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Lord Bach moved Amendment No. 275SA:


The noble Lord said: I was fascinated and intrigued by the expert analysis of this field by the noble Lord, Lord Kingsland. I believe that he strayed into one or two amendments that are not in this group. He will forgive me if I do not reply to every one of the excellent points that he made. I should certainly need to look at Hansard for a long time before I could answer him satisfactorily. However, I shall do my best in terms of one or two--

Lord Kingsland: I understand entirely that the Minister may feel unable to reply to Amendment No. 275J. I could not find it in the group. Indeed, I could not find it anywhere in today's groupings. It may well be that the matter was dealt with on a previous Committee day. However, in the context of the set of amendments, I felt it appropriate to deal with that point.

Lord McIntosh of Haringey: We understand that it was debated with Amendment No. 241N.

Lord Kingsland: In saying what I said, I by no means felt that I was necessarily in the right. The Minister has pointed out that, indeed, it has already been debated. I understand entirely that the Minister does not want to repeat what he said previously.

Lord Bach: I do not, and the noble Lord made the point that Amendment No. 275N is in the next group and will no doubt be answered.

Amendment No. 275G is in this group. It concerns the opportunity for the authority to vary a decision notice that does not dilute anyone's rights because it is subject to requirement for consent. As regards final notices, we have previously said, and I repeat, that they will replace the Part V and Part VIII penalty notice provisions. We shall oppose those provisions on Report.

The Government's amendments to Clause 377 apply the separation requirement to supervisory decisions as well as those subject to warning and decision notices. That is the extension we thought that the Opposition sought, although the nature of those decisions requires some limited provision for urgent circumstances.

I guarantee that I shall look carefully at the other comments and questions which the noble Lord asked during his response to the amendments which I moved and shall write to him in due course.

On Question, amendment agreed to.

Clause 373, as amended, agreed to.

Clause 374 agreed to.

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Clause 375 [Warning notices]:

Lord McIntosh of Haringey moved Amendment No. 275TA:


    Page 196, line 25, at end insert--


("( ) state the action which the Authority proposes to take;").

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 275UA:


    Page 196, line 28, leave out paragraph (c) and insert--


("( ) state whether section (Access to Authority material) applies; and
( ) if that section applies, describe its effect and state whether any secondary material exists to which the person concerned must be allowed access under it.").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 275ZA, 275A, 275C, 275N, 275NA, 275NB and 275NC. They are not all government amendments, but would noble Lords opposite prefer me to deal with their amendments now or wait until they have spoken to them? I am in their hands.

Lord Kingsland: We should be delighted if the Minister would speak to these amendments as well as to the government amendments. It will save a lot of time.

10.45 p.m.

Lord McIntosh of Haringey: I recognise Amendment No. 275A tabled by noble Lords opposite. It goes too far, but as my colleagues said in another place when responding to an identical amendment, we have been considering further amendment to the provisions concerning access to the evidence relied on by the FSA.

That further consideration was prompted by representations made to us by the Law Society after the Bill had been introduced in another place and was already being debated in Committee there. The concern of the Law Society was that the FSA could, if it was minded to do so, selectively rely on evidence, such as expert witness statements, that pointed in different directions.

We accepted that point, and have been actively engaged in finding a solution. The result of those considerations are the amendments before the Committee. In all those cases to which the full disciplinary-type procedure applies-- which includes market abuse, cancellation of permission, issuing a prohibition order and all those types of decision to which my noble friend Lord Bach referred in relation to third party rights--we are proposing a considerable enhancement to the right of access.

Not only will there be a right of access to the evidence the FSA is relying on, but there is in addition to be a right of access to material that the FSA has considered in arriving at its decision or which it has obtained in the course of investigating the matter and which it considers might undermine its case.

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That test is modelled on the disclosure rules that apply in criminal proceedings--I am not getting any attention from the crowded Opposition Front Bench--under the Criminal Procedure and Investigations Act, though adapted to reflect the fact that the FSA is not simply an investigatory or prosecuting body, but one with broad supervisory responsibilities. The FSA will potentially hold a large amount of evidence in relation to an authorised person that could be said to relate to the matter covered by a notice without being particularly germane to it.

It would be excessively bureaucratic if the FSA were required to assess all the information it might hold for various purposes which may be said, in some loose sense, to relate to a matter covered by a warning notice. That is why the secondary material which must be considered for granting access is deliberately restricted to matters considered by the FSA in taking the decision or obtained in the course of investigating the matter with which the notice is concerned. Without that, the extensive access requirements that we are proposing would hopelessly disadvantage the regulator.

I wish to make it clear that we would not normally apply such onerous access requirements to a regulatory body and we certainly do not regard that as a precedent for other areas. But we are conscious that the FSA is a body exercising a necessarily wide range of powers and we are sensitive to the concerns that have been expressed. We have concluded, therefore, that an approach modelled on the criminal procedures is appropriate and justified here. However, it would not be appropriate or desirable to extend those rights across the full range of FSA decisions. The disclosure rules on which they are modelled are designed for cases where there is some mischief alleged. That translates readily enough into market abuse and the various disciplinary powers.

We propose also to extend those rights where the FSA is proposing to take the ultimate step of cancelling a person's authorisation under Part IV or approval under Part V or to issue a prohibition order under Part V or Part XX. But we do not consider it appropriate or desirable to apply those rights to the majority of supervisory decisions, many of which will be relatively routine, or to the determination of applications for new or increased permission or approval, recognition or authorisation. In those cases the FSA is not judging whether X has done Y, but whether the FSA is satisfied that X meets standard Z.

Applying the rights of access to all those decision-making procedures would be excessive and would unduly interfere with the ability of the FSA to respond prudently and sensitively to the very different circumstances which different supervisory cases will present. I should add that the rights of access will apply at both the warning and decision notice stages--a further enhancement on the position under the Bill as it stands--because we have no wish to deprive a person of the opportunity to see the evidence in order to assess whether or not to refer the matter to the tribunal,

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irrespective of whether the person had previously taken the opportunity in order better to inform their representations.

We have also made provision dealing with the issues of public interest immunity and commercial sensitivity, as we said in another place that we would. Finally, we have provided that the third parties whose interests may be prejudiced by the reasons given in a warning or decision notice will also enjoy rights of access to the relevant evidence.

I turn to Opposition Amendments Nos. 275NA, 275NB and 275NC which focus on an important and interesting aspect of the new, wider access rights set out in the new clause. Subsection (2) ensures that the FSA is able to consider how similar or comparable cases have been dealt with in order to ensure proper consistency in its proposed actions and penalties, without thus opening up sensitive commercial details about other businesses to scrutiny by the subject of the action currently proposed. If action is being taken against a person X, it is no business of X's whether or not similar action was previously taken against another person, Y.

Indeed, the action in the earlier case may not have been pursued, in which case it would be unfair to reveal details of what had been proposed to another person without consent. I can see that noble Lords opposite appreciate that thinking, but they propose through Amendment No. 275NA that there should be a right of access to the material considered for comparative purposes so long as the material can be made available without disclosing the other person's identity. I cannot agree. Even if it was sufficient not to disclose Y's identity--and in many cases I doubt whether that would be sufficient to avoid revealing sensitive information about identifiable other persons--I do not accept that X has any business knowing what was or was not decided in the case concerning Y. I certainly do not see the need to require the FSA to give access to such material, which could involve a lot of additional cost in terms of editing documents.

There will, however, be considerable material in the public domain to assist X in determining whether the action proposed is in line with general FSA policy and practice. First, where the FSA proposes to impose a financial penalty under Parts VIII or XIV it will be required to have regard to its published statement of policy. The tribunal will also be able to refer to the relevant statement, and the person subject to the proposed decision, X, will be able to refer to it too.

Secondly, if the action against Y proceeded, and any consideration by the tribunal or higher court has been completed, details of the case would have been made public under the new clause on final notices and X would have access to those details. If the action was still subject to reference to the tribunal it would hardly be right to disclose any details about it, anonymous or not.

Finally, the FSA has already proposed that from the bringing into force of this legislation, the FSA annual report will include accounts of enforcement action taken, including in particular details on cases settled or

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determined by the tribunal; financial penalties imposed and costs awarded; and significant judgments by the tribunal.

Amendment No. 275NB simply says that subsection (2) does not prevent the FSA from providing a summary of the principal characteristics of those cases. Let me assure the noble Lord, Lord Kingsland, that as currently drafted, subsection (2) does not prevent that. As I have indicated, we expect that the FSA will publish some information along those lines in its annual reports.

Subsection (3)(b) enables the FSA to withhold material where providing access would be unfair given the likely significance of the material to the current case, weighed against the potential prejudice to the commercial interests of another person.

Again, the Opposition suggest that there should be a requirement to permit access to the material if the identity of the other person or persons could be withheld. That goes too far. The FSA is required to come to a conclusion about the fairness of providing access to the material. If the material can be made available in a way that is not unfair, the FSA should do so. However, requiring the FSA to provide access where, despite withholding the identities, it is still unfair to do so, would be wrong.

So again I cannot accept this amendment. The necessary discretion is already provided for. Overriding it may lead to unfair and unintended results. In resisting these amendments, I have sought to make clear that I am not disagreeing with the noble Lords that the FSA should consider whether the objections against disclosure can be satisfactorily overcome, but the new clause strikes the right balance already. I beg to move.


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