Memorandum by Denton Hall
We wish to make a submission to the Joint Committee
as set out below and in the attached Annex.
Denton Hall is a leading international law firm,
based in the City of London but with over 120 partners in more
than a dozen offices around the world. In addition to an active
financial markets and regulatory law practice in London, we have
advised governments and securities regulators and exchanges in
many overseas countries, on capital markets development in general
and in particular on the drafting of securities laws and regulations.
We did not respond directly to HM Treasury on
last July's Consultation Document on the Financial Services and
Markets Bill, but rather were very active in industry and professional
groups in preparing their submissions. However, we now wish to
pursue a number of specific points which we feel have been inadequately
addressed despite the various submissions.
We would draw the Joint Committee's attention
to the following five points, each of which is developed further
in the Annex to this memorandum.
1. "NO ACTION"
The response of Treasury and the FSA has so
far missed the point, which is that a "no action" letter
procedure is needed to deal with problems in the Act (as finally
passed) and related statutory instruments. FSA guidance may not
help, and FSA is clearly incompetent to waive legislative provisions.
A formal, open and transparent procedure should
be enshrined in statute.
2. TRANSPARENCY OF
All rules, guidance, policy statements, and
general decisions should be published and be readily accessible
except where confidential to a particular firm. The Bill should
require this of FSA, and Treasury's standards for the recognition
of exchanges should require this of exchanges.
Everyone working with the regime has a right
to know as much as possible about the regulators' attitude and
thinking on issues, at least once it is being implemented in practice.
All too often policy and other decisions affecting particular
descriptions or categories of firm, or even all the members of
an exchange, are not published but circulated only to the firms
which the regulator knows to be affected.
3. ENFORCEMENT POLICY
The key elements of enforcement policy should
be specified in the Bill, or perhaps in a statutory instrument
subject to prior consultation and to the affirmative resolution
procedure. Even if FSA is required to consult on and publish such
policy, it is not right that it should have as broad discretion
to determine (and change) it as is currently proposed.
4. SCOPE OF
The position of professional firms, such as
solicitors, accountants and actuaries, has not been adequately
addressed. The Treasury has expressed its intention that such
firms should not generally require authorisation but the draft
primary and secondary legislation would not significantly alter
the current position.
There is still scope for much improvement in
the form of presentation of and clarity of language in the draft
Bill (for example in relation to market abuse) and draft statutory
instruments (especially that on regulated activities).
6. TRANSITIONAL ARRANGEMENTS
FSA must be required or encouraged to have transitional
periods for all changes, since even basic changes like the proposed
new set of principles for business can have important organisational,
systems and training implications.
We trust that this outline together with the
attached Annex are sufficiently clear. We should be happy to elaborate
further any particular point.
16 April 1999