INVESTMENTS AND INVESTMENT BUSINESS (Hansard, 12 June 1986)

§ Mr. Howard
I beg to move amendment No. 2. in page 2, line 3, leave out from 'Schedule' to 'shall' in line 9 and insert 'and is not excluded by Part III of that Schedule. (3) For the purposes of this Act a person carries on investment business in the United Kingdom if he—

(a) carries on investment business from a permanent place of business in the United Kingdom; or

(b) by way of business engages in the United Kingdom in any activity which falls within any paragraph in Part II of that Schedule and is not excluded by Part III or IIIA of that Schedule.
(4) Part I to IIIA of that Schedule'.

§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
With this it will he convenient to take Government amendment No. 19 and the amendments thereto: (a), line 7, at end insert 'or with a person who, by reason of the number of occasions he enters into transactions of the kind in question, the consideration involved in those transactions or the circumstances in which they are entered into, may reasonably be taken to understand the risks involved'. (b),line 10, after 'exempted person', insert `or a person who may reasonably be taken to understand the risks involved'.

(c),line 15, leave out 'authorised person or exempted'.

(d). line 16, leave out 'the authorised'.

(e), line 16, leave out from 'person' to end of line 17.

§ Mr. Howard
When we discussed this subject in Committee some suggestions were made that the territorial scope of clause 1 was in some respects too broad and that there was a risk that if unamended the provisions of the Bill might drive away business from overseas which is very valuable to the balance of payments and which is not done with ordinary investors in this country. I undertook at that stage to consult and to bring forward amendments excluding from the scope of the Bill certain transactions entered into by overseas businesses. The amendments are the fruit of that consultation.
551 The amendments are designed to deal with two types of business. The first, which is covered by paragraph 22A of schedule 1, concerns business done here by an overseas person—that is, a person without a permanent place of investment business in the United Kingdom — with or through a qualified person. By "qualified person", I mean either an authorised person whose ordinary business involves transactions of the kind in question or an exempted person doing business in respect of which he is exempt. When the transaction is done with or through an authorised person, that person will be sufficiently expert to understand the risks involved in dealing with an overseas person who is not subject to the Bill. If he is acting for a client, it will be for the authorised person to look after his client and to have regard to his client's circumstances.
The provision allowing transactions to be effected through an exempted person would also allow overseas persons to use the facilities of a recognised investment exchange without obtaining authorisation.
The second type of business with which I was concerned was the sort of business where the overseas person made no effort to solicit business in the United Kingdom from unauthorised persons. This is the purpose of paragraph 22B. The effect of this paragraph will be to exclude from the definition of investment business certain activities undertaken by an overseas person. The exclusion will apply where the activity is engaged in either on the unsolicited initiative of a person in the United Kingdom or where the overseas person's client or customer is a person on whom he is permitted to cold-call or to whom he is permitted to send advertisements under the regulations to be made under the Bill. It is likely that these regulations will allow cold calling on and the sending of advertisements to professional and business investors and existing clients. I believe that that exclusion will meet the objectives underlying the amendments put forward by my hon. Friend the Member for Croydon, South.
The provisions in the amendment would, I believe, meet most of the concerns which have been expressed about undermining the protection that the Bill will afford to investors. However, I would welcome comments on the extent to which they achieve the desired effect. This is a complex matter on which our deliberations are greatly assisted by the representations that we receive from interested parties. I believe that, overall, our proposals strike about the right balance, but I am prepared to consider further adjustments of the balance if a case can be made for them.