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The Earl of Onslow: I tried very hard to understand what the Minister said. I found it immensely difficult. I shall be surprised if I am alone. Is it possible for the noble Lord to sum up what he said during the past five minutes--I see he grins with horror at the thought--in something which is called the Queen's English? I listened very hard but found it incredibly difficult to understand. I do not think that I am the most stupid Member of your Lordships' House.
Lord McIntosh of Haringey: First, this part of the Bill is about the Financial Services Authority making rules. Secondly, Clause 129 says that it makes rules about authorised persons, who are the people covered by the Bill in activities which are regulated by the Bill. Thirdly, Clause 130 states that there might be occasions when the authority must regulate activities carried out by authorised persons which are not regulated activities. Therefore, the amendments take out Clause 130 and bring those provisions into Clause 129. However, there is one exception to that. Fourthly, there must be a restriction on which unregulated activities are covered by the rule-making power.
The Earl of Onslow: That is terrific. Why the hell did he not say it before? That told us exactly what we wanted to know. I stand gobsmacked in admiration for what the noble Lord said. That explanation was very good, but the other one was very difficult to understand. I thank him.
Lord McIntosh of Haringey: It might be difficult for Members of the Committee to understand and it was difficult for me to understand. I ran a management practice and having been in business all my life I used to say to people who wrote reports for me, "Tell me what that means". After they had told me what it meant, I would say, "Well, why didn't you write that?". Unfortunately, legislation and even Ministers' speeches about legislation are different. I have to cover the waterfront and go into more detail. It was true of the noble Earl's government, too.
I turn to Amendment No. 231XA. Clause 141, which has nothing to do with Clauses 129 or 130, allows an authorised person to be sued for damages if a private person suffers loss as a result of the contravention of a rule. The effect of Amendment No. 231XA would be to prevent such actions for damages in respect of non-regulated activity rules.
As I explained in putting the case for the Government's amendments, we are proposing to remove the clause which confers the power to make non-regulated activity rules as such. That was the second point I made. In any event, we believe that the FSA's power to make rules relating to non-regulated activities is narrower than has often been supposed. We believe that under our new proposals it will be clear that the FSA will have a power to make rules only about non-regulated activities if it considers that it is necessary or expedient to do so in order to protect the consumers of regulated activities.
I believe that the same logic which results in the authority being given power to make rules in relation to non-regulated activities follows through to there being a right of action for breach of statutory duty in relation to contraventions of such rules. I keep looking towards the noble Earl, Lord Onslow, to make sure that he is still with me!
It is part of the necessary protection for consumers of regulated activities. The right of action for breach of statutory duty is of course only available to private persons. Perhaps I may give an example. Let us suppose that an authorised person who also carried on a non-regulated coin-dealing business were to operate an authorised collective investment scheme in which participants' money was pooled for the purposes of investing in coins. Operating any collective investment
However, it is not inconceivable that some rules might need to be applied to the coin dealing business--purely as a minimum--in order to make sure that the funds contributed by participants in the collective investment scheme--that is, the consumers of the regulated activity--are protected.
A rule might be necessary to require an independent valuation of any purchase for the scheme made using investors' funds which the scheme operator makes for his coin dealing business in order to avoid any conflict of interest he might otherwise have and to ensure that the scheme participants' interests are protected. It may be arguable that the rule would touch on the running of the non-regulated coin dealing business. However, it is clear that if he contravenes such a rule, and the coins are sold to the scheme at what turns out to be a disadvantageous price, there could be damage to the interests of the scheme participants. Are we together on this?
Lord McIntosh of Haringey: That is why we believe that the FSA must have the power, exercisable only in such cases, to make rules which affect the carrying on of a non-regulated activity. It follows that if an authorised person were to breach such rules, a private person should be able to bring an action for breach of statutory duty in any case where he suffers loss or damage as a result of the rule breach. The two propositions go hand in hand.
Lord Stewartby: I do not want to add to the Minister's already heavy burden, but could we have five Haringey bullet points at the beginning of each government amendment? That would make them a great deal easier to understand.
Lord McIntosh of Haringey: The risk of oversimplification is great. The case of Pepper v. Hart states that what Ministers say at the Dispatch Box when explaining Bills can sometimes be taken into account in a court of law. It is dangerous.
Our Amendment No. 231XA is an amendment to Clause 141. Under that clause, the contravention by an authorised person of the authority's rules is actionable at the suit of a private person who suffers loss as a
For those reasons, we object to the Government's Amendment No. 226D. Our amendment draws the distinction between regulated activity and non-regulated activity, as does the Bill as drafted. We do not believe that the right to damages should apply in cases involving breach of non-regulated activities. The effect of the Government's amendment is to do away with that distinction, which we believe should be kept.
Resolved in the affirmative, and amendment agreed to accordingly.
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