Letter to Justin Wray, HM Treasury, from
Henry Manisty, Head of Government and Regulatory Affairs, Reuters
Ltd, supplied for information
THE REGULATION
OF FINANCIAL
SERVICES E-COMMERCE
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
| 
