Select Committee on Delegated Powers and Deregulation Twelfth Report


FINANCIAL SERVICES AND MARKETS BILL—GOVERNMENT AMENDMENTS FOR REPORT STAGE

INTRODUCTION

  47.  The Committee has already commented on this bill at the pre-legislative scrutiny stage and when it was introduced into this House[3] and also commented on a number of amendments before they were considered in Committee.[4] The government has now invited the Committee to consider amendments to be tabled for Report Stage. These amendments are discussed in the Treasury's Memorandum which also discusses those amendments made to the bill in Committee which were not referred to the Committee at that stage because of the timetable. The Committee has considered these amendments which have already been made to the bill but sees no need to comment on them.

REPORT STAGE AMENDMENTS

  48.  The amendments to clause 19 (nos. 1 to 6)[5] affect the definition of "engaging in investment activity" to which the restrictions on financial promotion apply. The amendments introduce the term "controlled investment" and define it as an investment of a kind of within a class specified in an order made by the Treasury. The first order (or an amending order extending the scope of the controls) will be subject to affirmative procedure, other orders to negative procedure. There are other consequential amendments.

  49.  The new clause (no. 7)[6] to be inserted after clause 93 enables the Treasury to provide by order for competition scrutiny. The Memorandum explains the need for the new power to which negative procedure applies.

  50.  Clause 142 confers powers on the Authority to make rules in relation to the regulation of financial promotion under Parts II and XVII of the bill. Amendments nos. 8-10[7] limit this rule making power for the reasons given in the Memorandum.

  51.  The new clause (no. 11)[8] to be inserted after clause 142 allows the Authority to make rules which will, in effect, allow firms to operate "Chinese Walls". The Memorandum explains the need for this and the consequential amendments (nos. 18 and 19).

  52.  The amendment to clause 188 (no. 12)[9] extends the Treasury's power to make orders under that clause to enable exemptions to be created from the obligations under clause 174 to notify proposed action affecting control over authorised persons. Negative procedure applies.

  53.  Clause 344 allows regulations made by the Treasury to create exceptions from the restrictions imposed by clause 343 on the disclosure of confidential information received by the FSA and others under the bill. The amendments (nos. 13-17)[10] are intended to meet the criticism of the width of this power made by the Committee in its Seventh Report when the Committee urged that the power should be restricted "in a way which clearly limits it to information needed by regulatory and other public functions". The Memorandum explains the amendments which meet the Committee's recommendation.

  54.  The new clause (no. 20)[11] to be inserted before clause 398 provides the Treasury with an order-making power to allow the Authority to require firms to review their past business and, where appropriate, make restitution. The power is subject to affirmative procedure (amendment no. 26)[12]. The Memorandum explains the need for this power.

  55.  Clause 405 provides that certain contracts shall not be made void or unenforceable if they are gaming contracts. Subsection (2) defines such a contract as one entered into by way of business when the making or performance of the contract "constitutes a regulated activity falling within paragraph 2 of Schedule 2". The Memorandum explains why this provision is defective. The amendments (nos. 21-23)[13] deal with this but do so by creating a new Treasury order-making power subject to negative procedure.

  56.  The new clause (no. 24[14]) to be inserted after clause 406 allows the Treasury to make regulations about the service of documents under the bill. The Memorandum explains the need (regulations will enable changes to be made to keep up with electronic systems). Negative procedure applies.

  57.  Clause 416 allows the Treasury to make by order transitional provisions. The Memorandum explains why that clause is not adequate to ensure a smooth transition from present regulatory system to those under the bill. The new clause (no. 25)[15] to be inserted after clause 416 extends the power in clause 416 to cover the matters identified in the Memorandum.

RECOMMENDATION

  58.  The Committee welcomes the amendments to Clause 344 as meeting our earlier recommendation. Having considered the Government's other amendments we consider that these raise no problems either in relation to the delegated powers or to the parliamentary control provided for these powers.[16]


3   7th report, HL Paper 36. The Government's response to this report was printed as an Annex to our 8th report, HL Paper 43. Back

4   10th report, HL Paper 47. Back

5   The Treasury's memorandum was prepared on 10 April, before the Marshalled list was produced. For ease of reference we cross-refer the Treasury's numbering system with that of the Marshalled list dated 11 April 2000 (HL Bill 53-I). Nos 1 to 6 translate as Marshalled amendments 50 to 52 and 54 to 56. Back

6   Marshalled list no. 128. Back

7   Marshalled list nos. 153 to 155. Back

8   Marshalled list no. 156. Back

9   Marshalled list no. 159. Back

10   Marshalled list nos. 179 to 183. Back

11   Marshalled list no. 212. Back

12   Marshalled list no. 222. Back

13   Marshalled list nos. 213 to 215. Back

14   Marshalled list no. 216. Back

15   Marshalled list no. 220. Back

16   This report is also published on the Internet at the House of Lords Select Committee Home Page (http://www.parliament.uk), where further information about the work of the Committee is also available. Back


 
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