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Lord Kingsland: I am grateful to the Minister and I am sure that that is an appropriate point to leave the matter. Unless I misunderstood him, the example he gave to me concerned new subsection (8) and not new subsection (7). I am content to leave the matter there and to return to it at the Report stage.

Lord McIntosh of Haringey: It referred to new subsection (8), but it was about new subsection (7).

On Question, amendment agreed to.

Clause 5, as amended, agreed to.

5.30 p.m.

Clause 6 [The reduction of financial crime]:

[Amendments Nos. 63 to 69 not moved.]

Clause 6 agreed to.

Clause 7 [The Authority's general duty to consult]:

Lord Sharman moved Amendment No. 70:


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The noble Lord said: In moving Amendment No. 70, I wish to speak also to Amendment No. 72. This group consists very much of probing amendments, designed to establish in a broad term what comprises "practitioners" and the manner of their consultation.

As it stands, the Bill requires the FSA to consult only with practitioners and consumers. The term "consumers" is defined for these purposes in Clause 9(7), but the term "practitioners" is not defined and no reference is made to the categories of practitioners or the practitioner panel as set out in Clause 8(5). In any event, I believe that the issue here is that the FSA should be seen to be consulting as widely as possible and should be required to have in place effective arrangements for consulting all relevant parties, including other professionals; for example, the Law Society company law committee, and so on.

In terms of the current definitions within the Bill, it is also unclear to me whether the status of "representing" is a formal requirement--for example, for a person nominated by the recognised investment exchange to represent its interests on the practitioner panel--or whether it is a less formal arrangement. I believe that it should also be noted that, under the current definition, the persons whom the authority may appoint to the practitioner panel under Clause 8(5) would not necessarily include members of professions who would be subject to regulation under Part XX of the Bill, since they are not authorised position persons, they would not be representing authorised persons, they are not persons representing recognised investment exchanges, and they are not persons representing recognised clearing houses.

I believe that it is important that we should know what the Government have in mind in terms of "practitioners" in the broadest sense. Then we can deal quite properly with how they should be consulted. I beg to move.

Lord Saatchi: I rise to speak to Amendment No. 73, which is intended to ensure that members of the practitioner panel should feel free to report in an independent and, if necessary, critical manner about any area with which they are concerned. We must remember that, as it stands, all the members of the panel are appointed by the FSA with the exception of the chairman, whose appointment and dismissal are subject to Treasury approval.

This amendment would require that, before the FSA appoints any person to the practitioner panel, it must consult others who represent the interests of practitioners with a view to identifying suitable candidates for appointment. I do not believe that the amendment imposes on the FSA too onerous an obligation; only one to consult such persons who represent the interests of professions as the FSA considers appropriate. The amendment would go some way to ensuring that the panels have independence and can be a force to be reckoned with.

Lord Elton: Perhaps I may speak to Amendment No. 74B, which is grouped with these amendments. In introducing the group, the noble Lord, Lord Sharman,

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spoke of the need to define the practitioners. I believe that my amendment fits more comfortably with the amendment of my noble friend Lord Saatchi, to which he has just spoken. That amendment seeks to ensure that all practitioners, however defined, are embraced in the consultative and advisory process. Accordingly, I sought to draft words which would ensure that the whole of the field of market practitioners was in some way embraced in the panel.

In discussion with the BBA, it has been drawn to my attention that, by referring to those people as "representing" parts of the market, the wording of my amendment might encourage them to believe that they had some sort of constitution which they must represent in competition with other members of the panel. That, of course, is very far from what I intended. I should say that this amendment is drafted purely as a probing amendment to discover how the Government expect it to work. However, if it seemed necessary to do anything at a later stage, I would prefer wording which excluded the constituency element but which might ensure that individuals appointed between them have experience of each of the activities listed in Part I of Schedule 2, which is where the definition of where those people are drawn from lies.

The important point is that the panel should not be a "pick-and-mix" selection by the authority. The authority should be required to produce a mix which is genuinely representative of practitioners as a whole and which cannot be skewed in any one particular way to suit the inclinations of the authority at any particular time.

Lord McIntosh of Haringey: With these amendments, we turn to the questions of how the practitioners panel should be appointed and the interests which it might represent. It is important to understand the way in which the arrangements for the practitioner panel are to work. The purpose of the panel is not to create a super-trade association for the industry or, indeed, a super-trade union to represent the interests of those who work in the industry. Indeed, if we tried to do that, I believe that we would arouse considerable antagonism both from, for example, the British Bankers' Association and from the banking and insurance trade unions. Neither is it the case that the consumer panel is intended to be a loud but single voice for consumers. Again, if we tried to do that we might arouse the antagonism of the National Consumer Council and the Consumers' Association.

The role of the practitioner panel is to enable the authority to have access to dedicated expertise to improve its ability to perform the functions conferred on it by the Bill. I shall not rehearse at length the arguments about what the panels should do. That is the subject of another group of amendments. However, it is enough to say that the same considerations apply in determining the role of the panels as apply when we consider who they are to represent and how the members are to be appointed.

I turn, first, to the representation on the panel. Clause 8(5) sets out certain minimum requirements; that is, individuals who are authorised persons,

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representatives of authorised persons, recognised investment exchanges and clearing houses. That list is indicative; it is not intended to be inclusive.

Perhaps I may first explain the distinction between the classes of person in paragraphs (a) and (b). The first category is aimed at ensuring that sole traders will be represented; that is, they will be authorised in their own right. The second is aimed primarily at giving a voice to incorporated firms. Of course, a corporate bank, insurance company or securities firm cannot itself be a member of the panel. Therefore, the body must be represented perhaps by a director of such a company, just as the chairman of the panel is the chairman of Schroder. However, the wording in paragraph (b) would already cover authorised persons who are represented through trade associations.

The other two categories in Clause 8(5) make express reference to recognised bodies under Part XVIII of the Bill. Those bodies need to be represented in their own right because of the special role that they play--distinct from the authorised community--in the markets for investments, using investments in the sense that they are used in the Financial Services Act 1986.

Amendments Nos. 70 and 72 would add to the categories of persons who must be represented. A new category introduced by Amendment No. 72 is approved persons, such as certain employees and directors under Part V of the Bill. I must say that I do not see appointments to the practitioner panel as being made on a self-interest basis; on the contrary, I rather think that membership of the panel is a public service. Panel members are not paid at the moment. Therefore, if a director of a bank is appointed, he may well be appointed on the basis of the contribution he has to make to the panel.

Secondly, approved persons are in any event likely to be represented by default, since we would expect many, if not all, of the appointees to the panel to be persons who perform functions that we expect to be controlled functions for the purposes of Part V of the Bill. So most members of the panel will anyway be approved persons in their own right. That is certainly the case on the basis of the panel's current membership. It is the case also that, as representatives of firms employing approved persons, they will be able to consider relevant issues from an appropriately informed perspective.

Thirdly, it is important to remember also that the authority's legislative powers and much of the work of the panel will focus on the activities of authorised persons; that is, the firms and the regulatory implications of the authority's action on those firms. The powers in relation to approved persons form a relatively minor part of the total area of responsibility.

Another suggested addition is such other bodies as the authority considers appropriate. The clause as drafted already allows that since it specifies only the requirements imposed on the authority, not the powers which the authority has in any event.

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Amendment No. 74B in the name of the noble Lord, Lord Elton, also seeks to specify the persons who should be represented on the panel, but instead of referring to them in terms of whether they are authorised, approved and so on, he sets out a list on sectoral lines. The amendment may be defective in any event since I should have thought that the different types of investment were the issue and not the activities which a person carries on in relation to that investment. However, it starts to create a potentially long list of people who would need to be represented on the panel.

We believe that it is unnecessary and undesirable to be too prescriptive about the constitution of the panel. Our approach must be to specify certain minimum categories of persons who we believe must be represented if the panel is to meet the requirements under Clauses 7 and 8. Clause 8 does not exclude the possibility of other persons being members; it simply does not require them to be. One reason for our approach is that we wish members of the panel, once appointed, to act objectively on behalf of practitioners as a whole and not to represent the interests of particular individuals, companies or industries.

I turn now to Amendment No. 73 spoken to by the noble Lord, Lord Saatchi. Again, to a degree, the appropriateness of an amendment of this kind depends on the purpose for which the panel is established. Certainly, where the intention is to provide the industry with a voice from which it can make its views known to the authority, the amendment makes perfect sense. But it is not for the authority to create and fund a trade association. The requirements for the panel are being introduced to ensure that the authority has access to the professional expertise it needs to be able to carry out its functions effectively and efficiently.

Of course, I do not rule out the possibility of enabling the authority to seek nominations for candidates to the panel from industry sources. It has done that in the past. The Bill will not prevent it from doing so in the future. But that is a decision for the authority. It should not feel obliged to accept candidates forced upon it by the industry. It may feel that it would be appropriate to adopt a Nolan approach to appointments, as I believe it has done in regard to the consumer panel.

I hope that that gives Members of the Committee who have tabled amendments some reassurance about the practitioner panel and, indeed, the consumer panel when we come to it.


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