§ Mr. HowardI beg to move, That this House doth agree with the Lords in the said amendment.
Mr. Deputy SpeakerWith this it will be convenient to take the following Lords amendments: No. 18, leave out clause 16.
No. 19, after clause 16, insert the following new Clause—
§ "PERSONS AUTHORISED BY RECOGNISED PROFESSIONAL BODIES
§
Authorisation by certification by recognised professional body.
.— (1) A person holding a certificate issued for the purposes of this Part of this Act by a recognised professional body is an authorised person.
(2) Such a certificate may be issued by a recognised professional body to an individual, a body corporate, a partnership or an unincorporated association.
(3) A certificate issued to a partnership—
No. 20, after clause 16, insert the following new clause—
and, in relation to a certificate issued to a partnership constituted under the law of England and Wales or Northern Ireland or the law of any other country or territory under which a partnership is not a legal person, references in this Act to the person who holds the certificate or is certified shall be construed as references to the persons or person for the time being authorised by the certificate to carry on investment business as mentioned in paragraph (b) above.
§
"Professional bodies—
.— (1) In this Act a "professional body" means a body which regulates the practice of a profession and references to the practice of a profession do not include references to carrying on a business consisting wholly or mainly of investment business.
(2) In this Act references to the members of a professional body are references to individuals who, whether or not members of the body, are entitled to practise the profession in question and, in practising it, are subject to the rules of that body.
(3) In this Act references to the rules of a professional body are references to the rules (whether or not laid down by the body itself) which the body has power to enforce in relation to the practice of the profession in question and the carrying on of investment business by persons practising that profession or which relate to the grant, suspension or withdrawal of certificates under section (Authorisation by certification by recognised professional body) above, the admission and expulsion of members or otherwise to the constitution of the body.
(4) In this Act references to guidance issued by a professional body are references to guidance issued or any recommendation made by it to all or any class of its members or persons seeking to become members, or to persons or any class of persons who are or are seeking to be certified by the body, and which would, if it were a rule, fall within subsection (3) above.
No. 21, in clause 18, page 12, line 39, leave out from "that" to end of line 18 on page 13 and insert
the requirements of subsection (2A) below and of Schedule (Requirements for recognition of professional body) to this Act are satisfied as respects that body.
(2A) The body must have rules which impose acceptable limits on the kinds of investment business which may be carried on by persons certified by it and the circumstances in which they may carry on such business and which preclude a person certified by that body from carrying on any investment business outside those limits unless he is an authorised person otherwise than by virtue of the certification or an exempted person in respect of that business.
No. 22, in clause 19, page 13, line 27, leave out "any of the requirements of subsection (2) of that section are" and insert
section 18(2A) above or any requirement of Schedule (Requirements for recognition of professional body) to this Act.
No. 23, after clause 19, insert the following new clause—
§
"Compliance orders—
—(1) If at any time it appears to the Secretary of State—
§
No. 24, in clause 20, page 13, line 36, leave out subsections (1) to (3) and insert—
(1) The Secretary of State may make regulations requiring a recognised professional body to give him forthwith notice of the occurrence of such events relating to the body, its members or persons certified by it as are specified in the regulations and such information in respect of those events as is so specified.
(2) The Secretary of State may make regulations requiring a recognised professional body to furnish him at such times or in respect of such periods as are specified in the regulations with such information relating to the body, its members and persons certified by it as is so specified.
(3) The notices and information required to be given or furnished under the foregoing provisions of this section shall be such as the Secretary of State may reasonably require for the exercise of his functions under this Act.
(3A) Regulations under the foregoing provisions of this section may require information to be given in a specified form and to be verified in a specified manner.
(3B) Any notice or information required to be given or furnished under the foregoing provisions of this section shall be given in writing or in such other manner as the Secretary of State may approve.
§ No. 25, in page 14, line 14, after "but" insert "(a)".
§
No. 26, in page 14, line 18, at end insert
; and
(b) notice need not be given in respect of any rule or guidance, or rules or guidance of any description, in the case of which the Secretary of State has waived compliance with this subsection by notice in writing to the body concerned;
and any such waiver may be varied or revoked by a further notice in writing.".
§ No. 27, in page 14, line 19, after "of" insert ", or of regulations under,"
§ No. 60, in clause 45, page 30, line 45, after "or" insert "persons certified by a".
§ No. 67, in clause 48, page 33, line 36, after "or" insert "a person certified by a".
§ No. 68, in clause 49, page 34, line 26, after "or" insert "a person certified by a".
§ No. 72, in clause 50, page 36, line 3, after "or" insert "a person certified by a".
§
No. 73, in page 36, line 16, leave out from third "of' to "to" in line 18 and insert
a recognised self-regulating organisation or a person certified by a recognised professional body".
§ No. 78, in clause 51, page 38, line 2, after "or" insert "a person certified by a".
§ No. 106, in clause 57, page 45, line 20, after "or" insert "a person certified by a".
§
No. 107, in page 45, line 24, leave out
a member of such an organisation or body
§
and insert
such a member or so certified".
§ No. 116, in clause 59, page 46, line 29, after "or" insert "a person certified by a".
508§ No. 129, in clause 66, page 49, line 6, after "substitution" insert "(a)".
§ No. 130, in page 49, line 7, leave out "or recognized professional body".
§
No. 131, in page 49, line 10, at end insert
; and
(b) for the reference to the rules of a recognised professional body of a reference to any prohibition or requirement imposed in the exercise of powers for such purposes by that body or by any other body or person having functions in respect of the enforcement of the recognised professional body's rules relating to the carrying on of investment business".
§ No. 166, in clause 82, page 63, line 10, after "or" insert "certification by a ".
§ No. 170, in clause 89, page 68, line 18, leave out "other than section 15".
§ No. 171, in page 68, line 26, leave out paragraph (f)
§
No. 172, in page 68, line 35, leave out from first
organisation" to end of line 37 and insert
or certification by a recognised professional body, the name and address of the organisation or body;".
§ No. 173, in page 69, line 5, leave out "15 or".
§ No. 175, in page 69, line 40, at end insert "or".
§ No. 176, in page 69, line 43, leave out from "effect" to end of line on page 70.
§
No.177, in clause 92, page 71, line 28, after "or" insert
a person certified by a".
§
No. 185, in clause 96, page 76, line 10, after "1" insert
and paragraphs 4, 4A and 7E of Schedule 13".
§
No. 304, in clause 141, page 110, line 4, after "or" insert
certification by a".
§
No. 317, in clause 148, page 115, line 40, after "or" insert
certification by a".
§
No. 320, in page 116, line 20, after "or" insert
certification by a".
§
No. 321, in page 116, line 29, after first "or" insert
certification by a".
§
No. 336, in clause 153, page 123, line 40 after "or" insert
certification by a".
§
No. 338, in clause 154, page 125, line 36, at end insert
certification by a".
§
No. 339, in page 126, line 8, after "or" insert
certification by a".
§
No. 344, in page 127, line 8, after "Schedule 2" insert
paragraph 4(6) of Schedule (Requirements for recognition of professional body)".
§
No. 380, in clause 171, page 140, line 4, after "or" insert
a person certified by a".
§
No. 383, in clause 173, page 141, line 5, at end insert—
"certified" and "certification" mean certified or certification by a recognised professional body for the purposes of Part I of this Act;".
§
No. 384, in page 141, line 29, leave out "16" and insert
Professional bodies".
§
No. 386, in page 141, line 38, leave out "16" and insert
Professional bodies".
§
No. 388, in page 143, line 12, leave out "16" and insert
Professional bodies".
§ No. 433, after schedule 2, insert the following new Schedule — Requirements for recognition of professional body—
§
"Statutory status
1. The body must:—
§
Certification
2. — (1) The body must have rules, practices and arrangements for securing that no person can be certified by the body for the purposes of Part I of this Act unless the following conditions are satisfied.
(2) The certified person must be either—
(3) Where the certified person is an individual his main business must be the practice of the profession regulated by the certifying body and he must be practising that profession otherwise than in partnership; and where the certified person is not an individual that person's main business must be the practice of the profession or professions regulated by the recognised professional body or bodies of which the individual or individuals mentioned in sub-paragraph (2)(b) above are members.
(4) In the application of sub-paragraphs (2) and (3) above to a certificate which is to be or has been issued to a partnership constituted under the law of England and Wales or Northern Ireland or the law of any other country or territory under which a partnership is not a legal person, references to the certified person shall be construed as references to the partnership.
§
Safeguards for investors
3. — (1) The body must have rules regulating the carrying on of investment business by persons certified by it; and those rules must in respect of investment business of any kind regulated by them afford to investors protection at least equivalent to that afforded in respect of investment business of that kind by the rules and regulations for the time being in force under Chapter V of Part I of this Act.
(2) The rules under that Chapter to be taken into account for the purposes of this paragraph include the rules made under section (Financial resources rules) and under sections 49 and (Compensation fund) so far as not themselves applying to persons certified by the body.
§
Monitoring and enforcement
4.—(1) The body must have adequate arrangements and resources for the effective monitoring of the continued compliance by persons certified by it with the conditions mentioned in paragraph 2 above and rules, practices and arrangements for the withdrawal or suspension of certification (Subject to appropriate transitional provisions) in the event of any of those conditions ceasing to be satisfied.
(2) The body must have adequate arrangements and resources for the effective monitoring and enforcement of compliance by persons certified by it with the rules of the body relating to the carrying on of investment business and with any rules or regulations to which those persons are subject under Chapter V of Part I of this Act in respect of business of a kind regulated by the body.
(3) The arrangements for enforcement must include provision for the withdrawal or suspension of certification and may include provision or disciplining members of the body who manage or control a certified person.
(4) The arrangements for enforcement may make provision for the whole or part of that function to be performed by and to be the responsibility of a body or person independent of the professional body.
(5) The arrangements for enforcement must be such as to secure a proper balance between the interests of persons certified by the body and the interests of the public; and the arrangements shall not be regarded as satisfying that requirement unless the persons responsible for enforcement include a sufficient number of persons who are independent of the body and its members and of persons certified by it.
510
(6) The arrangements for monitoring may make provision for that function to be performed on behalf of the body (and without affecting its responsibility) by any other body or person who is able and willing to perform it.
§
Investigation of complaints
5.—(1) The body must have effective arrangements for the investigation of complaints relating to—
(2) Paragraph 4(4) above applies also to arrangements made pursuant to this paragraph.
§
Promotion and maintenance of standards
6. The body must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of investment business and co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority body or person having responsibility for the supervision or regulation of investment business or other financial services.
Amendment to the Lords amendment, in page 97, line 12, at end insert
`the whole or part of'.
No. 531, in schedule 12, page 201, line 41, leave out "or recognised professional body".
No. 532, in page 201, line 44, leave out "or body".
No. 533, in page 202, line 1, leave out "or body".
No. 534, in page 202, line 3, at end insert—
3.—(1) Any proceedings with respect to a decision or proposed decision of a recognised professional body—
(2) Any proceedings with respect to a decision or proposed decision of a recognised professional body or of any other body or person having functions in respect of the enforcement of the recognised professional body's rules relating to the carrying on of investment business—
No. 535 in page 203, line 13 at end insert—
(2A) A recognised professional body.
No. 536, in page 203, line 16, column 1, leave out "or paragraph 2(b) or (c) above" and insert
, paragraph 2(a), (b) or (c) or paragraph 2A(a), (b) or (c) above".
No. 537, in page 203, line 48, column 1, at end insert—
, any other body or person mentioned in paragraph 3(2) of Part I of this Schedule".
No. 538, in page 204, line 4, column 1, leave out "or paragraph 2(b) or (c)" and insert
, paragraph 2(a), (b) or (c) or paragraph 2A(a), (b) or
No. 539, in page 204, line 23, leave out "or membership" and insert ", membership or certification".
No. 540, in schedule 13, page 206, line 23, leave out from "that" to end of line 43 and insert—
any of the requirements of section 18(2A) of this Act or paragraphs 2 to 6 of Schedule (Requirements for recognition of professional body) to this Act are not satisfied he may in accordance with this paragraph make a recognition order under section 18 of this Act "an interim recognition order" notwithstanding that all or any of those requirements are not satisfied.
511
(2) The Secretary of State may, subject to sub-paragraphs (2A) and (2B) below, make an interim recognition order if he is satisfied—
(2A) Where the requirements which are not satisfied consist of or include those mentioned in paragraph 2 of Schedule (Requirements. for recognition of professional body) to this Act an application for an interim recognition order shall be accompanied by—
and the Secretary of State shall not make the order unless it appears to him that those criteria conform as nearly as may be to the conditions mentioned in that paragraph and that the applicant will, until the requirements of that paragraph are satisfied, have arrangements for securing that no person is certified by it (or by virtue of paragraph 4A below treated as certified by it) except in accordance with those criteria and for the effective monitoring of continued compliance by those persons with those criteria.(2B) Where the requirements which are not satisfied consist of or include that mentioned in paragraph 6 of Schedule (Requirements for recognition of professional body) to this Act, the Secretary of State shall not make an interim recognition order unless it appears to him that the applicant will, until that requirement is satisfied, take such steps for complying with it as are reasonably practicable.
§ No. 541, in page 206, line 45, after second "the" insert "practices and".
§ No. 542, in page 207, line 4, after "rules" insert ", practices".
§ No. 543, in page 207, line 10, after "rules" insert ", practices".
§
No. 544, in page 207, line 13, leave out "and arrangements, or other rules" and insert—
, practices and arrangements, or other rules, practices".
§ No. 545, in page 207, line 22, after "rules" insert ", practices".
§ No. 546, in page 207, line 25, after "rules" insert ", practices".
§
No. 547, in page 207, line 27, leave out "of subsection (2)(b) and (c) of that section" and insert—
mentioned in sub-paragraph (1) above.
§ No. 548, in page 207, line 30, at end insert—
§
"Interim authorisation by recognised professional bodies
4A. — (1) If at the time when an interim recognition order is made in respect of a professional body that body is unable to issue certificates for the purposes of this Act, any person who at that time is included in the list furnished by that body to the Secretary of State in accordance with paragraph 4(2A)(a) above shall be treated for the purposes of this Act as a person certified by that body.
(2) If at any time while an interim recognition order is in force in respect of a professional body and before the body is able to issue certificates as mentioned in sub-paragraph (1) above the body notifies the Secretary of State that a person
512
not included in that list satisfied the criteria of which particulars were furnished by the body in accordance with paragraph 4(2A)(b) above, that person shall, on receipt of the notification by the Secretary of State, be treated for the purposes of this Act as a person certified by that body.
(3) If at any time while an interim recognition order is in force in respect of a professional body it appears to the body—
it shall forthwith give notice of that fact to the Secretary of State and the person in question shall, on receipt of that notification by the Secretary of State, cease to be treated as certified by that body.(4) Where by virtue of this paragraph a partnership is treated as certified by a recognised professional body section 15(3) of this Act shall apply as it applies where a certificate has in fact been issued to a partnership.
(5) Where by virtue of this paragraph any persons are treated as certified by a recognised professional body the requirements of paragraph 2 of Schedule (Requirements for recognition of professional body) to this Act so far as relating to the retention by a person of a certificate issued by that body and the requirements of paragraph 4 of that Schedule shall apply to the body as if the references to persons certified by it included references to persons treated as certified.
§ No. 549, in page 207, line 30, at end insert—
§
"Power of recognised professional body to make rules required by this Act.
4B. — (1) Where a recognised professional body regulates the practice of a professional in the exercise of statutory powers the matters in respect of which rules can be made in the exercise of those powers shall, if they would not otherwise do so, include any matter in respect of which rules are required to be made—
(2) Rules made by virtue of this paragraph may in particular make provision for the issue, withdrawal and suspension of certificates for the purposes of this Act and the making of charges in respect of their issue and may accordingly apply to persons who are, or are to be, certified or treated as certified by the body in question whether or not they are persons in relation to whom rules could be made apart from this paragraph.
(3) Rules made by virtue of this paragraph may make different provision for different cases.
(4) The Secretary of State may at the request of a recognised professional body by order extend, modify or exclude any statutory provision relating to the regulation of the conduct, practice, or discipline of members of that body to such extent as he thinks necessary, or expedient in consequence of the provisions of this paragraph; and any order made by virtue of this sub-paragraph shall be subject to annulment in pursuance of a resolution of either House of Parliament.
§ Mr. HowardAlthough a detailed explanation of the effects of this large group of amendments would take rather more time than is available, it may be helpful if I give some of the background to their overall purpose.
The Government recognise that a large number of professional people—solicitors, accountants, surveyors, and so on—engage in investment business incidentally to the practice of their profession. Indeed, in some cases the investment business which they carry on has come to be regarded as an ancillary service that someone practicing 513 the profession in question is widely expected to provide. Clearly, there has to be a system of regulation for investment business carried on in this way, but it did not seem to us necessary that many thousands of professionals should be effectively forced into joining recognised self-regulating organisations if other arrangements could be equally effective. In particular, it seemed sensible to build on the professional monitoring and disciplinary arrangements which the main professional bodies already have if this could provide adequate investor protection. That principle underlay our original proposals and has not changed.
The clauses as originally drafted provided for the authorisation of individual members of recognised professional bodies who were practising their profession on their own account or in partnership. This was because at present membership of such bodies is generally confined to individuals and the bodies' disciplinary sanctions are generally available only against individual members. However, it has been suggested that it would be desirable to allow in the Bill for the authorisation of other forms of practice, particularly corporate practices. The Royal Institution of Chartered Surveyors already allows its members to practise in corporate form, and there are similar developments under way in other professional bodies. The Government accept that it would not be desirable to stand in the way of such developments, and the first new clause therefore allows authorisation to be conferred on corporate practices as well as partnerships and individuals practising on their own account. This apparently simple change necessitates a large number of amendments to take account of the fact that the firm certified by a recognised professional body may not itself he a member of the body, although it must be subject to the body's rules.
The second purpose of the amendments is to clarify and extend the requirements for recognition. Some critics have suggested that the special regime for professional bodies will be a "soft option". We have always made it clear that that was not our intention. The House will recognise that the new schedule includes many requirements which are derived from the corresponding provisions of schedule 2 for recognised self-regulating organisations. I would particularly like to draw the attention of the House to paragraph 3, which makes it clear that the investment business rules of the body must satisfy the same equivalence test as the rules of recognised self-regulating organisations, and to paragraph 4, which sets out the requirement for compliance with the rules to be effectively maintained and enforced.
The third main change is introduced by the third new clause, which gives the Secretary of State or designated agency an intermediate sanction, short of derecognition, against a recognised body which fails to comply with a requirement for recognition or with any obligation, such as an obligation to provide information, to which it is subject by virtue of the Bill. The sanction is a powerful one because if a recognised body were to disregard an order of the court it would be in contempt and liable to punishment accordingly.
This rather complicated group of amendments makes important changes to the provisions of the Bill relating to recognised professional bodies. The amendments represent the outcome of detailed consultation with the 514 professional bodies most likely to apply for recognition and I believe that they are in general now satisfied with them. The amendments will enable a greater range of businesses to be authorised by this route while providing for fully adequate protection to investors.
Mr. Deputy SpeakerThe amendment of the hon. Member for Beaconsfield (Mr. Smith) is grouped with these amendments. If he wishes to speak to his amendment, it will be perfectly in order for him to do so.
§ Mr. GouldI am grateful to the Minister for his explanation of this quite substantial group of new provisions. The Opposition do not quarrel with the purpose of the amendments. Happily, we can endorse most of what the Minister said about their intention. However, I should like to put to him one question. It arises from the notes on clauses that have been so helpfully provided by the Department, and it may help if I express myself more or less in the language that the Department used to explain the effect of the clause.
It points out that a recognised professional body will be able to issue certificates to different groups of people — bodies corporate, partnerships, unincorporated bodies. Then it makes the point that paragraph 2 of schedule 2—one of the provisions that accompanies the new clauses — requires a professional body to have arrangements and rules specifying the classes of persons who are entitled to be certified so as to ensure that only members of those classes are certified. If, however, by any chance a recognised professional body were to make a mistake and issued a certificate contrary to its own rules to a person who was not a member of the specified class, that person would nevertheless be authorised as the possessor of the appropriate certificate.
I understand why that is so, but I think that the Minister will agree that, if left open-ended in that way, it is a rather dangerous provision. Is he able to help the House by illustrating how the situation might arise and what measures would be taken by the Department to ensure that it was not repeated? It would be most unfortunate if a recognised professional body were consistently to issue certificates, contrary to its own rules, to people who in the ordinary course of events ought not to be authorised but who, by virtue of this delegation of powers to professional bodies, are permitted to carry on investment business as though authorised to do so.
§ Sir William Clark (Croydon, South)When my hon. Friend replies to the debate on these amendments, will he look at amendment No. 21, which has caused a certain amount of concern? It relates to professional bodies. I am a member of a professional body, and anything that is connected with accountancy means that I am subject to disciplinary action if anything goes wrong.
Many people are worried about the definition of "acceptable limits." Who is to determine what are acceptable limits for investment business? A large firm of accountants may have a turnover of £10 million or £20 million. If 5 per cent. of that business is investment business, a huge amount of money is involved. However, if a person is employed full-time in the life assurance business—I have to declare an interest as I advise the Life Insurance Association—his or her total income will be very small compared with the 5 per cent. or the 2.5 per cent. investment business of a large firm of accountants or solicitors. The investment side of an accountant's or a 515 lawyer's receipts will be a small part of his total income, whereas that represents the total income of a full-time intermediary.
The LIA and other professional bodies are worried about the fact that there could be unfair competition. Lawyers and accountants belong to recognised professional bodies and are provided with a blanket certificate, if I may put it that way. However, a part-time intermediary has to join a self-regulating organisation, and SRO rules and regulations are probably far more stringent than those of the disciplinary committee of a professional body.
It would be ridiculous to expect legitimate professional bodies to have to register with an SRO, and I should like my hon. Friend to reassure me on that point. Under no circumstances should one create in this Bill unfair competition between those who work part-time and those who work full-time in the financial services industry.
§ Mr. Tim SmithI very much welcome the changes that have been made as a result of the amendments. My hon. and learned Friend the Minister mentioned three. I should like to mention another helpful amendment. Originally, the Bill was drafted in terms of whether the investment business of a professional person was or was not incidental. Now it has been turned around. The Bill says that a professional person's main business must be the practising of a profession and not the running of an investment business. There was great doubt about what "incidental" meant, but that concept has now been removed from the Bill.
I share the concern of my hon. Friend the Member for Croydon, South (Sir W. Clark) about the meaning of "acceptable limits". It would be helpful if my hon. Friend the Minister could clarify what it means. Amendment No. 21 refers to
acceptable limits on the kinds of investment business.I assume that what it means is that when the Securities and Investments Board discusses with a body, with a view to its recognition, the terms upon which it might be recognised, it will look at the kinds of investment business that will or will not be authorised.Part II of schedule I contains a list of different kinds of investment business. I assume that the intention is to ensure that there will be acceptable limits upon which categories of investment business are to be part of the recognition deal. It seems to me that there will be a tradeoff as to what kinds of investment business the recognised professional body will be able to authorise and, as a quid pro quo, what rules and regulations it will need to deal with authorisation. Obviously, for investment advice a much less rigorous regime is needed than for investment management, where one is managing clients' funds. It would he helpful if my right hon. and learned Friend could clarify that point.
I shall now speak briefly about my modest amendment which is to subparagraph (6) of paragraph 4 to the new schedule on page 97. This is a new provision about monitoring and says that monitoring can be undertaken by somebody other than the body itself. Subparagraph 4 has a similar provision about enforcement but there it says that the whole or part of the enforcement function can be delegated, and it does not make the same provision for monitoring. It might be administratively convenient for part of the monitoring to be delegated and for part of it to be kept back.
§ 7 pm
§ Mr. BerminghamOne matter arises from the meaning of "acceptable limits". Will the Minister address his mind to what happens in a firm of solicitors where a partner is a trustee of a large and substantial trust with considerable investments? In the City of London and throughout Britain, there are a considerable number of solicitor trustees who manage between them, not millions but often billions of pounds' worth of investment. What does "acceptable limits" mean in such cases? Can the Minister advise us on that?
§ Mr. Robert McCrindle (Brentwood and Ongar)I endorse the points that have been made by my hon. Friend the Member for Croydon, South (Sir W. Clark). I shall restrict my remarks to Lords amendment No. 21. It says that the recognised professional body
must have rules which impose acceptable limits on the kind of investment business which may be carried on".I think that I echo a point made on both sides of the House when I ask "acceptable to whom?" Let us suppose for a moment that a recognised body such as the Law Society decided that it was perfectly acceptable for a high percentage of a solicitor's activities to relate to investment. I do not suggest that the Law Society is likely to do that. There are those of us who believe that in some way that would confer a lesser measure of investor protection than would be extended by an independent investment intermediary operating under the other provisions of the Bill which require him to register with his self-regulatory organisation.Throughout the approach by my hon. and learned Friend the Minister is the aim to create a system in which fair competition prevails, irrespective of the vehicle through which one seeks to obtain investment advice. I should like to see a closer examination of the words "acceptable limits" because the clause, as amended by their Lordships, remains rather ill-defined. It might be thought to provide a soft option for those who, to a large extent, will still engage in advising people on investment. It would be helpful if the Minister could clarify exactly what is intended by the words "acceptable limits". More important, perhaps he would underline that in dealing with an investment adviser who is authorised by a registered professional body, the investor will receive no less protection than he could expect to receive if seeking his investment advice through an independent investment intermediary registered by a self-regulatory organisation or the Securities and Investments Board.
§ Mr. CashI should like to draw attention to a point about which I have had extensive discussions on a number of occasions with the Minister during the passage of this Bill. We have also exchanged correspondence about the Society of Company and Commercial Accountants. That is a professional body with about 8,000 members and it has a well-deserved reputation for advising small businesses. In amendment No. 20, a professional body is defined as
a body which regulates the practice of a profession".Amendment No. 433 sets out the requirements for the recognition of a professional body. It says:The body must:—(a) regulate the practice of a profession in the exercise of statutory powers;".The Society of Company and Commercial Accountants would to all intents and purposes be excluded as a recognised professional body. One could write a treatise 517 on the reasons why that society should be accepted, but I have no intention of going through them. The society regards the provisions as unfair discrimination against it. No specific reason has been given about why it should not get this status. The Minister was good enough to send me a letter, which arrived today, in which he said that Parliament has had a number of opportunities to amend the Bill during its passage but has not done so. The inference there is that Parliament does not look upon the society as important enough to merit the status of a recognised professional body.I am the vice-chairman of the Conservative Small Business Bureau and secretary of the Back-Bench Committee on Small Businessses, and I am aware of the importance in the high street of relatively small accountancy bodies that are able to provide high quality service to small businesses. The proposals discriminate against the Society of Company and Commercial Accountants and that is unreasonable. I sincerely hope that the inference in the letter that I received from the Minister, that to some extent the door remains open, is something upon which we can build in the future. Many of the society's members hold important positions in industry and commerce and should receive the kind of recognition that they deserve.
§ Mr. John Butterfill (Bournemouth, West)I am a little anxious about what my hon. Friend the Member for Stafford (Mr. Cash) said because if we go down the road that he suggests we could say that all sorts of bodies ought to be included. Those bodies might be unsuitable and might not have members who are sufficiently well qualified. Does my hon. Friend think that the approval given to the Royal Institution of Chartered Surveyors should be extended to include the National Association of Estate Agents? There are worthy people in that association, but I am not sure that they are qualified to give investment advice. As far as I am aware, the accountancy body about which my hon. Friend speaks is not recognised under the Companies Acts and might therefore be considered unsuitable.
I should now like to pose a question to the Minister. My institution now allows corporate bodies to practise. I am a little worried that we may reach the stage where some institutional bodies may acquire shares in a partnership and use them as a means to gain recognition because they might not otherwise be able to gain recognition. That may be prevented by these proposals, but they are rather complex. Perhaps my hon. and learned Friend could enlighten me.
§ Mr. HowardI shall begin by responding to the point raised by the hon. Member for Dagenham (Mr. Gould). He asked what the situation would be in the event of a mistake being made in the granting of a certificate by a recognised professional body, thereby enabling the holder of that certificate to carry out investment business. He also asked what action could be taken if mistakes like that were made repeatedly. In an isolated incident the certificate could be withdrawn as soon as the mistake was discovered. If a recognised professional body were consistently to issue certificates to people who were not in the specified classes that the hon. Gentleman spoke about, or if it failed to withdraw such certificates when the facts came to its 518 attention, there would be grounds for the exercise of the powers contained in clause 19, which deals with the revocation of recognition of a professional body.
New clause 3, which we shall be debating later, provides for the obtaining of a compliance order to deal with the recognised professional body. Those safeguards are built into the Bill and they would deal with the matters to which the hon. Gentleman drew attention.
My hon. Friend the Member for Croydon, South (Sir W. Clark) and my other hon. Friends raised the matter of acceptable limits for the purpose of the clause, as did the hon. Member for St. Helens, South (Mr. Bermingham). It would be for the Secretary of State or the designated agency to determine whether the rules of a particular professional body imposed acceptable limits for the purposes of the clause.
New subsection (2A) of amendment No. 21 states:
The body must have rules which impose acceptable limits on the kinds of investment business which may be carried on by persons certified by it and the circumstances in which they may carry on such business…The rules must preclude a person certified by the body from carrying on investment business outside those limits unless he is authorised otherwise than by virtue of that certification or exempt in respect of that business under any of the provisions of chapter 4. This requirement for a scope rule is analogous to the corresponding requirements for self-regulating organisations, but the reference to circumstances reflects the intention that investment business carried on under the supervision of a recognised professional body will be limited to that carried on incidentally to the practise of the profession.There is no requirement in the Bill for a percentage limit or any other form of limit. What is appropriate will depend upon the circumstances. What is acceptable will depend especially on the type of business which a recognised professional body regulates and its capability for enforcing its rules effectively. The rules will have to be equivalent to those of the designated agency. That test of equivalence is common to the professional bodies and to the self-regulating organisations. There can therefore be no question of recognised professional bodies being a soft option in comparison with self-regulating organisations.
My hon. Friend the Member for Stafford (Mr. Cash) dealt with a different point, which he said that I had answered in a letter which he received today. As that letter was sent in reply to a letter which I received from my hon. Friend yesterday, that is not altogether bad going. Some of the difficulties which arise in the context of his point were answered by my hon. Friend the Member for Bournemouth, West (Mr. Butterfill). I suspect that this might be what is sometimes termed "an ongoing issue" between my hon. Friend the Member for Stafford and I. I cannot give him any further comfort this evening than I gave in the letter that he received earlier today.
In relation to the final point raised by my hon. Friend the Member for Bournemouth, West, the new schedule provides that a recognised professional body may issue a certificate only to a person managed and controlled by individuals who are members of the recognised professional body. My hon. Friend will see that the authority for that lies in paragraph 2(2)(b) of the new schedule proposed in amendment No. 433.
519 I can tell my hon. Friend the Member for Beaconsfield (Mr. Smith), in answer to his second point, that it is already possible in the terms of the Bill at present for the monitoring authority to be delegated in part.
§ Question put and agreed to.
§ Subsequent Lords amendments agreed to.