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Lord Kingsland: My Lords, I thank the Minister for what he has said. If I understood him correctly, he has gone some way towards giving me some comfort on these matters. I shall of course read the text of Hansard carefully before deciding whether to return to this matter at Third Reading. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 105 to 106A not moved.]

5.45 p.m.

Clause 50 [Determination of applications]:

Lord McIntosh of Haringey moved Amendment No. 107:



("(4) If the Authority grants an application for, or for variation of, a Part IV permission, it must give the applicant written notice.
(5) The notice must state the date from which the permission, or the variation, has effect.
(6) If the Authority proposes--
(a) to give a Part IV permission but to exercise its power under section 40(7)(a) or (b) or 41(1), or
(b) to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 42(5)),
it must give the applicant a warning notice.
(7) If the Authority proposes to refuse an application made under this Part, it must (unless subsection (8) applies) give the applicant a warning notice.
(8) This subsection applies if it appears to the Authority that--
(a) the applicant is an EEA firm; and
(b) the application is made with a view to carrying on a regulated activity in a manner in which the applicant is, or would be, entitled to carry on that activity in the exercise of an EEA right whether through a United Kingdom branch or by providing services in the United Kingdom.

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(9) If the Authority decides--
(a) to give a Part IV permission but to exercise its power under section 40(7)(a) or (b) or 41(1),
(b) to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 42(5)), or
(c) to refuse an application under this Part,
it must give the applicant a decision notice.").

The noble Lord said: My Lords, in moving Amendment No. 107, I shall speak also to Amendments Nos. 108 to 110; to the amendment of the noble and learned Lord, Lord Fraser, Amendment No. 110A; to government Amendments Nos. 111 and 112; to Amendments Nos. 163 to 166; and to Amendments Nos. 168 to 170. These amendments are all part of the package of procedural amendments, of which we gave notice some time ago.

Amendment No. 107 establishes the procedures for granting or refusing applications for a new permission or variation of an existing permission under Part IV. If an application is granted, the applicant receives written notice which states the date on which the new permission takes effect. If the FSA proposes to grant or vary a permission in accordance with an application, but to impose limitations or requirements under Clauses 40, 41 or 42, it must follow the warning and decision notice procedure.

The warning and decision notice procedure also applies if the FSA proposes to refuse an application--unless the reason for refusal is that the applicant should properly notify under Schedule 3 in accordance with the directives, in which case we would expect the question of which route was correct to be sorted out in discussion with the home state regulator.

The first new clause after Clause 51 (Amendment No. 109) applies the flexible, supervisory-type decision procedure to the exercise of the FSA's own initiative power to vary an authorised person's permission under Part IV. The own initiative power is, as I have explained, one of the key tools in the FSA's regulatory toolbox; a power that needs to be exercised in different ways according to the circumstances of each case.

Where action needs to take effect immediately or at some date prior to the full process having been completed, it is important that the action can and does take effect then. That is provided for by subsection (2), as qualified by subsection (3) which requires the FSA reasonably to consider it necessary for the action to take effect immediately or while the decision is open to review, having regard to the grounds on which the action is being taken.

On the other hand, where the power is being exercised to apply relatively routine requirements--for example, adjusting the premium income limit for an insurance company or setting a new capital ratio for a bank--to reflect new aspects of that authorised person's business, there may be no need for the requirement to take effect before the person concerned has had the opportunity to refer the matter to the tribunal, in which case the requirement will not take effect while the matter is open to review.

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The second new clause after Clause 51 (Amendment No. 110) deals with the procedure for cancellation of permission. As I made clear when introducing the changes in Committee, we are applying the full warning and decision notice procedures to those decisions, in effect treating them in the same way as disciplinary-type cases. This reflects the seriousness of this kind of regulatory action. It is possible to adopt this process only on the basis that if protective action is required in the meantime, the own initiative power is there for that purpose.

These new clauses replace Clauses 51, 52 and 53, which we are omitting under Amendments Nos. 108, 111 and 112.

Amendments Nos. 163, 164 and 165 remove the requirement under Clause 253 for the direction to specify the date on which a requirement takes effect, and replaces this with a requirement for the notice under Clause 255 to specify when the requirement takes effect. This removes an element of duplication--as it stands, both the direction and the notice would appear to specify these dates--and aligns the provisions more closely with others in the Bill.

As with subsection (12) of the second new clause after Clause 51 (Amendment No. 110), Amendments Nos. 166, 168 and 170 introduce new subsections into clauses setting out the supervisory procedures for giving directions under Clause 253 to authorised collective investment schemes; for giving directions under Clause 263 to recognised overseas collective investment schemes; and for giving directions under Clause 277 to overseas collective investment schemes authorised by virtue of Clauses 266 or 268.

These new subsections define what is meant by a decision being "open to review" by reference to the new subsection (6A) to Clause 386, to which we will come in due course. This therefore determines the basic presumption about when a decision takes effect in the absence of any need for the supervisory action to take effect any earlier.

Amendment No. 169 is a consequential change which makes clear that a decision to refuse an application for variation or revocation of a direction made under Clause 263 can be referred to the tribunal.

Some of the amendments to Part XVII reflect the fact that we can now introduce a common definition of what is "open to review" for the purposes of supervisory decisions. This is the effect of Amendment No. 193, to which we shall come in due course. The others are directed at slight technical points--duplicative requirements to set dates in one case and the omission of an explicit provision about references to the tribunal in another.

The amendment of the noble and learned Lord, Lord Fraser, Amendment No. 110A, seeks to amend Clause 52, which we propose to omit. I shall respond in terms of the replacement clause rather than the clause as printed. The noble and learned Lord seeks to introduce a minimum period of 14 days before the issue of a written notice under Clause 52 before a decision can take effect. Clause 52 currently deals with

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the authority's exercise of its own initiative power in cases other than those where it is necessary for the authority's action to take immediate effect.

As we have proposed an amendment to omit Clause 52, it might be helpful if I respond in terms of its replacement. By virtue of subsection (2) of the new clause, a supervisory decision could take effect immediately it is given or on a specified date. But this can happen only if the FSA considers it necessary that it should happen. Even in such cases, we would expect that an authorised person would be given the maximum possible notice before any action were to take effect. It would be in only relatively rare cases--for example, where it is necessary to protect consumers--that anything less than 14 days' notice should be given. I hope that that will satisfy the noble and learned Lord, Lord Fraser. I beg to move.

Lord Fraser of Carmyllie: My Lords, I had observed that my amendment sought to amend a clause which the noble Lord intended to delete. If he had not been so obviously enjoying giving the answer he gave, I might have interrupted him to tell him that it was an unnecessary response.

Lord McIntosh of Haringey: My Lords, I cut it down very substantially.

Lord Fraser of Carmyllie: My Lords, I am delighted to hear that. Perhaps I may say to the Minister that I understood the point that he was making. My point about notice is not only covered in subsection (2) but, presumably, if the notice has to give notice of his right to refer a matter to the tribunal and must give an indication of the procedure, doubtless within that there would be some indication of the time limits to which that reference would be subjected. When it comes to my moment of glory, I intend not to move the amendment.


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