PREVENTION OF FRAUD (INVESTMENTS) BILL.

HL Deb 14 March 1939 vol 112 cc145-79

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Committee.—(Lord Templemore.)

On Question, Motion agreed to.

House in Committee accordingly:

[The EARL OF ONSLOW in the Chair.]

Clause 1 [Licensing of dealers in securities]:

LORD TEMPLEMORE

There are two drafting Amendments to this clause. It is proposed to add the words "or agent." The addition of these words closes a possible loophole, since without these words it might be possible for the principal to circumvent the provision by employing not employees in the strict sense, who are required to have representatives' licences, but agents paid on a commission basis. I beg to move.

Amendment moved— Page 2, line 1, after ("servant") insert ("or agent").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

I beg to move the second Amendment.

Amendment moved— Page 2, line 6, after ("servant") insert ("or agent").—(Lord Templemore.)

On Question, Amendment agreed to.

Clause 1, as amended, agreed to.

Clause 2:

Saving for certain transactions.

(2) For the purpose of determining whether or not a person has contravened any of the restrictions imposed by Section one of this Act, no account shall be taken of his having done any of the following things (whether as a principal or as an agent), that is to say.— (a) effecting transactions with, or through the agency of,— (ii) the holder of a principal's licence, and (b) issuing documents which, by virtue of the Companies Act, 1929, must conform to the requirements of Section thirty-five or Section three hundred and fifty-five of that Act with respect to the contents of prospectuses, or which in fact conform to the requirements of either of those sections, or of his having, as a principal, acquired, subscribed for or underwritten securities or effected transactions with a person whose business involves the acquisition and disposal, or the holding, of securities (whether as a principal or as an agent).

LORD TEMPLEMORE

The first Amendment to this clause is a drafting Amendment. I beg to move.

Amendment moved— Page 2, line 32, at end insert ("or").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

The next two Amendments are drafting Amendments which are really consequential on later Amendments to Clause 16. I beg to move the first of these.

Amendment moved— Page 2, line 37, leave out from ("of") to the end of line 38.—(Lord Templemore.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

I beg to move the next Amendment.

Amendment moved— Page 2, line 39, leave out ("of") and insert ("or trustee under").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

The next Amendment is a drafting Amendment to bring the provision into line with the words in sub-paragraph (i) "or a person acting on behalf of such a person as is so mentioned."

Amendment moved— Page 3, line 11, leave out ("principal's").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

This is drafting; I beg to move.

Amendment moved— Page 3, line 12, leave out ("document") and insert ("any document").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

This is drafting; I beg to move.

Amendment moved— Page 3, line 17, leave out from ("which") to the end of line 18 and insert ("contains the matter which, by virtue of subsection (1) of either of the said sections, it would have to contain if it were a prospectus to which that subsection applies").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD WARDINGTON

had given Notice that he would move in subsection (2), after "sections" at the end of paragraph (b), to insert "or which are by Statute expressly exempted from the necessity of complying with the requirements of either of those sections." The noble Lord said: The point of my Amendment has been met already, and I therefore do not move it.

VISCOUNT BERTIE OF THAME

Before we leave this clause, I have a question to ask my noble friend of which I have given him private notice: whether his intention is that companies incorporated by Royal Charter should be excluded from the operation of this clause. Perhaps it would save time if I were to withdraw this question now and the Lord Chancellor considered it between now and Report.

THE LORD CHANCELLOR (LORD MAUGHAM)

I will certainly consider it if the noble Viscount will allow me to.

Clause 2, as amended, agreed to.

Clause 3 agreed to.

Clause 4:

Deposits or guarantees required in connection with applications for principal's licences.

4.—(1) Subject to the provisions of this section, the Board of Trade shall not grant a principal's licence unless the sum of five hundred pounds has been, and remains, deposited by the applicant for the licence with the Accountant General of the Supreme Court of Judicature.

(3) The Board of Trade may make such regulations as appear to them to be necessary with respect to the investment of sums deposited under this section, the deposit of securities in lieu of money, and the payment to the depositor of the interest or dividends from time to time accruing due on any securities in which a deposit under this section is for the time being invested, or on any securities deposited under this section in lieu of money.

VISCOUNT BERTIE OF THAME had given Notice of two Amendments in subsection (3)—namely, to leave out "and" ["and the payment"] and, at the end of the subsection, to insert "and the realisation of such securities as aforesaid in special circumstances." The noble Viscount said: The first of these Amendments would be only drafting if the second Amendment were accepted. With regard to the second Amendment, your Lordships will notice that subsection (2) provides that

1. (a) in the event of the depositor becoming bankrupt, the amount of the deposit shall be paid to the trustee in bankruptcy; or
2. (b) if, in a case where the depositor is a corporation, the corporation is ordered to be wound up by, or under the supervision of, the Court, the amount of the deposit shall be repaid to the corporation.

But no provision is made as to the disposal of securities which have been deposited in lieu of money. I originally drafted three Amendments to meet the case, but I have had the advantage of discussing with the advisers of my noble friend Lord Templemore, through his good offices, this matter among others, and his advisers suggested that these two Amendments would be sufficient to cover the point. They now stand in my name, and I hope the noble Lord will see his way to accept them.

Amendment moved— Page 4, line 37, leave out ("and").—[Viscount Bertie of Thame.)

LORD TEMPLEMORE

I am much obliged to my noble friend. These Amendments of his do improve the Bill, and I have great pleasure in accepting them.

On Question, Amendment agreed to.

THE LORD CHAIRMAN

The word "special" in the next Amendment as printed should be "specified."

VISCOUNT BERTIE OF THAME

I beg to move the Amendment with that alteration.

Amendment moved— Page 4, line 42, after ("money") insert ("and the realisation of such securities as aforesaid in specified circumstances").—(Viscount Bertie of Thame.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

My attention has been called to a grammatical error by my noble friend Viscount Bertie, and I have much pleasure in moving this Amendment.

Amendment moved— Page 5, line 35, leave out ("their") and insert ("its").—(Lord Templemore.)

On Question, Amendment agreed to.

Clause 4, as amended, agreed to.

Clause 5 agreed to.

Clause 6:

References to tribunal of inquiry.

(2) For the purposes of this section there shall be a tribunal of inquiry (hereinafter referred to as "the tribunal") consisting of a chairman, and one other person appointed by the Lord Chancellor, being members of the legal profession, and one person appointed by the Treasury, being a person who appears to the Treasury to be experienced in matters of finance or accountancy and not being a person in His Majesty's service.

A person appointed to the tribunal shall be appointed to be a member thereof for a specified period not being less than three years, subject to such conditions with respect to the vacation of his office in the event of his incapacity or resignation as may be imposed before the time of his appointment; and a person ceasing to hold office as a member of the tribunal shall be eligible for re-appointment thereto.

THE EARL OF IDDLESLEIGH moved, in subsection (2), to leave out "members of the legal profession" and insert "barristers of not less than seven years' standing." The noble Earl said: This Amendment refers to the composition of the tribunal which is to act as a court of appeal from the decision of the Board of Trade. In such circumstances it is of great importance that the members of this tribunal, which has to perform judicial functions, should be persons qualified to weigh evidence with the utmost care. It seems desirable that the Committee should exact some qualifications beyond that of being a member of the legal profession. I have adopted the qualification for a County Court Judge, and I beg to move.

Amendment moved— Page 7, line 29, leave out ("members of the legal profession") and insert ("barristers of not less than seven years' standing").—(The Earl of Iddesleigh.)

THE LORD CHANCELLOR

Your. Lordships will appreciate that for my part I am not in the least hostile to the other branch of the legal profession, and I am particularly not hostile to barristers, whether they are of more or of less than seven years' standing. It has, however, fallen to my lot to have to do with the framing of tribunals of inquiry both in reference to a Bill that was fought at great length in this House and the name of which I fear to mention, and to various other Bills which have been before the House. In some cases I have been able to limit the persons who are to be put upon the tribunal of inquiry to barristers of so many years' standing, and in other cases I have thought it my duty to refuse. The reason is that I think there are cases in which solicitors are as fit to serve on such a tribunal as the great majority of barristers. They have experience which barristers sometimes do not possess, and accordingly there are cases where the addition of a solicitor to such a tribunal adds to its powers. I am therefore unable to accept the Amendment which has been prepared by the noble Earl and which strikes out the possibility of a solicitor being a member of this tribunal.

The Chairman and one other person are to be appointed by the Lord Chancellor, and we must hope that the Lord Chancellor will fulfil his duties under this section with complete impartiality and with the best judgment he can bring to bear upon the matter. If the noble Earl is content merely with an Amendment which requires that these persons should have some experience, for my part I should not be in the least entitled to oppose such a Motion. But, after all, does it matter very much? The Lord Chancellor has to consider who these people shall be, and they will probably be persons of far more than the seven years' experience which the noble Earl suggests is sufficient for a barrister. For the moment the Amendment, as it stands, has the serious defect of ruling out all solicitors from such an appointment, and I am therefore unable to accept it.

THE EARL OF IDDESLEIGH

In deference to the great experience of the noble and learned Lord who sits upon the Woolsack, I am prepared to withdraw this Amendment if the Committee will give me leave to do so.

Amendment, by leave, withdrawn.

LORD TEMPLEMORE

The next is a drafting Amendment.

Amendment moved— Page 7, line 37, leave out ("in the event of his incapacity or resignation").—(Lord Templemore.)

On Question, Amendment agreed to.

Clause 6, as amended, agreed to.

Clause 7 agreed to.

Clause 8:

Information to be furnished to Board of Trade by holders of licences.

(2) If, at any time while a principal's licence granted to a corporation is in force, any person becomes a director of the corporation, the corporation shall forthwith notify the name and address of that person in writing to the Board of Trade.

(3) If, at any time while a representative's licence is in force, the holder of the licence leaves or enters the service of any person, he shall forthwith notify the name and address of that person in writing to the Board of Trade.

VISCOUNT BERTIE OF THAME moved, in subsection (2), after "name," to insert "nationality." The noble Viscount said: Under the present law the director of a company has to disclose his nationality of origin. I do not go quite so far as that in this Amendment, but if a person becomes a member of a corporation, I think the corporation should notify the Board of Trade not only of his name and address but also of his nationality. I beg to move.

Amendment moved— Page 10, line 13, after ("name") insert ("nationality").—(Viscount Bertie of Thame.)

LORD TEMPLEMORE

I accept the Amendment.

On Question, Amendment agreed to.

LORD TEMPLEMORE moved, in subsection (3), after "of" ["of any person"] to insert "or becomes or ceases to be an agent of." The noble Lord said: This is a drafting Amendment; it is consequential on the Amendment to Clause 1, page 2, line 6. I beg to move.

Amendment moved— Page 10, line 17, after ("of") insert ("or becomes or ceases to be an agent of").—(Lord Templemore.)

On Question, Amendment agreed to.

Clause 8, as amended, agreed to.

Clause 9:

Publication of names of holders of principals' licences.

9. The Board of Trade shall cause to be published, at such times and in such manner as they think proper, the names and addresses of all holders of principals' licences for the time being in force, so however that the said information shall be published not less often than once a year.

VISCOUNT BERTIE OF THAME moved, after "names," to insert "nationality." The noble Viscount said: This is not quite consequential, and I do not know whether my noble friend accepts it. Unless any noble Lord wishes for an explanation, I beg to move.

Amendment moved— Page 10, line 25, after ("names") insert ("nationality").—(Viscount Bertie of Thame.)

LORD TEMPLEMORE

I accept the Amendment.

On Question, Amendment agreed to.

Clause 9, as amended, agreed to.

Clause 10 [Provisions as to industrial and provident societies]:

LORD TEMPLEMORE

These Amendments are drafting Amendments, and I beg to move.

Amendments moved—

Page 11, line 26, leave out ("shares in the share capital of") and insert ("securities")

Page 11, line 27, leave out from ("money") to ("been") in line 28.

Page 12, leave out lines 38 and 39 and insert ("have invested or deposited money").—(Lord Templemore.)

On Question, Amendments agreed to.

Clause 10, as amended, agreed to.

Clause 11 [Provisions as to building societies]:

LORD TEMPLEMORE

The Amendments to this clause are also drafting Amendments. I beg to move.

Amendments moved—

Page 14, line 32, leave out ("in the public interest so to do") and insert ("so to do in the interests of persons who have invested or deposited or may invest or deposit money with the society")

Page 14, line 36, leave out ("any shares in the share capital of") and insert ("securities")

Page 14, line 37, leave out from ("money") to ("shall") in line 38.—(Lord Templemore.)

On Question, Amendments agreed to.

Clause 11, as amended, agreed to.

Clause 12:

Penalty for fraudulently inducing persons to invest money.

12.—(1) Any person who, by any statement, promise or forecast which he knows to be misleading, false or deceptive, or by any dishonest concealment of material facts, or by the reckless making of any statement, promise or forecast which is misleading, false or deceptive, induces or attempts to induce another person— (c) to enter into an agreement the purpose or pretended purpose of which is to secure a profit to any of the parties by reference to fluctuations in the value of some commodity, shall be guilty of an offence, and liable to penal servitude for a term not exceeding seven years.

LORD TEMPLEMORE

This Amendment is really a drafting Amendment. It makes it clear that it is not only an offence, by misleading statements, etc., to invite another person to enter into a speculative commodity transaction, but also to invite him to offer to enter into such a transaction.

Amendment moved— Page 16, line 31, after ("into") insert ("or offer to enter into").—(Lord Templemore.)

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME moved, in subsection (1) (c), to leave out "some commodity" and insert "any property other than securities." The noble Viscount said: When I first read this Bill I was uncertain whether the word "commodity" covered dealings in currency, and therefore I originally put down an Amendment to the Interpretation Clause, to insert "'commodity' includes currency." The noble Lord's advisers, however, thought that the intention of that Amendment would best be covered by moving the Amendment which is now under discussion, and subsequent Amendments later on. I am much obliged for that advice, which I hope your Lordships will follow.

Amendment moved— Page 16, line 34, leave out ("some commodity") and insert ("any property other than securities").—(Viscount Bertie of Thame.)

LORD TEMPLEMORE

I accept.

On Question, Amendment agreed to.

Clause 12, as amended, agreed to.

Clause 13:

Restriction on distribution of circulars relating to investments.

(2) The preceding subsection shall not apply—

1. (a) in relation to any document which by virtue of the Companies Act, 1929, must conform to the requirements of Section thirty-five or Section three hundred and fifty-five of that Act with respect to the contents of prospectuses, or which in fact conforms to the requirements of either of those sections, or
2. (b) in relation to any document the issue or publication of which is required or authorised by any Act other than this Act or by any enactment of the Parliament of Northern Ireland.

(3) This section shall not prohibit the distribution or possession of any document by reason only— (a)that it contains an invitation or information— (iii) made or given by a corporation to holders of securities of or to persons employed by or to creditors of, that corporation or any other corporation which, in relation to the first mentioned corporation, is a subsidiary company as defined by Section one hundred and twenty-seven of the Companies Act, 1929, with respect to securities of the first mentioned corporation or of any such other corporation as aforesaid, or

THE LORD CHANCELLOR had on the Paper Amendments to subsection (2) (a), to insert (i) after "which," where that word first occurs, and to leave out "which in fact conforms to the requirements of either of those sections" and insert:

1. "(ii) contains the matter which, by virtue of subsection (1) of either of the said sections, it would have to contain if it were a prospectus to which that subsection applies, or
2. (iii) is a document to which subsection (3) of the said Section thirty-five does not apply by virtue of the proviso to that subsection."

The noble and learned lord said: These Amendments to Clause 13 are Amendments to carry out the object to which the noble Lord, Lord Wardington, called attention when the matter was last before your Lordships, and their object is, I think, precisely the object which we desire to carry out. The clauses dealing with various matters which are the subject in Clause 13, subsection (3), of what may be called the savings or exemptions from the prohibitory part of the section, provide that no person shall, after the appointed day, "distribute circulars of a special kind relating to investments." The noble Lord pointed out that there were certain documents which were really in pari materia to documents with regard to which there were savings and exemptions contained in subsection (3) of Clause 13; and the attention of the Government having been called to the matter, it appeared that the better course would be to introduce a new subsection (3) and to insert also another provision which your Lordships will find is one of the Amendments proposed on the printed list.

The first Amendment is only one to insert the figure (i). That is of no importance. The second Amendment is to leave out a certain portion of the present clause as it exists in the Bill, and therefore to exclude from liability for the distribution of circulars and so forth of matters which, "by virtue of subsection (1) of either of the said sections"—that refers to the two main sections in the Companies Act—namely, Sections 35 and 355—the document "would have to contain if it were a prospectus to which that subsection applies." The new sub-paragraph (iii) reads: is a document to which subsection (3) of the said Section thirty-five does not apply by virtue of the proviso to that subsection. In other words the Amendments simply provide that certain innocent documents shall not be subjected to the prohibitory provisions of the Bill, and I think the Amendments carry out that Amendment which the noble Lord, Lord Wardington, desires.

Amendment moved— Page 17, line 22, after ("which") insert ("(i)").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I have already stated the reasons for the second Amendment and I beg to move.

Amendment moved—

Page 17, line 27, leave out from ("or") to ("or") at the end of line 28, and insert— ("(ii) contains the matter which, by virtue of subsection (1) of either of the said sections, it would have to contain if it were a prospectus to which that subsection applies, or (iii) is a document to which subsection (3) of the said Section thirty-five does not apply by virtue of the proviso to that subsection").—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD WARDINGTON moved to insert in subsection (2), after paragraph (b): or (c) in relation to any class or classes of documents, the issue or publication of which is authorised by an order for the time being in force under this subsection; (3) Any order under the last preceding subsection shall be made by the Board of Trade and may be rescinded or varied by a subsequent order made by the Board.

The noble Lord said: In view of the statement of the Lord Chancellor I shall not move the Amendment to add words to paragraph (a) of subsection (2), but I do move my next Amendment. I do not think that the list of exemptions contained in subsections (2) and (3) of Clause 13—the exemptions from the general ban upon circulars relating to investments—is comprehensive enough. There is grave risk of legitimate business being hampered in the future if there is not some machinery provided in the Bill for making additions to the literature specified in those subsections. I referred to this matter on the Second Reading. Only a fortnight has intervened between that time and now, and already two cases, which had not been foreseen, have arisen and have formed the subject of two subsequent Amendments. One is by the Government, where the case is one of putting up securities for sale is dealt with, and another is dealt with by an Amendment in my own name which is intended to cover the case of Company A wanting to buy the shares of Company B. Those are two additional cases which were not foreseen and if they were not put into the Bill no machinery except an entirely new Act of Parliament would enable them to be dealt with. I feel that it is desirable to give the Board of Trade some extended power to make exceptions and I therefore beg to move the Amendment standing in my name.

Amendment moved— Page 17, line 33, at end insert the said new words.—(Lord Wardington.)

THE LORD CHANCELLOR

The Government are greatly obliged to the noble Lord for the care he has taken in making suggestions with regard to this difficult and complex Bill. As to this Amendment, the Government take the view that the noble Lord is quite right in thinking that some further power of exemption should be given to the Board of Trade. They are doubtful about accepting the precise Amendment moved by the noble Lord. They think that the cases which it may be desired to deal with under this Amendment are cases that should take the form of an exemption given by the Board of Trade in particular cases only, and if the noble Lord is willing to accept my promise that the Government will move a suitable Amendment on Report, of which of course he will be given due notice, I hope he may be satisfied, for the moment at any rate, not to press his Amendment.

LORD WARDINGTON

I thank the Lord Chancellor and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD TEMPLEMORE

The next Amendment is drafting.

Amendment moved— Page 18, line 6, after ("by") insert ("or on behalf of").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD WARDINGTON moved, in subsection (3) (a), after sub-paragraph (iii), to insert: (iv) made or given by any person to all holders of the securities or any class of the securities issued by any company (other than those (if any) already owned by the person making such offer) offering to acquire such securities or any part of such securities.

The noble Lord said: This is rather a wide Amendment, and I do not know whether it will commend itself to the Lord Chancellor, but it is, as I said just now, designed to cover the case of one company desiring to purchase the shares of another company and circularising in connection with such an acquisition under Section 155 of the Companies Act, 1929, all dissentient shareholders in cases where the scheme or contract has been approved by the majority.

Amendment moved— Page 18, line 15, at end insert the said sub-paragraph.—(Lord Wardington.)

THE LORD CHANCELLOR

I think it is very likely that some Amendment may be desirable to permit perfectly proper transactions which take place under Section 155 of the Companies Act, 1929, but these things are not very easy to draft, and it so happens that the noble Lord's Amendment is one which precisely makes legal a particular fraud which has been investigated on more than one occasion before the present day. The fraud in question is this. Some person not of very high character circularises the shareholders of a particular company with an offer to acquire their shares in exchange for some other securities in a company which is represented as having every possibility of turning out to be more than a gold mine, but as to which it may be pretty safe to say that the securities are completely worthless. This is one of the devices which the present Bill is designed to meet. Accordingly, the Government cannot accept this Amendment in its present form, but, as I started by saying, the noble Lord may be able so to limit his Amendment, if necessary—and I am afraid I cannot say that I have given enough time to the question whether it is necessary or not—that legitimate transactions under Section 155 of the Companies Act will not be hit. Of course, there is no intention in the least of objecting to those or making them illegal. It is a question of getting a suitable phrase which will permit that to be done.

LORD WARDINGTON

I am content to accept the assurance of the Lord Chancellor, and I beg leave to withdraw.

Amendment, by leave, withdrawn.

LORD TEMPLEMORE

The next two Amendments are drafting.

Amendments moved—

Page 18, line 17, leave out ("of") and insert ("under")

Page 18, line 29, leave out ("in the share capital").—(Lord Templemore.)

On Question, Amendments agreed to.

THE LORD CHANCELLOR moved to insert at the end of subsection (3) (a): (viii) made or given with respect to any securities in connection only with a sale or proposed sale of those securities by auction, or

The noble and learned Lord said: The object of this Amendment is to prevent advertisements or statements made in connection with the sale of securities by auction from being prohibited statements. It will be remembered that if an auctioneer sells only stocks and shares in the course of his business, or if a large part of his business is connected with the sale of stocks and shares, he will require a licence under one of the other clauses of the Bill. But with regard to auctioneers' catalogues it is thought that they ought not to be subject to the provisions of this clause if they are concerned only with securities which are proposed to be sold at a particular auction sale, and that is the only object of this Amendment.

Amendment moved— Page 18, line 34, at end insert the said sub-paragraph.—(The Lord Chancellor.)

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME

The next two Amendments are consequential.

Amendments moved—

Page 18, line 38, leave out ("some commodity") and insert ("any property other than securities")

Page 18, line 40, leave out ("that commodity") and insert ("such property").—(Viscount Bertie of Thame.)

On Question, Amendments agreed to.

LORD TEMPLEMORE

The next Amendment is drafting.

Amendment moved— Page 19, line 2, leave out ("other than") and insert ("which is not").—(Lord Templemore.)

On Question, Amendment agreed to.

Clause 13, as amended, agreed to.

Clause 14:

Stock exchanges and associations of dealers in securities.

(3) It shall be the duty of every recognised stock exchange or recognised association of dealers in securities to furnish to the Board of Trade, so often as may be prescribed (which shall be not less often than once a year) a list of all persons who, at the date on which the list is furnished, are members of the stock exchange or of the association, as the case may be; and as soon as may be after receiving any list furnished to them under this subsection the Board shall cause the list to be published in such manner as they think proper.

LORD TEMPLEMORE moved, in subsection (3), to leave out "of all persons" and to insert "showing with respect to each person." The noble Lord said: This and the following Amendments deal with the following point. The subsection in its present form imposes on recognised stock exchanges and recognised associations the duty of furnishing to the Board of Trade lists of their members, and provides that the Board shall publish such lists. It is, however, not sufficient that lists of members should be furnished, as they would be of little value to the public without particulars of the business names under which such persons carry on business, that is, their partnership names or firm names and their addresses.

Amendment moved— Page 21, line 14, leave out ("of all persons") and insert ("showing with respect to each person").—(Lord Templemore.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

I beg to move.

Amendments moved—

Page 21, line 14, leave out ("of all persons") and insert ("showing with respect to each person")

Page 21, line 15, leave out ("are members") and insert ("is a member")

Page 21, line 16, after the first ("be") insert ("his name and business address and the style under which he carries on business")

Page 21, line 24, after ("of") insert ("the").—(Lord Templemore.)

On Question, Amendments agreed to.

Clause 14, as amended, agreed to.

Clause 15 [Banks, etc.]:

LORD TEMPLEMORE

The next three Amendments are drafting.

Amendments moved—

Page 22, line 9, leave out from ("of") to ("manager") in line 12.

Page 22, line 11, leave out the second ("of") and insert ("or trustee under")

Page 22, line 17, leave out ("principals").—(Lord Templemore.)

On Question, Amendments agreed to.

Clause 15, as amended, agreed to.

Clause 16:

Trustees of unit trusts.

16.—(1) The Board of Trade may by order declare to be an approved trustee of unit trusts for the purposes of this Act any corporation in relation to which the Board are satisfied that the following conditions are fulfilled, that is to say:—

1. (a) that the corporation is incorporated under the law of some part of the United Kingdom, and has a place of business in Great Britain at which notices and other documents are received on behalf of the corporation, and
2. (b) that the corporation is empowered by its constitution to undertake the business of acting as a trustee, and
3. (c) either—
1. (i) that the corporation has a capital (in stock or shares) for the time being issued of not less than five hundred thousand pounds, of which an amount of not less than two hundred and fifty thousand pounds has been paid up, and that the assets of the corporation are sufficient to meet its liabilities (including liabilities in respect of the repayment of its capital), or
2. (ii) that more than four-fifths of the said capital of the corporation is held by another corporation being a corporation in relation to which the conditions as to capital and assets specified in subparagraph (i) of this paragraph are fulfilled.

(3) Subject to any exceptions which may be prescribed, every deed or other instrument (executed whether before or after the commencement of this Act) under which property is, in pursuance of any unit trust scheme, vested in an approved trustee of unit trusts, shall be deemed to contain such provisions as may be prescribed, and any provision contained in any such deed or other instrument shall, if and so far as it is inconsistent with any of the provisions so prescribed, be of no effect.

(4) It shall be the duty of every corporation, being an approved trustee of unit trusts to furnish to the Board of Trade, so often as may be prescribed (which shall not be less often than once a year) the prescribed particulars of every unit trust scheme under which property is vested in the corporation as trustee; and as soon as may be after any particulars have been furnished to them under this subsection the Board shall cause the particulars to be published in such manner as they think proper.

THE LORD CHANCELLOR moved, in subsection (1), to leave out "approved trustee of unit trusts" and insert "authorised unit trust scheme." The noble and learned Lord said: The next dozen or so Amendments are a little bit difficult to follow unless you see the effect of them in the shape of a Bill that is altered to contain them, but the main object of them is this. Your Lordships will remember that considerable objection was taken to Clause 16 (3) of the Bill by Lord Wardington, and it was felt by persons on behalf of the Government that the clause might be redrafted—I believe somebody was so injudicious as to say that the clause gave him a pain! The object of the present Amendments is to redraft Clause 16 and to improve it in the course of the redrafting. Accordingly there are quite a large number of Amendments, consequential and otherwise. Perhaps your Lordships will allow me to tell you shortly, if I can, what the effect of all these Amendments is. Then it might be that some noble Lords would think it right to wait until the Report stage to see if the objects in question are properly carried out and, if thought fit, to move Amendments on Report. I hope they will be satisfied with the general nature of the clause as it will stand after these Amendments have been made.

The first thing is this. Under the Bill as it stands, in Clause 16 (1) the Board of Trade may "by order declare to be an approved trustee of unit trusts for the purposes of this Act," any corporation which fulfils certain conditions. The question of unit trusts was greatly discussed in another place, and it was strongly urged that certain recommendations of the Anderson Committee should be adopted. Since the passage of the Bill through another place, further representations have been made to the effect that the law with regard to unit trusts should, at any rate, be amended, though it is not the object of the present Bill to deal with the matter completely. The proposals which I am now putting forward have three aspects. First, instead of approving the trustee, the Board of Trade under the Amendments will, in effect, approve the unit trust scheme provided it fulfils certain conditions, one of which will be that the trustee must have the status laid down in the Bill. Secondly, the scheme must be such as to secure that all property subject to the trust is vested in a trustee under a deed providing, to the satisfaction of the Board, for certain definite matters which have got to be specified and which, in the proposals before your Lordships, are specified in the Schedule. These are reasonable conditions to which it is thought no reputable trustee can object.

Thirdly, there is a new subsection (3) for enabling trusts to be varied or supplemented by a deed made between the trustee and the manager for the purpose of complying with the conditions in the Schedule. That will result in this. Existing unit trusts in almost every case, at any rate, will have to bring into effect a supplemental deed which will contain provisions under which they will be complying with the provisions it is now proposed should form part of the general law relating to unit trusts. With regard to future unit trusts, they will ab initio commence with the proper provisions, the clauses which are thought to be necessary, in order that the public interest may be safeguarded.

These Amendments are, no doubt, of some importance. They will not satisfy entirely the views of some trustees of unit trusts who want most elaborate provisions to deal with the matter, and, on the other hand, they will not satisfy those who think that the Bill should leave untouched all unit trusts at present in existence, however unsatisfactory their provisions may be and whatever abuses may be open to some of the less reputable of these institutions. It has been found, owing to the complaints with regard to some such unit trusts, that that contention cannot be accepted. Accordingly the Government have thought fit to meet the point raised by Lord Wardington, with regard to subsection (3) of the existing Clause 16, and to take the opportunity for wholly redrafting Clause 16 and carrying out in a more efficient way the three proposals which I have stated to the Committee. As I have already indicated, it is very hard to follow the matter from these complicated Amendments which stand in my name and in the name of Lord Templemore to carry out these objects, but perhaps with that explanation your Lordships will be content, unless any noble Lord wants to ask any question, to take the matter for the present as being that which I have attempted to state, and to move any Amendments which may be considered desirable at a later stage. I beg to move.

Amendment moved— Page 24, line 2, leave out ("approved trustee of unit trusts") and insert ("authorised unit trust scheme").—(The Lord Chancellor.)

LORD WARDINGTON

I should like to thank the noble and learned Lord for the way in which he has met the points I raised on Second Reading.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I beg to move the next Amendment on the Paper.

Amendment moved— Page 24, line 3, leave out ("corporation") and insert ("unit trust scheme").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved, in subsection (1), to leave out paragraphs (a) and (b) and "(c)," and insert:

1. "(a) that each of the persons who are respectively the manager and the trustee under the scheme is a corporation incorporated under the law of some part of the United Kingdom, and having a place of business in Great Britain at which notices and other documents are received on behalf of the corporation, and
2. (b) that the scheme is such as to secure that all property subject to any trust created in pursuance of the scheme is vested in the trustee under a deed providing, to the satisfaction of the Board, for the matters specified in the Schedule to this Act, and
3. (c) as respects the corporation being the trustee."

The noble and learned Lord said: I beg to move.

Amendment moved— Page 24, line 6, leave out from the beginning of the line to ("either") in line 14, and insert the said new paragraphs.—(The Lord Chancellor.)

THE EARL OF IDDESLEIGH

I wish to draw attention to the wording of paragraph (b), which reads: that the scheme is such as to secure that all properties subject to any trust created in pursuance of the scheme is vested in the trustee … Later on we shall come to the Schedule, and the Amendment to be moved in that case uses the phrase, "will be vested," which is more correct and more applicable to the circumstances. I suggest that the Government should consider that point and make it "will be" in this case also. I am also informed that the term "vested" in this clause is one that may give rise to certain legal difficulties and that a further definition of the word may be desirable.

THE LORD CHANCELLOR

I will certainly undertake to consider both those suggestions with the assistance of my advisers. I am not sure I agree with the first, but I may be converted during the days that will elapse before this matter again comes before your Lordships. In those circumstances perhaps it is not necessary for me to indicate my hesitation on the first point.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I beg to move the next Amendment.

Amendment moved— Page 24, line 30, leave out from ("any") to ("the") in line 31 and insert ("authorised unit trust scheme").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I move the next Amendment.

Amendment moved— Page 24, line 32, leave out ("corporation") and insert ("scheme").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I now move the next Amendment.

Amendment moved— Page 24, line 33, leave out ("such a trustee") and insert ("an authorised unit trust scheme").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I move the next Amendment in my name.

Amendment moved— Page 24, line 37, leave out ("corporation") and insert ("scheme").—The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I move the next Amendment on the Paper.

Amendment moved— Page 24, line 41, leave out ("corporation") and insert ("manager under the scheme and on the trustee under the scheme").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I move the next Amendment.

Amendment moved— Page 25, line 3, leave out ("corporation") and insert ("manager and the trustee").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I move the next Amendment.

Amendment moved— Page 25, line 6, leave out ("the corporation desires") and insert ("they desire").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I move the next Amendment on the Paper.

Amendment moved— Page 25, line 11, leave out ("corporation and, if it so requests, afford it") and insert ("manager or trustee and, if he so requests, afford him").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved to leave out subsection (3) and insert: (3) The terms of any trust created before the commencement of this Act in pursuance of a unit trust scheme may, notwithstanding anything in any deed, be varied or supplemented by a deed made between the trustee and the manager under the scheme, and containing such provisions as may be certified by the Board of Trade to be necessary for the purpose of securing that the condition mentioned in paragraph (b) of subsection (1) of this section is fulfilled in relation to that scheme.

The noble and learned Lord said: I beg to move.

Amendment moved— Page 25, line 14, leave out subsection (3) and insert the said new subsection.—(The Lord Chancellor.)

THE EARL OF IDDESLEIGH

This gives rise to a possible eventuality. Your Lordships will notice that the supplementary deed is purely voluntary. It is a deed which may be entered into by the trustees and management, or may not be entered into by them. We have to contemplate the possibility that the management will refuse to enter into the supplementary trust deed, and continue as an unauthorised unit trust. In that case the trustee should, I suggest, be given the power either to dismiss the management or resign from the trust; for it is totally contrary to the desires of any of the respectable bodies which act as trustees of unit trusts that they should be put into the position of being trustees for an unauthorised trust. I hope that question may have consideration, and that appropriate measures will be taken to deal with the position.

THE LORD CHANCELLOR

I know some consideration has already been given to this matter; but I am not sure that it has been given exactly to the point to which the noble Earl calls attention. As I do not want to delay your Lordships by going through the clauses of the Bill as amended in order to see what answer can be afforded to the noble Earl, I will promise that the matter shall be considered, and that if any supplementary or other clause is necessary to carry out his idea, or to prevent the injury which he suggests may arise unless his idea is carried out, it shall be inserted.

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved to leave out subsection (4) and insert: (4) The Board of Trade shall, not less often than once a year, cause particulars of every unit trust scheme which is for the time being an authorised unit trust scheme, to be published in such manner as they think proper.

The noble and learned Lord said: I beg to move the Amendment in my name to leave out subsection (4).

Amendment moved— Page 25, line 24, leave out subsection (4) and insert the said new subsection.—(The Lord Chancellor.)

THE EARL OF IDDESLEIGH

I also wish to ask a question on this subsection. It reads "particulars of every unit trust scheme…to be published." What particulars? Would it not be desirable to lay down and specify what particulars shall in fact be published? Then there is no indication in the Amendment as to on whose shoulders is to be placed the onus of publication. I take it that it will not be placed upon the trustee but upon the management.

THE LORD CHANCELLOR

I think the first point is met in this way, that the particulars are to be published in such manner as the Board of Trade may think proper. I do not know that anything else beyond that is necessary or desirable. It may from time to time seem to the Board of Trade that particulars should be publicly specified. The particulars may sometimes be of a wide nature, and then some years afterwards it may be found that it is not so necessary to have such wide particulars, and the Board may desire to cut them down. I do not think they should be cast-iron particulars, because the Board of Trade, if I may say so with great respect to that important Department, have not got much experience at the moment of particulars relating to unit trusts. Then, if I may deal with the other point, I think it is possible that the clause should be amended by laying the obligation for delivery of the particulars on the manager rather than on the trustee, but that again must be considered before the Bill reaches another stage.

On Question, Amendment agreed to.

On Question, whether Clause 16, as amended, shall be agreed to?

LORD MANCROFT

Is the effect of these Amendments sufficiently stringent? I do not think it is. Particularly in the case of the later Amendments or Schedule rearrangements touching Clause 16, and indeed in the case of the whole clause, I do not think the clause is sufficiently strengthened so far as it governs or controls the trustees. There is no doubt about this, that the small investor has for years looked upon the trustee as the real guardian of his savings, and wrongly. The trustees perform quite a different function from that of the management. We are told that we should wait and see how this Bill works. Then perhaps another Bill might be brought in. I think it would have been better to deal with all these questions by a thorough amendment of the Companies Act, 1929. I am not against the unit trust movement with which this clause almost exclusively deals. I believe it performs a useful function. I believe it has protected the small investor and recently has prevented the small investor from losing much money which he otherwise would have lost if he had put his money into some untried companies. But not nearly enough light is let in upon the organisation of these trusts. It is necessary that there should be a very much deeper probing and examination into their control and organisation and methods than is provided by this particular clause, or by the Bill as a whole.

The Anderson Report—a most excellent Report which I am sorry to say the Government has not adopted—pointed out the weak spots of the unit trust movement and they ought to have been dealt with more fully in this clause or by this Bill. The managers of unit trusts ought not to be allowed to appear to be conferring charitable benefactions on the investor. The contrary ought to be made clear. The managers are making a very profitable thing out of the public. They invite the public to hand over their savings, for what purpose? Primarily for the managers' benefit. The public pays heavy fees and in this these trusts ought to be under greater control. The Economist for April 17, 1937, published a unit trust survey, and your Lordships will probably be astonished when I say, reading from that Supplement, that the loading or service charge of some of these trusts begins at 5 per cent., plus brokers' charges, and goes up to 6½, 7½, 8 and 10 per cent. That is to say, that in dealing with these large sums of invested money, amounting to £100,000,000 put into the unit trusts by the public, not less than £5,000,000 or probably £10,000,000 is raked off by the managers and their friends in some form or other. I do not say there should be no rake off, but they should not pose as charitable benefactors of the public. They are getting paid very sweetly without the small investor realising it. Parliament ought to control them through a Bill of this kind. The managers of unit trusts take care to hide what they are doing and making. With great care the managers shield themselves first behind the fact that the trustees are great corporations. In that way they draw away people's attention from seeing that they are making money by diverting public notice to banks and insurance companies who act merely as trustees. They then take care to hide what profits they get as managers and even to hide their names.

I have looked through the list of a large number of advertisements of these unit trusts in the Economist Supplement of April, 1937, and there are only two in which the names of the managers are given. I do not know what the noble and learned Lord the Lord Chancellor will say if I perhaps misquote a legal maxim, but I believe it is said that concealment is the shadow of fraud. I do not for a moment impute fraud. There is an interesting case on page 27 of this Supplement. I will not mention names, but there are thirteen trusts, one of them with six issues. On the board of the companies managing these trusts is a director of one of the great British banks. The principal shareholder in the managing companies is one corporation. One "A" share in this corporation is held by the executor and trustee company of the bank whose director is a director of the managing company. This share entitles the executor and trustee company of the bank to half the profits as long as the company are managers. Here again you have a screen by which the names of the directors of the managing companies are kept in the background and then a further screen behind which the bank's executor and trustee company get half the profits of the managing companies, and one of the trustees of the executor and trustee company is also the bank director.

This screened information behind a second screen is an example of the policy of concealment which the Amendment in my name is designed to correct. I wish to avoid inflicting another speech on your Lordships and so I would like to be permitted to say that I have an Amendment which is designed to carry out the views I have just expressed. There has been a persistent attempt to hide managers' names. Why should they seek to hide their names even if they are making large profits out of the sale to the public of unit trust units? What have they to fear? I therefore propose to insert an extra paragraph in the Schedule, which appears on pages 10 and 11 of the Marshalled List of Amendments, to provide for disclosure of the name, address and description of the manager and, if the manager be a managing company, of the names, addresses and descriptions of the directors of that company. I think that embodies the spirit of the earlier Amendment accepted by the noble and learned Lord Chancellor to Clause 14. By that Amendment we say it is necessary for persons to give their names and addresses. I think that in order to let people know what is going on it should be compulsory when they issue a document to the public to give the names and addresses of the managers. I look upon the unit trust movement as being able to do a great deal of good for the country and for the small investor. But at the same time it is a weapon which in unworthy or greedy hands may result in the public being fleeced severely and without that being easily detected. I hope your Lordships will allow me to make this mild protest so that when later opportunity occurs for revising the whole unit trust system I shall be in a position to say that I was in favour of more stringent regulations even in this Bill.

THE LORD CHANCELLOR

In reference to the noble Lord's protest, I cannot help pointing out that the noble Lord could have moved Amendments to Clause 16 or to the Schedule in order to carry out the protest which he says is so desirable. I wish to say that I never suggested that your Lordships should wait and see how this measure, when it became an Act, would work. What I said was, knowing how difficult it is to follow a number of clauses and Amendments in a Bill like this, that your Lordships might wait until the Report stage, when you will have the whole thing printed and can see exactly what proposal is before you, and can, if you are not satisfied, move Amendments. I did not suggest that the noble Lord was not to move Amendments, but a number of the Amendments which stand in my name and in the name of my noble friend Lord Templemore are Amendments which I venture to think will carry out to a great extent the objects which the noble Lord has at heart. This measure, as your Lordships are well aware, is not devoted simply to the matter of amending unit trusts from what I may call the ground floor. It is a measure for the prevention of fraud in relation to investments, and the Amendment which I am moving I venture to think will go a long way towards preventing frauds in relation to unit trusts, more particularly if the Amendment passes providing that trust deeds must be properly framed. I am sorry if the noble Lord thinks he has not been fairly met in this matter. If he does think that, there is an Amendment which he has put down to the Schedule, which I propose to deal with when we reach that stage.

LORD MANCROFT

I do not blame the noble and learned Lord Chancellor, but I take exception to the Government's weak policy which gave rise to this Bill. We had an immensely capable and interesting Report from the Anderson Committee which dealt meticulously with the points to which public attention should be drawn in the organisation of unit trusts. The Government bring in a Bill which has been watered down.

THE LORD CHANCELLOR

Not watered down, strengthened.

LORD MANCROFT

It was not made very strong. The noble and learned Lord gives us only this clause to deal with a position that needs drastic handling. This Bill, so far as unit trusts are concerned, is a makeshift Bill. After all, primarily the Bill is designed to prevent fraud by share-pushing. But what will it stop? At the most £5,000,000 a year. You can lose £5,000,000 in a year by perfectly honest mishandling of two or three companies, by having honest, incompetent directors over eighty years of age on the boards of two or three old prosperous concerns. You can lose £5,000,000, or £50,000,000, in a year by allowing a number of companies to be floated here in England to unload shares on the public, of the type of the Swedish Match Company. This Bill does not touch such causes of loss. Although I may be out of order in thus discussing the whole Bill, yet I think that Clause 16 and the Schedule, as dealing with unit trusts, do not fully meet the case. The Bill itself disappoints me and makes me the more anxious to protest against Clause 16 because I think that the whole Bill is nothing more than a stopgap to correct various positions which ought to have been dealt with by an overdue and complete amendment of the Companies Act, 1929.

On Question, Clause 16, as amended, a greed to.

LORD RANKEILLOUR moved, after Clause 16, to insert a new clause. The noble Lord said: I think I can really explain this proposed new clause by reading it: . The provisions of Section six of this Act with regard to appeals against refusals or revocations of licences shall apply in like manner to refusals or revocations of orders of exemption. I cannot see why an appeal should not be given against the refusal or revocation of orders of exemption. They may have very serious effects on the bodies concerned, and I suggest that the complete discretion given to the Board of Trade without appeal goes far beyond the necessities of the case. I understand, however, from what the noble and learned Lord said on the Second Reading, that he is willing to accept this Amendment.

Amendment moved—

After Clause 16, insert the following new clause: (". The provisions of Section six of this Act with regard to appeals against refusals or revocations of licences shall apply in like manner to refusals or revocations of orders of exemption.").—(Lord Rankeillour.)

THE LORD CHANCELLOR

I am very sorry to think that some message which I sent to Lord Rankeillour has gone astray. Although it is perfectly true that I expressed the hope that I could meet him on this matter, I afterwards discovered that it was exceedingly difficult to do so.

LORD RANKEILLOUR

May I just say that I had some intimation of the difficulty from an official, but I did not really think at that time that it was a message from the noble and learned Lord himself.

THE LORD CHANCELLOR

I am exceedingly sorry: I must have sent a message which went astray. I hope the noble Lord will accept my apologies. The position is this. This Amendment would have the effect that, if there is a revocation of an exemption by the Board of Trade, there will be an appeal in like manner as if there were a refusal to grant a licence or a revocation of a licence. The difficulty that my advisers feel in reference to that proposal is that they consider that revocation of an exemption is a matter for the discretion of the Board of Trade and that it ought not to be subject to an appeal. They consider that the Board of Trade must make up their minds whether the conditions subject to which the order was made have not been fulfilled, or whether the circumstances relevant to the making of the order have materially changed. They point out that the Board of Trade alone will know the circumstances relevant to the making of the order.

I do not propose to take up much time in arguing this matter, and for this reason: I cannot help thinking that it is a case which will practically never arise—I will not say never, but practically never. It is most unlikely that the Board of Trade will revoke an order declaring a man to be an exempted dealer. This Amendment will affect Clause 15 (3). The position will very seldom arise, because in the first place the Board of Trade will very rarely take away an order declaring a man to be an exempted dealer; in the second place, if the Board of Trade do so they will do it because they will be satisfied that (a) or (b) in Clause 15 (3) have been proved to be grounds on which the order will be made. Therefore in a few cases only will there be any temptation to appeal. Finally, if there were an appeal, I may say from my very large experience of the law that it would very rarely indeed be successful. Accordingly I am strongly of the opinion that we are now considering something which would take place perhaps once in ten years, and that it is not worth while to spend your Lordships' time in considering a matter of so little importance, more particularly when a strong view is taken that the whole matter ought to be left to the discretion of the Board of Trade, who are not to be presumed likely to act without good cause.

LORD RANKEILLOUR

I cannot help thinking that the arguments which the noble and learned Lord has used with regard to this Amendment would have applied equally to the provisions of Clause 6. I am afraid this is another example among many of the powers which are being continually taken by Government Departments to have in their own hands decisions that might, and in same cases ought to be, the object of some kind of judicial inquiry. At this stage I will not pursue the matter, but I may raise it again on the next stage.

Amendment, by leave, withdrawn.

Clause 17 agreed to.

Clause 18:

Offences committed by corporations.

18. Where any offence under this Act committed by a corporation is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other officer of the corporation, he, as well as the corporation, shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

LORD WARDINGTON moved, to leave out "or to be attributable to any neglect on the part of." The noble Lord said: I should like to put in a plea for the official of a company who, by accident and without any fraudulent intent, brings himself under the penalties of this clause as it stands. I feel that, to be fair to him, the Committee should strike out these words. This Amendment is not to save him from the consequences of any fraudulent misdoing, but merely to protect him from being branded as a criminal if, owing to pressure of time or ill health, by a pure slip on his part he does something which could be considered to come under the clause as it is now drafted. I beg to move.

Amendment moved— Page 26, line 5, leave out ("or to be attributable to any neglect on the part of")—(Lord Wardington.)

THE LORD CHANCELLOR

I must confess that I have some sympathy with this Amendment, but I am not sure that I can accept it in its present form, because after all, if we pass the Amendment as proposed by the noble Lord, a director would not be liable for the grossest possible negligence, although he certainly should be. On the other hand, the difficulty is in finding some adjective that can be applied to the word "negligence," and that might lead to great legal difficulty. There are cases where in Acts of Parliament, and certainly in the judgments of the highest tribunals, the adjective used has been the adjective "gross," and the liability to be occasioned in that case by gross negligence on the part of any director, manager, secretary and so on should be appropriate. What I can say is that I will endeavour before the next stage to find some phrase or adjective, which will prevent a director avoiding liability in regard to negligence of such a character that it should be treated as a misdemeanour. It might be done by the insertion of "serious" or some word of that sort, but a director does undertake some responsibility, and if his negligence passes a particular line, and really becomes serious, then I think your Lordships will agree he should be liable, if only as an encouragement to others.

LORD WARDINGTON

I beg to thank the Lord Chancellor. I had in view an official, rather than a director, but in view of what the Lord Chancellor has said I beg leave to withdraw.

Amendment, by leave, withdrawn.

Clause 18 agreed to.

Clauses 19 and 20 agreed to.

Clause 21:

Laying of rules and regulations before Parliament.

21. Any rules or regulations made under this Act by the Board of Trade shall be laid before Parliament as soon as may be after they are made.

THE EARL OF IDDESLEIGH moved to add to the clause: and if either House of Parliament within the next twenty-eight days on which that House has sat after any such rules or regulations have been laid before it, passes a Resolution against the rules or regulations or any part thereof, the rules or regulations shall thenceforth be void, but without prejudice to the validity of anything previously done thereunder or to the making of new rules or regulations.

The noble Earl said: the object of this Amendment is to secure that both Houses of Parliament shall have not only the duty to debate, but also the right to prohibit any of the regulations which the Board of Trade are empowered, in I think sixteen instances, to make. This is an Amendment upon which this House has frequently insisted in the past, and if the Government will admit the principle of the Amendment I am quite willing to leave the wording to them.

Amendment moved— Page 26, line 21, at end, insert the said words.—(The Earl of Iddesleigh.)

LORD TEMPLEMORE

The Government will accept the Amendment in principle, but I have to inform my noble friend that it is not quite in the right form. If he will withdraw it I will give an undertaking that the Government will put down a suitable Amendment on the Report stage.

Amendment, by leave, withdrawn.

Clause 21 agreed to.

Clause 22:

Service of notices.

22. Any notice to be served under this Act on any person may be served by post and a letter containing the notice shall be deemed to be properly addressed if it is addressed to that person at his residence or place of business for the time being in Great Britain.

VISCOUNT BERTIE OF THAME moved, after "his," to insert "last known." The noble Viscount said: These notices have to be served on certain people. They are notices under subsection (4) of Clause 4, which relates to the refusal or revocation of a principal's licence, and under Clauses 15 (3) and 16 (2) which relate to the revocation of an exemption order and an order to approve a trustee of unit trusts. The object of the Amendment is only to deal with shady characters, who might plainly change their private and business addresses without giving notice to the Board of Trade. Honest people would doubtless advise the Board of Trade of a change of address. These notices may be of an urgent character, and I think in many Acts of Parliament the last known address is sufficient for notices to be addressed to,

Amendment moved— Page 26, line 25, after ("his") insert ("last known").—(Viscount Bertie of Thame.)

LORD TEMPLEMORE

The Government agree to this Amendment.

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME

I beg to move.

Amendment moved— Page 26, line 25, after ("or") insert ("last known").—(Viscount Bertie of Thame.)

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME moved a manuscript Amendment, to leave out "for the time being." The noble Viscount said: This is drafting.

Amendment moved— Page 26, line 26, leave out ("for the time being").—(Viscount Bertie of Thame.)

On Question, Amendment agreed to.

Clause 22, as amended, agreed to.

Clauses 23 to 25 agreed to.

Clause 26:

Interpretation.

26.—(1) In this Act, unless the context otherwise requires, the following expressions have the meanings hereby assigned to them respectively, that is to say: approved trustee of unit trusts" means a corporation declared by an order of the Board of Trade for the time being in force to be an approved trustee of unit trusts for the purposes of this Act; shares" means shares in the share capital of a corporation, or stock of a corporation;

THE LORD CHANCELLOR moved, in subsection (1), to leave out the definition of "approved trustee of unit trusts." The noble and learned Lord said: I think the Amendments to Clause 26 are all consequential on those numerous Amendments to Clause 16 which have already occasioned your Lordships some time. The first two are certainly merely consequential. The third is a definition of "court" which is also in substance consequential, and the next is stopping a slight chink in the Bill as drawn, so as to introduce the words "inducing or attempting to induce," as well as the word "inviting." I think your Lordships will agree that these Amendments are in proper form.

THE LORD CHAIRMAN

As these are all consequential Amendments, perhaps I may be allowed to put them en bloc.

Amendments moved—

Page 27, leave out lines 6 to 10.

Page 27, line 12, leave out from ("scheme") to the end of line 15, and insert ("declared by an order of the Board of Trade for the time being in force to be an authorised unit trust scheme for the purposes of this Act;")

Page 27, line 23, at end insert ("'the court' means, in relation to any industrial and provident society, the court having jurisdiction to wind up the society")

Page 27, line 27, leave out ("inviting") and insert ("inducing or attempting to induce")

Page 28, leave out lines 9 to 13.—(The Lord Chancellor.)

On Question, Amendments agreed to.

THE LORD CHANCELLOR moved, in subsection (1), at the end of the definition of "shares," to insert "or shares in such an unincorporated building society as is mentioned in Section seven of the Building Societies Act, 1874." The noble and learned Lord said: This again is not entirely consequential. There are a number of provisions in the Bill with reference to building societies, and as your Lordships know they are building societies which are incorporated under the Building Societies Act, 1874. There are still some societies which were formed before 1874. Some of them are very prosperous and respectable societies. Some of them may be not quite so good. I do not know. But it is desired to make societies that are unincorporated get the benefit as regards the prohibition of improper dealings or actions with regard to their shares, by bringing them within the scope of the Bill.

Amendment moved— Page 29, line 17, at end, insert ("or shares in such an unincorporated building society as is mentioned in Section 7 of the Building Societies Act, 1874").—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD TEMPLEMORE

The next Amendment is drafting.

Amendment moved— Page 29, line 23, leave out ("whom") and insert ("which").—(Lord Templemore.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved to insert after subsection (2): (3) Any reference in this Act to a manager under a unit trust scheme or to a trustee under such a scheme shall be construed as a reference to the person in whom are vested the powers of management relating to property for the time being subject to any trust created in pursuance of the scheme or, as the case may be, to the person in whom such property is vested.

The noble and learned Lord said: This is only a definition of a manager of a unit trust scheme. It is also consequential upon Amendments to Clause 16.

Amendment moved— Page 30, line 6, at end, insert the said new sub-section.—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 26, as amended, agreed to.

Clause 27 [Application to Scotland]:

LORD TEMPLEMORE

These Amendments are purely drafting, in order to cure inaccuracies in the clause.

Amendments moved—

Page 30, line 25, leave out ("four") and insert ("six")

Page 30, line 29, leave out ("subsection (6) of Section eleven") and insert ("subsection (8) of Section thirteen")

Page 30, line 32, leave out ("(9)") and insert ("(11)")

—(Lord Templemore.)

On Question, Amendments agreed to.

Clause 27, as amended, agreed to.

Remaining clause agreed to.

THE LORD CHANCELLOR moved to insert: