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Lord Bach moved Amendment No. 158BD:


The noble Lord said: My Lords, I beg to move.

Lord Elton: My Lords, the odd grouping of my noble friend's amendment at the beginning of this group means that when the Minister spoke to his amendments for the first time it blocked out any comments on them because, of course, no one can speak to an amendment at Report stage after the Minister. Therefore, I am speaking on the first amendment in his group.

I wish merely to express my thanks for the circulation of the interpretation of the effect of this vast shoal of amendments, which would have been beyond me had he not sent it. Even so, the task of keeping up with the flow of government amendments--even with this facilitating assistance--is something which would normally be a full-time job for people who had the time in which to do it. I repeat the complaints made earlier by my noble friends--we have perhaps rather lost sight of the resentment that we felt in the early stages--that it is very difficult indeed for a House which is not supposed to consist of full-time professionals to keep up with the volume of technical changes that the Government are making to highly technical legislation. But I am grateful to the Minister for having done his best to help us with the nearest thing to a Keeling schedule that he can provide. That is the point I wished to make.

Lord Bach: My Lords, I am very grateful to the noble Lord. Although it is painful to have to go through technical amendments such as these, it may be that in years to come others will thank us for having taken the trouble to do so, even shortly.

On Question, amendment agreed to.

9 May 2000 : Column 1463

Lord Bach moved Amendments Nos. 158BE to 158BK:


    Page 82, line 16, leave out paragraph (a).


    Page 82, line 21, leave out paragraphs (d) and (e).


    Page 82, line 24, leave out paragraphs (f) to (l).


    Page 82, line 39, leave out ("the Authority") and insert ("an investigating authority").


    Page 83, line 2, leave out ("Authority") and insert ("investigating authority").


    Page 83, line 4, leave out subsections (4) and (5) and insert--


("(4) Subsection (5) applies if it appears to the Authority that there are circumstances suggesting that--
(a) a person may have contravened section 18;
(b) a person may be guilty of an offence under any enactment other than this Act--
(i) which the Authority has power to prosecute under this Act; but
(ii) which it would not otherwise have power to investigate;
(c) an authorised person may have contravened a rule made by the Authority;
(d) an individual may not be a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised or exempt person;
(e) an individual may have performed or agreed to perform a function in breach of a prohibition order;
(f) an authorised or exempt person may have failed to comply with section 55(5);
(g) an authorised person may have failed to comply with section 58(1) or (2);
(h) a person in relation to whom the Authority has given its approval under section 58 may not be a fit and proper person to perform the function to which that approval relates; or
(i) a person may be guilty of misconduct for the purposes of section 65.
(5) The Authority may appoint one or more competent persons to conduct an investigation on its behalf.
(6) "Investigating authority" means the Authority or the Secretary of State.").

On Question, amendments agreed to.

Clause 165 [Investigations etc. in support of overseas regulator]:

Lord Bach moved Amendments Nos. 158BL and 158BM:


    Page 83, line 22, leave out ("a person") and insert ("one or more competent persons").


    Page 83, line 24, leave out ("(so far as relating to") and insert ("(as a result of").

On Question, amendments agreed to.

Clause 166 [Investigations: general]:

Lord Bach moved Amendments Nos. 158BN to 158BS:


    Page 84, line 25, leave out ("the Authority") and insert ("an investigating authority").


    Page 84, line 26, after (" 164(3)") insert ("or (5)").


    Page 84, line 28, leave out paragraph (b).


    Page 84, line 35, after (" 164(1)") insert ("or (4)").


    Page 84, line 39, leave out from ("(2)") to second ("of") in line 40.

On Question, amendments agreed to.

9 May 2000 : Column 1464

Clause 168 [Additional power of persons appointed as a result of section 164(1)]:

Lord Bach moved Amendment No. 158BT:


    Page 86, line 18, leave out from ("appointed") to end of line 20 and insert ("as a result of subsection (1) or (4) of section 164").

On Question, amendment agreed to.

Clause 169 [Powers of person appointed to investigate as a result of section 164(2)]:

Lord Bach moved Amendments Nos. 158BU and 158BV:


    Page 86, line 35, leave out ("or (4)").


    Page 86, line 36, leave out ("(so far as relating to") and insert ("(as a result of").

On Question, amendments agreed to.

Clause 170 [Admissibility of statements made to investigators]:

[Amendments Nos. 158C and 158D not moved.]

Lord McIntosh of Haringey moved Amendment No. 158DA:


    Page 87, line 15, leave out ("(4)") and insert ("(5)").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 158BC. I beg to move.

On Question, amendment agreed to.

Clause 171 [Information and documents: supplemental provisions]:

Lord McIntosh of Haringey moved Amendment No. 158DB:


    Page 88, line 10, leave out ("(4)") and insert ("(5)").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 158BC. I beg to move.

On Question, amendment agreed to.

Clause 172 [Entry of premises under warrant]:

Lord McIntosh of Haringey moved Amendment No. 158DC:


    Page 89, line 31, leave out ("(4)") and insert ("(5)").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 158BC. I beg to move.

On Question, amendment agreed to.

Clause 174 [Obligation to notify the Authority]:

Lord Kingsland moved Amendment No. 158E:


    Page 90, leave out lines 27 and 28 and insert ("Before a person can acquire").

The noble Lord said: My Lords, I shall speak first to Amendments Nos. 158E, 158EA, 158EB, 158EC, 158H, 158J, 158K, 158L and 158M.

These amendments were tabled by the Opposition in Committee. If I recall correctly, the Minister said in Committee that he was broadly in agreement with the objectives of these amendments and that he would think about the points that had been made. The Government have not tabled any amendments to this clause, and as a reminder of the Minister's remarks, we have tabled our amendments again.

9 May 2000 : Column 1465

The Minister will be relieved to hear that I do not want to repeat what I said in Committee, except to say that the corresponding provisions dealing with the obtaining of new or increased control in relation to UK authorised investment firms under the existing Investment Services Regulations 1995 use wording which mirrors our amendments. Regulation 41(1) of those regulations states that:


    "No person shall become"--

a relevant controller of a UK authorised investment firm unless--


    "he has served on each relevant regulator written notice that he intends to become such a controller".

We have followed this approach with our amendments as we believe that this form of wording is clearer than the present form of words in Clauses 174 and 186. I should remind your Lordships that these are not merely technical points: failure to comply with Clauses 174 and 186 constitutes a criminal offence.

So far as concerns Amendments Nos. 158F and 158G, they relate to the definition of "controller" as used for the purposes of the "control over authorised persons provisions". They refer specifically to the definition of an "associate". Importantly, it is necessary to aggregate with the acquired's own holding of shares or voting rights, the shares or voting rights of his associates, and it is provided in Clause 175(5) that "associate" has the same meaning as in Clause 412.

Clause 412 repeats the definition in the implementing regulations relating to all three single market directives. However, it seems to include as an associate a nominee company and as a result all shares held by the nominee company have to be aggregated, and this could in itself bring the notification procedures into play. Similarly, the definition extends to cover parties to an agreement for the acquisition or disposal of shares and, although acquisition and disposal probably relate to transfer of the legal title, it would be dangerous to assume that this does not include brokerage agreements.

Accordingly, it would be necessary to regard the broker as an associate and all the interests of that broker would have to be aggregated. Even worse than this, if the acquirer is the nominee company or broker, it will be necessary to aggregate with him all the holdings and voting rights of all clients, even if they have nothing to do with the nominee or broker at all.That is going far too far, especially in the case of control over authorised persons provisions, but also even in so far as the control provisions generally are concerned. In addition, I do not see how the person "H" in Clause 412(4) can possibly discover the facts which the definition of "associate" requires him to do in this regard.

The Treasury's Explanatory Notes say that the Treasury will be given the power to provide exemptions from Part XII where, for example, the definition of "associates" has the effect that two or more people would have to notify the same acquisition of shares or voting rights. That is exactly what the wide definition of "associates" always requires, as it catches

9 May 2000 : Column 1466

two people in relation to the same holding of shares rather than agreements relating to two different holdings, as is surely intended. As I have explained, the scope of "associates" can be far wider than this as it can apply to all client relationships. In my submission, therefore, the Government ought to agree to this amendment or, better, agree it in Clause 412 itself.

I speak now to Amendments Nos. 219A to 219F. As your Lordships will be aware, Clause 412(1) provides that its definition of "controller" applies throughout the Bill. However, there are similar but different provisions relating to who is a controller for the purposes of Part XII--control over authorised persons--and therefore that should be expressly excluded from the terms of Clause 412(1). The definition of "associate" applies both in relation to a company in which each holder holds shares and in relation to another company in which each holder can exercise or control the exercise of voting rights. Applying that in paragraph (g), which is in any event far too wide, leads to a ridiculous situation. It means that, if a holder has a relevant agreement or arrangement with another person in relation to the company in which he holds shares, that other person is also an associate in relation to the company in which he has voting rights, even though the agreement has nothing to do with it. The converse is also true. I can therefore see no justification for this wide definition, which would lead to absurd results.

I would also emphasise that the amendment follows the wording which is in the single market implementing regulations. Those are the regulations under the European Communities Act which implement the four single market directives. It may be that the draftsman of the Bill was being over-precise in separating out the two different holdings into two different companies, but we surely have to insist that the "associate" definition stays as it is in the implementing regulations. Even if it does, it still has the problems which Amendment No. 11 tries to solve, but this peculiar extension only makes the position more inexplicable. There is really no way that any company can possibly police it. Amendments Nos. 219D and 219E delete "D" from paragraph (g) as a consequence of going with a single company test. I beg to move.


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