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( ) supervisory notices; and
( )")

The noble Lord said: In rising to move Amendment No. 275P I shall be more cautious. I shall speak to the government amendments and let the Opposition move their amendments. We can vary these procedures as it suits us. I shall speak to Amendments Nos. 275Q, 275R, 276, 276ZA and 276AA at the same time.

Clause 377(2) requires the authority to have procedures designed to ensure that the final decision giving rise to a warning or decision notice is taken by someone not involved in gathering the evidence. This subsection was introduced in response to a recommendation of the Joint Committee that the Bill

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should enshrine the role envisaged for the FSA's "Enforcement Committee". It deliberately leaves open the form that this separation must take, so as not to set the FSA's current administrative procedures in stone. It is right that it should be able to change them from time to time in the light of experience and in line with best administrative practice.

As Clause 377 is currently drafted, this separation requirement would apply only to decisions which give rise to a warning notice and a decision notice. This covers disciplinary type decisions and decisions to revoke authorisation, approval and so forth, and decisions to refuse (or not fully grant) applications.

The Government's Amendments Nos. 275P, 275Q and 275ZA apply the important principle of separation also to supervisory decisions such as decisions to vary Part IV permission. I believe that that goes beyond what was required to meet the concerns of the Joint Committee, but they should be all the more welcome to the Committee for that.

However, this extension raises new issues. We are all conscious of the need to ensure that the authority is able to act speedily when necessary in order to ensure that consumers are not put at risk. That concern has lain behind many of these procedural changes. Amendment No. 275R therefore allows the authority's procedures to provide for a supervisory decision to be taken by an appropriately senior person within the authority even though he may have been involved in some way in gathering the evidence, if this is necessary in order to avoid harm to the interests of consumers which might be caused if the decision was delayed whilst it was considered by a separate person.

It is of course important that this should not mean that decisions are taken by someone unsuitable within the authority. Accordingly, the amendment goes on to provide that the person must be of a level of seniority appropriate to the importance of the decision, and this level of seniority must be specified in the published procedure on which the authority is required to consult by Clause 378.

The "supervisory notice" category is defined by Amendment No. 276AA to cover notices issued in relation to decisions taken to intervene in relation to a collective investment scheme under Clause 250; to suspend promotion of an overseas collective investment scheme under Clause 261; to intervene in relation to an overseas scheme under Clause 273; or to impose a requirement on a former underwriting member of Lloyd's under Clause 314.

We will bring forward amendments at Report to extend that to include the procedures applicable for varying an authorised person's Part IV permission, for discontinuing or suspending the listing of any securities under Part VI, or for imposing requirements under Part XIII on an incoming firm. We did not insert the references to these new clauses at this stage because some of the new clauses themselves need to be added on Report.

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The remaining government amendment in this group, Amendment No. 276, is a minor drafting point. I beg to move.

Lord Kingsland: I shall respond to what the Minister has said on Amendment No. 275R, while my noble friend Lord Saatchi will speak to our Amendment No. 276A.

As regards Amendment No. 275R, this amendment inserts a new subsection, subsection (2A) in Clause 377. It sets out a requirement that the authority must determine the procedure it is to follow in relation to the giving of warning and decision notices, to which are now added supervisory notices as defined in Amendment No. 276AA.

The most important part of this procedure is that the decision that gives rise to the obligation to give a notice is to be taken by a person not directly involved in establishing the evidence on which the decision has been based. In other words, the investigatory function is to be separated from the enforcement function. As I understand it, Amendment No. 275R will provide an exception to this principle. The exception will be that in the case of supervisory notices, the decision to issue the notice can be taken by the same person investigating, if the authority thinks that this is necessary in order to protect the interests of consumers, and if the person taking the decision is of a sufficiently senior level.

I can see the sense in this procedure, which the Government have indicated will apply only where it is necessary for the authority to act swiftly in emergencies. However, although the authority may need to take the enforcement decision quickly, I think that it would be perfectly appropriate to urge the Government also to provide that, once the enforcement decision has been taken, a separate senior official of the authority should review that decision internally and be empowered to reverse it. Presumably the emergency would then be over and therefore the normal procedures would apply, albeit retrospectively.

I emphasise that our Amendment No. 276A is still needed. It relates to Clause 377(9) which provides that the FSA's failure to follow its published procedures does not invalidate the notice given. In other words, the person who decided to issue the notice could be the same person who investigated the circumstances, even though new subsection (2A), which we have discussed, does not apply.

I understand that the Government have justified subsection (9) by saying that it is needed to correct clerical and minor inaccuracies; this is because they do not want the whole regulatory procedure to be invalidated for this reason. However, there is no limitation to clerical or other minor errors. That is why we must insist that the provision applies only if the failure is not material and does not, as it were,

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prejudice the person who receives the notice. This seems to me to play fair with both the authority and the defendant.

Lord McIntosh of Haringey: It may be helpful if, before the noble Lord, Lord Saatchi, moves the opposition amendment, I respond to the point that has been made about Amendment No. 275R. The noble Lord has made what appears to me to be a perfectly legitimate point. He has recognised the need for swift action in such cases and has suggested that subsequently there should be a review by another senior person. Perhaps I may say, first, that we are referring only to supervisory cases here, not to regulatory cases.

Nevertheless, I should like to think about the practicality of the noble Lord's suggestion for a review. Without making any commitment at this stage, perhaps I may talk to him further on the matter between now and Report stage.

Lord Kingsland: I am most grateful to the Minister for that intervention.

Lord Saatchi: I wish to speak to Amendment No. 276A. Clause 377 requires the FSA to set out procedures in relation to the giving of warning notices and decision notices. In particular, the clause separates the people who investigate from the people who decide on enforcement, which is as it should be. However, subsection (9) then allows the FSA to ignore its own procedures, which is not as it should be. So far, the Government have refused to delete subsection (9) or limit it to situations where the firm is not unduly prejudiced. The Government, I believe, think that subsection (10) solves our problem. However, we disagree because we find that that works only if the authorised firm appeals. Therefore our amendment seeks to deprive the FSA of the right to ignore its own procedures except in minor clerical cases.

Lord McIntosh of Haringey: I shall respond to Amendments Nos. 276YA and 276A. Subsection (9) of Clause 377 does not excuse the FSA from the need to take care in following its published procedures. It is important that these procedures are transparent and fair. It is also important that people can rely on their being followed.

However, subsection (9) is needed in order to ensure that the tribunal procedures, which are designed to test out the merits of the decision, cannot be hijacked by lengthy arguments on prior procedural details. For example, it would be ridiculous if a person could argue that some minor deviation in the way that a notice was drafted meant that the notice was ineffective, that the tribunal could not determine the merits of the case and that the whole procedure had to be started afresh. It would be worse still if this meant that the person was able to ignore an important supervisory notice that varied his permission or otherwise required him to behave, or refrain from behaving, in a certain way.

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In this latter situation, the arguments might potentially not be raised at the appropriate time, but months or even years later when the FSA sought to take further action against a firm which had ignored an earlier FSA decision. We would not want a minor clerical error in the drafting of a notice to be the ground for reopening a decision.

As the Government explained in another place, where the FSA has failed to follow its procedures, the appropriate course is for the tribunal to proceed to hear the case, exercising its unfettered discretion to consider the merits of the FSA's decision.

The tribunal is a first instance tribunal. The tribunal's own fair procedures should rectify any failure by giving the person a fresh chance to have a fair hearing. It is right that its consideration should overtake the FSA's consideration, including any earlier procedural errors that may have been made by the FSA. Subsection (10) makes that explicit.

On Question, amendment agreed to.

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