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Lord Bach moved Amendment No. 6:
- After Clause 9 insert the following new Clause--
(" .--(1) This section applies to a representation made, in accordance with arrangements made under section 7, by the Practitioner Panel or by the Consumer Panel.
(2) The Authority must consider the representation.
(3) If the Authority disagrees with a view expressed, or proposal made, in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.").
The noble Lord said: My Lords, the two opposition parties tabled joint amendments on the first day of Report about representations made to the authority by the practitioner and consumer panels.
In response, my noble friend indicated some sympathy for certain of the points raised in debate and said that he believed that there was scope for improvements to be made to the arrangements under the Bill for giving feedback to the panels. Accordingly, he undertook to consider the matter further.
Having given the matter careful thought, we have tabled this new clause which requires the FSA to consider representations made to it by either panel in accordance with the arrangements under Clause 7 and, where the FSA disagrees with those representations, to make a written statement of its reasons for disagreeing.
We believe that this new clause adds, in a structured way, a great degree of transparency and therefore improves on the arrangements for the panels. I commend it to the House. I beg to move.
Lord Kingsland: My Lords, I think I can say that this is a rare moment for the connoisseur of the arts and mysteries of Her Majesty's Treasury to savour; because this is the second acceptance in a row of amendments tabled by the Opposition.
Perhaps I may say to your Lordships that this amendment is of even greater consequence than its predecessor because, as the Minister has said on frequent occasions, the authority has legislative powers. As a regulatory authority, its position is unique in that respect. It will make rules which it will not have to bring to your Lordships' House before they become binding. Therefore, it is right that the authority should be answerable to somebody and that somebody--or perhaps I should say, those somebodies--are the practitioner panel and the consumer panel.
I am delighted that, in circumstances where there is disagreement between the authority and those panels, the authority will have to give its reasons. I have just one question to put to the Minister. Can I be assured that, in circumstances where the authority gives such reasons, those reasons will be made public?
Lord Newby: My Lords, I join the noble Lord, Lord Kingsland, in thanking the Government for coming forward with an amendment which meets the concerns raised in our earlier amendments. Again, I express the hope that this new trend of flexibility which the Treasury has shown in relation to these two amendments may be a growing trend in the future.
4.45 p.m.
Lord Bach: My Lords, the answer to the noble Lord's question is "yes". I am delighted if we have, on this occasion, managed to please the noble Lord. Perhaps in future he will look more kindly on the Treasury and not believe everything he reads about it in the quality newspapers.
On Question, amendment agreed to.
Clause 18 [Authorised persons acting without permission]:
Lord McIntosh of Haringey moved Amendment No. 7:
- Page 8, line 17, leave out subsection (2) and insert--
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 7, 10, 12, 14, 17 to 19, 24, 61, 70, 71, 141 and 142, which is an opposition amendment to Amendment No. 141. The origin of this group of amendments goes back further than this House. On 20th July 1999, in another place, the Government undertook to reconsider the different provisions in the Bill dealing with rights of action where contraventions of requirements such as those that may be imposed under Parts IV, X and IX are concerned. Part IV is concerned with permission to carry out regulated activities, Part X with rules and guidance, and Part IX with incoming firms.
The broad aim is to reproduce the current pattern of rights of action as provided for under Sections 62 and 62A of the Financial Services Act 1986 as far as it is possible to do so given the different structure of the Bill.
Under those provisions, consumers enjoyed rights of action not only for breaches of rules, but also for breaches of requirements imposed using the intervention powers under the Act. Those types of requirement, both rules and interventions, will often correspond more correctly to permissions under Part IV and requirements imposed on incoming firms under Part IX than rules made under Part X.
The position is also complicated by the different circumstances in which rights of action may be enjoyed by non-private persons depending on the nature of a breach. That is a more complicated situation than is currently allowed for under either Clause 18, which confers no rights of action for permission breaches, and Clause 197, which confers rights of action by analogy with Clause 145 in Part X.
Our amendment to Clause 18 and the new clause after Clause 197 will therefore confer on the Treasury a power to prescribe the circumstances in which a person may have a right of action as a result of a breach of a requirement imposed under Parts IV or XIII respectively.
I should make it clear here that the default position will be that breaches of Part IV and Part XIII requirements do not attract rights of action. Only the cases that are prescribed by order will give rise to such rights. That is necessary to ensure that there is similar treatment between authorised persons who are subject to rules and requirements with similar effects. For example, some investment firms are constrained from
However, it is not our intention to create rights of action in respect of requirements which are equivalent to financial resources rules; for example, individual capital ratios for banks, or premium income limits for insurance companies. The effect will therefore be to make it clear that breaches of these requirements do not attract rights of action.
Part X already contains a power for the FSA to specify whether a breach of a rule by an authorised person attracts rights of action for private persons, and to specify that some classes of rules attract rights for non-private persons. The amendment to Clause 145 ensures consistency within the Bill by aligning the power with the new provisions in Clauses 18 and 197.
The amendment therefore replaces the FSA's power with a power for the Treasury to prescribe circumstances in which a right of action that would be exercisable by a private person can be exercised by a non-private person. This would, for example, enable the Treasury to reproduce Regulation 3 of the Financial Services Act 1986 (Restriction of Right of Action) Regulations 1991, which ensures that a non-private person--for example, a solicitor, who is acting in a fiduciary capacity for a private person, for example, a minor--can exercise the same rights as a private person. We did not feel that it was sufficiently clear that the current wording would enable us properly to address this sort of situation.
The amendment to Clause 69(2) makes equivalent provision for contraventions under Part V.
I turn now to Clause 397. Reviews of past business are in effect a mechanism for redress when there has been a widespread or regular failure on the part of authorised persons to comply with rules and private persons have suffered losses in respect of which authorised persons are liable to make compensation payments.
As Clause 397 stands, it would not be possible to set up a review of past business which required authorised persons to compensate non-private persons. Our amendment will allow them to do so in circumstances and capacities to be prescribed by the Treasury. This group of amendments has been brought about as a result of the Government's careful consideration of points made on different occasions by Members of the Opposition. I am grateful to them for expressing their concerns. I hope they will support these changes. Perhaps I may respond to the opposition amendment when it has been spoken to. I beg to move.
Lord Kingsland: My Lords, apart from our own Amendment No. 142, the amendments in this group
Amendment No. 142 seeks to deal with the following problem. Government Amendment No. 141 seeks to allows a non-private person acting as an intermediary, typically a fiduciary such as a trustee or agent, to bring an action for compensation under Clause 397 for widespread or regular rule contraventions even though the intermediary is not a private person.
That seems fine in principle, but in our submission the clause, as drafted, allows the intermediary to bring an action on behalf of other non-private persons. We believe that that cannot be right. Our amendment to the government amendment is to restrict the right of an intermediary to bring an action to circumstances in which it is acting solely for private persons who could bring the action themselves if they were not using the intermediary.
That was the approach adopted in the 1991 Treasury regulations which restricted the right of action for contravention of FSA rules to private investors. We think that that approach is the proper one to adopt.
("(2) The contravention does not--
(a) make a person guilty of an offence;
(b) make any transaction void or unenforceable; or
(c) (subject to subsection (3)) give rise to any right of action for breach of statutory duty.
(3) In prescribed cases the contravention is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.").
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