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The noble Lord said: My Lords, the regulations set out the legal framework for the establishment, carrying on and regulation of open-ended investment companies--or OEICs, as they are more commonly known. By way of background, I should explain that an OEIC is a type of company whose business is investment in securities such as shares of other companies. It issues shares to its investors and its capital may go up or down as shares are issued or cancelled. Its investments are managed by a fund manager, who must be authorised by the FSA.
The assets of an OEIC--the investments that it owns--must be held by a depository, who must also be authorised by the FSA. The depository plays a key role, similar to that of the unit trust trustee, and must be legally independent of the directors of the OEIC. That independence requirement is an important feature of the robust framework of protection for investors within which OEICs operate. The investment assets of the OEIC must be well distributed to spread investment risk and the OEIC itself and the key players must be authorised.
Those principles were established in the existing regulations governing OEICs--the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996. The regulations before your Lordships today make no major changes. They rationalise and modernise the regulatory structure for OEICs. The provisions of the regulations also represent an important liberalisation. They will pave the way towards extending the range of authorised OEICs available for sale in the UK. It will be for the FSA to determine the categories of funds that may be established as OEICs. For the moment, only those that invest in transferable securities--that is, stocks and shares--can be marketed to the general public.
Providers of funds want to take advantage of the economic and marketing benefits of OEICs for a wider variety of funds--for example, money market funds, which can be used as a convenient and stable way of
This is a win-win situation. By opening up the scope for fund providers to offer a wide variety of funds in OEIC form, the regulations will give fund providers an efficiency advantage and customers will have the advantage of more choice with no detriment to investor protection.
A further significant change introduced by the regulations is an extension in the role of the FSA to act as a single point of contact on OEICs. As well as regulating OEICs, it will also be responsible for registering OEICs and maintaining the register. Under existing regulations, the registration is undertaken at Companies House. That is a cumbersome and unnecessary split of responsibilities. The new provisions represent a significant rationalisation, which has been welcomed by the investment funds industry.
The regulations simplify matters by setting out that the provisions for OEICs are broadly the same as those for unit trusts, as set out in the Act. Therefore, there should be no significant divergence in the regulations which govern authorised unit trusts and OEICs. Such a divergence could have caused confusion and potential costs. In addition, a consistent approach by the FSA will benefit providers who choose to offer both unit trusts and OEICs.
To minimise disruption for providers, companies constituted under existing regulations will be treated as formed under these regulations. In recent years, extensive consultation has taken place on the regulation of OEICs, and we are grateful for the detailed work that the respondents have undertaken on these complex regulations.
The OEIC is a modern, flexible and transparent investment product. It has proved popular in the relatively brief period for which it has been available. These regulations will result in greater potential flexibility and choice for investors because of the range of OEICs available. They set a firm foundation from which OEICs can go from strength to strength. I commend them to the House. I beg to move.
The Parliamentary Under-Secretary of State, Home Office (Lord Bassam of Brighton) rose to move, That the draft order laid before the House on 1st March be approved [10th Report from the Joint Committee].
The noble Lord said: My Lords, this is an important order and I am pleased that we have the opportunity to debate it today. It covers three key areas of amendments to the existing 1975 exceptions order. It also represents an important milestone in the progress towards implementation of the Criminal Records Bureau.
First, I should place the order in the context of the policy on rehabilitation of offenders as a whole. It has long been accepted that it is important that those who offend should be able to reform, pick up their lives again after paying the penalty, and have a fresh start. The order does not seek to undermine the principle of punishment. However, if we are not to have an underclass of people who can never work again, some means must be put in place for rehabilitation.
However, it has also been accepted that the need for rehabilitation must be balanced against the risk from the ex-offender to society and, in particular, to its most vulnerable members. That is why, so long as the Rehabilitation of Offenders Act has been in place, there has also been a list of positions in relation to which the offender, even if his conviction under the Act is "spent", cannot escape his past. If asked an excepted question in respect of all past convictions by a person entitled to ask such a question, the offender must answer in respect of all past convictions and not merely in respect of those which are unspent.
It is crucial that that list of positions is compiled correctly. We must protect the vulnerable, and safeguards must be put in place for certain offices and certain aspects of life, such as national security. However, we must not make the list such that an offender who has put his past behind him is disadvantaged where that is not necessary due to the demands of the job.
I turn to the three areas of amendment covered by the present order. They are all amendments to categories which are included in the 1975 exceptions order but which need to be updated. The new provisions would replace those in the existing order in these areas.
The most complicated is that relating to working with children. The main effect of the order is to carry through the policy agreed on the definition of "working with children" contained in the Criminal Justice and Court Services Act 2000. Such positions are regulated, as set out in Part II of the Act. We debated that definition in detail during the passage of the Bill last year.
The positions in question are those from which people who have been disqualified from working with children are banned. They include front-line carers, such as foster carers and teachers, those who supervise such workers, and, crucially, those with power to dismiss them. They also include all workers in certain areas of particular vulnerability, such as children's homes and schools. They include positions of influence, such as social services directors and the "great and the good" in organisations concerned with children, such as charitable trustees. All such positions need to be covered by the exceptions order so that full checks can be made.
I now turn to the subject of healthcare workers--the second group covered by the order. The existing exception applies to all those who provide health services. That, of course, includes newly qualified general practitioners. Each health authority area maintains a list of GPs who are available for work. However, currently there is no provision for further criminal checks to take place when GPs move to a new health authority area and are put on a list for that area. The new order will allow such checks to take place.
The final group is justices' chief executives. Section 87 of the Access to Justice Act 1999 removed the requirement for justices' chief executives to be eligible as justices' clerks--a profession included in the order. Effectively, it removed the requirement for justices' chief executives to be legally qualified as barristers or solicitors--again, professions included in the exceptions order.
There is no reason why JCEs should not be subject to the same provisions as JCs--justices' clerks--and their assistants, who are required to disclose spent convictions. The amendment will ensure that all new appointees, some of whom will not be lawyers, are covered by the exceptions order.
Finally, I make a more general point relating to the order. Noble Lords will notice that for the amendment order we have adopted the wider definition of "work" used in the Criminal Justice and Court Services Act 2000. That includes all work, whether paid or unpaid, in all sectors, including voluntary or volunteering work. I am sure that that is right. Where the nature of the work justifies it, we can no longer properly limit exceptions to areas of formal employment. The risks presented by certain positions are not affected by employment status; nor, therefore, should the exceptions order be so affected.