeping the permission in force.
As the noble Lord, Lord Kingsland, admitted, Amendments Nos. 148 to 150 are drafting amendments to Clause 45 which concerns the exercise of the FSA's powers in support of an overseas regulator. Amendment No. 148 would make it clear that the FSA's own-initiative power does not include cases in which an authorised person has formally applied for variation or cancellation under Clause 42. However, there may be other circumstances in which an authorised person might effectively request the FSA to vary or cancel its permission. For example, if a firm with an existing Part IV permission subsequently qualifies for authorisation under Schedule 4, Amendment No. 130, which we have just agreed, requires the FSA to cancel the firm's existing permission unless it considers that there are good reasons not to do so.
Therefore, we think that it is appropriate to use a generic description such as "request" rather than include a specific reference to an "application". However, I appreciate the intention behind the amendment and I can confirm that the reference to "request" is intended to include such an application.
Amendments Nos. 149 and 150 would also make minor drafting changes to Clause 45. Subsection (3) requires the FSA, in deciding whether or not to exercise its own-initiative powers, to consider whether it is necessary to do so in order to comply with a Community obligation. Clearly if the FSA considers that this is necessary, it must comply. In any other case, the FSA has a discretion whether to do so and subsection (4) sets out some of the matters it can take into account.
The amendment would turn subsection (4) around and restrict the circumstances in which this discretion applies to cases in which the FSA considers that compliance is not necessary. But that amendment is in our view unnecessary. Subsection (3) already requires the FSA to consider whether it is necessary to exercise its power to comply with a Community obligation. If it fails to consider this, it will be in breach of that requirement. So, in summary, we think that subsection (4) is fine as it is.
("(3) If, on qualifying for authorisation under this Schedule, a firm has a Part IV permission which includes permission to carry on a permitted activity, the Authority must give a direction cancelling the permission so far as it relates to that activity.
(4) The Authority need not give a direction under sub-paragraph (3) if it considers that there are good reasons for not doing so.").
Page 235, line 20, leave out sub-paragraph (3).
On Question, amendment agreed to.
Page 14, leave out line 24.
3.45 p.m.
Page 14, line 28, leave out ("This section applies") and insert ("A person ceases to be an authorised person").
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 135, 136 and 146 to 150. Amendment No. 134 proposes to amend Clause 31 by deleting the expression "This section applies" and inserting the words:
"A person ceases to be an authorised person".
Amendments Nos. 134 to 136 all apply to Clause 31, which deals with the withdrawal of a person's status as an "authorised person". However, the concept of the authority withdrawing a person's status as an "authorised person" seems to me at any rate to be a hangover from the passage of the Bill in the other place. Since then, the authorisation provisions of the Bill have undergone significant amendment. In my submission, the current provisions of Clause 31 represent something of an anomaly.
"a person who has a Part IV permission to carry on one or more regulated activities",
is authorised,
"for the purposes of this Act".
It follows, therefore, that if an authorised person's Part IV permission is cancelled he must automatically cease to be an "authorised person". There is no requirement on the authority to give a direction
withdrawing that person's status as an "authorised person", as provided by Clause 31(2). My amendments provide instead that a person ceases to be an "authorised person" if his Part IV permission is cancelled. As a result, there is no regulated activity for which he has permission.
"it is no longer necessary to keep",
with the words,
"there is no good reason for keeping".
Clauses 42 and 43 deal with a variation of an authorised person's Part IV permission either at the request of that person or upon the initiative of the authority's own powers. In both cases:
"If, as a result of a variation of a Part IV permission ... there are no longer any regulated activities for which the authorised person concerned has permission",
the authority must,
"once it is satisfied that it is no longer necessary to keep the permission in force",
cancel it.
"it is no longer necessary",
in both Clause 42(4) and Clause 43(2). We have suggested alternative words; namely,
"there is no good reason for keeping the permission in force".
We believe that that form of words is preferable. It should be easier to determine whether there is good reason for keeping the permission in force, rather than trying to determine whether there is reason that makes it necessary to keep the permission in force.
"In subsections (4) and (5) 'request' means a request of a kind mentioned in subsection (1)".
Clause 45(1) does in fact refer to two types of request. The first two lines of the subsection refer to the authority's power to,
"vary or cancel a Part IV permission otherwise than at the request of an authorised person",
while reference is made in the third and fourth lines to the authority exercising its powers,
"in respect of an authorised person at the request of, or for the purpose of assisting, a regulator",
outside the United Kingdom. In my submission, it would be clearer if the first use of the words "at the request" were replaced by the words "on the application", as this is a form of words used in Clause 42(1) and (2).
"as a result there is no regulated activity for which he has permission".
I must say that that sounds simpler than the provisions in the Bill as drafted. However, there are other means by which a person may have permission to carry on a regulated activity--for example, EEA or treaty firms qualifying under Schedules 3 or 4. I am sorry to say that the effect of these amendments would be to make the question of their status unclear.
"once it is satisfied that it is no longer necessary to keep the permission in force, cancel it".
There are all sorts of reasons why the FSA might need to keep a permission in force; for example, the firm may have contravened a requirement and be subject to some form of investigation, or enforcement or disciplinary proceedings. Alternatively, the FSA may be concerned that the firm might have contravened a requirement and may wish to satisfy itself that the firm is not trying to hide something.
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