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Lord McIntosh of Haringey: My Lords, yes.

Lord Kingsland: My Lords, I am much obliged. The purpose of the amendments to Clause 42 is to allow the authority to refuse an application to vary or cancel a permission in "the interests of consumers" or "potential consumers" rather than,


Presumably, that provision was originally required because it was thought that the interests of consumers can be affected even in relation to some consumers only. Meanwhile, potential consumers have been omitted altogether. I beg to move.

5 p.m.

Lord McIntosh of Haringey: My Lords, when proposing similar amendments in Committee the noble Lord, Lord Kingsland, explained that he was concerned about the possibility that the FSA may try to continue to authorise someone inappropriately. I hope I can offer him some assurance on that point so that he may feel able to withdraw the amendments.

The purpose of Clause 31 is to provide certainty as to whether or not a person continues to have the status of an authorised person following the cancellation of a Part IV permission. That is necessary because, as Clause 29 indicates, a person may have permission to carry on regulated activities other than under Part IV. When the FSA cancels a Part IV permission it will have to decide whether other permissions carry on. If it concludes that they do not, it will be obliged to give a direction under Clause 31(2). That will put the status of the person concerned beyond doubt.

I want to emphasise that the clause does not offer the FSA an alternative means of prolonging authorisation. Subsection (2) clearly states that where the cancellation of a Part IV permission means that an authorised person no longer has a permission for any regulated activity, the FSA,


    "must give a direction withdrawing that person's status as an authorised person".

Clause 31 simply provides certainty as to the effect of the cancellation of a Part IV permission on the status of the person involved. Although subsection (1)(b) makes it clear that the clause applies only when the cancellation of a Part IV permission means that the person has no permission by virtue of any other provisions of the Bill, we believe that it is helpful to have a distinct administrative act that confirms that the result of the cancellation is that the person's authorisation has been withdrawn.

I now turn to Amendments Nos. 98 and 100 which concern Clause 42. These amendments are concerned with cases where the FSA has varied a person's Part IV permission with the result that there are no longer any regulated activities which that person is permitted to carry on. Once the FSA is satisfied that it is no longer

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necessary to keep the permission in force, it must cancel it. We believe that is an appropriate test which ensures that the FSA cannot keep a permission in force unnecessarily.

We also believe, and the FSA believes, that it places a more stringent test on the FSA than the one proposed in these amendments. There are, of course, various reasons why it may be necessary for the FSA to keep a permission in force. A firm may, for example, have contravened a requirement and so be subject to some form of investigation or to enforcement or to disciplinary proceedings. Alternatively, the FSA may be concerned that a firm may have contravened a requirement and, therefore, needs to satisfy itself that the firm is not trying to hide something. Clearly, the FSA's ability to protect consumers would be seriously undermined if it were unable to deal with issues such as these merely because a person had ceased to be authorised.

It is important that we should bear in mind that almost throughout the Bill we have succeeded in including provisions to deal with former authorised persons. If we had to deal with former authorised persons in every regulatory provision of the Bill, we could easily extend the length of it by 50 per cent. There are all sorts of additional complications that arise when seeking to regulate somebody who is no longer a regulated person. In this part of the Bill we keep them in membership so that they can be regulated and disciplined, rather than let them out and have to bring them back again for disciplinary purposes.

The effect of Amendments Nos. 98 and 100 would be to undermine the rigour of the test that is applied. If the amendments were accepted, the FSA would be able to keep a permission in force by relying on the fact that it was unable to satisfy itself that there was "no good reason" why the person should not continue to be subject to its control. That is a difficult test for any regulator. How can it ever be sure that there is no good reason for continuing to be able to exercise control over a person? The test in the Bill as it stands, on the other hand, would require the FSA to cancel permission if it is satisfied that it is no longer necessary for permission to be continued.

In turn, that requires the FSA to address the situation that had led it to conclude that permission should be continued and ask itself the question whether the situation is still such that it is necessary that permission should be continued. If it has no reasonable grounds for concluding that it is necessary, the effect of the Bill is that permission should be cancelled. I believe that is where we started and that that is the intention of the noble Lord. We do not believe that the test is sufficiently stringent. It would not give firms certainty that they will not be the subject of unnecessary regulation. I hope that these amendments will not be pressed.

Lord Kingsland: My Lords, I thank the Minister for the tone, if not the content, of his response. From the fact that these amendments have been retabled after much debate in Committee, he will have concluded that we regard them as, although superficially

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technical, of considerable importance. I should like to reflect on what the Minister said. We can come back to the amendments at Third Reading. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 94 and 95 not moved.]

Clause 40 [Giving permission]:

Lord Fraser of Carmyllie moved Amendment No. 95A:


    Page 17, line 44, leave out from beginning to ("as") in line 45.

The noble and learned Lord said: My Lords, at an earlier stage I tabled a number of amendments which were prompted by the Law Society of Scotland. In this group are two of my amendments, to which I can speak briefly.

Amendment No. 95A relates to Clause 40. The proposal is that the wording given as an example of the limitation that the authority might incorporate into the description of a regulated activity should be deleted. The point is a short one. If those words remain in, the concern is that, applying one of the principal canons of construction, there may be a limit on the limitations that the authority could impose. It may be dangerous to do that and, accordingly, the words ought to be deleted. It does not seem to me that that can do any damage to the statute and it will certainly have the effect of simplifying it in an appropriate fashion.

Amendment No. 95B relates to Clause 41. As your Lordships will have observed, this is a short but possibly rather startling provision that the authority can include a requirement which extends to,


    "activities which are not regulated activities".

We have already spent some considerable time this afternoon discussing what might be included in "regulated activities". It is clear from some of the earlier clauses that we debated that the Treasury has wide powers to specify what may and may not be regulated. It is surprising therefore that this requirement can go beyond regulated activities.

It may be that the Minister has already explained why the provision is necessary. But it seems to the Law Society and to me that it goes further than necessary. Accordingly, we should simply delete subsection (3). But I shall listen with interest to discover whether or not there is a sound basis for its inclusion. I beg to move.

Lord Brightman: My Lords, Amendments Nos. 96 and 97, which relate to Clause 42, are grouped with Amendments Nos. 95A and 95B. It is therefore my duty to speak now rather than later.

As we are looking at Clause 42 for a second time, perhaps I may mention a point of drafting of some importance which occurred to me rather late in the day. I do not expect the Minister to deal with this point in any substance because I did not give him notice in advance that I was going to raise it.

So far as I can discover, there is no definition of "consumer" in Part IV of the Bill. I may be wrong; I may have overlooked it somewhere, in which case

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I hope I shall be stopped. If there is no definition, then there seem to be four choices. Choice number one: there is a definition of "consumer" in Clause 135. That definition is adopted in Schedule 4. Choice number two: Clauses 5 and 12 use the Clause 135 definition, but add a few more persons as consumers. Choice number three: in Clause 9 we have the same definition as in Clauses 5 and 12, but excluding "authorised person" who is defined in Clause 407. Choice number four: we could have no special definition so that the dictionary definition applies. That, I believe, was the course advocated by the noble Lord, Lord Peston, on the second day of Committee when he said,


    "I have lectured on consumer theory for about 40 years and believed that I understood what a consumer was".--[Official Report, 20/3/00; col. 45.]

As I said, I do not expect the Minister to deal with this point in substance now, but perhaps it could be considered before Third Reading.

Perhaps I may mention an allied point. There are some 280 pages to this Bill. Is it necessary to read every single line in order to see whether or not the word "consumer" is used again and to check that it has been defined; or is there some electronic equipment available in the House to those who wish to study the Bill, which will indicate where the word "consumer" is used? There are more than 7,000 lines in the Bill. I have reason to believe, which I shall not go into now, that the word "consumer" is used in other places in the Bill without definition. It would be too big a job for me to go through the Bill line by line. But perhaps I can be informed whether or not there is some equipment which will do it for me.

5.15 p.m.

Lord Kingsland: My Lords, as I understand it, Amendments Nos. 96 to 101 are intended to tidy up Clause 43 and refer to the power the authority uses, on "its own initiative", to vary the Part IV permission to carry on specific regulated activities. Part IV is the normal permission for which firms apply.

We had thought, in another place, to make it clear that Clauses 43 and 44 were indeed the exercise of the authority's own initiative power. The revised subsection (1) covers exactly the same ground as cases (a) to (c) except that, as mentioned in the Explanatory Notes, it is not linked to specific activities.


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