Select Committee on European Union Minutes of Evidence

Letter to Justin Wray, HM Treasury, from Henry Manisty, Head of Government and Regulatory Affairs, Reuters Ltd, supplied for information


Thank you for seeing Ben Wilson and me recently to discuss online financial advertising and related matters connected with HMT's programme of regulatory modernisation.

  We would urge HMT to undertake further public consultations on the financial promotions and regulated activities order with the aim of ensuring that their provisions are:

    (i)  clear and workable for the online economy; and

    (ii)  fully in accordance with European Community legislation and with policies developed elsewhere in government.

  On the attached sheet we have summarised the main e-commerce relevant points that Reuters suggest should be addressed in revised Exemption and Regulated Activities orders so as to achieve the above objectives. In addition to these points, we would strongly urge HMT to review the provisions relating to "making arrangements enabling or facilitating deals" in the draft Regulated Activities Order with the aim of achieving clarity, and of ensuring that the mere provision of technology or communications that is used by others for the purposes of investment business will not by itself constitute the activity of "making arrangements enabling or facilitating deals" for the purposes of the Order. At present, there is widespread uncertainty among City law firms, and even we understand at the FSA, about the meaning and scope of the arrangements provisions. They are mystifying to laymen. This is highly unsatisfactory in an area where breach is a criminal offence.

  We would make the general point that the two Orders have very great relevance to online suppliers and other companies that are not part of HMT's more usual constituency of authorised firms. Such firms will not be familiar with the language and other intricacies of UK financial services regulation. Furthermore, in the online sector many of such firms will be resident in other countries, whether within or outside the European Union. These factors make it particularly desirable for clear and concise terminology to be employed wherever possible and for HMT to be pro-active in seeking to understand the activities and needs of this lay community.

  We recall that the First Report of the Joint Committee on Financial Services and Markets[12] reviewed the issues of financial promotions and concluded as follows:

    "98. The changing nature and growth of communications pose challenges to the regulatory authorities which seem only likely to increase in the future. We recommend that the Government should carry out a review of these likely challenges and ways of dealing with them."

  We regret that this recommendation of the two Houses of Parliament has it seems thus far been ignored by HMT. We urge HMT to undertake this review without further delay so that it has the best possible opportunity, on the basis of a well-informed position, to create a regulatory framework that will facilitate the United Kingdom becoming the world leader in financial services e-commerce.

  Finally, we would be very grateful if you could clarify HMT's position in respect of the newly extended EU Transparency Directive as it relates to the Financial Services and Markets Act (by reason of Clause 19 concerning online financial promotions) and in relation to the two orders referred to above. Each of these measures relates to information society services and therefore, in order for each to be legally enforceable, appears to be covered by the obligatory prior notification mechanisms provided for in the Transparency Directive.[13]

  We would be very pleased to discuss any of these points with you if you believe this could be useful.

21 June 2000

12   HL Paper 50-1/HC 328-1. Back

13   In accordance with the Directive, at a stage at which the measure notified may be further modified. The Directive expressly applies to provisions relating to online services even when they are contained within more general measures. Back

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