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House adjourned at fifteen minutes past seven o'clock.
The Committee met at half-past three of the clock
[The Deputy Chairman of Committees (LORD HASKEL) in the Chair.]
The Deputy Chairman of Committees (Lord Haskel): I have to tell your Lordships that if there is a Division in the Chamber while we are sitting, the Committee will adjourn for 10 minutes as soon as the Division Bell rings.
The noble Lord said: This amendment deals with the implementation of the transparency rules required by the EU's transparency obligations directive. Its purpose is to prevent gold-plating by limiting the powers of the competent authority to those required by the transparency obligations directive.
Article 1.1 of the directive defines the scope of the instrument as issuers whose securities are admitted to trading on a regulated market within the EU. New Section 90A empowers the competent authorityin this case, the Financial Services Authorityto make rules to apply the requirements of the directive, but subsection (1)(b) enables the FSA to go beyond the requirement of the directive and to apply the rules to shares traded on markets in the UK which are not regulated. This is, therefore, an example of gold-plating.
particularly when it is not clear from the Bill quite what this expression is intended to mean. Presumably it is not just a regulated market but also a public market, rather than, for example, an internal market operated by a company in its own shares, as will frequently be the case with private companies.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): The Government want to ensure that markets are regulated in the most effective and proportionate manner. The noble Lord has rightly focused on the fact that this clause goes beyond implementing the transparency directive. The first clause would give the competent authority the ability
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to impose rules on issuers on non-regulated markets, such as AIM, to require voteholders and issuers to disclose major shareholdings.
This is not a new power. Disclosure requirements currently apply to all public limited companies, which include the bulk of companies traded on UK non-regulated markets. The Government took the decision in reviewing company law to transfer this aspect of the DTI's disclosure power to the Financial Services Authority, as it fits with the FSA's disclosure powers in relation to regulated markets, and to align it with these powers. This proposal was consulted on as part of the company law reform White Paper, at chapter 4, "Ensuring Better Regulation and a 'Think Small First' Approach". The consultation on the proposals specifically asked the question:
"Do you agree with the proposal to give the FSA powers to make issuers admitted to trading on non-regulated markets in the UK (and those with qualifying holdings in those issuers), subject to the regime where appropriate for market transparency reasons?"
Eleven out of 12 respondents supported this proposal. If this power were to be omitted from the legislation there would be no ability for the competent authority to ensure reasonable and proportionate disclosure of major shareholdings of companies traded on public markets. The Government consider this degree of transparency to be necessary for both regulated and non-regulated markets. I therefore ask the noble Lord to withdraw the amendment.
In making any rules on regulated markets, the FSA is required to have regard to a range of factors. Two of these factors are specific to conditions on regulated markets. The Government have therefore included a provision that, when the FSA is considering making rules for non-regulated markets, it must have regard to those factors as if they applied to non-regulated markets. This ensures that the constraints operating on the FSA when making rules for regulated markets are also extended to its rule-making powers for non-regulated markets. As this provision acts as a legitimate constraint on the competent authority's rule-making powers, I hope that the noble Lord will agree to withdraw this amendment.
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