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Lord McIntosh of Haringey: I am grateful for that support, but I suspect that it is limited to these amendments and that the noble and learned Lord's disagreement with the Government is much more widely based than that. This is a non-criminal regime for domestic purposes. We could have extended the existing criminal offences so that they applied to a wider range of behaviour. However, we did not believe that that was proportionate or that it was right to create new criminal offences. That is the fundamental issue of social policy with which we have been concerned.

We have built in safeguards to the market abuse regime appropriate to an ECHR criminal regime. That is not because we were convinced that it will be classed as a criminal regime by the European Court, but out of caution that it might be. In our view and that of our legal advisers, the market abuse penalty regime is fully compatible with the ECHR. I hope that the noble Lord will not pursue these amendments.

Lord Kingsland: I have sought to provide the Minister with an American alternative. It seemed to me perfectly reasonable to do so because the United States has experience in this area which stretches back to the early 1930s. Nobody can deny that the United States has an extremely successful securities industry.

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However, and not entirely to my surprise, the Minister has rejected my views. I shall reflect on that rejection in the context of the other remarks he made about the offence of market abuse in general. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 216:


    Page 54, line 2, at end insert ("("A")").

The noble Lord said: In moving this amendment I speak also to Amendment No. 217. Clause 113 allows the FSA to impose a penalty if someone has engaged in market abuse. I believe that I can speak reasonably fast now that the noble Lord, Lord Peyton, is not here. My articulation is so marvellous that everyone can understand me. The clause also allows the FSA to impose a penalty if someone has encouraged or required another person to engage in market abuse either by taking, or refraining from taking any action. While it is in the end behaviour which actually damages the market in a particular instance, it is right that we should seek to deter people from using other means to abuse a market. That is part and parcel of protecting it.

However, there is a loophole in the clause at present. Let us suppose that person A, an investment adviser, encourages a number of clients to buy or sell particular investments. In doing what A has advised them to do, it is unlikely that any of the clients concerned would be regarded as engaging in behaviour which fell short of the standards reasonably expected of them.

After all, each was simply acting on the advice of a person whose business it is to offer such advice. As a result, it may be that the reasonable user of the market would not consider that any of A's clients had engaged in market abuse. None may have failed to observe expected standards in this case.

However, the overall impact on the market of all the transactions effected by A's clients may be to produce a misleading impression as to the market in the investments concerned, and this may have been A's objective as he may have had a holding in the investments concerned which he wished to dispose of at an advantageous price. Perish the thought. If he had effected himself the transactions which he advised his clients to effect, he would almost certainly have engaged in abuse. The amendment to this clause simply closes this loophole by providing that a penalty can be imposed if the behaviour would have been abuse if person A had engaged in it himself. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 217 and 218:


    Page 54, line 5, leave out ("market abuse") and insert ("behaviour which, if engaged in by A, would amount to market abuse").

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    Page 54, line 6, at end insert--


("( ) But the Authority may not impose a penalty on a person if, having considered any representations made to it in response to a warning notice, there are reasonable grounds for it to be satisfied that--
(a) he believed, on reasonable grounds, that his behaviour did not amount to market abuse; or
(b) he took all reasonable precautions and exercised all due diligence to avoid engaging in market abuse.").

The noble Lord said: I spoke to Amendments Nos. 217 and 218 in the debate on Amendment No. 208A. I beg to move.

On Question, amendments agreed to.

Lord McIntosh of Haringey moved Amendment No. 219:


    Page 54, line 6, at end insert--


("( ) If the Authority is entitled to impose a penalty on a person under this section it may, instead of imposing a penalty on him, publish a statement to the effect that he has engaged in market abuse.").

The noble Lord said: In moving Amendment No. 219, I shall speak also to Amendments Nos. 221, 222, 223 and 235.

Clause 113 allows the FSA to impose a penalty if someone has engaged in market abuse or required or encouraged another person to do so. If the FSA imposes a penalty, either following a reference to the tribunal or in the absence of one, under the provisions of Clause 376(5) it must publish such information about the matter in such a way as it considers appropriate.

However, what the FSA cannot currently do under Clause 113 as it stands is to make a public statement about someone as an alternative to imposing a penalty. This is an option which is open to the FSA under Clause 65(3) of Part V of the Bill on approved persons and under Clause 198 in the general disciplinary regime in Part XIV of the Bill. On reflection, we think that this is a useful alternative power to introduce into Part VIII as well. Amendment No. 219 therefore allows the FSA to make a statement in situations where it could impose a penalty but does not wish to do so.

Let me make it clear that this does not mean that it can only make a statement where it would be appropriate to impose a penalty, but rather where it has the power to impose a penalty. It may be that in some cases a financial penalty is a disproportionate response given the circumstances surrounding particular abusive behaviour but that some sanction is nevertheless warranted. The new power will allow the FSA to make a statement as an alternative to imposing a penalty.

Amendments Nos. 221, 222 and 223 make consequential changes to reflect the fact that a penalty will not be the only option open to the FSA when someone has engaged in market abuse.

The amendment to Clause 165 made by Amendment No. 235 treats statements in the same way as penalties as regards the prohibition on the use of statements obtained under compulsory powers in proceedings.

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Clause 165, which we shall debate later, provides that statements obtained under such powers cannot be used in proceedings to impose a market abuse penalty against the person who gave it--and noble Lords with a memory of the Guinness case will realise why this is necessary. This is a consequence of the Government's decision to apply, as a precautionary measure, the ECHR criminal protections to the market abuse penalty regime.

Having considered the issue carefully, the Government are of the view that for the same reasons it would be appropriate to treat proceedings to make public statements--which, after all, could be quite embarrassing for those about whom the statements are being made--in the same way. Public statements and monetary penalties are both sanctions and, given the nature of the market abuse regime, it is not appropriate to differentiate between them for the purposes of the ECHR protections.

Legal assistance will therefore also be available, where appropriate, for proceedings to make a public statement in the same way as for proceedings to impose a monetary penalty for market abuse. That is the effect of Amendment No. 223, since under Clause 125 legal assistance is available to those who meet any prescribed criteria if he is an individual who has referred a matter to the tribunal under Clause 117(4). I beg to move.

On Question, amendment agreed to.

Clause 113, as amended, agreed to.

Clause 114 [Statement of policy]:

[Amendment No. 219A not moved.]

Lord McIntosh of Haringey moved Amendment No. 220:


    Page 54, line 19, at end insert--


("( ) A statement issued under this section must include an indication of the circumstances in which the Authority is to be expected to regard a person as--
(a) having a reasonable belief that his behaviour did not amount to market abuse; or
(b) having taken reasonable precautions and exercised due diligence to avoid engaging in market abuse.").

The noble Lord said: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Clause 114, as amended, agreed to.

Clause 115 agreed to.

Clause 116 [Warning notices]:

[Amendment No. 220A not moved.]

Lord McIntosh of Haringey moved Amendment No. 221:


    Page 55, line 13, leave out ("impose a penalty on") and insert ("take action against").

The noble Lord said: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

[Amendment No. 221A not moved.]

Clause 116, as amended, agreed to.

21 Mar 2000 : Column 257

Clause 117 [Decision notices and right to refer to Tribunal]:


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