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Lord Kingsland: I shall read carefully in Hansard the Minister's response and, if necessary, return to the matter on Report. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 152 to 154 not moved.]
Clause 49 [Applications under this Part]:
Lord McIntosh moved Amendment No. 155:
- Page 22, line 28, after ("may") insert ("reasonably").
In another place, the Economic Secretary to the Treasury made a number of commitments to review the Bill to ensure that various provisions that appeared throughout the Bill were consistent. One such commitment related to the procedures, including consultation, for the exercise of the authority's legislative powers. That matter was addressed in the Bill before it was brought to this House.
Another matter on which a commitment was given was to review the extent to which actions were qualified by the word "reasonable"--or "reasonably"--and indeed to look again at provisions where those words did not feature. We had a certain amount of fun with this subject yesterday. The Government have now completed that review and these amendments reflect that work.
During the Bill's passage through the Commons, it was suggested on a number of occasions that it would be helpful, in particular provisions of the Bill, to make an express requirement for the authority to what is required by the provision in a way that is "reasonable".
As a matter of administrative law, it is well understood that a body exercising public functions under statute must act "reasonably". That requirement will apply to the authority just as it does to other bodies, such as the Treasury or the Secretary of State. If the authority were to act in a way in which no reasonable authority would, that would give rise to a risk of challenge by judicial review.
It goes without saying, I hope, that the Government would not wish the authority not to act reasonably in carrying out the functions conferred on it by or under the Bill. Imposing express requirements for the authority to act reasonably in certain clauses might, therefore, make little real difference in the way the authority was required to act under those clauses. But at the same time, it might have the effect of casting possible doubt on the need for the authority to act reasonably in other clauses where the requirement to act reasonably was not made explicit.
Against that background, we have not sought to impose requirements on the face of the Bill for the authority to act reasonably in every particular circumstance. However, we have identified some inconsistencies of approach which the amendments seek to correct. With the exception of Amendment No. 263 to Clause 331, the effect of the amendments is to restrict the authority's ability to request information, or further information, in connection with applications for permission, approval, authorisation and recognition. The amendments have the effect of limiting requests to information that the authority may reasonably require for relevant purposes.
We believe that that is helpful, since the effect of importing a "reasonableness" test to such provisions is to qualify not so much the way in which the authority
acts, but the kinds of information that may be requested. That also achieves consistency with certain other provisions where a reasonableness criterion is applied; for example, where the authority must allow a "reasonable period" for consultation, or charge a "reasonable amount" for copies of drafts and final versions of rules.Amendment No. 263 is different only in that it applies a similar reasonableness criterion to access to information; but in that case, it relates to the access that auditors and actuaries are entitled to have to an authorised person's records and information under the arrangements in Clause 331. I commend the amendments to the Committee and beg to move Amendment No. 155.
On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendment No. 156:
- Page 22, line 30, leave out ("further information") and insert ("such further information as it reasonably considers necessary to enable it to determine the application").
Clause 49, as amended, agreed to.
Clause 52 [Procedure on exercise of the Authority's own-initiative power]:
Lord Kingsland moved Amendment No. 157:
- Page 23, line 33, at end insert--
The noble Lord said: In moving this amendment, I should like to speak also to Amendments Nos. 158 and 185A.
Clause 52 allows the authority to cancel or vary an authorised person's permission to carry on a particular investment activity. Under the market abuse parts of the Bill, individuals against whom the offence of market abuse is alleged are entitled to a particular form of protected procedure involving warning orders, warning notices, decision notices, and ultimately access to a tribunal. Those protected procedures are denied to authorised bodies when they themselves are pursued for one or another reason by the authority.
Amendments Nos. 157 and 158 both seek the same objective; that is, to give the protection of a warning notice to authorised parties. Amendment No. 185A seeks, on the same principle, to provide similar protection under Clause 88. Clause 88 brings in the warning notice procedures if the authority, as the competent authority, wants to impose a penalty on a listed company, or indeed other persons, for breach of
The Minister will be aware that there was a substantial debate on this matter in the Joint Committee. Much of it revolved around the scope of Article 6.1 of the European Convention on Human Rights. The legal arguments in support of what I seek to do in the Bill have been well rehearsed. The noble Lord will be relieved to hear that I do not intend to embark on yet another exegesis of those matters. Nevertheless, the Opposition consider this to be a vital matter and hope that the Minister has had time for reflection since his colleagues in another place dealt with these issues. I am hopeful that I may receive a better reply from him than Members of the Opposition received in another place. I beg to move.
Lord Sharman: I support these amendments. I am not a lawyer and I do not wish to embark upon any form of legal argument. However, I believe that these are important amendments in terms of establishing confidence in the market-place in the activities of the FSA. Where an authorised person can be accused of misbehaviour, it is vitally important, in terms of maintaining confidence in the regulator and confidence in the market-place, that it should be on the basis of relatively open government. It is fundamental that the evidence upon which an accusation is based should be available to the accused. It is more than a question of legal argument; it is a matter of establishing confidence in the regulator.
Lord McIntosh of Haringey: The noble Lord, Lord Kingsland, asked me whether I had had time to reflect. I have had time to reflect but I have not had enough time to reflect. This is the point at which I completely grovel to the Committee. We announced at Second Reading our intention to bring forward amendments to rationalise the decision-making process in the Bill. I very much regret that we have not been able to bring forward these amendments in time to have them discussed at this stage of the debate. This is a highly technical area, though I recognise that it covers important issues of concern that were extensively debated in another place. It is important that we should get the drafting of these provisions right. We should not try to do it piecemeal.
Before dealing with the noble Lord's amendments, I shall briefly describe what our amendments will achieve. The amendments that we intend to bring forward will distinguish three categories of decision to which subtly different sets of procedures will apply.
First, there will be disciplinary type decisions such as decisions to impose a penalty or make a public statement about misconduct. These may be under Parts V, VI, VIII or XIV. For this category, there is no particular urgency for the decision to take effect. Accordingly, the warning notice and decision notice procedures set out in Part XXVI will apply in full. We therefore accept the thrust of Amendment No. 185A,
For these disciplinary decisions there will be a right of access to the evidence relied on and to evidence considered by the FSA which might undermine its case. The decision will come into effect only when the full procedure, including any judicial stages, is complete. I hope that my confirmation of this important point deals with one of the main concerns that has been expressed about the arrangements in the Bill.
We intend that the benefit of this same procedure should also be extended to certain types of case which, although not truly disciplinary in nature, involve particularly serious action by the FSA. This will include decisions by the FSA to cancel all permission (and therefore authorisation) under Part IV, to withdraw approval or make a prohibition order under Part V, and other similar types of action in relation to collective investment schemes under Part XVII, the professions under Part XX and auditors and actuaries under Part XXII. It will also cover cases where the FSA proposes to order restitution under Part XXIII. All these cases involve serious action, but action which need not necessarily come into effect with great urgency because, for example, there are other means by which the FSA can protect consumers in the short term.
The second category will cover the remaining supervisory type decisions, such as varying permission and imposing requirements under Part IV and suspension or discontinuance of listing under Part VII. Although these decisions can have a considerable impact on the persons concerned, their main objective is to ensure that consumers are properly protected. A more flexible procedure is therefore required which will allow the FSA's decision to take effect with the urgency required by the circumstances.
For these supervisory cases, we propose to follow the procedural model already set out in Clause 314 for Lloyd's directions. The decision would take effect on a specified date, whether or not the matter had been referred to a tribunal in the meantime. In some cases it will be necessary for the decision to take effect immediately, but we will ensure that the FSA cannot set any date that comes into its head. Instead, we propose that the date would have to be reasonable having regard to the harm that might be done if the requirement did not take effect then. For example, if no harm would be done by affording a longer time for representations to be made and for the tribunal to consider the matter, the person concerned should not be subject to the immediate imposition of the requirement.
The subject of the supervisory type decision would enjoy the rights currently provided for under Part IV to know the reasons for the decision, to make representations and to refer the matter to the tribunal. However, the rights of access to evidence will not apply. That is because these decisions will often be relatively routine. Full criminal style rights of access
For that reason, we cannot accept the thrust of Amendments Nos. 157 and 158, which seek to apply too much of the disciplinary procedure to these inherently supervisory decisions. I realise that I am using new definitions which are not contained in the Bill and with which noble Lords may not be familiar.
The third category will concern the grant or refusal of applications for permission, approval and recognition in respect of, for example, applications under Part IV (permission for authorised firms), Part V (approval for individuals), and Part XVII (authorisation of collective investment schemes). Where applications are granted in full or subject to changes to which the applicant consents, there should be a fast-track notice procedure which allows the applicant to benefit from the decision at the earliest time and with the minimum of procedural formality.
Where applications are refused, granted only in part or granted subject to requirements, the applicant should be entitled to receive a warning notice setting out the reasons for the decision, the standard opportunity to make representations, a decision notice and the right to refer the matter to a tribunal if still aggrieved by the decision. However, we do not consider that it is appropriate or necessary for the right to access to evidence to apply in this category of case.
Pending completion of the procedures, the FSA's decision will stand. That will ensure that the applicant can benefit from the permission or approval to the extent that it has been granted, while also ensuring that unfit applicants cannot carry on as if their applications had been granted while the judicial process runs its course.
I grovel once more! We should have been able to bring forward these amendments in time for this debate; we have not been able to do so. I have sketched out the changes that we propose to make. I hope to table amendments shortly. Meanwhile, I hope that noble Lords will trust me when I say that our amendments will meet the point in Amendment No. 185A, although we cannot accept Amendments Nos. 157 and 158 which would go too far in applying the disciplinary procedures to supervisory decisions.
("( ) The Authority must allow the authorised person access to the evidence which it has in relation to the matters causing it to propose to exercise the power.
( ) The Authority's procedures in relation to the giving of warning notices as determined pursuant to section 375 shall apply in relation to the giving of the notice referred to in subsection (3) as if it was a warning notice.
( ) The Authority's procedures in relation to the giving of decision notices as determined pursuant to section 376 shall apply in relation to the giving of the notice referred to in subsection (4) as if it was a decision notice.").
4.30 p.m.
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