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Lord Bassam of Brighton moved Amendment No. 30:
- Page 15, line 34, at end insert--
The noble Lord said: My Lords, in moving Amendment No. 30, I shall speak also to Amendments Nos. 34 and 37. During the debate in Committee, the noble Lord, Lord Cope, expressed concern that some of the activities undertaken by accountants during the course of their work might mean that they fell within the definition of private investigators, as defined in the Bill, and thus would require a licence. The amendments which I bring forward this afternoon deal with those issues.
As I indicated during the debate, the Government wish to ensure that the provisions of the Bill are targeted on the specialist providers of security services. We have stated that we wish to regulate those providers but do not want the Bill's provisions inadvertently to catch groups which are not relevant to
Since Committee stage, we have held discussions with a variety of specialist bodies such as the Institute of Chartered Accountants in England and Wales, the Serious Fraud Office and the Financial Services Authority, as well as with a number of private companies. Those discussions echoed the concerns expressed in the Chamber in Committee, and we received some helpful advice on how to deal with the those concerns.
The Government accept that the wording of paragraphs 4 and 5 in Schedule 2 do not make it adequately clear that we are not seeking to include accountants in the Bill's regulatory framework. Amendments Nos. 34 and 37 therefore seek to provide a clear exemption for accountants from the definitions of private investigators. They also provide a clear exemption from the definition of a security consultant, in response to representations from the Institute of Chartered Accountants in England and Wales, which expressed the concern that some activities of accountants may also fall into that category.
Finally, Amendment No. 30 adds a definition to Clause 23, the Bill's interpretation clause, explaining what we mean by the term "relevant accountancy body" as that is used in amending Schedule 2. That definition builds on that proposed in the amendment that the noble Lord, Lord Cope, moved in Committee, and expands on it by adding in additional bodies.
We have listened carefully to the concerns that have been expressed to us on this matter, and we are grateful for the constructive nature of the discussions we have had. The amendments will ensure that professional accountants are excluded from the Bill's provisions.
The amendments to our amendments, which were moved by noble Lords opposite, seek to extend the exemptions to employees of members of those relevant accounting bodies; for example, trainees, secondees, support staff and other employees who are not members of the accountancy bodies that are listed in Amendment No. 30. We should remind ourselves that we are talking in this context solely about people who hire themselves out under a contract to supply clients with specialist services. Members of the relevant accountancy bodies and their staff who are working "in-house"--that is, for their own company--fall outside the scope of the Bill.
It is not necessarily the case that only members of those relevant accountancy bodies may be hired out under contract to provide services that are relevant to the Bill's provisions. Many of the large well-known accountancy firms have diversified and provide a wide range of services. For example, the publicity material of one of the very largest firms offers expertise in cybercrime, asset recovery, corruption investigations and fraud risk management.
It may well be the case that members of the relevant accountancy bodies as defined by Amendment No. 30 will play a part in some or all of those services. It is also possible that some employees who are not members of those bodies will also play a part. Amendments Nos. 35 and 38 would exempt the latter group from the need for a licence solely on the ground that they were employed by exempted persons. I do not think we should go that far. Employees of accountancy firms who are not themselves members of the relevant accountancy bodies may, if hired out under contract in some of the fields of investigation that I described just now, be undertaking the same type of work as people who legitimately offer their services as private investigators or security consultants but not as accountants. Those groups are rightly required to have a licence under paragraph 4 of Schedule 2. It would therefore be anomalous for non-accountants in accountancy firms to be exempt from licensing when private investigators and security consultants offering the same or similar services would be caught by the Bill. I hope that noble Lords will agree to Amendments Nos. 30, 34 and 37 and that noble Lords opposite will, having heard my comments in this afternoon's debate, withdraw Amendments Nos. 35 and 38. I beg to move.
Lord Cope of Berkeley: My Lords, this group of amendments concerns accountants, and I should declare an interest as a member of the first of the institutes listed in Amendment No. 30.
I am extremely grateful to the Minister for listening to what was said by noble Lords in Committee and by the relevant bodies outside the House and for introducing the amendments. They involve the same list of accountancy bodies as was used on an earlier occasion. It is important to have such a provision in the Bill. I hesitate to agree unreservedly to the provision in view of the matter to which the Minister drew attention. My concern is that the amendment may cover not all of the staff in an accountancy practice but only those who are members of one of the listed institutes. Accountants obviously employ people without the qualifications that they have to do all sorts of administrative and other tasks. Some of those will be "in-house" tasks but others will arise when working for clients. I am not sure whether carrying out an audit of a company involves working for a client company under contract; it seems to me that it does, and should be considered as such.
The Minister made reassuring comments on secondees, trainees and students but they do not quite match my reading of the Bill. Pepper v. Hart may help in that respect; the Minister has explained what he believes the Bill will cover. I hope that it is correct that someone who is employed in an accountancy practice for accountancy purposes would not require a licence, and that the authority will interpret the Bill in that way.
I am also worried about the fact that, if an individual is found to require a licence for an activity such as investigating a fraud in the course of an audit or as a forensic accountant, his managers and supervisors and the partners of the whole firm--this
If the Minister can respond today, that would be fine; I could give the matter further reflection in the light of his comments. I do not believe that the provisions that exclude "in-house" operations are quite as sweeping as the Minister implied because they do not seem to cover staff who frequently work on a client's premises examining the client's books for audit or for other investigatory purposes.
Lord Thomas of Gresford: My Lords, I support the Government's position in this regard. It is right to restrict the exemption to members of the relevant accountancy bodies who carry out activities for the purposes of any accountancy practice. The fact of the matter is, as the Minister made clear, that large firms offer a separate service of private investigation and security consultancy. If they want to do that--they are perfectly entitled to diversify in that way--they should fall within the Bill's provisions. They would be carrying out activities that were not for the purposes of an accountancy practice but for other purposes. The position that the Government have adopted and which the Minister outlined is sensible and right and we shall support it.
Baroness Noakes: My Lords, I want to speak in support of the amendments that were moved by my noble friend Lord Cope. I declare an interest as a member of the Institute of Chartered Accountants and as a former partner of KPMG. The Minister will be familiar with its affairs, having been associated with us briefly. I use the word "us" in the past tense!
The affairs of large accounting firms are very complex and have moved considerably from their early roots--there have been changes in terms of drawing up sets of accounts and auditing those accounts. It is hard to say what the practice of accountancy is. I understand the distinction that the Government sought to draw in this context, but it is difficult to say with any precision what is and what is not accountancy practice because all such activities are carried out in one unified firm. Even the internal divisions of the firm will not give you a guide to what one might call "accountancy what not". Indeed, all-embracing internal divisions such as forensic accountancy can cover a very wide number of activities, some of which noble Lords might think were accountancy and some not. But the firms themselves would think that they were part of their accountancy practices.
Therefore, I urge the Minister to look again at those provisions to ensure that they are practicable. To seek to make a distinction which is not easily reflected in the way in which firms operate in today's world may well cause a number of practical difficulties.
Lord Bassam of Brighton: My Lords, perhaps I should declare an historic interest in the affairs of KPMG, a company with which I was delighted to be associated for a couple of years. I am grateful for the noble Baroness's contribution in this exchange.
I think we have got it about right. We have taken extremely careful soundings from the various institutions. I should require some further persuasion, more than I have heard during these exchanges, before I gave an undertaking to look again at this matter. As I am very fond of issuing correspondence, I shall invite more persuasive correspondence on this matter between now and Third Reading if noble Lords really want to press the point. I believe that we have it right. The balance is right and appropriate.
We have drawn a clear distinction between different sets of activities, although I take the fundamental point made by the noble Baroness that the world of accountancy and the practices of the large firms in particular are ever-changing and organic in the way that they transmogrify over time. I hope that noble Lords will not take this as too stern a rebuff at this stage but I require more evidence before I am prepared to give the matter further consideration.
On Question, amendment agreed to.
Schedule 1 [The Security Industry Authority]:
(""relevant accountancy body" means any of the following--
(a) the Institute of Chartered Accountants in England and Wales;
(b) the Institute of Chartered Accountants of Scotland;
(c) the Institute of Chartered Accountants in Ireland;
(d) the Association of Chartered Certified Accountants;
(e) the Chartered Institute of Management Accountants;
(f) the Chartered Institute of Public Finance and Accountancy;").
5.30 p.m.
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