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Lord McIntosh of Haringey moved Amendment No. 169:
- Page 33, line 6, at end insert--
The noble Lord said: Amendment No. 169 is grouped with Amendments Nos. 170 to 172, 179 and 191. These amendments make changes to the accountability arrangements which surround the competent authority in the light of the transfer of function from the Stock Exchange to the FSA.
We considered the merits of possible changes on a case-by-case basis, given the different nature of the competent authority function and the fact that those responding to consultation were generally content with Part VI of the Bill when the London Stock Exchange was named as the competent authority. We concluded that it was appropriate to make some changes. Although the Stock Exchange has carried out the function in a satisfactory manner, we believe that, as a result of the transfer to a body which has not carried out the function before, it is right to import a number of statutory checks and balances into Part VI.
Therefore, Amendments Nos. 169, 170 and 172 would ensure that the provisions of the Bill which apply to the FSA in its main role would apply also when the FSA acts as a competent authority. The provisions are applied subject to modifications set out in the new schedule inserted by Amendment No. 172. That means that all the arrangements in Schedule 1 which relate to the constitution of the FSA, the role of the non-executive members of the board, arrangements for the discharging, monitoring and enforcement of functions and the FSA's status all apply to the FSA as competent authority as well.
The provisions in paragraph 7 of Schedule 1 also apply. The complaints investigator will be able to investigate complaints about the competent authority in the same way as he investigates complaints about the FSA more generally. The FSA's annual report must cover the discharge of its functions as competent authority, as must the annual general meeting provided for in paragraph 11.
Only three matters in Schedule 1 are not applied directly to the competent authority. First, the provisions of paragraph 19 on the exemption of liability from damages are not applied. As for the FSA more generally, statutory immunity for the competent authority is extremely important in ensuring that it can carry out its job effectively. Let there be no doubt about that. It is simply that that is provided for separately in Clause 97.
Secondly, the provisions of paragraph 16 on penalties are not applied. Equivalent provision is provided by Amendment No. 192, which inserts a new clause after Clause 195. We shall debate that in a later group.
Finally, the provisions of paragraph 17 of Schedule 1 are disapplied. Amendment No. 191 introduces a similar provision for the competent authority concerning fees. The new schedule also disapplies a
When we originally drew up the provisions of Part V1 of the Bill, we considered carefully whether we should set objectives for the competent authority in the legislation. We concluded that there was no need to do so for two reasons. First, this is an area where the directives permeate all that the competent authority does. Secondly, given its ability to transfer the functions to another body, the Treasury has a different role vis-a-vis the competent authority from the one that it has in relation to the FSA generally. Therefore, we intend that, as now, the Treasury will continue to agree annually the competent authority's objectives and to hold regular meetings to assess progress. The Treasury will, of course, be accountable to Parliament for how it goes about that.
However, we did consider it appropriate to introduce principles along the lines of those in Clause 2(3) to ensure that the competent authority was subject to appropriate constraints on the manner of its regulation. Therefore, Amendment No. 171 inserts a new clause after Clause 72 which requires the competent authority to have regard to a number of matters in discharging its general functions. I shall not list them because they are broadly equivalent to the matters set out in Clause 2(3), subject to changes which are necessary to take account of the fact that the competent authority is concerned with listed securities rather than regulated activities.
That aside, the only substantive difference is that there is no equivalent to the principle concerning the responsibilities of senior management. That is because the competent authority is not concerned with the conduct of the business of issuers in the same way as the FSA, as financial services regulator, is concerned with the conduct of authorised firms.
Paragraph 3 of Schedule 7 provides that Clause 7 of the Bill, which requires the FSA to consult the consumer and practitioner panel, does not apply to the competent authority because the constituencies concerned are different. The current arrangements, under which the competent authority consults a Listing Authority Advisory Committee, composed of issuers, corporate finance practitioners and investors' representatives, work well. Proposals for new listing rules or changes to existing rules are also referred to the Listing Rules Committee for its advice prior to public consultation.
We considered that incorporating those committees into the legislation would remove the current flexibility which the competent authority has without bringing any real gain. Here, we are talking about a completely different scale of operation from the FSA generally. As I said, the competent authority has fewer than 100 staff. Almost all the listing rules are derived from directive requirements. There is no point building in bureaucratic arrangements simply for the sake of it.
However, in modifying Clause 146 as it applies to the FSA in this context, paragraph 4 of the new schedule puts a statutory requirement on the FSA,
Paragraph 4 also concerns the ability of the FSA to issue general guidance under Clause 148 in its capacity as competent authority. Again the procedural requirements, including the duty to consult, apply in the same way to competent authority guidance as for FSA guidance more generally.
The final element in the accountability and transparency arrangements is not yet fully in place. This concerns the warning notice and decision notice procedure and rights to refer competent authority decisions to the tribunal.
Amendment No. 179 provides for a right for an issuer to refer a competent authority decision to discontinue or suspend listing to the tribunal. That is not the end of the story as regards tribunal rights. We shall be bringing forward amendments on Report to align the decision procedures we shall be applying to other FSA decisions to competent authority decisions. And we will also be giving a right to refer competent authority decisions to the tribunal. Specifically there will be a right to refer decisions: to refuse admission to listing; to suspend or discontinue listing; to impose a penalty or issue a public censure; and decisions to refuse admittance to the list of sponsors or to remove people from that list.
Taken together the changes we are making to enhance the accountability arrangements for the competent authority should provide the Committee with the assurance that the FSA will carry out the function in a way which continues to give investors confidence while meeting the needs of issuers wishing to access the capital markets. I beg to move.
Lord Sharman: I am rather confused by Amendment No. 171. If the Bill creates the FSA as the competent authority for listing, which I understand is required by the European listing directive, I am at a loss to understand why it is necessary to insert this clause. All the provisions of this clause are covered in Clause 2, which places a duty on the authority in carrying out its general functions. If it were the competent authority, I must assume that that would include acting as the competent authority. Therefore, it seems to me to be repetitive and I do not understand why it is necessary. Perhaps the Minister will explain that to me.
I wish also to raise a point of detail which returns to the issue of facilitating competition. Paragraph (1)(f) in Amendment No. 171 states:
Does that mean facilitating competition between individual listed securities in terms of the liquidity of the market; or does it mean facilitating competition in regard to the listing of securities--that is, competition between the various types of market which might list securities; or does it mean competition in regard to the trading of listed securities; or does it mean all of those? Perhaps the Minister will help me.
Lord McIntosh of Haringey: The answer to the first question requires a textual analysis between Clause 2(3) and the new clause inserted by Amendment No. 171. Doing that as rapidly as I can, I see that Clause 2(3)(b) refers to,
As regards the second question, the reason is that we have the power to transfer the function under Schedule 7 and it is simply a matter of drafting convenience. I believe that the note which I have been handed tells me what I have already said but I cannot read it!
("( ) Schedule 6A modifies this Act in its application to the Authority when it acts as the competent authority.").
5.30 p.m.
"In discharging its general functions the competent authority must have regard to ... the desirability of facilitating competition in relation to listed securities".
I spent a lifetime working in areas around that and I am at a loss to understand what that means.
"the responsibilities of those who manage the affairs of authorised persons".
That is not included in Amendment No. 171. It is for that reason that the matter is dealt with in this way. I believe that the other items are the same, which is why I did not read them out. But that textual difference, apparently, makes it more convenient to deal with it by having a new clause rather than by reference back to Clause 2.
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