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Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Kingsland, for his support for the other amendments in the group. I am grateful, too, for his explanation of Amendment No. 142. He is right in saying that it is our intention simply to enable a person acting in a fiduciary or comparable capacity to exercise the rights that the private person would have and nothing more. But that is clear already.

The new subsection goes on to state that the loss suffered by a A--that is, the fiduciary or equivalent--is to be treated as a loss suffered by a private person,

"in relation to whom A was acting in that capacity".

So it is only fiduciaries or persons acting in some other prescribed capacity on behalf of private persons who are added by the amendment. I hope that when the time comes the noble Lord will feel able not to pursue his amendment.

Lord Kingsland: My Lords, I am grateful to the Minister for his explanation. His interpretation of the clause is the one I seek. However, with great respect to the noble Lord, I believe that it would provide the clarity that the legislation needs if he accepted the amendment which I have tabled. Litigants will now have to look not only at the Act but also at the Minister's speech in order to acquire the necessary clarity.

Lord McIntosh of Haringey: My Lords, we have some time between now and Amendments No. 141 and 142. Although we are occupied with other matters we shall both continue to think about it, as will my officials. My view is that what I have said is entirely clear from the Bill and therefore the amendment, though well intentioned, is not necessary.

On Question, amendment agreed to.

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Clause 19 [Restrictions on financial promotion]:

Lord Kingsland moved Amendment No. 8:

Page 8, line 22, leave out ("or inducement to engage in investment activity") and insert ("to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so").

The noble lord said: My Lords, in moving Amendment No. 8 I shall speak also to Amendments Nos. 9 and 82.

I understand that the Minister accepts that a mere factual statement would normally not be caught by Clause 19. We, in turn, accept that, in some cases, a statement of fact could be used as a way of persuading the person receiving the communication to buy or sell investments.

At a meeting I was privileged to attend last week with the Minister, I think it was agreed that the Treasury would think further about the wording which should be used to catch what was intended--namely, promotional communications. On the basis that the Government will ensure that it is made clear in the financial promotions exemption order that a mere statement of fact--for example, that British Land shares had gone up 10 per cent in the preceding week--will not be treated as an inducement unless it is intended to act as an inducement--we will withdraw our amendment.

Amendment No. 9 is repeated from Report stage because the Minister also stated, at the same meeting last week, that he will consider again whether to accept the terms of Amendment No. 9 or something similar. The amendment seems to me, at any rate, to conform with what the Treasury wishes to achieve. We entirely accept that the amendment can be introduced in the Treasury's exemption order rather than in the Bill. We would be grateful to hear what the Minister has to say about this.

Finally, I turn to Amendment No. 82. The present wording of the Bill gives rise, for the first time, to a world-wide prohibition on marketing collective investment schemes which have not been approved by the authority for marketing to the general public. In our view it is not appropriate to impose this prohibition where the local regulator allows marketing to the particular category of investor which the firm wishes to approach. This prohibition means that the only firms which cannot market the fund, in the country concerned, to investors outside the authority's permissions, which the local regulator allows to be solicited, are firms authorised under the Bill. That is wholly contrary to the Bill's principle that the UK's competitive position should be maintained.

The Minister in another place indicated, in Committee, that she accepted that it is not necessary to impose as wide a restriction on the marketing of collective investment schemes by firms which are authorised under the Bill as the prohibition on financial promotions by persons who are not authorised under the Bill at all.

I believe that the Treasury indicated, at the meeting held last week which the Minister kindly arranged, that it intends to provide an exemption from the

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prohibition on marketing unregulated collective investment schemes in the case of certain communications from within the UK to investors outside it; although the exact scope of the exemption has not yet been decided. On the basis that this exemption will cover our concerns and allow marketing of unregulated collective investment schemes to investors outside the UK as now, even if the FSA has not provided a specific exemption for them, we would be pleased to withdraw the amendment.

Lord Wedderburn of Charlton: My Lords, perhaps I may ask the noble Lord a question about the first two amendments to which he spoke; that is, Amendments Nos. 8 and 9. The phrase which the noble Lord chose is that,

"which is intended",

which is obviously clear,

"or might reasonably be presumed to be intended".

I do not know what that means. I would understand a second limb that said, "or might reasonably be understood to be intended". That would be a perfectly normal process, but presumption comes from somewhere else. Where is the presumption from? What kind of matter would be presumed to be intended other than that which would be understood to be intended?

Courts will obviously pay great attention to the fact that that word is used and not the normal word "understood".

5 p.m.

Lord Kingsland: My Lords, I am grateful to the noble Lord for his intervention. The object of the phrase,

"or might reasonably be presumed to be intended",

is to prevent the authority from having to prove mens rea in a particular case; in other words, it refers to an inference from the facts. If the noble Lord is unhappy with the word "presumed", I shall be happy to replace it with a word that he considers more appropriate. But that is the point.

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Kingsland, for taking the time to come and talk with us last week in relation to the issues behind these amendments and I can certainly confirm that in the course of that discussion we felt that the issues between us were narrowing, as has happened so often in this Bill. But that does not mean, I am afraid, that it enables me to accept his amendments; nor does it persuade me, after consideration following the meeting, that we need to make further amendments to the Bill.

Amendment No. 8 replicates an amendment at Report stage. It would delete "inducement" from the financial promotion restrictions and replace it with,

"an invitation to engage in investment activity or information which is intended or might reasonably be presumed [or understood] to be intended to induce any person to do so".

The amendment registers concerns that have been expressed throughout parliamentary proceedings on this Bill, that the language of Clause 19(1) is drawn too

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widely and that it requires amendment to achieve the Government's stated policy to capture promotional communications only. That is where we are generally in agreement.

I acknowledge that there are different dictionary definitions of "inducement" and one of the possibilities is to,

"bring something about or cause it to happen".

But there is a difference between the meaning that that word could be given on its own and the meaning that it will have in the particular context of this Bill.

When we met last Thursday to discuss this issue, notwithstanding the breadth of meaning ascribed to "inducement" outside the Bill, I said to the noble Lord, Lord Kingsland, that the Government do not believe that "inducement", as used in the Bill, will catch communications where the effect has been to prompt an investment decision regardless of the motivation of the communicator. We are convinced that "inducement", in its Bill usage, already incorporates an element of design or purpose on the part of the person making the communication.

When Clause 19 was amended in Committee in another place, we did not intend to move away from the idea that there must be an element of persuasion contained in the communication. If we had intended the clause to catch communications that prompted an investment activity, regardless of the communicator's intention, we would have made that clear by using a term other than "inducement".

In addition, we consider that the word "inducement" gathers some flavour from its juxtaposition with "invitation". Our intention, in relying on "invitation or inducement", has always been to capture the flavour of "old" advertising and cold calling, but without being limited to specific media implicit in those terms. That, after all, is the reason why we are making any changes at all in this Bill from the Financial Services Act 1986.

It follows that the clause as it stands will not catch communications of the type that have been put to us as giving rise to concern; for example, public announcements, exchange of draft share purchase agreements in corporate finance transactions or cases in which the recipient of a communication simply misunderstands its contents and engages in investment activity as a result. Those are not inducements.

We have considered carefully whether there would be advantage in expanding on "inducement" in the way that the amendment proposes. Inevitably, in determining whether a particular communication constitutes an inducement, much will depend on the context. Something that would not be considered an inducement in one set of circumstances could well be an inducement in another. Very often the difference will depend on the actual or perceived intent behind the communication. As we indicated, we believe that this already emerges from the word "inducement", and we do not want to compromise that.

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Our objection to Amendment No. 8 is that it does not throw any light on what "inducement" actually means. In fact, it is possible that an amendment to the effect of the noble Lord's would have precisely the opposite effect to that which he intends. By making explicit mention of intention on the face of the Bill, there is a danger that the courts will take "inducement" to have the wider meaning that it may bear in other contexts outside the Bill. There is no reason to mention "intention" if one believes, as we do, that the notion of design or purpose is implicit in this context. It follows that by making explicit provision for intention, we could imply that we are using the word "inducement" in its widest sense. That could well have the effect of catching some of the things that we and noble Lords opposite do not want to catch. We consider therefore that it is best to leave the provision as it stands.

Amendment No. 9 seeks to amend subsection (3) of Clause 19 so that subsection (1), which sets out the basic prohibition, does not apply unless the communication is intended, or might reasonably be presumed to be intended, to be acted on by a person in the United Kingdom. Amendment No. 82, also proposed at Report stage, proposes a similar change to Clause 233, which relates to promotions of collective investment schemes.

Amendment No. 9 focuses on what is meant by,

"communication ... capable of having an effect in the United Kingdom",

whereas Amendment No. 82 seeks to limit the prohibition to promotions which are made to persons in the UK. The noble Lord, Lord Kingsland, described them as a "world-wide ban", which contains a certain amount of hubris; as if we could impose a world-wide ban. I shall discuss those amendments together because they are related.

The Government believe that the issue of territorial scope is one which is best dealt with in subordinate legislation. For Clause 19 we have already proposed something designed to address the issue raised by Amendment No. 9 in the draft order set out in the Treasury's second consultation document on financial promotion which was issued in October last year; namely, cutting back the,

"capable of having an effect",

test in subsection (3) of Clause 19. We are giving careful consideration to representations that have been made on this and other points. We propose to ensure that the prohibition only catches cases where there are risks to consumers in the United Kingdom so far as our intentional obligations allow.

In relation to Clause 233, noble Lords will recall that in Committee a new Treasury power was introduced to make exemptions. One of the main purposes of that was to enable exemptions to be made to allow outward promotions to other jurisdictions where it was appropriate to do so. We intend to do that.

In Committee, these amendments were part of the general exercise of amending Clauses 19 and 233 to ensure that the Treasury has the necessary flexibility to adjust the scope of both prohibitions, not only to take

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full account of technological developments, but also to deal with our international obligations. In particular, we are subject to certain EU requirements in relation to certain outward and inward promotions.

Clauses 19 and 233 now provide for a Treasury order-making power to disapply the prohibition in both clauses in relation to communications originating in specific countries or groups of countries such as EU member states. These provisions will enable us to comply with our obligations to give effect to requirements such as a home state regime for e-commerce transactions, while at the same time enabling us to give effect to obligations which arise by virtue of general EU law under the treaty. Let me say quite categorically that the Government are committed to ensuring that the financial promotion regime set out in both Clauses 19 and 233 complies with Community requirements.

With specific regard to Amendment No. 9, we maintain our belief that it is not at all clear what "acted on" means. I refer to the example we used on Report. If a communication is sent from abroad for onward transmission by an agent in the UK, is that a communication which is intended to be "acted on" by a person in the United Kingdom?

We have met on this subject. We have thought about this subject. The noble Lord has thought about this subject. We take the view that these amendments would not add to the Bill and may indeed subtract from it.

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