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The noble Lord said: My Lords, in moving this amendment, I shall speak also to government Amendments Nos. 21, 22, 143, 160, opposition Amendment No. 161, and government Amendments Nos. 162 to 167 and 170 to 173.
The three amendments to Clause 34 (Amendments Nos. 20 to 22) correct the incorrect and unintended implication from the use of "it" and "its" in that clause; namely, that a person authorised as a result of paragraph 1(1) of Schedule 5 may not be a natural person. The provision covers operators, trustees and depositories of recognised collective investment schemes. The question of whether these roles can be
The Government's amendments to Schedule 3--namely, Amendments Nos. 160 onwards--are part of our response to concerns raised by the Opposition at Committee stage in this House. The changes ensure that the passporting provisions work properly and are fully compatible with European law. As the Bills stands, if an incoming EEA firm fails to go through the relevant procedures set out in paragraphs 13 and 14 of Schedule 3 before carrying on regulated activities in the United Kingdom, the enforcement of the agreements provisions of Clause 24 will apply to transactions effected in the course of carrying on this business. Likewise, Clause 25 will apply to transactions effected by an authorised person in consequence of anything said or done by the incoming firm in the course of carrying on such business.
We have given a lot of further thought to the enforcement provisions over the course of our debates and have made a number of amendments to meet concerns raised by noble Lords opposite and their colleagues in another place. We have also reconsidered their application in this context and have concluded that this is probably disproportionate and possibly discriminatory.
If an outgoing UK authorised person carries on activities covered by the relevant directive in another EEA state without having gone through the relevant procedures, the Bill will not render transactions effected by that person in the course of carrying on those activities unenforceable. To apply the enforcement of agreements provisions to incoming firms that fail to follow the proper procedures might, therefore, be discriminatory.
The similarity of approach of the opposition Amendment No. 161 suggests that the noble Lords opposite share our view, at least to some extent, that these provisions need to be disapplied. The new paragraph that we propose to insert after paragraph 15 disapplies Clauses 24 and 25 in relation to any agreement entered into by an EEA firm in the course of, or any agreement entered into by an authorised person as a result of, regulated activity carried on without the relevant procedures having been completed. The amendment also disapplies Clause 27, which deals with enforcement of deposit agreements. I apologise to your Lordships for the fact that this was omitted from the list that we supplied last week. It has been corrected and relaid, and now appears in the corrected form on the Marshalled List.
Leaving aside the point about Clause 27, the Opposition alternative is less generous in terms of the circumstances in which Clauses 24 and 25 would be disapplied. The use of the term "permitted activity" may be intended to narrow the effect of this paragraph to activities covered by the directives, rather than any regulated activity. However, the definitions of "permitted activity" in paragraphs 13 and 14 of Schedule 3 are related to the activities set out in the consent notices provided for in those paragraphs. A
As this is the most significant step in the procedures as far as concerns the EEA firm and its home state regulator, narrowing the effect of the new paragraph to only those cases where that step had in fact been taken would pretty well completely neutralise the purpose of the amendment.
As regards UK firms, sub-paragraphs 18(11) and 19(9) of Schedule 3 currently provide that the FSA may make rules for UK firms not subject to the rulemaking powers under Part X which offer cross-border services without having completed the necessary procedures set out in those paragraphs. This is aimed at subsidiaries of UK credit institutions which may benefit from the extended passport under Article 18 of the Second Banking Coordination Directive, but whose activities in the UK may not be regulated activities under the Bill; for example, consumer credit lenders.
We have decided that that approach is unsatisfactory. It is not clear that a power to make rules for unauthorised persons will be effective in ensuring that the necessary notification procedures are observed, which is of course necessary in order fully to meet the requirements of that directive. So the new paragraph that we are inserting after paragraph 19 makes a failure to follow the correct notification procedure a criminal offence. This follows the existing law and removes the need to make provision for the FSA to make rules applicable to persons who would not otherwise be subject to FSA rules. Therefore, we are deleting those two sub-paragraphs.
Amendments Nos. 162 to 167 address particular concerns raised by the Opposition in Committee on 21st March; namely, that the provisions of paragraph 19 did not accurately reflect the notification procedures for provision of cross-border services under the Investment Services Directive. Therefore, these amendments explicitly align the provisions on the outward passport for cross-border services with the provisions of the Investment Services, Second Banking Coordination Directive, Third Life Insurance Directive and Third Non-life Insurance Directive.
We are also responding to an issue raised by the noble Lord, Lord Kingsland, by way of our Amendment No. 163. This will remove subparagraph 19(1)(b) which prevents a UK insurance company from commencing its cross-border activities until the FSA has made the necessary notification--in the form of a "consent notice"--to the host state regulator and has informed the company of the fact. The requirement is not provided for by the insurance directives in relation to cross-border services, although it is in relation to the establishment of a branch in another member state. Therefore, imposing it here would be incompatible with the directives. Consequently, we propose to remove subparagraphs 19(3) to (6).
Finally, our amendment to paragraph 19(7)--Amendment No. 165--clarifies that the FSA must notify a firm's host state regulator of a notice of intention by sending a copy of the notice of intention to the host state regulator within a month of its receipt by the FSA. The amendment adds a requirement that when the FSA sends the notice of intention to the host state regulator it must also give written notice to the firm. The amendment also adds the requirement that if a firm's EEA right derives from the Investment Services Directive, it must wait until it receives this written notice before it begins providing the service to which the notice of intention relates.
Our amendments to Schedule 6 address a number of issues arising in relation to paragraph 2, which establishes various conditions for authorisation that relate to the location of a person's registered and/or head office and, indeed, where he carries on business. Paragraph 2(1) proceeds on the assumption that every body corporate incorporated under the law of any part of the United Kingdom will have a registered office. That may not be the case; for example, a body incorporated by a private Act of Parliament may not have a registered office.
Paragraph 2(2) imposes threshold conditions on EEA persons which, in the case of EEA firms under Schedule 3, would give the FSA a responsibility that went beyond that allowed for the host state by the home/host state division of responsibility established by the directives. We also consider that it may be disproportionate in respect of EEA persons who are not subject to the directives, particularly treaty firms qualifying for authorisation under Schedule 4.
Thirdly, we have concluded that paragraphs 2(3) to (5) impose unnecessarily restrictive conditions on persons from non-EEA States. In particular, sub-paragraph (5) should not apply to non-UK persons. The requirement to carry on business in the UK should be the default requirement for UK nationals and not, as it is presently drafted, for unincorporated persons from other states.
To the extent that it is necessary for the FSA to impose requirements in relation to the corporate or structural arrangements of overseas firms, this can be adequately achieved through the suitability criterion under paragraph 5, which requires the FSA to be satisfied that a person's affairs are conducted soundly and prudently.
We propose to amend paragraph 2(1) of Schedule 6 so that the requirement that a body corporate incorporated under the law of any part of the United Kingdom must have both its head office and its registered office in the UK applies only to a body corporate that actually has a registered office. In the case of any other body corporate, the requirement should be that the head office must be in the United Kingdom. This is required by the single market directives.
To a large part, these amendments respond to points which the Opposition have raised in debate here and in another place and we are grateful to them. They also reflect some further thinking on these issues by the Government. The result is a set of amendments which serve to reduce some unnecessary burdens on overseas persons doing business, or seeking to do business, in the United Kingdom. I beg to move.