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Lord Borrie: My Lords, the noble Lord, Lord Kingsland, is keen for the wording of the Bill to be plain and clear. I draw his attention, therefore, to paragraphs 7 and 8 of Schedule 1 that he has not mentioned.

Paragraph 7(1)(b) of Schedule 1 provides:

The noble Lord may say, "The Bill states that the person must be independent, but how does one achieve that?" I stress paragraph 7(3), which the noble Lord did not quote. It states:

    "The Treasury's approval is required for the appointment or dismissal of the investigator".

If the noble Lord's concern is that the Treasury should have a role, we have that provision. The Treasury has a role.

Secondly, if the noble Lord, Lord Kingsland, is concerned that there may be the appointment of a stooge, or that someone enjoying some security of tenure and who cannot be removed turns out to be a stooge, we have the provision that the Treasury's approval is needed not only for appointment but also dismissal. If there are complaints about that person being of no value as an independent person, those provisions ensure the position.

Finally, on the investigation of complaints, under paragraph 8(4) it is plain that the investigator can consider a complaint even if it has not been referred to him by the authority. That demonstrates again an independence, and the possibility of independently proceeding with an investigation, even if the matter has not been referred to the investigator. These provisions--there may be others; I do not want to spend too much time upon the matter--ensure the independence which is so much the concern of all noble Lords. I think that the role of the Treasury, which I quoted, should have been noticed by the noble Lord.

Lord Stewartby: My Lords, the noble Lord, Lord Borrie, points to some of the safeguards built into the schedule. It would be churlish not to accept that the Government have improved the Bill since it first appeared and have strengthened the rights of those who have complaints or may be disciplined. That is very much to be welcomed.

However, we have to accept also that the heart of the concern about the Bill, even as amended and improved, is that an extremely powerful and

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monolithic body will have enormous powers of control of functions in the financial markets and in relation to those who exercise those functions. It is necessary, therefore, to see that there are no cracks in the process which can tip the balance unreasonably in favour of the authority.

In that connection, I refer to the issue dealt with in Amendment No. 17. In paragraph 7(4) of Schedule 1 it is the opinion of the authority which determines whether the terms and conditions on which the investigator is appointed meet the two requirements of headings (a) and (b). I can see no reason why, as my noble friend suggests, that should not be in the opinion of the Treasury. There is no harm in putting those safeguards into statute. Once the Bill is enacted such changes will not be possible. The authority would lose nothing by the amendment unless it felt that the Treasury might take a different view from itself.

It would be a great reassurance to have the opinion of the Treasury as the determining factor. I hope that, despite the changes which have been made--I acknowledge that they have improved the position of those who may have complaints--it is an amendment the Government feel able to accept.

Lord Elton: My Lords, I endorse what my noble friend said and go further. I draw attention to Amendment No. 18. It seems a difference of substance if the decision as to whether or not to pursue a complaint rests with the authority or an independent investigator. At present the Bill states that,

    "The Authority is not obliged to investigate a complaint in accordance"--

and so on--

    "which ... it considers would be more appropriately dealt with in another way".

These may appear to be presentational points. However, presentation is important, and in this case there is the possibility that a difference of treatment may result from the different placing of authority.

Lord McIntosh of Haringey: My Lords, the complaints procedure is an important part of the accountability package. As noble Lords have recognised, the Bill has benefited from the scrutiny of the Joint Committee and there have been significant amendments to the Bill as a result.

The Bill should deliver an open and transparent mechanism for people to have their complaints dealt with quickly. The arrangements which the FSA envisages for the complaints scheme were outlined in a letter from the authority to the noble Lord, Lord Burns, which was copied to those who spoke in the debate in Committee and which has been placed in the Library of the House.

Amendment No. 17 would require the Treasury rather than the FSA to set the terms and conditions on which the complaints investigator is appointed. I endorse the need for the complaints investigator to be operationally independent of the FSA. The noble Lords, Lord Borrie and Lord Stewartby, indicated the ways in which the Bill has been improved to achieve that.

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Paragraph 7(1)(b) of Schedule 1 refers to "an independent person". The Treasury's approval is required for the appointment or dismissal of the investigator (paragraph 7(3)). The FSA, in paragraph 7 of its paper of 9th March, proposes that the panel to advise the FSA board on selection of the investigator should be chaired by the non-executive deputy chairman of the FSA, include the chairs of the practitioner forum and consumer panel and, in accordance with Nolan best practice, have a fourth member selected to give an independent and external perspective. You cannot get much further away from the executive directors of the FSA. Paragraph 9 of the FSA paper proposes that the investigator should not be an employee, member or officer of the FSA.

Paragraph 7(4)(a) of Schedule 1 provides that the investigator must be free at all times to act independently of the FSA. Paragraphs 7(5) to (14) provide that there has to be extensive consultation on the nature of the complaints scheme. Paragraph 8(6) provides that the FSA can be required by the investigator to publish any response to a well-founded complaint, or one which criticises the authority. Government amendments laid in Committee prevent FSA employees from investigating complaints against the FSA and are now paragraph 8(8). The FSA, in paragraph 9 of its paper, proposes that the investigator's office be staffed by individuals who perform no duties for the FSA and that the office itself be located away from the FSA's premises. I do not believe it can be said that nothing is being done to secure the investigator's independence.

Amendment No. 17 would run counter to one of the principles of the new regime--that the Bill sets clear objectives for the FSA and a framework within which it should operate and account for itself--but how the objectives are achieved is for the FSA to determine. In this case, we have set the objective of an independent complaints investigator; it is for the FSA to achieve it. Handing responsibility for appointing the investigator to the Treasury, which would go beyond the existing power of the Treasury to approve the appointment or dismissal of the investigator, might imply a role for the Treasury or its appointee in handling operational level complaints against the FSA. That would not be the appropriate relationship between the Treasury and the FSA, whether in this case or on any other issue.

Amendments Nos. 18 to 21 would require all complaints against the FSA to go to the complaints investigator. I continue to believe that the FSA should have the chance to rectify any complaint made against it. That position was supported by the noble Lords, Lord Borrie, Lord Grabiner and Lord Faulkner, and the noble and learned Lord, Lord Donaldson, when we considered the matter in Committee.

Most complaints arrangements, including those relating to regulated firms under the current system, give the subject of the complaint the chance to put his own house in order before an independent investigator is brought in. We are really trying to set up a mechanism for cases which the FSA cannot resolve with complainants--not every single case that might arise. But the scheme still preserves transparency. If

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the FSA decides not to investigate a complaint, the investigator should know about it and can take up the complaint if he sees fit. I hope that noble Lords will not pursue the amendments further because they run counter to any established practice of complaints procedures.

Amendment No. 22 would allow the investigator to recommend that the FSA makes an ex gratia payment when he considers that a complaint is well-founded or he has criticised the FSA in his report. The FSA has considered the case for ex gratia payments and it sets out its approach in the paper copied to many noble Lords and to which I have already referred. The FSA intends in its paragraph 10 that ex gratia payments should in principle be available for both regulated firms and their employees, and consumers. In paragraph 11, it proposes that the investigator should be able to recommend ex gratia payments in cases of maladministration by the FSA involving loss, distress or inconvenience. No amendment to the Bill is required to allow ex gratia payments. The FSA will be consulting further on the matter and it plans to issue a paper for full public consultation in late April. I hope that noble Lords will not press the amendments.

5 p.m.

Lord Kingsland: My Lords, I can be terse to the point of being telegraphic. I should like to return to the issue of Amendment No. 17 at Third Reading. I cannot understand why the Minister is not prepared to accept that amendment.

I want to reflect on his replies to Amendments Nos. 18 to 21. I recognise that a number of noble Lords took the view that the Minister takes. Although I disagree with it, I want to reconsider the appropriateness of those amendments. When they are called I shall not move them.

However, I find his reply to Amendment No. 22 wholly unsatisfactory. In the Bill, the Government are asking for statutory immunity for the FSA, yet they are not prepared to put on the face of the Bill the power of an independent investigator to make ex gratia awards. That renders the Government's undertakings about the powers of the independent investigator and what he is capable of doing deeply suspect. Therefore, when we reach Amendment No. 22, I shall want to test the opinion of the House. In the meantime, I beg leave to withdraw Amendment No. 17.

Amendment, by leave, withdrawn.

[Amendments Nos. 18 to 21 not moved.]

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