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Lord Carter: My Lords, if I may interrupt business, it seems that there is general agreement that we can probably finish the groups before us by eight o'clock. I suggest that we do so, and that we take the Unstarred Question at eight o'clock. I shall be grateful if the House can complete this business by eight o'clock so that noble Lords waiting for the Unstarred Question do not have to wait too long.

Lord Bach moved Amendment No. 44:


On Question, amendment agreed to.

Clause 129 [Legal assistance scheme]:

[Amendment No. 45 not moved.]

Clause 133 [General rule-making power]:

Lord Hunt of Wirral moved Amendment No. 46:


    Page 68, line 15, leave out from ("to,") to end of line 16.

The noble Lord said: My Lords, I return to a subject raised on Report. The Minister may recall that on behalf of a number of organisations, but in particular the Association of British Insurers, I was concerned that the words "may be adversely affected by" would extend a wide definition of "consumer". My amendment deletes the words "may be adversely affected by" and inserts new sub-paragraph (c) clarifying that we are referring to persons,


    "who have rights or interests which may be adversely affected by the use of any such services by persons acting on their behalf or in a fiduciary capacity in relation to them".

I hope that with that clarification we return to what I think the Government originally intended: a tighter definition of the word "consumer".

In moving the amendment, I hope that I have also explained Amendments No. 47 and 86 to 89 which are consequential on the amendment. I beg to move.

Lord Bach: My Lords, I am grateful to the noble Lord for tabling the amendments. We have at several stages of the Bill had debates on the meaning of the word "consumer" as it is defined for the purposes of the Bill. It has taken a bit of time to arrive at a definition that incorporates all the appropriate persons without leaving out a category of person that the authority should properly be expected to protect.

I believe that these amendments, and the corresponding amendments that define "client" for the purposes of Clause 321, now strike the right balance. I am bound to say that it is most unlikely we would ever be able to achieve absolute precision in the definition, however long we worked at it and however long the relevant provision in the Bill were to become. However, I think that we are now so close to the point we are striving to reach that we should adopt the definition proposed by these amendments.

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I am therefore pleased to advise your Lordships' House that the Government accept all the amendments in this group and we are grateful to the noble Lord, Lord Hunt of Wirral.

On Question, amendment agreed to.

Lord Hunt of Wirral moved Amendment No. 47:


    Page 68, line 17, at end insert ("; or


(c) who have rights or interests which may be adversely affected by the use of any such services by persons acting on their behalf or in a fiduciary capacity in relation to them.").

On Question, amendment agreed to.

Clause 136 [Insurance business rules]:

Lord McIntosh of Haringey moved Amendments Nos. 48 and 49:


    Page 69, line 16, leave out ("deal in") and insert ("effect or carry out").


    Page 69, line 20, leave out ("long-term insurance business") and insert ("business which consists of the effecting or carrying out of contracts of long-term insurance").

On Question, amendments agreed to.

Clause 137 [Insurance business: regulations supplementing Authority's rules]:

Lord McIntosh of Haringey moved Amendments Nos. 50 to 55:


    Page 69, line 35, leave out ("deal in") and insert ("effect or carry out").


    Page 69, line 39, leave out ("deal in") and insert ("effect or carry out").


    Page 70, line 3, leave out from ("of") to end of line 4 and insert ("charges").


    Page 70, line 5, leave out from ("making") to ("created") in line 6 and insert ("charges").


    Page 70, line 8, leave out from ("circumstances") to end of line and insert ("charges").


    Page 70, line 12, at end insert--


("(6) "Charges" includes mortgages (or in Scotland securities over property).").

On Question, amendments agreed to.

Clause 142 [Control of information]:

Lord McIntosh of Haringey moved Amendment No 56:


    Page 72, leave out lines 19 to 21 and insert ("about the disclosure and use of information held by an authorised person ("A").").

The noble Lord said: My Lords, in moving Amendment No. 56 I speak also to government Amendments Nos. 58 and 60. Perhaps noble Lords opposite will allow me to speak now to their Amendment Nos. 57, 59 and 62 if that is convenient.

The Bill was amended at Report stage on 9th May, conferring on the authority the power to make control of information rules with regard to authorised persons.

The Government have discussed Clause 142 with the City Liaison Group with regard to outstanding concerns in relation to the operation of this clause. Having considered carefully the group's concerns

18 May 2000 : Column 420

(specifically with regard to the scope of the rule-making power), the Government are proposing three amendments to Clause 142 which, we hope, will tackle the issues raised.

Amendment No. 56 will enable the authority to make rules specifying circumstances in which a person may withhold information, or decide not to use information, which he would otherwise have to disclose or use for his customer's benefit. This means that if the authorised person maintains arrangements that conform with the rules (broadly speaking, if they maintain Chinese walls), then he will not be subject to certain obligations that would otherwise apply. This brings the clause into closer alignment with the power set out in the Financial Services Act, allowing the authority to make rules similar in effect to rules adopted under that Act.

Amendment No. 58 amplifies the sort of rules that can be made about disclosure and use of information. It should be stressed that subsection (2), as amended, is not designed to restrict the application of subsection (1). The purpose behind subsection (2), as amended, is to indicate how the rule-making power may be exercised with regard to an authorised person's fiduciary obligations towards his client.

With regard to the deletion of the current subsection (2), the Government consider that in view of the other changes made to this subsection there is no need to make specific provision for rules which,


    "require A to restrict or prevent the passing of information within his business".

We believe that the power to make these rules is implicit in the broad power set out in subsection (1) of Clause 142 as amplified by subsection (2) as amended. I should stress again that the purpose of Clause 142 is to enable the authority to make rules that are similar in effect to rules currently adopted under the Financial Services Act. The Government believe that this clause effects this purpose.

Amendment No. 60 deletes subsections (3) and (4) so as to ensure that Chinese walls are effective in relation to dealings by an authorised person with different departments in his client's firm which might also be operating a Chinese wall. I commend the government amendments to the House.

Perhaps I may turn, by agreement, to Opposition Amendments Nos. 57 and 59. We believe that our amendments to Clause 142 already deal with the concerns raised in those amendments. Given that Clause 142(1) will allow the authority to make rules about the use and disclosure of information held by an authorised person, it is implicit in that power that the authority will be able to make rules which may take the form of "enabling" or "requiring" rules. I repeat that the purpose behind Clause 142 is to allow the authority to make rules that are similar in effect to rules currently adopted under the Financial Services Act. It should be noted that the relevant provision in that Act provides for both enabling and requiring rules. In the light of my remarks, I hope that noble Lords will see fit not to move their amendments.

18 May 2000 : Column 421

So far as their Amendment No. 62 is concerned, on Report I stressed that the Government believe that the courts would be unlikely to hold that someone could successfully sue an authorised person for breach of fiduciary duties where the authorised person had complied with FSA rules made under Parliament's delegated legislative powers. We maintain that there is no need for a specific defence in Clause 142.

In addition, the new clause makes express provision for rules compliance, which will have certain consequences. The Bill states that in specified circumstances an authorised person may withhold information which he would otherwise have to disclose and may decide not to use information to benefit certain persons when he would otherwise have to use it to their benefit. These provisions are aimed specifically at displacing the fiduciary duties that would otherwise arise. If the Bill states that information can be withheld or not used in certain circumstances, then in those circumstances it can be withheld or not used. Nothing else is needed to achieve that result.

There is a very real danger than an express civil liability defence in Clause 142 will have implications in relation to the effect of compliance with authority rules in other areas of the Bill. In the light of the fact that we have achieved the same effect in a way that safely negotiates round those dangers, I urge noble Lords not to move this amendment. I beg to move Amendment No. 56.

On Question, amendment agreed to.

[Amendment No. 57 not moved.]


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