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Lord Jenkin of Roding: My Lords, I wish to say a few words in support of Amendment No. 95B in the name of my noble and learned friend. Perhaps one should have paid more attention to this. But, on reflection, it is a surprising provision to find in a Bill that requirements that may be imposed, may extend to activities which are not subject to regulation under the Bill. It would be helpful if the Minister could give some indication of what the provision is aiming at.

Reverting to the earlier amendment on which the House divided, let us suppose that we have a regulated firm of insurance brokers or financial advisers and the authority decides, as a condition of the authorisation, that it is going to impose requirements in relation to that firm's giving of advice on mortgage products. Is

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there anything in the clause which would prevent that being done? It seems to me it is entirely open to the authority to do it. Yet the Government say that they do not intend the Bill to extend to that activity in the early stages. My noble and learned friend raises a good point and we need an explanation.

Lord McIntosh of Haringey: My Lords, I cannot resist the temptation to respond to the noble and learned Lord, Lord Brightman, first. I love that kind of point and he raised it in his characteristically lucid way. The answer to his question is case four; in other words, it is the dictionary definition. My noble friend Lord Peston was right in saying that, in general terms, if one has lectured on something for 40 years without anybody ever questioning what was meant by "consumer", it is probably better to leave it that way unless we intend the word to be used in a different way in legislation.

However, as I explained when responding to the noble Lord, Lord Elton, earlier this afternoon, there are many instances where words are used in a special case in this Bill. Indeed, as I said, we set out a glossary in the Explanatory Notes, which is now out of date as regards its references as to where to find the definitions. There are plenty of definitions; in fact, the Bill is overflowing with definitions of words that are used other than in their normal dictionary sense. But this is not one of them.

The noble and learned Lord, Lord Brightman, also asked me whether there was any electronic equipment that would enable him to detect other cases where the word is used. I assume that this legislation, like all legislation, is in electronic form on the Treasury's website, or on an equivalent website. If that is the case, it can be subject to key word searching in the same way as any other electronic file. However, if I am wrong about that, I shall write to the noble and learned Lord. It would certainly be absurd for us to engage in 19th-century pursuits, such as concordances carried out manually by scholars or rather by the unfortunate research assistants of scholars. I believe that we are entitled to better than that in the 20th century. My noble friend reminds me that I should refer to the 21st century; that is indeed correct. Well, I have been too busy to catch up.

I turn now the amendments tabled in the name of the noble and learned Lord, Lord Fraser. Amendment No. 95A would simply remove the example of the sort of limitation that could be imposed on the carrying on of a "regulated activity". I can assure the noble and learned Lord that the inclusion of a single example, which is intended to be a helpful illustration, is not something that will give rise to the restraints of the normal canons of construction to which he referred. That is certainly not the intention; nor is it the effect of the phrase. It has been included to make it clear that the power can be exercised in this important way. There are other examples of exemplifications that do not invoke the Latin clause from which he spared us; namely, inclusio unus exclusio alterius--I hope that I said that correctly.

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In granting permission to carry on an activity, it is vital that we should be clear that the FSA can specify circumstances in which it may or may not be carried on. Without the ability to make such restrictions, the FSA would be required to err on the side of caution in borderline cases and to withhold permission to carry on the regulated activity. I cannot believe that that is what the noble and learned Lord intended.

In deciding whether to impose such limitations, perhaps I may reassure the noble and learned Lord that the FSA must have regard to what is necessary to satisfy it that the threshold conditions are met and that consumers are adequately protected. If the applicant feels that the FSA has not been reasonable in imposing the limitation, he has recourse to the tribunal.

Amendment No. 95B seeks to prevent the FSA imposing requirements on the way in which how an authorised person conducts his unregulated activities. This, too, is essential if we are to have an effective and proportionate regulation. Let us take a simple example: how would banking supervision work if requirements could not be imposed on the way or the extent to which they lend? Given that the "own initiative power" is such an important tool in dealing with systemic issues--I shall deal with the genesis of that power when I describe our amendments--it is vital that it should be capable of addressing the problems that arise in the conduct of authorised persons' unregulated activities.

The noble Lord, Lord Jenkin of Roding, also referred to Amendment No. 95B. Of course, any requirements imposed by the FSA in relation to unregulated activities must be proportionate and relevant to the FSA's objectives under the Bill. That is the overall constraint with which we are working. The FSA can impose a requirement on conduct of unregulated activities only if the grounds set out in Clause 43(1) are satisfied. However, this is not a backdoor approach, as feared by the noble Lord, to the regulation of unregulated activities. It is essential that the FSA should be able to impose requirements on unregulated activities; for example, any financial resources requirements would need to extend to the whole of a firm's business. They could not be restricted to those parts of the business that are regulated because that would be like the judgment of Solomon; if we tried to make that distinction, the baby might die as a result of being cut in half. It is only possible to impose a requirement having regard to the need to meet the threshold conditions and the need to protect consumers. That, of course, takes us back to Clause 37.

I shall now deal with the Government's amendments in this group. Amendments Nos. 96, 97 and 99 clarify the grounds on which the FSA may refuse permission or exercise its own initiative power under Clause 43. The aim is to ensure that these powers can properly be exercised in order to minimise wider systemic risks. Amendments Nos. 96 and 97 clarify the ability of the FSA to take account of the interests of potential as well as actual consumers in deciding whether to refuse an application for a Part IV permission.

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The amendments also remove the possible and unintended implication of the reference to "a group of consumers" that the FSA is bound only to consider the interests of specific consumers or groups of consumers, and not those of consumers generally. The purpose of that reference was to give the FSA the necessary discretion to refuse an application on the grounds that granting it would have an adverse impact on the interests of a broad group of consumers; for example, depositors. But given the nature of systemic risk, we believe it is desirable to make it clear that this discretion would apply where the adverse impact was to the interest of consumers and potential consumers generally.

Amendment No. 99 is similar in intent. The power under Clause 43 to vary or cancel a person's Part IV permission, which is referred to as the FSA's "own initiative power", is a critical part of the authority's range of powers to deal with a wide range of regulatory concerns, including systemic threats. Therefore, it is vital that this power should be exercisable when necessary in the interests of consumers generally, and not just those who are consumers of the regulated activities for which the authorised person has permission.

Before I forget, perhaps I may interrupt myself at this point and tell the noble Lord, Lord Jenkin, that, when I referred to the reference back to Clause 37, I should have said Clause 39. I am sure that the noble Lord noticed that error and that he would have picked me up on it later.

Amendment No. 99 also removes the words,

    "in relation to one or more, or all, of the regulated activities for which he has a Part IV permission",

from the end of case A. The amendment also takes the opportunity to reorganise the drafting of Clause 43(1) so that the three grounds appear as separate subsections (a), (b) and (c) rather than cases A, B and C.

Amendment No. 101 is also a drafting device. It defines the term "own initiative power" to which I referred earlier and which is already used elsewhere in this part of the Bill; for example, in Clause 45(6) and Clause 48(2). Amendments Nos. 102 and 103 incorporate the new defined term in Clause 44(1) and Clause 45(1).

Before I conclude, I should also give your Lordships notice that, following some discussion in another place of the head office requirements imposed by paragraph 2 of Schedule 6, we have been considering whether these requirements may bite a little too hard on some overseas firms, including some from elsewhere in the European economic area. We are checking to ensure that Schedule 6 is completely consistent with our Community obligations and with the need to maintain the openness of the UK financial markets. If necessary, we may table amendments at Third Reading. If we are in a position to lighten the regulatory burden in some way at that stage, I hope that noble Lords will feel able to indulge us.

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