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Lord McIntosh of Haringey moved Amendment No. 191:

("( ) applications under section (Sponsors) for approval as a sponsor; and
( ) continued inclusion of sponsors in the list of sponsors.
(2) In exercising its powers under subsection (1), the competent authority may set such fees as it considers will (taking account of the income it expects as the competent authority) enable it--
(a) to meet expenses incurred in carrying out its functions under this Part or for any incidental purpose;
(b) to maintain adequate reserves; and
(c) in the case of the Authority, to repay the principal of, and pay any interest on, any money which it has borrowed and which has been used for the purpose of meeting expenses incurred in relation to--
(i) its assumption of functions from the London Stock Exchange Limited in relation to the official list; and
(ii) its assumption of functions under this Part.

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(3) In fixing the amount of any fee which is to be payable to the competent authority, no account is to be taken of any sums which it receives, or expects to receive, by way of penalties imposed by it under this Part.
(4) Subsection (2)(c) applies whether expenses were incurred before or after the coming into force of this Part.
(5) Any fee which is owed to the competent authority under any provision made by or under this Part may be recovered as a debt due to it.").

On Question, amendment agreed to.

Clause 95, as amended, agreed to.

Lord McIntosh of Haringey moved Amendment No. 192:

    After Clause 95, insert the following new clause--


(".--(1) In determining its policy with respect to the amount of penalties to be imposed by it under this Part, the competent authority must take no account of the expenses which it incurs, or expects to incur, in discharging its functions under this Part.
(2) The competent authority must prepare and operate a scheme for ensuring that the amounts paid to it by way of penalties imposed under this Part are applied for the benefit of issuers of securities admitted to the official list.
(3) The scheme may, in particular, make different provision with respect to different classes of issuer.
(4) Up to date details of the scheme must be set out in a document ("the scheme details").
(5) The scheme details must be published by the competent authority in the way appearing to it to be best calculated to bring them to the attention of the public.
(6) Before making the scheme, the competent authority must publish a draft of the proposed scheme in the way appearing to it to be best calculated to bring it to the attention of the public.
(7) The draft must be accompanied by notice that representations about the proposals may be made to the competent authority within a specified time.
(8) Before making the scheme, the competent authority must have regard to any representations made to it under subsection (7).
(9) If the competent authority makes the proposed scheme, it must publish an account, in general terms, of--
(a) the representations made to it in accordance with subsection (7); and
(b) its response to them.
(10) If the scheme differs from the draft published under subsection (6) in a way which is, in the opinion of the competent authority, significant the competent authority must (in addition to complying with subsection (9)) publish details of the difference.
(11) The competent authority must, without delay, give the Treasury a copy of any scheme details published by it.
(12) The competent authority may charge a reasonable fee for providing a person with a copy of--
(a) a draft published under subsection (6);
(b) scheme details.
(13) Subsections (6) to (10) and (12) apply also to a proposal to alter or replace the scheme.").

On Question, amendment agreed to.

Clause 96 agreed to.

Clause 97 [Exemption from liability in damages]:

[Amendments Nos. 193 and 194 not moved.]

Clause 97 agreed to.

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Clause 98 [Interpretation of this Part]:

Lord McIntosh of Haringey moved Amendments Nos. 195 to 197:

    Page 44, line 6, leave out ("Stock Exchange") and insert ("Authority").

    Page 44, line 13, at end insert--

("( ) If, as a result of an order under Schedule 7, different functions conferred on the competent authority by this Part are exercisable by different persons, the powers conferred by section 87 are exercisable by such person as may be determined in accordance with the provisions of the order.").

    Page 44, line 24, leave out ("(3)(a)") and insert ("(3)").

On Question, amendments agreed to.

Clause 98, as amended, agreed to.

Schedule 10 [Offers of Securities]:

Lord McIntosh of Haringey moved Amendments Nos. 198 to 201:

    Page 244, line 21, leave out ("has such meaning as may be specified") and insert ("means--

("(a) the government of the United Kingdom;
(b) the government of any country or territory outside the United Kingdom;
(c) a local authority in the United Kingdom or elsewhere;
(d) any international organisation the members of which include the United Kingdom or another EEA State; and
(e) such other bodies, if any, as may be specified.").

    Page 246, line 29, at end insert--

("( ) a recognised body within the meaning of section 1(7) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990,").

    Page 246, line 31, after ("1985,") insert--

    ("( ) section 1 of the Housing Associations Act 1985,").

    Page 247, line 41, leave out from ("a") to end of line 42 and insert ("public authority.

( ) "Public authority" means--
(a) the government of the United Kingdom;
(b) the government of any country or territory outside the United Kingdom;
(c) a local authority in the United Kingdom or elsewhere;
(d) any international organisation the members of which include the United Kingdom or another EEA State; and
(e) such other bodies, if any, as may be specified.").

On Question, amendments agreed to.

Schedule 10, as amended, agreed to.

Clauses 99 to 105 agreed to.

Clause 106 [Sanction of the court for business transfer schemes]:

Lord McIntosh of Haringey moved Amendment No. 202:

    Page 48, line 11, at end insert ("Parts I and II of").

The noble Lord said: In moving Amendment No. 202, I shall speak also to Amendments Nos. 203 to 208 and 272. We have now reached Part VII of the Bill, which was introduced on Report in another place. It largely carries forward arrangements under Schedule 2C to the Insurance Companies Act 1982 for the transfer of insurance business from one company to another. This is something that is required by the single market directives for insurance. However, the current provisions in Schedule 2C have developed over

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the years and have, over that time, become unnecessarily complicated. Noble Lords might well be familiar with the concept of matters of this kind being unnecessarily complicated. They vary depending on whether the insurance business includes general or long-term insurance and whether the business is direct insurance or reinsurance. We have therefore taken the opportunity to rationalise these arrangements.

Another feature of Part VII is that it plugs a gap in existing legislation that in the past has always meant that banks have needed to resort to the Private Bill procedure in the event of a business transfer. That process often leads to a complex, burdensome and inefficient process to achieve a corporate restructuring. However, of greater concern, and the reason for making provision in a Bill related to financial services regulation, is that under a Private Act procedure the regulator does not have a suitable role in determining whether a transfer should be allowed to take place.

The Committee will wish to note that the problems that are addressed by this part are specific to the insurance and banking industries. Other companies can restructure and amalgamate with relative ease under the provisions of the Companies Act 1985. Transfers from building societies and friendly societies are provided for separately under the Building Societies Act 1986 and the Friendly Societies Act 1992. For that reason, there is no need to bring them within the scope of Part VII.

It might be helpful if I clarify that we are talking about transfer of a business from one company to another--often, though not always, when two companies within a group are being restructured. It is not directly linked to mergers and take-overs, where the ownership of the company may change, although where a take-over has occurred the new parent company may subsequently decide to amalgamate or restructure the business of its subsidiaries. Another situation where such transfers occur is when a company is failing and, in order to protect the interests of its creditors or customers, another company agrees to take over part of the business of the failing firm.

Turning specifically to the amendments, while we felt it was appropriate to introduce at as early a stage as possible the key elements of our policy in this area, it was always the case that we would need to revisit the detail of the provisions. This group of amendments, which I commend to the Committee, is a result of that further work.

It will be for the courts to decide whether to sanction a business transfer. Amendment No. 206 introduces a new clause after Clause 107 to allow a court to require that an independent actuary be appointed to report on the transfer of business from an insurance company. This is particularly aimed at circumstances where a firm is in financial difficulties and the transfer may depend on the company taking over the policies being able to reduce the amount of the liability to policyholders. In practice, the court would only sanction the transfer where the effect of the transfer was no worse than if it did not go ahead and the insolvent company was instead left to run off its business.

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In considering whether to allow such a transfer, the court will need to be sure that policyholders' interests will be properly protected. This clause is designed to enable the court to take an informed decision by enabling it to secure the appropriate advice from an independent expert about any proposed reduction in benefits.

Amendments Nos. 203 and 207 give the FSA powers to issue certificates where the business of an overseas insurer is being transferred to a firm authorised and regulated in the UK. This carries forward equivalent provisions in the Insurance Companies Act 1982. The procedure will allow the FSA to confirm to an overseas regulator whether the transferee company in the UK meets the necessary solvency requirements; in short, whether it is capable of accepting the business to be transferred.

Amendment No. 202 simply makes a consequential change to Clause 106 to reflect the fact that Amendment No. 203 introduces a new part into Schedule 11, so the current reference to Schedule 11 needs to be restricted to Parts I and II of the schedule. Amendment No. 208 introduces a new clause, again carrying forward provisions currently in the Insurance Companies Act. It ensures that where an insurance business transfer has been approved in another EEA member state, the transfer will have effect in UK law in relation to relevant policies. This will mean that a person in the UK who has an insurance policy affected by such a transfer, will have their rights and obligations transferred to the new company.

As I have already mentioned, Part VII replaces provisions currently within the Insurance Companies Act 1982. Amendment No. 272 is a minor amendment reflecting that. It replaces a reference to Schedule 2C of that Act with a reference to Part VII of the Bill. The group also includes two minor Scottish amendments to Clause 107. Amendments Nos. 204 and 205 simply reflect the fact that the Scottish equivalent of an English law concept of a mortgage is a security over property. I beg to move.

6.15 p.m.

Lord Peyton of Yeovil: Again, in the interests of cordiality, I should like to congratulate the noble Lord on the wonderful job that he is doing as regards rewriting this Bill. It is quite a task for him to undertake. He has all the sympathy of compassionate people like myself on this side of the Chamber.

If a Bill of this bulk is produced, it not only generates a lot of work, but also a lot of questions. We have been astonishingly restrained in not testing the noble Lord's wisdom and knowledge more severely. But I want to ask a serious question.

I understand exactly what is meant by the "Necessary margin of solvency". But how will the authority decide what that is? Will it be decided upon purely financial grounds and the amount of money involved, or upon the general appearance of the transferee which may not have made a favourable

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impression upon the authority? I should like some idea as to how this important point will be decided and how the amount will be arrived at.

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