Financial Services and Markets Act 2000 (Regulated Activities) Order 2001

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Miss Melanie Johnson: I am deeply grateful to the hon. Gentleman for his points and to his advisers for their involvement. I am also relieved that he did not find more typographical errors in the orders.

Before I begin to respond to his points, I should add for the record that all three orders are compatible with the European convention on human rights under the Human Rights Act 1998.

The hon. Gentleman referred to the issue of newspapers and raised some questions on that. Provided that they meet the principal purpose tests, the specialist financial publications will benefit from the exclusion for advice that applies to newspapers. That was the point on which he sought clarification.

In answer to the hon. Gentleman's questions, all kinds of stakeholder pensions will be covered under article 82, and a branch does constitute a permanent place of business under article 3. The term ``open-ended investment company'' will indeed have the meaning given to it in section 417 of the Financial Services and Markets Act 2000. It is not necessary for the order to define the term as well. The hon. Gentleman made the point that OEICS are defined in section 417—the general interpretation provision in the Act—whereas authorised unit trusts are not, but there is no problem with proceeding as we have done.

The hon. Gentleman made several points in relation to the scope for arranging deals and investments. I attempted to cover some of those issues in my opening remarks. We sought to make some changes with the order, but much remains the same. We have reduced the scope for arranging deals and investments by including a new exclusion from that activity where the arrangements merely provide the means by which one party to a transaction or a potential transaction is able to communicate with other such parties.

We have not included an amendment suggested by Mr. Charles Abrams, I believe, because it is circular and does not work. That may have been the point to which the hon. Gentleman wanted to return. The purpose of the regulated activities order is to specify regulated activities. It does not therefore make much sense to exclude activities that are not regulated. I assure the hon. Gentleman that we gave the matter serious consideration before deciding that we did not want to take such a course.

The hon. Gentleman also made several points in relation to specific exclusions for professionals. We have not included a specific exclusion from the activity of arranging deals and investments for professional firms. We doubt that preparing or negotiating legal documentation for a transaction would amount to arranging deals in investments. If the activities of a professional firm spill over into arranging deals and investments, the firm may be able to rely on the exclusion in article 67, which will be available, first, when the activities are carried on in the course of a profession that does not otherwise consist of regulated activities, and, secondly, when they may reasonably be regarded as a necessary part of other services provided in the course of that profession. We have liberalised the exclusion in article 67, which is based on paragraph 24 to schedule 1 of the Financial Services Act 1986. The wording has been changed from

    ``is a necessary part of other advice or services''

    ``may reasonably be regarded as a necessary part''

to make it more useful to professional firms. If a professional firm's activities do not fall within the exclusion in article 67 it would be open to the firm to submit to the regime for professionals in the Financial Services and Markets Act 2000.

On the point about the signature on investment agreements, I assure the hon. Gentleman that merely signing an agreement is not equivalent to making an investment as an agent under article 21. I hope that the hon. Gentleman feels reassured about that.

On the definition of shares, including interests in collective investment schemes, we have not changed the definition as suggested by the hon. Gentleman. If he is concerned about the matter because of the scope of the public offers of securities regulations, the right solution would seem to be to change those regulations and not the regulated activities order. The definition of shares reflects that in the Financial Services Act 1986. The change proposed by the hon. Gentleman seems an odd way of dealing with the problem, if it is a problem, as it could have several unintended consequences.

On the definition of a close relative, we have amended the exclusion in article 70—which relates to activities carried on in connection with the sale of a body corporate—so that the definition includes trustees of trusts in relation to which beneficiaries are close relatives. However, it was not appropriate to amend the definition of a close relative in the rest of the regulated activities order.

The hon. Gentleman raised issues in relation to passporting and the universal passport. That is a matter for the regulations to be made under schedule 3 of FISMA. He also referred to the open market, the promotion of which is one of the thrusts of our policy. However, I assure him that such matters must be dealt with under other regulations.

Questions were asked about the priority of the overseas persons exemption over the passport, and the authorisation for credit institutions to be involved in all the activities that they can lawfully carry on. We are not convinced on the first point about the priority of the overseas persons exemption, but I shall consider the matter when the passporting regime is implemented under schedule 3, as we discussed a moment ago. Schedule 3 also deals adequately with the hon. Gentleman's second point about the authorisation for credit institutions, but we shall consider the matter further when we make the relevant regulations.

The hon. Gentleman asked about the Myners review and the pension fund trustees. It is a deliberate policy to require trustees to get advice from authorised persons, which reflects the requirements of the Pensions Act 1990. When there is more than one tier of a fund, each fund must have as its primary purpose investment in private equity.

There is a deliberate policy to ensure that the person managing a fund's assets must be authorised for asset management; fourthly, the inclusion of the reference to overseas persons in article 4(6) of the business order reflects the position in section 191 of the Financial Services Act 1986. I hope that that clarifies the matter for the hon. Gentleman.

In respect of the investment passport, a United Kingdom bank wanting to do investment business in another EEA state will, under section 418 of FISMA be treated as carrying on business in the United Kingdom. It will be authorised in the United Kingdom and have a passport to other EEA states under the investment services directorate. That will clarify the scope of the passport under the new law.

Question put and agreed to.

Resolved,

    That the Committee has considered the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001, No. 544).

DRAFT FINANCIAL SERVICES AND MARKETS ACT 2000 (CARRYING ON REGULATED ACTIVITIES BY WAY OF BUSINESS) ORDER 2001

Resolved,

    That the Committee has considered the Draft Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001—[Miss Melanie Johnson.]

DRAFT FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) ORDER 2001

Resolved,

    That the Committee has considered the Draft Financial Services and Markets Act 2000 (Exemption) Order 2001.—[Miss Melanie Johnson.]

        Committee rose at three minutes to Eleven o'clock.

The following Members attended the Committee:
Malins, Mr. Humfrey (Chairman)
Benn, Mr. Hilary
Cotter, Mr.
Field, Mr.
Fisher, Mr.
Flight, Mr.
Griffiths, Mr. Win
Healey, Mr.
Johnson, Miss Melanie
Luff, Mr.
McGuire, Mrs.
Todd, Mr.

 
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Prepared 15 March 2001