§ As amended (in the Standing Committee), again considered.
§ Mr. HowardI beg to move amendment No. 178, in page 143, line 31, at end insert—
§ 'Classes of investors
§
10. The conduct of business rules and other rules and regulations made under Chapter V of Part I of this Act must take proper account of the fact that provisions that arc appropriate for regulating the conduct of business in relation to some classes of investors may not (by reason of their knowledge, experience or otherwise) be appropriate in relation to others.'
§ This amendment has been proposed in order to add a new principle to schedule 6 to the Bill. This would enable the Secretary of State to refuse to transfer rule-making functions to an agency if he did not consider that the rules made by the agency took proper account of the fact that different provisions are appropriate for the regulation of the conduct of business in respect of different classes of investors. Different provisions are needed depending on the characteristics of different investors.
§ This addition to schedule 6 provides a clear signpost to the designated agency to draw up its rules and regulations so as to reflect the differing skills, knowledge, resources and experience of different investors. The rules should, therefore, be flexible in the means by which they ensure adequate investor protection and the orderly conduct of the market. The variable should be not the entitlement to investor protection but the means whereby it is secured.
§ I am well aware of the concern that has been expressed in the City and elsewhere that the weight of regulation may drive business overseas. I do not share that pessimism. Certain basic safeguards, such as honesty and fair dealing, should apply to all investment business and are essential if the United Kingdom is to maintain and, indeed, enhance its position as one of the world's leading financial centres. At the same time, we fully recognise the dangers of overregulation. That is why the regulatory framework encourages practitioner-based regulation through the recognised self-regulating organisations and professional bodies.
§ By virtue of clause 162, the Bill already enables different rules to be made for different cases. The new principle introduced in this amendment requires that the Secretary of State be satisfied that the designated agency has paid proper regard to the different means by which appropriate investor protection can be provided in respect of different categories of investor. For example, some categories of business or professional investor will not need the full panoply of the rules to protect their interests. The House will know that the draft rules which the Securities and Investments Board has been publishing during recent months already distinguish between what are defined as business investors and other investors, a category which will include the less sophisticated, private investor.
§ I welcome that approach. The principle to be incorporated in schedule 6 should, therefore, offer reassurance to those who have been concerned lest this approach might not be followed in future.
§ Mr. GouldWe accept that there are different categories of investors who possibly need different levels or mechanisms to protect their interests.
612 I ask the Minister to bear in mind two matters. First, I hope that the new provision in schedule 6 will not be allowed to operate as some sort of pretext to exempt, for example, the Eurobond market from effective regulation.
Secondly, will the Minister bear in mind that boundaries change between the professional investor and the smaller and less experienced investor, which require a great deal of flexibility in approach? Those boundaries must be watched carefully as the less experienced investor is tempted to move into new areas.
§ Amendment agreed to.