HC Deb 14 February 1939 vol 343 cc1590-4

(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.

(2) Where any sum has been deposited under this Section, then—

  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 super vision of, the court, the amount of the deposit shall be repaid to the corporation;
and the Board of Trade may by regulations determine the circumstances in which, apart from the preceding provisions of this Subsection, a sum deposited under this Section may be withdrawn; but, save as aforesaid, no person shall be entitled to withdraw or transfer any deposit made under this Section.

(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.

(4) Upon any application for a principal's licence the Board of Trade may dispense with the necessity of making a deposit under this section in relation to the application—

  1. (a) if there is given to the Board by a person approved by them an undertaking in the prescribed form that, in consideration of the Board granting such a licence upon that application, the person giving the undertaking will, upon the occurrence of the following event at any time before a further principal's licence is granted to the holder of the licence referred to in the undertaking, that is to say, the holder becoming bankrupt or, in a case where the holder is a corporation, the corporation being ordered to be wound up by, or under the supervision of, the court, pay the sum of five hundred pounds to the trustee in bankruptcy or to the corporation, as the case may be; or
  2. (b) if the Board are satisfied that the applicant has at all times since the be ginning of the year nineteen hundred and thirty-nine been carrying on in Great Britain the business of dealing in securities, and that it would cause him undue hard ship to make a deposit under this section.

(5) In the event in which, by virtue of an undertaking given under the last preceding subsection, any sum becomes payable to a trustee in bankruptcy or to a corporation, the trustee or the corporation, as the case may be, shall have the power and duty to recover that sum from the person by whom it is payable; but if, in a case where any sum is paid in pursuance of such an under taking, it is found upon the administration in bankruptcy or the winding-up that the assets of the bankrupt or the corporation exceed the amount required to meet his or their debts and liabilities (including the costs and expenses of the administration or winding-up), the amount of the excess or the amount of the sum so paid, whichever is the less, shall be repaid by the trustee or corporation to, or to the personal representative of, the person by whom the under taking was given.—[Mr. Johnston.]

Brought up, and read the First time.

4.38 p.m.

Mr. Johnston

I beg to move, "That the Clause be read a Second time."

I hope we shall have better luck with this proposed new Clause than the hon. and learned Gentleman had with his Amendment. This subject was discussed at considerable length upstairs, and I think there was general agreement, not confined to Members of any one party, that something in the nature of the proposals in this Clause ought to be accepted by the Government and inserted in the Bill. Let the House remember what we are doing. For the first time we are giving a certificate, a Government certificate, a national guarantee certificate, which will say that Mr. A, Mr. B. or Mr. C. are reputable persons, that they are legally entitled to buy and sell shares, that their bona fides have been examined by the Board of Trade and that everything known about them is to their credit. Therefore they are licensed to buy and sell shares. When they have obtained their licence they can proceed to act.

What we ask in the new Clause is that persons who get this Board of Trade certificate shall make a deposit to the State during the time that they are engaged in the business, and that they shall have interest paid upon their money. By so doing they will be compelled only to act as representatives of other professions and business are compelled to act. Some organisations, insurance for example, have to give a deposit of £20,000 to the State as security for their good behaviour during the time they are operating. We ask that the deposit should be £500, but we do not ask that the deposit shall apply necessarily to everyone who has been engaged in this business prior to 1st January of this year. There may be any number of persons who have been engaged in this business for many years, and it would be absurd to go to them wholesale at once and say, "We want £500 from you as a guarantee of your good behaviour in the future." We do, however, ask that everybody who comes into the business as from 1st January this year, who comes in with his eyes open and obtains the certificate from the President of the Board of Trade, shall be asked to put down as a security for his good behaviour in this most lucrative and dangerous business, the sum of £500, on which he will be paid interest from the time the Government hold the money. If he should go bankrupt, the £500 would inure to his estate and would be a drop in the ocean which could be distributed among his unfortunate creditors.

I do not say that this would make a very material difference in a large number of cases, but it is something that the State in giving this O.K.—if I may use an Americanism—should get this deposit of £500 as a guarantee of good behaviour. I cannot see any reputable stockbroker disagreeing with this proposal. I know of some who whole-heartedly agree with it. We have been pleased to see that some writers in the financial Press have supported the idea and have placed the deposit which ought to be asked by the President of the Board of Trade at not less a sum than £2,000. We have not gone as far as that. We have been more modest and moderate and have asked for £500, but we ask the President of the Board of Trade to take power to impose the £500 deposit even in the case of persons who were in business before 1st January, 1939, if the Board of Trade deems it to be advisable so to do. There are some persons in this business whom we on these benches would like to see pay a very much larger deposit than £500. I think I have made clear to hon. Members what we are trying to achieve, and as there was a consensus of opinion in the Committee that this would be a very good Clause to add to the Bill, I hope the House will accept the new Clause.

4.46 p.m.

Mr. Graham White

I wish to support the proposed Clause. It is undeniable that the principle of the Clause is sound, and proof of that is to be obtained from the fact that it has been the practice of Stock Exchanges for a very long time to exact a deposit or security from an applicant for membership as a condition of giving him permission to transact business. I should support the Clause all the more heartily if the right hon. Gentleman the Member for West Stirling (Mr. Johnston) had been a little bit bolder and had fixed the deposit at a higher figure than £500, because in most of the cases which have led to serious losses on the part of the public, £500 would have been no deterrent to the rogues who defrauded the public. It has been suggested that the provision of £500 might cause hardship to certain people who are in business at the present time, but I find it difficult to believe that there would be many, if any, cases of hardship. I think that most of the people concerned would be able to find, if required to do so, a sum of £500 as a security for their bona fides. In any case, as the Clause is not to apply to those who were in business prior to the end of last year, I think that difficulty has been met.

4.48 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. Cross)

In the Committee upstairs, the right hon. Gentleman the Member for West Stirling (Mr. Johnston) pressed his ideas on this subject and his desire that a deposit or guarantee of £500 should be required in connection with applications for a principal's licence. The matter was discussed at some length in the Committee, and my right hon. Friend and the Committee were sympathetic. Indeed, the only point that was raised was the possibility of such a provision causing hardship to existing businesses, and that point is met in the proposed Clause by giving the Board of Trade discretion to waive the deposit altogether in cases where the making of it would involve undue hardship. Although I do not wish to enter into a controversy with the hon. Member for East Birkenhead (Mr. White), who thinks that £500 is an inadequate figure and that it will be no deterrent to many of the rogues, I would remind him that it was because of the fear that it would be a deterrent to honest, small men if the figure were larger, that it was generally agreed that it would be best to leave it at £500. I hope the House will accept the new Clause.

Clause added to the Bill.