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Lord Kingsland: My Lords, with great respect to the Minister, I think it is a little rich of him to suggest that we are trying to stifle enterprise by seeking greater precision in the Bill. I believe I can honestly say that throughout the proceedings on the Bill we have sought greater precision in order to encourage enterprise, because the greater the amount of imprecision there is, the greater will be the uncertainty for those who must operate under it. The greater that uncertainty, the more likely it will be that people will become less resourceful. The whole object of seeking greater precision in these definitions is to encourage enterprise and to make OEICs work--as the Minister put it so evocatively.

Despite what the Minister has said, I hope that over the next few days he will reflect on the enhanced quality that the Opposition believe this amendment would bring to the Bill so that on Third Reading at least a little movement might be seen on this. I hope very much that we shall not have to discuss this matter again at that stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 253 [Directions]:

Lord Kingsland moved Amendment No. 162B:



("to a person in the United Kingdom--
(a) an invitation to participate in a collective investment scheme; or
(b) information which is intended or might reasonably be presumed to be intended to induce any person to do so.").

The noble Lord said: My Lords, Amendments Nos. 162B and 162C concern restrictions on promotion. Clause 234 imposes special restrictions on the marketing of collective investment schemes. As it stands, the prohibition applies to even non-UK branches of the authorised person--even in relation to investors outside the UK. We wish to make the same amendments to the prohibition as we are proposing for financial promotion generally.

In another place the honourable Mrs Melanie Johnson, the Economic Secretary, said in Committee that she was beginning to realise that marketing restrictions applicable to authorised persons under the provisions of Clause 231 do not need to be as wide as those applicable to non-authorised persons under Clause 19. That is why the amendment restricts the prohibition to communications,


    "to a person in the United Kingdom".

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This restriction follows the existing law. We tried several times to persuade the Minister that it would damage UK competitiveness if the local regulator allowed the marketing of collective investment schemes to particular categories of investor not allowed by the FSA--typically high net worth individuals--and the only firms which could not market such schemes to them were authorised persons.

The prohibition applies to all authorised persons, not only UK firms. Why should non-UK firms that establish a branch in the United Kingdom, perhaps using an EC passport, have to be subject to a worldwide prohibition on marketing investment funds to prohibited categories of investor from that UK branch? In addition, if the collective investment scheme that they want to market is established in the UK--typically an English limited partnership--the non-UK firm cannot market it from any branch anywhere in the world, which is perhaps going a bit over the top. The imposition of the world-wide prohibition is likely to induce United Kingdom, or non-UK, authorised persons to use an offshore group company--for example, a special purpose subsidiary--to market the collective investment scheme to prohibited categories of investors outside the United Kingdom. It does not do anyone any good to force them to take that step and perhaps incur substantial expense.

Amendment No. 162C seeks to make a similar amendment to the special restrictions on promoting collective investment schemes as the amendment proposed to the general prohibition on "financial promotion" marketing in Clause 19. I beg to move.

11.15 p.m.

Lord McIntosh of Haringey: My Lords, we discussed a similar issue in relation to Clause 19. This is another area where, as I indicated then, the differences between the Government and the noble Lord, Lord Kingsland, may be narrowing.

Amendment No. 162B to Clause 234(1) seeks to delete "inducement" and replace it with,


    "(a) an invitation to participate in a collective investment scheme; or (b) information which is intended or might reasonably be presumed to be intended to induce any person to do so".

I understand the importance which the Opposition attach to this amendment. But there is not a great deal of difference between us in terms of policy. In Committee I undertook to look at whether Clause 234(1) needed further clarification in respect of the meaning of "inducement". As the Government said repeatedly in relation to this clause and the corresponding words of Clause 19, only promotional communications will be targeted by the prohibition. I believe that is also the intention of the Opposition's amendment.

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As things stand, in my view, Clause 234 as drafted is the best way of tackling these issues. The term "inducement" should, we believe, only catch communications of a promotional nature. The noble Lord, Lord Kingsland, kindly agreed to meet me this Thursday to discuss the matter in the context of Clause 19. I should like to reserve any further judgment on his amendment until we have had the opportunity to have that meeting. I hope that on that basis he will feel able to withdraw it.

Amendment No. 162C seeks to amend subsection (3) of Clause 234 so that subsection (10), which sets out the basic prohibition, does not apply unless the communication is intended or might reasonably be presumed to be intended to be acted on by a person in the United Kingdom. That too was a Committee stage amendment. But there is concern that the clause is not sufficiently clear; that the communication will only be caught if it is targeted or "directed at" a person in the UK. We have said that we believe the issue is one best dealt with in subordinate legislation and have proposed something designed to achieve that in the draft order set out in the second consultation document; namely, cutting back the "capable of having effect" test in subsection (3).

The amendment proposed by the noble Lord, Lord Kingsland, indicates why the Government's approach is prudent. It is not at all clear what "acted on" means. For example, if a communication is sent from abroad for onward transmission by an agent in the United Kingdom, is that a communication which is intended to be "acted on" by a person in the United Kingdom?

Another intention behind the amendment may be the need to address our Community obligations. Let me say categorically that the UK takes its Community obligations seriously in respect both of our treaty obligations in general and any specific legislation such as the proposed e-commerce directive, in particular with regard to the territorial jurisdiction and other requirements it might place on the UK's rules. We are committed to ensuring that these rules comply with all Community requirements. Clause 234 was amended in Committee to clarify that the Treasury can adjust the scope of the Bill's financial promotion regime in order to take full account of international and technological developments. Given our intention to modify the scope of prohibition using secondary legislation, the Government will continue to resist this amendment. I hope that noble Lords will not press it.

Lord Kingsland: My Lords, the Minister reminded me of our meeting on Thursday at 3.30 p.m. That seems a long way away at 11.20 p.m. when we have got through only half of the amendments on the third day of Report stage. Nevertheless, it has sufficient allure for me to thank the Minister for his response and the prospect of discussing all these matters again in 48 hours. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No.162C not moved.]

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Clause 248 [Procedure when refusing approval of change of manager or trustee]:

Lord Kingsland moved Amendment No. 162D:


    Page 130, line 9, leave out from ("notice") to end of line 10 and insert--


("(a) to the manager if notice of the proposal was given under section 247(1) and, unless the Authority considers that there are good reasons not to do so, to the trustee; and
(b) to the trustee if the notice of the proposal was given under section 247(3) and, unless the Authority considers that there are good reasons not to do so, to the manager.").

The noble Lord said: My Lords, this amendment relates to an issue that we also discussed in Committee concerning Clause 248. As your Lordships are doubtless well aware, that clause deals with the procedure to be adopted by the authority when refusing approval of a change of manager or trustee or an alteration to an authorised unit trust scheme. Under Clause 248(1) notice of the refusal is only to be given to a person who gave notice of the proposal. In turn, that notice will be given by the trustee or the manager of the unit trust.

However, both are likely to be involved in the outcome. Our amendment in Committee was to the effect that notice of refusal should be given both to the trustee and the manager. That did not find favour on the basis that there may be confidential information in the notice which should be restricted to one party.

We accept that there should be a confidentiality override. Our amendment would oblige the authority to give the notice of refusal to both parties unless, in the case of the person who did not give notice of the proposal, the FSA considers that there are good reasons for not giving the notice of refusal to that person. In Committee the Minister said that if, as proposed, the notice went only to the applicant, the authority could, under Clause 257(4) pass on to the other party,


    "such information about the revocation or variation, in such a way, as it considers appropriate".--[Official Report, 27/3/00, col.629.]

However, as is clear, Clause 257(4) deals with revocation or variation and does not address the circumstances set out in Clause 248(1). There is no provision elsewhere for passing on information in the event of the refusal of a request to replace the manager or trustee.

As regards Amendment No. 264A, the introduction of the supervisory notice procedure for certain types of enforcement action has resulted in the removal of these cases of the 28-day minimum period for representations. Without fettering the authority's discretion, we believe that it is important to introduce a test of reasonableness in Clause 255(4)(d) for making representations. The authority would still be able to specify a period which allowed for no representations before the event in the case of an urgent decision, but would require a reasonable period for representations

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after the decision had been taken. It would also establish a discipline requiring a reasonable period to be specified in non-urgent cases. I beg to move.


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