AMENDMENT OF FINANCIAL SERVICES ACT 1986 (Hansard, 26 October 1989)

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

I shall not detain the House for long. The new clause has two objectives. It seeks first that the Securities and Investments Board should have the power to maintain a register of all those in the financial advising world, and secondly, that the SIB should be able to lay down conditions as to how and when those names should be placed on the register. That could be by a competence test or by educational qualification. The SIB may be inhibited from taking the lead, so I suggest that we should alter the Companies Bill to remind the SIB that it can take such a lead and then it will probably do so.

The background to the new clause, as my hon. Friend will recollect, is that during the early stages of the Financial Services Bill, the SIB and the Marketing of Investments Board organising committee petitioned the Government to include a competence test, but that was refused. Now that FIMBRA is embarking on competence tests and the SIB is also considering its position, the time has come to provide the powers which could be used to set a standard. The designated rules could be used a a vehicle for requiring all appropriate self-regulatory organisations and registered professional bodies to introduce registers and tests. If the Minister cannot give us a categorical assurance tonight, or if the wording of the new clause is somehow defective, I hope that he will give the new clause sympathetic consideration.

§ Mr. Redwood

I have listened with interest to the arguments presented by my hon. Friend the Member for Croydon, South (Sir W. Clark) in presenting new clause 51, but I believe that the Bill has enough safeguards for investors already in place. The House should remember the substantial degree of control over individuals employed in investment business by the existing powers in the Financial Services Act.

Authorised firms have a clear and direct responsibility for ensuring that their employees are properly selected, trained and supervised. They are also responsible for ensuring that their employees comply with the full panoply of conduct of business rules or risk loss of authorisation or other sanctions. Large firms in which staff tend to specialise or which undertake a variety of activities have to ensure that the only members of their staff who advise the public on investments are those who are fully competent to do so.

The Act provides two other powers. First is the power to obtain information from authorised businesses, self-regulatory organisations and other recognised bodies. That enables the SIB to obtain such information on individuals and other matters as it deems neccessary for investor protection. The recognised bodies are able to obtain information from their members under similar provisions in their own rule books.

The second relevant power is contained in section 59 of the Financial Services Act 1986, under which the SIB can seek an order banning an individual from being employed 1245 in connection with investment business. A list can therefore be kept of all individuals who appear not to be fit and proper persons to engage in such business.

Given the weight that the Act places on the authorisation of businesses and not individuals, and given the array of powers available to ensure that those businesses employ only individuals who are properly selected and trained, I cannot see the advantage to be gained from requiring specific tests of competence.

Passing such a test would never guarantee that an individual was incompetent at that time or in the future any more than the absence of a qualification could be held to disqualify someone with a lifetime's experience who had been giving good service.

I am afraid that I am not convinced that the limited benefits of the additional powers proposed by my hon. Friend would outweigh the burdens that they would place on business.

In the light of that, I hope that my hon. Friend will withdraw new clause 51.