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Lord Bach moved Amendment No. 66:


The noble Lord said: My Lords, this amendment is a technical change which should make subsection (4)(b) of Clause 163 a little clearer. At present this gives the FSA the power to investigate:


    "an offence under any [other] enactment ... which the FSA has power to prosecute ... but it would not otherwise have power to investigate".

That refers in effect to money laundering offences under the regulations to be prescribed under Clause 395(1)(b). Those are the only offences which would be covered by Clause 163(4)(b). The amendment therefore replaces subsection (4)(b) with a direct reference to prescribed money laundering offences.

This technical change will also remove a potential doubt as to the fact that it enables the FSA to mount investigations into possible money laundering offences in Scotland. It is clearly important that the FSA should be able to conduct investigations into such suspected offences regardless of where in the UK they may have been perpetrated. I beg to move.

On Question, amendment agreed to.

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Clause 169 [Admissibility of statements made to investigators]:

Lord Kingsland moved Amendment No. 67:


    Page 89, line 23, leave out ("a") and insert ("that").

On Question, amendment agreed to.

[Amendment No. 68 not moved.]

Clause 180 [Conditions attached to approval]:

Lord McIntosh of Haringey moved Amendment No. 69:


    Page 96, line 41, leave out ("refusal") and insert ("decision to refuse").

The noble Lord said: My Lords, I understand that this amendment was to be debated with opposition Amendment No. 23, which was not moved. However, since it is purely formal, I beg to move.

On Question, amendment agreed to.

Clause 197 [Actions for damages]:

Lord McIntosh of Haringey moved Amendment No. 70:


    Leave out Clause 197.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 71:


    After Clause 197, insert the following new clause--

CONTRAVENTION OF REQUIREMENT IMPOSED UNDER THIS PART

(".--(1) Contravention of a requirement imposed by the Authority under this Part does not--
(a) make a person guilty of an offence;
(b) make any transaction void or unenforceable; or
(c) (subject to subsection (2)) give rise to any right of action for breach of statutory duty.
(2) In prescribed cases the contravention is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.").

On Question, amendment agreed to.

Clause 208 [The compensation scheme]:

Lord Bach moved Amendment No. 72:


    Page 111, line 26, leave out ("qualified for authorisation under Schedule 3 at that time") and insert (", at that time--


(a) qualified for authorisation under Schedule 3, and
(b) fell within a prescribed category,").

The noble Lord said: My Lords, perhaps I may deal first with the government amendments in this group; namely, Amendments Nos. 72, 73 and 80. These amendments allow a more precise definition of the extent to which EEA firms can, like UK firms, be required to join the compensation scheme, The scheme is designed to provide a safety-net of protection for consumers where authorised firms carrying on regulated activities find themselves unable to meet their liabilities and it would therefore be wrong to allow EEA firms authorised by virtue of Schedule 3 to opt out of providing this protection.

18 May 2000 : Column 426

The issue was raised by an opposition spokesman in another place, the honourable Howard Flight, who said that the compensation scheme should apply to all operators in the marketplace, with compulsory membership.

There are questions of EC law here, and the Treasury has had to consider carefully how best to ensure that the requirements of Part XV of the Bill meet our obligations under EC directives. The Investor Compensation Directive and the Deposit Guarantee Directive provide that EEA firms that participate in deposit and investor compensation schemes in their home state cannot be required to join the UK scheme.

Clause 208(10) therefore provides that firms authorised by virtue of their passport rights under Schedule 3 need not participate under the scheme unless they elect to do so under Clause 209(5). They may elect to participate where the UK scheme offers higher levels of compensation than their home state scheme--taking out "top-up cover" under the new scheme will enable them to compete on a level playing field with UK firms.

As things stand, however, those provisions go wider than intended because they apply to all passported firms, whether or not they are covered by directive requirements. That could lead to gaps in the protection provided by the compensation scheme, particularly in the area of insurance, where there is no requirement on other member states to put in place their own compensation arrangements. I can tell noble Lords that, in fact, there are some member states that have no such protection for insurance policyholders. That is why the existing arrangements under the Policyholder Protection Acts require incoming firms to participate in the UK scheme. These amendments will allow such protection to continue under the new compensation scheme.

The amendments to Clauses 208 and 209 will allow the Treasury to prescribe which passported firms are given a choice whether to join the scheme. The effect of the changes proposed will be to enable the Treasury to require all passported firms not covered by EC directives to join the scheme in the same way that UK firms will be required to join. The amendments allow the Treasury to deal with this matter in regulations because the requirements imposed by EC directives may change over time. It is therefore necessary to ensure that the Bill allows sufficient flexibility for detailed changes to be made in order to ensure that we continue to fulfil our obligation under EC law.

The amendment to Clause 219 is consequential on these changes to Clauses 208 and 209. Clause 219 enables the scheme manager to inspect certain documents held by the Official Receiver. The amendment to Clause 219 enables the Treasury to prescribe the extent to which that provision applies to EEA firms.

As part of this group of amendments, the noble Lord, Lord Hunt of Wirral, has tabled an amendment. Perhaps he will forgive me if I speak to it at this stage.

18 May 2000 : Column 427

When we considered Part XV on Report, the noble Lord raised a technical concern about what is now Clause 210(1) in connection with reinsurance. My noble friend asked his officials to pursue this point with the Association of British Insurers and the FSA in the run-up to today's deliberations. We have also had a constructive exchange with the noble Lord opposite on this matter.

The upshot of those discussions is that the Treasury now agrees that there could be circumstances in which the scheme might wish to pay compensation to insurance company policyholders. That would bring Clause 210 into play. It is therefore desirable to amend the Bill to make clear that the assignment of a policyholder's rights to the scheme manager is not intended to cast doubt on the ability of insurance companies to claim under relevant reinsurance contracts. The noble Lord's amendment would have that effect. For the second time today, already, the Government are happy to accept his amendment.

Lord Hunt of Wirral: My Lords, I thank the Minister for his generous words and for acknowledging the importance of the point I was able to make on behalf of the Association of British Insurers. I am grateful to him for having removed the necessity for my making any speech at all by indicating in advance that he is willing to accept my amendment, which I shall move at the appropriate moment.

On Question, amendment agreed to.

Clause 209 [General]:

Lord Bach moved Amendment No. 73:


    Page 112, line 20, after ("3") insert (", and


(b) falls within a prescribed category,").

On Question, amendment agreed to.

Clause 210 [Rights of the scheme in relevant person's insolvency.]:

Lord Hunt of Wirral moved Amendment No. 74:


    Page 112, leave out lines 35 to 37 and insert--


("( ) as to the effect of a payment of compensation under the scheme in relation to rights or obligations arising out of the claim against a relevant person in respect of which the payment was made;").

On Question, amendment agreed to.

Clause 211 [Continuity of long-term insurance policies]:

Lord McIntosh of Haringey moved Amendments Nos. 75 and 76:


    Page 113, line 34, leave out ("carry on long-term insurance business") and insert ("have permission to effect or carry out contracts of long-term insurance").


    Page 113, line 39, leave out from first ("of") to ("to") in line 40 and insert ("a relevant long-term insurer's business so far as it consists of the carrying out of contracts of long-term insurance, or of any part of that business,").

On Question, amendments agreed to.

18 May 2000 : Column 428

Clause 212 [Insurers in financial difficulties]:


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