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There are a number of points relating to Part XX of the Bill that I should like to explore by means of these three amendments. As I understand it, these provisions were first introduced into the Bill at Report stage in the House of Commons. If that is correct, it seems wholly appropriate that in this Chamber some time should be taken to examine them.
This part of the Bill seems wholly appropriate and I have no fundamental difficulty with it. As I indicated when I introduced the first amendment today, a number of amendments that I have tabled have been promoted by the Law Society of Scotland. This statute will regulate investment on both sides of the Border.
So far as Scottish solicitors are concerned, there is undoubtedly a degree of tension that emerges here, not least because, as solicitors, they are governed principally by the Solicitors (Scotland) Act, and that statute has now passed to the responsibility of the Scottish Parliament. So as they conduct their ordinary business as solicitors, if that is to be changed in any way, it will not be a matter for this House or another place, but for the Scottish Parliament.
That said, it is clear to me that those who carry on investment business north of the Border, whether they are solicitors, bankers or whatever, would be exceedingly alarmed were there to be separate regimes for investment regulation on either side of the Border. I hasten to stress that I have no difficulty with that provision, provided there is the understanding that solicitors in Scotland will be statutorily governed by two separate Parliaments.
What I understood as a relatively simple arrangement has become more complicated over the past week or so. I thought that the Financial Services Authority, as Clause 316 indicates, will be required to keep itself informed about
Such activities are not an incidental matter because unlike solicitors in England, for more than 100 years solicitors in Scotland have not only conveyed houses, concluded contracts and made up wills but have carried out a considerable degree of investment business. They continue to do so, so that is an important aspect of their work,
I now understand that in the regulation of Scottish solicitors' exempt activities, the FSA--using one power or another conferred by the Bill--has put out to tender to a number of organisations the task of regulating solicitors in Scotland that carry on exempt regulated activities. The reasoning behind that is to keep fees down, which is not a bad idea. One of the
Another possibility is that the duties relating to activities that fall within Clause 316(1)(b) might be given to PricewaterhouseCoopers. That is an exceptionally good organisation. I have worked with it in the past and have no complaint about its professionalism in accounting, auditing and consultancy.
The third possibility is that the Law Society of England and Wales might be given responsibility for looking after the exempt business of solicitors in Scotland. If the Minister can assure me that is an off-the-wall proposal and that no decision is likely to be taken to give the ultimate power of regulation or oversight to the English society, I would be immensely reassured. Were such a thing to be proposed, if the Minister has not already heard the rumble of distant thunder, he shortly will.
I am exploring the matter now because I understand that a decision one way or the other is to be taken by 10th April--and I doubt that we will reach Report stage before then. I shall be grateful if the Minister will clarify the issue. I am not sure whether the matter falls within Clause 316(1)(b) or is covered by the power that we have already given the FSA in Schedule 1(6).
As to Amendment No. 259YA, when my noble friend Lord Kingsland moved an amendment not so long ago, the noble Lord, Lord McIntosh, indicated that the word "information" encompassed a wide range of material, not just documents. As one who likes an unencumbered statute book, I believe that anything that can be deleted should be deleted.
My second amendment would require the authority to apply to the courts if it wishes to obtain information. If we were to have the contained arrangement that I first understood to be the basis of Part XX, that might be excessive. If a body, however distinguished, such as PricewaterhouseCoopers--or in Scotland, the Law Society of England and Wales--is to exercise that activity, intervention by a court would seem an appropriate regulation on the possibly arbitrary exercise of power by the FSA.
If the designated professional body--which I understand to be the Law Society of Scotland--found that the arrangements were so elaborate and excessive in their regulatory burden that it wanted to get out, it should have the opportunity to say, "We are not going to permit lawyers in Scotland to carry on investment business any longer. It is too excessive a burden".
Lord Fraser of Carmyllie: The Minister may grin. One matter that takes up an excessive amount of time at Scottish Law Society AGMs and otherwise is the onerous and proper requirement imposed upon lawyers in Scotland to contribute to a guarantee fund. If the complaint is that the burden of that fund is so heavy, solicitors in Scotland ought to have the opportunity to withdraw by their own hand from that
I am probing as carefully as I can and no Chief Whip needs to be worried about my intentions at this stage--but the fuller the answer that I secure this evening, the less time we will devote to the issue on Report.
Lord Taverne: I rise to speak to Amendments Nos. 259A, 259B and 259C which in effect delete subsection (7) of Clause 318. The subsection provides exemption from the general prohibition on some activities if they are the only activities carried on by a person. The amendments are directed at the problems faced by solicitor investment managers who may now find themselves at a disadvantage because they are subject to regulation by both the FSA and one of the Law Societies.
For some time a number of firms of solicitors have provided clients with professional investment services. Many clients are retired or elderly people; others act on behalf of relatives, trusts or charities. Those clients look for a seamless legal and financial service so that they do not have to waste a lot of time and money co-ordinating the help of different services. Solicitor investment managers usefully fill a gap in the market because they provide independent financial management integrated with traditional legal services. They provide a personal service, which is perhaps somewhat unusual today, and an important one. Examples of activities that would be regulated in the case of some firms and not others include: acting for clients who are trustees; providing custody service for trust share certificates; acting for clients who are executors of an estate; advising on and arranging transactions to effect bequests in wills; and the provision of custody service of share certificates during the administration period. They also advise clients in divorces and, for example, arrange the disposal of a life policy which is part of a matrimonial settlement.
If those services are regulated by the FSA in some cases and not in others, those firms which are subject to two forms of regulation will have higher costs than those which are not but which carry out exactly the same service. Many firms will be unable to sustain the increased costs compared with their competitors and will close or demerge their investment departments which carry out mainstream investment business in order to remain competitive in their core legal business. That would reduce consumer choice, because at present professional firms provide a distinctive, independent service that is not motivated by commissions. This is a personal service which is provided by a known individual, often against the
Clauses 316 to 323 in Part XXII of the Bill provide that solicitors who conduct investment business as an incidental part of their practice are to be regulated by one of the Law Societies. However, where a firm carries out any mainstream investment business, that business, and any incidental investment business which the firm carries on, is to be regulated by both the FSA and Law Society. The Association of Solicitor Investment Managers believes that the Bill needs to be amended to deal with that anomaly. The association accepts that mainstream investment business should be within the remit of the FSA but that incidental investment business performed by solicitors as part of their legal practice should remain to be regulated by the Law Societies alone. The answer to this appears to be the deletion of subsection (7), which is what these amendments are about. I hope that the Government will give this serious consideration.
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