§ Order of the Day for receiving the Report of Amendments read.
§ LORD TEMPLEMOREMy Lords, I beg to move that this Report be now received.
§ Moved, That the Report of Amendments be now received.—(Lord Templemore.)
§ LORD MANCROFTMy Lords, I ask permission to make a correction, in order that there may be no chance of my doing an injustice to anyone connected with the managers, or trustees, of any unit trust. 428 I am informed by a correspondent that, when I was speaking at the Committee stage of Clause 16 of this Bill, and after I had quoted page 27 of the Unit Trust Survey of the Economist of April, 1937, I ought also to have quoted the following words, which appear earlier, on page 17 of that same survey:
Sub-unit holders participate in profits, after payment of manager's expenses. Instalment-purchase facilities available.May I ask your Lordships to allow me now to add those words as applicable to my remarks of March 14; and to say that I certainly did not intend to infer that there was any impropriety on the part of my correspondent or of the trustee company in which he is interested?
§ On Question, Motion agreed to, and Amendments reported accordingly.
§ 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,—
(b) issuing 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 contains the matter which, by virtue of subsection (I) of either of the said sections, it would have to contain if it were a prospectus to which that subsection applies,
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 had given Notice of Amendments in subsection (I)—namely, to leave out "and" at the end of paragraph (a), and to leave out paragraph (b) and insert:
(b) issuing any prospectus to which Section thirty-five or Section three hundred and fifty-four of the Companies Act, 1929, applies,
(c) issuing any document relating to securities of a corporation incorporated in Great Britain which is not a registered company, being a document which—
(d) issuing any form of application for shares in, or debentures of, a corporation together with—
§ The noble Lord said: My Lords, the first two Amendments are in the main drafting Amendments. I can explain them if your Lordships wish, but they are drafting, in order to make the Bill clearer. I beg to move the first two Amendments.
§ Amendments moved—
§ Page 3, line 11, leave out ("and").
§ Page 3, line 12, leave out paragraph (b) and insert the said new paragraphs.—(Lord Templemore.)
§ On Question, Amendments agreed to.
§ Clause 8 [Information to be furnished to Board of Trade by holders of licences]:
§ LORD TEMPLEMOREMy Lords, the Amendments to this clause are drafting and I beg to move.
§ Amendments moved—
§ Page 10, line 12, at end insert ("in writing to the Board of Trade")
§ Page 10, line 13, leave out ("nationality")
§ Page 10, leave out from ("person") to end of line 14 and insert ("and also his nationality or the fact that he has no nationality").—(Lord Templemore.)
§ On question, Amendments agreed to.
§ Clause 9 [Publication of names of holders of principals' licences]:
§ LORD TEMPLEMOREMy Lords, these two Amendments are also virtually drafting Amendments. As some holders of licences may be corporations, it would seem desirable, in order to bring them so far as possible into line with individuals, to require them to state the country under the law of which they are incorporated. I beg to move.
§ Amendments moved—
§ Page 10, line 25, leave out ("nationalities")
§ Page 10, line 26, after ("force") insert ("and also— 430
- (a) in relation to any holder of a principal's licence who is not a corporation, his nationality or the fact that he has no nationality, or
- (b) in relation to any holder of a principal's licence who is a corporation, the country under the law of which the corporation is incorporated").—(Lord Templemore.)
§ On Question, Amendments agreed to.
§ Clause 13:
§ Restriction on distribution of circulars relating to investments.
§ (2) The preceding subsection shall not apply—
- (a) in relation to any document which—
- (i) 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
- (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, or
- (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.
§ THE LORD CHANCELLOR (LORD MAUGHAM) moved, in subsection (2), to leave out paragraph (a) and insert:
- "(a) in relation to any distribution of a prospectus to which Section thirty-five or Section three hundred and fifty-four of the Companies Act, 1929, applies, or in relation to any distribution of a document relating to securities of a corporation incorporated in Great Britain which is not a registered company, being a document which—
- (i) would if the corporation were a registered company, be a prospectus to which the said Section thirty-five applies, and
- (ii) contains all the matters which, by virtue of the said Section three hundred and fifty-four, it would have to contain if the corporation were a company incorporated outside Great Britain and the document were a prospectus issued by that company, or
- (b) in relation to any issue of a form of application for shares in, or debentures of, a corporation, together with—
- (i) a prospectus which complies with the requirements of Section thirty-five or Part XII of the Companies Act, 1929, or
- (ii) in the case of a corporation incorporated in Great Britain which is not a registered company, a document containing all the matters mentioned in sub-paragraph (ii) of paragraph (a) of this subsection,
431 or in connection with a bona-fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures, or."
§ The noble and learned Lord said: My Lords, these Amendments to Clause 13 are in fact nothing but drafting Amendments, but it was thought—one of your Lordships suggested this to the House—that the existing Clause 13 was not in some respects sufficient to prevent a perfectly honest transaction from being subject to the restrictions imposed by the clause. Accordingly, it has been thought better to express in substantial detail, what are the transactions which are prohibited and those which are not prohibited by Clause 13. There is one matter which is not completely permitted under subsection (2) and that is the publication or the distribution of documents referring to underwriting, and we accordingly refer to that at the end of the first Amendment. The new clause, as printed, does permit that to be done in the ordinary way. It is simply a matter of putting the clause in a more intelligible form. I beg to move.
§
Amendment moved—
Page 17, line 22, leave out paragraph (a) and insert the said new paragraphs (a) and (b).—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ THE LORD CHANCELLORThe next Amendment is drafting.
§
Amendment moved—
Page 17, line 37, leave out ("document the issue or publication of") and insert ("any distribution of documents").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§ LORD TEMPLEMOREMy Lords, the two next Amendments are purely drafting.
§ Amendments moved—
§ Page 17, line 38, after ("by") insert ("or under")
§ Page 17, line 39, after ("by") insert ("or under").—(Lord Templemore.)
§ On Question, Amendments agreed to.
§ LORD TEMPLEMORE moved, in subsection (2), at the end of paragraph (b), to insert "and shall not apply in relation to any distribution of documents which is permitted by the Board of Trade." The noble Lord said: My Lords, Lord Wardington, in the debate 432 on the Committee stage of the Bill, pointed out that there was a risk that exemptions from the circularisation provisions, which are contained in subsections (2) and (3) of Clause 13, might be found not comprehensive enough to secure that legitimate business would not be hampered in the future. The object of this Amendment is to meet the possible difficulty which he mentioned, by providing that the Board of Trade may, in their discretion, free from the circularisation restrictions documents not at present excluded which it is in the interest of legitimate business to exclude.
§
Amendment moved—
Page 17, line 41, at end insert the said words.—(Lord Templemore.)
§ On Question, Amendment 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 showing with respect to each person who, at the date on which the list is furnished, is a member of the stock exchange or of the association, as the case may be, his name and business address and the style under which he carries on business; 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), after "business," where that word occurs for the second time, to insert "and, if the member is a corporation, the name of each of the directors thereof." The noble Lord said: My Lords, as members of a recognised association may be limited companies and there is a possibility of rules of stock exchanges being altered so as to permit unlimited companies to be members, it is desirable that the particulars to be furnished by such stock exchanges and associations should include names of directors. The names of the directors would be included in the lists which are to be published by the Board of Trade.
§
Amendment moved—
Page 21, line 28, after ("business") insert ("and, if the member is a corporation, the
433
name of each of the directors thereof").(Lord Templemore.)
§ On Question, Amendment agreed to.
§ Clause 16:
§ Trustees of unit trusts.
§
16.—(I) The Board of Trade may by order declare to be an authorised unit trust scheme for the purposes of this Act any unit trust scheme in relation to which the Board are satisfied that the following conditions are fulfilled, that is to say:—
(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
§ THE LORD CHANCELLORThe next is a purely drafting Amendment.
§
Amendment moved—
Page 24, line 24, leave out from ("that") to ("a") in line 27, and insert ("any trust created in pursuance of the scheme is expressed in").—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§
THE LORD CHANCELLOR moved to add to subsection (1):
Provided that, if with respect: to any trust the Board of Trade are satisfied that, by reason of the special circumstances of i he trust, the fulfilment in relation thereto of the condition specified in paragraph (b) of this subsection is impracticable, the Board may dispense with the fulfilment of that condition in relation to that trust so far as it appears to them that they can properly do so without prejudicing the interests of the beneficiaries.
§ The noble and learned Lord said: My Lords, in certain unit trust schemes, the provisions of the trust deed allow the trustee to register the underlying securities of the trust in the names of companies which are wholly owned by the trustee and are under his control. This is done for convenience of working. Your Lordships will be aware, that there are banks, for instance, which hold their trust securities in the name of some company which is a separate company, but a holding company wholly controlled by the banks in question. I think the majority of the great banks follow that system. If that is the case, and there is a trustee who happens to be in that position, the provisions of the Bill as it stands could not very easily be carried out; and accordingly it is thought proper to insert a provision under which, if the Board of Trade are satisfied that 434 "by reason of the special circumstances of the trust, the fulfilment in relation thereto of the condition specified in paragraph (b) of this subsection is impracticable, the Board may dispense with the fulfilment of that condition in relation to that trust so far as it appears to them that they can properly do so without prejudicing the interests of the beneficiaries."
§
Amendment moved—
Page 25, line 3, at end insert the said proviso.—(The Lord Chancellor.)
§ On Question, Amendment agreed to.
§
LORD RANKEILLOUR moved, after Clause 16, to insert the following new clause:
17. The provisions of Section six of this Act with regard to appeals against refusal or revocation of licences shall apply in like manner to revocations of orders of exemption.
The noble Lord said: My Lords, this is not the same Amendment as I moved and withdrew in Committee. On that occasion I moved that there should be an appeal against both refusals—namely, refusals of orders of exemption and of revocation of them, and in exactly the same way as is provided in the Bill with regard to licences. It has, however, been put to me that the positions are different with regard to licences and orders of exemption. Anyone who complies with what will be the statutory provisions of the earlier clauses of this Bill should obtain a licence as of right, and therefore if it is refused him on what he thinks insufficient ground, it is natural that there should be an appeal. But in the case of a refusal of an order of exemption, the matter is entirely, and is intended to be, in the discretion of the Board of Trade, and the refusal of an order of exemption would not prejudice the person or body applying.
§ That I quite admit as to the refusal in the first instance. But it is quite another matter when you come to the revocation. If a person or body has been doing business honestly under an order of exemption and it is withdrawn from him, his business must necessarily suffer. It is no use telling him he can go back and apply for a licence. The effect will be in practice that some delay will ensue and presumably he may not get his licence for some time. There may be a considerable interval between revocation of the order and the time when he can apply, and perhaps appeal, and finally get his licence. So I do submit that there may in certain cases, though perhaps not in 435 many, be a possibility of injustice which the provision of an appeal would remove.
§
Amendment moved—
Page 25, line 44, at end insert the said new clause.—(Lord Rankeillour.)
§ THE LORD CHANCELLORMy Lords, on behalf of the Government I will say at once I am unable to agree to this provision. I hope the noble Lord will tell me if I am right in thinking that the Amendment relates solely to cases under Clause 15, where the Board of Trade may by order declare any person to be an exempted dealer for the purposes of the Act, and where, under subsection (3) of that clause, the Board of Trade, with respect to any exempted dealer, consider that the order declaring him to be an exempted dealer ought to be revoked on one of two grounds. Is it to that that the Amendment is directed?
§ LORD RANKEILLOURIt would also apply, if I may say so, to Clause 16 (2).
§ THE LORD CHANCELLORMay I suggest to the noble Lord that it does not really apply to that, certainly not in terms, because there is no question of an exempted dealer. The present Amendment only applies as regards revocations of orders of exemption. The only revocation I am aware of in this Bill is under Clause 15 (1). At any rate, if the noble Lord will allow me, I am only going to deal with Clause 15 (1), and if he desires to suggest an Amendment to Clause 16 I am inclined to suggest to him it would be right to do that at the last stage of this Bill. Frankly I do not think the present Amendment covers Clause 16 at all. So far as concerns Clause 15, I recognise that there is some weight in what the noble Lord said, but I want your Lordships to understand the grounds on which I am unable to accept the Amendment.
Under Clause 15 the Board of Trade are given a discretion, which they need not exercise, to declare persons to be exempted dealers for the purposes of the Bill subject to certain conditions being fulfilled so long as the order is in force. Then it defines the sort of person to whom the order of exemption may be made to apply, and your Lordships will of course understand that if a person gets an order of exemption he then is free to deal 436 in securities to the extent of the order and is not bound by any other provision of the Bill unless he invites the public fraudulently to invest money, in which case he is dealt with by Clause 12. This is to be noted, because unless the conditions exist the Board of Trade cannot give exemption. The main business of the person must consist of either carrying on some business other than the business of dealing in securities—the most obvious example of that is a bank—or, secondly, dealing in securities in one or more of the ways mentioned in the next following paragraph. The next following paragraph is paragraph (b) which says:
The greater part of any business of dealing in securities done by him in Great Britain otherwise than in one of the ways referred to in sub-paragraph (ii) of paragraph (a) of this subsection must be effected with, or through the agency of …people of a particular class, such as a member of a recognised stock exchange, a recognised association of dealers in securities, the Bank of England, a statutory corporation, a municipal corporation, an exempted dealer, a person acting in the capacity of manager or trustee under an authorised unit trust scheme, a person acting on behalf of these persons, or a person who is the holder of a licence under the Act.These persons may be exempted, as I have said, at the discretion of the Board of Trade. Supposing it is found that one of two things happen. Either these conditions, which I agree are quite stringent, subject to which the order has been made, have not been fulfilled or—this is another ground—the circumstances relevant to the making of the order have materially changed since the order was made—in either of these two cases, and only in one of these two cases, the Board of Trade have power to revoke the order of exemption. The power of the Board of Trade is limited. As a matter of law, supposing the Board of Trade have acted beyond their power, and one or other of these grounds is not capable of being proved, in that case the person whose order of exemption is being cancelled is entitled to a certiorari: to apply to the Court and to make good the position, if he can, that the Board of Trade have acted beyond their powers under subsection (3). Supposing he cannot make good that allegation, and therefore the Board have acted within their power, it then seems to His Majesty's Government that there 437 should be no appeal. The facts on which the Board of Trade are empowered to act are facts of which they, and they alone, can be the proper judges, and it would lead to very great difficulty if, in a case where the original order of exemption is made at the pure discretion of the Board of Trade, it is possible to say that they can only exercise their discretion to revoke that order subject to an appeal.
Moreover, this is a matter which occurs to those in charge of this measure as one of considerable importance. If there is to be an appeal against the revocation of such an order of exemption, it would be necessary to describe the more detailed requirements in regard to the original ground of the order of exemption in order to provide the criteria according to which the Court or tribunal charged with the hearing of the appeal would be able to review the decision of the Board of Trade. In other words, it would be necessary to frame rules of conduct to be observed by exempted dealers, and such rules of conduct would not necessarily be those applying to licensed dealers in securities. It is to be anticipated that if any such rules or criteria were laid down, there would be very great objections to that being done in the City on the ground that it might very seriously and unnecessarily impede the carrying on of the business of the City. Moreover, it would cut across the principle of the Bill, which is to curb undesirable activities without interfering in any way with legitimate activities. In these circumstances I feel bound on behalf of His Majesty's Government to oppose this Amendment.
§ LORD RANKEILLOURMy Lords, I will not press this matter further. I quite admit that the wording of this Amendment would require some alteration if it were to cover the declared schemes under Clause 16 (2). With regard to the rest, I am free to confess that I should like to see, in print, what the noble and learned Lord has said before I attempt to answer it. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 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 438 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.
§ THE LORD CHANCELLOR moved to leave out "or to be attributable to any neglect on the part of." The noble and learned Lord said: My Lords, this Amendment looks a very simple one, but it is one which, I confess, has given me cause for some consideration. It was pointed out, when this matter was before your Lordships at an earlier stage, that the words "or to be attributable to any neglect on the part of any director, manager, secretary or other officers of the corporation" were likely to involve hardship to a director or other officer who, for some neglect which might be due to an accident, or slip—a thing which might happen to any of us—might have imposed upon him the penalties of the clause. I promised to consider it. I confess to your Lordships that I took some advice in the matter, and I propose an Amendment under which an offence can only be committed if the neglect is gross. I had proposed to insert a definition of "gross neglect" in its proper place, but on further consideration it seemed to me that this passage with reference to neglect is only of real importance having regard to the words "with the consent or connivance of … any director, manager, secretary, or other officers of the corporation" mentioned in the clause. Accordingly, I am meeting the proposal put forward by the noble Lord, Lord Wardington, by striking out the words "or to be attributable to any neglect on the part of." I think that meets the criticism which was made during the former stage of the Bill. I beg to move.
§
Amendment moved—
Page 26, line 16, leave out from ("of") to ("any") in line 16.—(The Lord Chancellor.)
LORD STRABOLGIMy Lords, I do not know if any other noble Lord proposes to offer any remarks on this Amendment, but I rise to differ respectfully from the noble and learned Lord Chancellor. I do not see why in these days we should lessen in any respect the penalties for this sort of offence, and if directors, who draw their fees as members of boards or officers of companies who are remunerated for their services, neglect 439 their duties, why should they escape a penalty? Your Lordships will have observed the last words of Clause 18, "punished accordingly." If it is obviously a case of inadvertence—a man may have been in ill health or something of that sort—the Court would take that into consideration, and he would be "punished accordingly." I think your Lordships should hesitate before approving of anything which will remove or weaken the responsibilities of officers and directors of corporations.
§ THE LORD CHANCELLORI have heard this point argued very often indeed both ways. It is by no means a new proposition that the noble Lord puts before your Lordships, but I am not convinced at present that he really does appreciate how far this goes if the words that I propose to omit are left in the Bill. I think your Lordships will fully agree that a director who has made some slight slip in, we will say, furnishing information for any purposes of the Bill, or rules or regulations under it, or has been guilty of some other offence which he did not in the least intend to commit, should not be liable to the same sort of penalty as persons who under Clause 17 make statements which are false to their knowledge in material particulars. There are other offences which might be committed by officials of corporations which are not within Clause 17, and of which offences the directors, managers, secretaries or other officers of the corporations might be thought to have connivance. If they did actually connive in those statements they would become liable under this clause, but if, as a matter of fact, it is only a question of inadvertent neglect or a slip which is liable to happen to anybody, I think the noble Lord, Lord Wardington, is right in saying the clause ought to be altered so as not to make such persons liable to punishment. They should not be put in the same category as persons who have acted in a wilful or reckless manner and not as a result of mere inadvertence.
At the same time it must be remembered that the directors of such corporations as we are dealing with here should be persons of the greatest integrity and position, and your Lordships will well understand that to be prosecuted for an offence under this Bill when it becomes 440 an Act is a proceeding to which no really responsible person in the City of London would like to be exposed. It would be a very unpleasant thing, even though the magistrate would probably in a case of pure inadvertence let him off very lightly. I think your Lordships were rather impressed by the argument put forward by the noble Lord, Lord Wardington, and for my part I think it would be advisable to make the alteration which I suggest in this Amendment.
LORD STRABOLGIMy Lords, on a point of drafting, my noble friend Lord Addison points out that it is not clear, which "any" in line 16 is meant. I think it is the second one, but I think it should be made clear.
§ THE LORD CHANCELLORMy Lords, the noble Lord is quite right. I should have mentioned, if I did not do so in reading the Amendment, that it is the second "any" which is meant.
§ On Question, Amendment 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.
§
LORD TEMPLEMORE moved to insert:
(2) If either House of Parliament, within the period of forty days beginning with the day on which any such rules or regulations as aforesaid have been laid before that House, resolves that the rules or regulations shall cease to have effect, the rules or regulations shall thereupon become void, without prejudice, however, to the validity of anything previously done thereunder or to the making of new rules or regulations.
In reckoning any such period of forty days as aforesaid no account shall be taken of any time during which Parliament is dissolved or prorogued, or during which both Houses are adjourned for more than four days.
The noble Lord said: My Lords, in Committee, my noble friend the Earl of Iddesleigh moved an Amendment to Clause 21 to provide for an adverse Resolution by either House of Parliament against rules or regulations which were laid before Parliament and his Amendment was accepted in principle, subject to drafting in the appropriate form. This Amendment implements the promise that was then given. I beg to move.
§
Amendment moved—
Page 26, line 31, at end insert the said new subsection.—(Lord Templemore.)
§ On Question, Amendment agreed to.
§ Clause 26 [Interpretation]:
§ LORD TEMPLEMOREMy Lords, the first two Amendments provide definitions of "prospectus" and "registered company" and are consequential on the Amendments to Clause 2, page 3, line 12, and Clause 13, page 17, line 22. I beg to move.
§ Amendments moved—
§
Page 28, line 30, at end insert—
("'prospectus' has the same meaning as in the Companies Act, 1929;"]
line 40, at end insert—
("'registered company' means a company formed and registered under the Companies Act, 1929, the Companies (Consolidation) Act, 1908, the Companies Act, 1892, or the Joint Stock Companies Acts as defined by Section three hundred and eighty of the Companies Act, 1929, but does not include a company registered under any of the said enactments in Northern Ireland or in Eire;").—(Lord Temple-more.)
§ On Question, Amendments agreed to.
§ LORD TEMPLEMOREMy Lords, the next two Amendments are drafting Amendments. I beg to move.
§ Amendments moved—
§ Page 30, line 25, after ("is") insert ("or may be")
§ Page 30, after ("vested") insert ("in accordance with the terms of the trust").—(Lord Temple-more.)
§ On Question, Amendments agreed to.
§ Schedule: