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Lord McIntosh of Haringey moved Amendment No. 186:


On Question, amendment agreed to.

Clause 384 [Notice of discontinuance]:

Lord McIntosh of Haringey moved Amendments Nos. 187 and 188:


    Page 204, line 26, leave out from ("if") to ("of") in line 27 and insert ("the discontinuance of the proceedings concerned results in the granting").


    Page 204, line 27, at end insert ("warning or decision").

On Question, amendments agreed to.

Clause 385 [Final notice]:

Lord Kingsland had given notice of his intention to move Amendment No. 188A:


    Page 204, line 33, leave out from ("130(1)") to end of line 35 and insert ("by the person concerned, the Authority must either itself refer the matter or give the person concerned a notice of discontinuance in relation to it.").

The noble Lord said: My Lords, I am most grateful to the Minister for giving such a full reply in response to Amendment No. 188A. I shall read very carefully what he said before deciding whether to pursue this matter at Third Reading. The weak point of his argument concerns a situation in which an individual chooses not to pursue his rights in the tribunal. In these circumstances, he will suffer a penalty which has been determined by the authority. I entirely understand that the noble Lord's answer will be, "Ah, but that situation was chosen by the individual's free will". It is in relation to whether he is right about the effect of that that any future argument on the matter will take place. I shall not move the amendment.

[Amendment No. 188A not moved.]

The Chairman of Committees: My Lords, in putting the following amendments, I should point out to your Lordships that there is a mistake in the Marshalled List as printed. In line 3 of Amendment No. 191, the word "section" should be "subsection".

1 a.m.

Lord McIntosh of Haringey moved Amendments Nos. 189 to 191:


    Page 205, line 11, at end insert--


("(5A) A final notice about a requirement to make a payment or distribution in accordance with section 378(3) must state--
(a) the persons to whom,
(b) the manner in which, and

9 May 2000 : Column 1542


(c) the period within which,
it must be made.").


    Page 205, line 15, after ("(5)(b)") insert ("or (5A)(c)").


    Page 205, line 19, at end insert--


("( ) If all or any of a required payment or distribution has not been made at the end of a period stated in a final notice under section (5A)(c), the obligation to make the payment is enforceable, on the application of the Authority, by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988.").

On Question, amendments agreed to.

Clause 386 [Publication]:

Lord McIntosh of Haringey moved Amendments Nos. 192 to 194:


    Page 205, line 33, at end insert--


("( ) When a supervisory notice takes effect, the Authority must publish such information about the matter to which the notice relates as it considers appropriate.").


    Page 205, line 38, at end insert--


("(6A) For the purposes of determining when a supervisory notice takes effect, a matter to which the notice relates is open to review if--
(a) the period during which any person may refer the matter to the Tribunal is still running;
(b) the matter has been referred to the Tribunal but has not been dealt with;
(c) the matter has been referred to the Tribunal and dealt with but the period during which an appeal may be brought against the Tribunal's decision is still running; or
(d) such an appeal has been brought but has not been determined.").


    Page 205, line 39, at end insert--


("( ) "Supervisory notice" has the same meaning as in section 390.").

On Question, amendments agreed to.

Clause 387 [Application of sections 388 and 389]:

Lord McIntosh of Haringey moved Amendments Nos. 195 to 198:


    Page 206, line 3, after ("section") insert ("(Cancellation of Part IV permission: procedure)(1),").


    Page 206, line 4, after ("66(1),") insert (" 87(4)(b),").


    Page 206, line 7, after ("section") insert ("(Cancellation of Part IV permission: procedure)(2),").


    Page 206, line 8, after ("66(4),") insert (" 87(6)(b),").

On Question, amendments agreed to.

Clause 388 [Third party rights]:

Lord McIntosh of Haringey moved Amendment No. 199:


    Page 206, line 38, at end insert ("or").

On Question, amendment agreed to.

Clause 389 [Access to Authority material]:

[Amendments Nos. 199A and 199B not moved.]

Clause 390 [The Authority's procedures]:

Lord Kingsland moved Amendment No. 199C:


    Page 209, line 5, after ("giving") insert ("a supervisory notice or").

9 May 2000 : Column 1543

The noble Lord said: I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 200 and 201:


    Page 209, line 15, at end insert--


("( ) (Exercise of own-initiative power to vary Part IV permission: procedure)(4), (7) or (8)(b);
( ) (Discontinuance or suspension: procedure)(2) or (5);
( ) 193(3), (6) or (7)(b);").


    Page 209, line 17, leave out paragraphs (b) and (c) and insert--


("( ) 264(3), (7)(a) or (9)(a) (as a result of subsection (8)(b));
( ) 278(3), (6) or (7)(b);").

On Question, amendments agreed to.

Clause 392 [Misleading statements and practices]:

Lord McIntosh of Haringey moved Amendment No. 202:


    Page 210, line 27, at end insert--


("( ) In proceedings for an offence under subsection (2) brought against a person to whom subsection (1) applies as a result of paragraph (a) of that subsection, it is a defence for him to show that the statement was made in conformity with price stabilising rules or control of information rules.").

The noble Lord said: My Lords, in moving this amendment, I should like to speak also to Amendments Nos. 203 to 206. The first two amendments in the group, Amendments Nos. 202 and 203, arise from the introduction of the new clause concerning control of information rules and fulfil a commitment to provide a defence from the offence of misleading statements and practices for behaviour in conformity with such rules. Such a defence currently exists in the Financial Services Act 1986. The amendments also ensure that there is a defence for behaviour in conformity with price stabilisation rules for both the offences in Clause 392.

The other amendments in the group make drafting changes, correcting the way in which Clause 392 relates to Schedule 2 dealing with regulated activities. I beg to move.

Lord Kingsland: My Lords, I do not seek to question the objective of the amendment, which relates to the market manipulation offence and the intention of which is entirely helpful. Perhaps I may make a point about the drafting.

A misleading statement, promise or forecast is exempted from the offence if it is made in conformity with control of information rules; but that would seem to apply only where the person making it is aware of the information and is allowed or required not to mention it.

With respect, I do not think it proper to provide an exemption for this, because it involves--does it not?--a deliberate lie. It would be much better if the individual concerned did not say anything. But what is perhaps more likely in practice is that the person who makes the statement, promise or forecast is the company acting through an individual who is not aware of the true position because he is on the wrong side of the Chinese wall. That ought to be covered as

9 May 2000 : Column 1544

well, or perhaps instead. In this case, an exemption should apply where the person makes the statement, promise or forecast without knowing that it is misleading, false or deceptive because the relevant information is withheld from him in compliance with the control of information rules. In addition, the company should not be treated as knowingly or recklessly making such a statement if the individual who makes the statement, promise or forecast is not aware of the relevant information and is not told to make it by somebody who is. I am aware that I have not canvassed this matter with the Minister. He may well wish to reflect on what I have said and return to it at Third Reading.

Lord McIntosh of Haringey: My Lords, I shall seek to avoid that. The control of information rules are, as I believe the noble Lord, Lord Kingsland, is aware, the Chinese wall rules. Subsections (1) and (2) of Clause 392 make it an offence knowingly or recklessly to make misleading statements in order to induce someone to enter into an investment agreement, or if the person is reckless as to whether it will induce someone to do it. Subsection (3) goes on to provide that it is an offence for a person to act in a way which creates a false or misleading impression if it is done for the purpose of creating that impression and thereby induces someone to enter into an investment agreement.

Subsection (4) provides certain defences. Amendments Nos. 202 and 203 are intended to fill a number of gaps in the coverage of these defences. At the moment subsection (4) provides that a person is not guilty of an offence under subsection (3) if he takes action in conformity with price stabilisation rules made by the FSA under Clause 141. That is repeated in Amendment No. 202. However, that amendment extends the provision to cover not only actions but also statements and thus also provides a defence to the offence created by subsections (1) and (2).

Amendment No. 202 also creates a new defence to the offence created by subsections (1) and (2). This follows the introduction of an amendment which enables the FSA to make control of information rules; in other words, Chinese wall rules. Accordingly, it will be a defence for a person to show that he acted in conformity with the control of information rules; that is to say, that he operated so-called "Chinese wall" rules. It would be a defence for him to say that he was on the wrong side of the Chinese wall and could not, therefore, be expected to act in the way that he would have done had he been on the other side of it.


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