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Lord Elton: As an ex-member of the panel, I endorse the remarks of the noble Lords, Lord Borrie and Lord Taverne. I ask the Government to pay close attention to the case made by my noble friend Lord Saatchi.

Lord McIntosh of Haringey: We have certainly paid close attention to the case that has been made. I had the pleasure of meeting the Director-General of the Takeover Panel and his colleagues with my noble friend Lord Richard. Also, a number of meetings have taken place between the panel and Treasury officials.

There is not too much between us. Neither we nor the FSA want the authority pulled into the tactical manoeuvring of parties to takeover battles. It is important that the interests of shareholders are not unnecessarily affected during takeover bids. That can be achieved through the FSA's enforcement policies and code of market conduct. The amendments acknowledge that there may be times when it will be appropriate for the FSA to intervene during or after a takeover, to take action against those who have engaged in or are engaging in market abuse.

Broadly speaking, these amendments would allow the FSA to adopt a policy that in takeovers it would take action in market abuse cases only where the Takeover Panel requested it to do so. The panel has

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indicated that it would, for example, seek to involve the FSA where its own rulings were not complied with or it believed that a penalty might be merited. Given that all sides acknowledge that there will be occasions when it is appropriate for the FSA to take action under its market abuse powers, the key question is: who should take that decision? We firmly believe that the decision in a particular case should rest with the statutory regulator charged by Parliament with the responsibility to tackle market abuse across the board.

The fundamental theme of the Bill is that all financial regulation, including self-regulation, should be brought within the umbrella of the Financial Services Authority. We cannot accept that it is right for the FSA to adopt a policy of exercising its market abuse powers in the case of a takeover only on the say-so of the panel. We are setting up the FSA as the single statutory regulator of the financial services industry. What the FSA does is conditioned by the objectives and principles given to it by Parliament, among them the protection of consumers and the maintenance of market confidence. In the area of market abuse we are giving it new powers to protect the financial markets and extending its reach to cover both regulated and unregulated persons. Together with that, it has statutory powers of investigation which enable it to compel people to answer questions.

While the Takeover Panel does a satisfactory job in regulating the conduct and process of takeovers, it is a very different body. The remit of the panel is much narrower than that of the FSA and is concerned with the interests of the shareholders of companies involved in takeovers--and why not? That is perfectly reasonable. There are good reasons for maintaining the current non-statutory approach to the regulation of takeovers. We want the process to be as quick and efficient as possible. But as far as concerns market abuse, the last word should rest with the body to which Parliament has given the job of tackling it. There are interests at stake other than those of the shareholders and the various parties to a takeover: the interests of other market participants and the market as a whole. Concerns about fairness and efficiency are at the heart of what we are doing.

Having said that the issue is narrower than may have appeared from the debate which has taken place, I hope that the Committee will not pursue the amendment and will allow the FSA, the Treasury and the Takeover Panel to continue the discussions which are in course at the present time.

Lord Northbrook: Can the Minister say whether there may be a conflict of interest in a case where a company which is subject to a takeover bid appeals to the FSA after the Takeover Panel has made an adjudication? That may be a more disadvantageous situation than the previous regime where the Takeover Panel makes a judgment. The whole regulatory framework may be more complicated, leading to delays in bid situations.

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Lord McIntosh of Haringey: I entirely agree with the noble Lord. We do not want the dual responsibilities to be exercised in such a way that one party plays one off against the other, or appeals from one to the other. That is what the current discussions between the Takeover Panel and the FSA are about.

Lord Elton: This is a complex and important matter. I hope that my noble friend will be able to provide noble Lords with an opportunity to debate this matter at a later stage when we are not quite as tired and anxious to conclude, as I am for one.

Lord Saatchi: I am grateful to all noble Lords on all sides of the Committee who have supported these amendments. We shall return to this matter at Report stage. This issue is much too important to debate at a quarter to 12, and perhaps we shall have another opportunity to debate it at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 276F not moved.]

Clauses 390 and 391 agreed to.

Lord McIntosh of Haringey moved Amendment No. 277:


    After Clause 391, insert the following new clause--


("Limitation on powers to require documents

PROTECTED ITEMS

.--(1) A person may not be required under this Act to produce, disclose or permit the inspection of protected items.
(2) "Protected items" means--
(a) communications between a professional legal adviser and his client or any person representing his client which fall within subsection (3);
(b) communications between a professional legal adviser, his client or any person representing his client and any other person which fall within subsection (3) (as a result of paragraph (b) of that subsection);
(c) items which--
(i) are enclosed with, or referred to in, such communications;
(ii) fall within subsection (3); and
(iii) are in the possession of a person entitled to possession of them.
(3) A communication or item falls within this subsection if it is made--
(a) in connection with the giving of legal advice to the client; or
(b) in connection with, or in contemplation of, legal proceedings and for the purposes of those proceedings.
(4) A communication or item is not a protected item if it is held with the intention of furthering a criminal purpose.").

The noble Lord said: Amendment No. 277 was debated with Amendment No. 89. I beg to move.

On Question, amendment agreed to.

Clause 392 [Definitions]:

[Amendments Nos. 277ZA and 277A not moved.]

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Lord McIntosh of Haringey moved Amendment No. 277B:


    Page 207, leave out line 46.

The noble Lord said: This amendment was debated with Amendment No. 226D. I beg to move.

On Question, amendment agreed to.

[Amendment No. 277C not moved.]

Lord McIntosh of Haringey moved Amendment No. 278:


    Page 208, leave out lines 32 and 33.

The noble Lord said: This amendment was debated with Amendment No. 168. I beg to move.

On Question, amendment agreed to.

Clause 392, as amended, agreed to.

Clauses 393 to 396 agreed to.

Clause 397 [Controller]:

[Amendment No. 278A not moved.]

Clauses 397 to 400 agreed to.

Clause 401 [Privileged communications]:

On Question, Whether Clause 401 shall stand part of the Bill?

Lord McIntosh of Haringey: I gave notice in the debate on Amendment No. 89 that I should oppose the Question that Clause 401 shall stand part of the Bill.

Clause 401 negatived.

Clause 402 [Consequential and supplementary provision]:

Lord Kingsland moved Amendment No. 278B:


    Page 214, line 3, leave out subsection (4) and insert--


("(4) No provision of this Act other than section (Imposition of restrictions or requirements by the Treasury) restricts powers conferred by this section.").

The noble Lord said: In moving the amendment, I speak to Amendment No. 278D. Amendments Nos. 278B and 278BA are, I think, consequential and supplementary provisions. On Amendment No. 278C, it is our view that the Treasury should be made subject to the same objectives as the authority. Only that will enable persons successfully to lobby the Treasury not to impose the authorisation requirement where that is not necessary to protect investors and to provide exemptions from the financial promotion regime.

Amendment No. 278D would require the Treasury to consult when exercising its power to make regulations or orders under the Act. Noble Lords are probably aware that a similar amendment was tabled previously in relation to particular powers of the Treasury to make orders. If the authority wishes to make rules, it has to go through a consultation procedure. But the Treasury does not have to do so. Many believe that it should have to undergo the same procedure. I beg to move.

Lord Bach: The new clause introduced by Amendment No. 278C is concerned with the constraints on the Treasury when exercising its delegated legislative powers conferred by the Bill.

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Amendment No. 278D takes a slightly different route but essentially that, too, is directed at restricting the exercise of powers by the Treasury.

I understand the thinking behind Amendment No. 278C. It is certainly not the Treasury's practice or intention to make regulations that are not necessary for a particular purpose, nor to make regulations that would in any way seek to damage competition, competitiveness or innovation. However, the difficulty with a provision such as this is that its effect cannot really be determined until the powers under the Bill are being exercised. For example, there could be a difficulty if we were required by EC directives or treaties to include within the regulated activities order something that we were not entirely persuaded on consumer protection grounds merited being subject to regulatory burdens.

From time to time, we all know that unforeseen circumstances arise that need to be dealt with. By their nature, we cannot predict what these will be or when they will arise. However, the Bill states clearly, so far as possible, what the relevant powers to make regulations and orders are for and how they are to be used. Many of the powers are very narrow in scope.

Amendment No. 278B is a consequential amendment to Clause 402 to ensure that the restrictions that would be introduced by Amendment No. 278C would apply equally to orders under Clause 402.

I hope that I can give the noble Lord reassurance about Amendment No. 278BA. I shall be plain and up-front about it. Part of the reason for having a provision along the lines of Clause 402--it is a fairly common Bill provision--is to enable the government of the day to cope with things that could not have been envisaged at the time the legislation was enacted, or matters of such detail that it would have been inappropriate for them to feature in a Bill. That is particularly important in a Bill of this length and complexity which is designed to enable the effective regulation of dynamic and diverse markets.

Amendment No. 278D seeks to impose on the Treasury obligations to consult on draft secondary legislation. Members of the Committee will be well aware that the Treasury has undertaken a number of consultation exercises on its proposed exercise of powers under the Bill. However, we must not lose sight of the reason for subjecting the authority to consultation and cost-benefit requirements. That reason is because the Bill will confer on the authority delegated powers to make legislative provision without parliamentary scrutiny. Of course, the same is not true in the case of the powers conferred on the Treasury. Secondary legislation will be made subject to parliamentary scrutiny. Therefore, we argue that the amendments are unnecessary. Normal parliamentary procedures provide adequate protection. I hope that the noble Lord will consider my reply and not press his amendments tonight.

30 Mar 2000 : Column 1055

11.45 p.m.

Lord Kingsland: I shall do precisely what the Minister has asked me to do. I shall consider what he said and shall not press the amendment tonight. I beg leave to withdraw it.

Amendment, by leave, withdrawn.

[Amendment No. 278BA not moved.]

Clause 402 agreed to.

[Amendment No. 278C not moved.]

Clause 403 agreed to.

[Amendment No. 278D not moved.]

Clause 404 [Parliamentary control of statutory instruments]:


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