§ Mr. Ken Eastham (Manchester, Blackley)
I realise that the night is very late—or rather, the morning is very early. Nevertheless, this debate is important for many people, especially old people—pensioners. It concerns the failures not only of the Investment Management Regulatory Organisation but of the Securities and Investments Board, in what the Opposition believe is a most shameful affair.
We see many scandals nowadays. It has become almost routine that every few months there is a scandal in banking or insurance, as a result of which there is a serious loss of confidence in the country, and a feeling that the honest brokering that we always saw as part of the British tradition can no longer be expected. We seem to be becoming a set of financial spivs. Britain seems to be a spivs' paradise for people who can work the system and avoid being caught out.
The Maxwell pension fraud has often been compared with the Bank of Credit and Commerce International affair and the Barlow Clowes scandal. However, we do not believe that it is the same. The fundamental difference is that in those two other cases clients made conscious decisions to opt for the chance to gain extra interest, and therefore it could be said that, partly knowingly, they chose to take a risk. In spite of that, the Government were most considerate over the Barlow Clowes affair, even though some of the money was being invested abroad.
In contrast, the Maxwell pensioners were not even informed, let alone consulted. That adds to the insult involved in other people simply taking over. As a result of that rough treatment, all those pensioners will pay a terrible price, which will cause sheer misery for many old people. It has ruined their lives and is undoubtedly ruining their health, too.
Ultimately, many hundreds of Maxwell pensioners will have to plead with the Department of Social Security, unless the Government face their responsibilities, step in and do the right thing by them. Those pensioners do not deserve such treatment. No one can stand idly by and say that they have brought the situation upon themselves. They have not.
What has happened in recent times should give us food for thought, and should give rise to a determination on both sides of the House to take a fresh look at the pensions question. Not only with the Maxwell swindle but time after time in the past few years, we have seen company takeovers conducted with an eye on the pension funds. When the asset stripping takes place, there are great advantages to be derived if there is a handsome pension fund thrown in. Contribution holidays and other features have also been introduced without those who contribute to the schemes being consulted or allowed to express an opinion.
Ministers cannot say that they knew nothing about the Maxwell risk, because it is now public knowledge that the Department of Trade and Industry expressed serious reservations about Maxwell years ago. The Bank of England had also sounded warnings, and it was said that Maxwell was not a trustworthy enough person to run a company.
I wonder whether there are any more skeletons in the cupboard. Will other scandals emerge in a few months' time, with more workers discovering that their pension 643 funds have been plundered by their employers? Only time will tell. That prospect is certainly sending a shiver down the spines of many people, who wonder where it will all end.
I do some unpaid work in the House as honorary secretary of the Amalgamated Engineering Union parliamentary group. A few weeks ago, I was approached by one of the union's district secretaries. He had written to the managements of three Watford companies requesting the appointment of an engineers' trustee to their respective pension funds. He was turned down. I then wrote a courteous letter to each of the companies, expressing concern at their attitude—especially in the light of recent events.
To date, I have received only two replies, and they were both disappointing. One stated:Given the AEU position on occupational pension schemes, the disappointment of the Parliamentary Group is not surprising. I would stress however that our intention is to abide by any present and future legislation relating to the operation of these schemes.It went on to say that the company wasactively seeking to improve the level of understanding and confidence of pension scheme members.However, that reply clearly implied that in the absence of any statutory changes, the company did not intend to make any of its own.
The Secretary of State for Social Security, in his statement to the House on 8 June, said that the Government were establishing an emergency £2.5 million fund for Maxwell pensioners. When we consider that several thousand pensioners are affected, one becomes extremely anxious about a sudden draw on those funds. As someone said to me, that fund of £2.5 million is, in football terms, about half Gazza's transfer fee and it has to provide for some 30,000 pensioners.
My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) has taken a close interest in the matter. He told me that he had referred to the ombudsman in respect of maladministration, but that he was still waiting for a reply. I do not know whether the Government have any influence to allow them to delay the appearance of observations by the ombudsman. I hope that that is not the case. I hope that the ombudsman will clearly condemn what has happened as a result of the huge scandal.
I met some of the pensioners three or four weeks ago and I was saddened to learn that, in trying desperately to take legal steps to protect themselves, they face bills of £1 million a month in respect of court judgments. That is beyond the pale when we consider that those people paid out their money and are being further insulted because, if they have the temerity to try to use the legal options through the courts, they will possibly face massive costs.
I speak with feeling about some of the Maxwell pensioners because many Maxwell pensioners worked for the Mirror Group at Withy grove in Blackley in Manchester. They have formed a committee and earlier today I spoke to their chairman, Mr. Ken Martin. He told me that at the moment they are partly relieved because their pensions are being made up by the Mirror Group. However, the proviso is that they will be made up only so long as the group is in profit. If the group has a sudden nose dive and falls into recession, will that hit the pensions? If the company decides to spend money on new plant and equipment, which can be vey expensive, will the pensioners fail to receive their returns?
644 There is obviously no guarantee for the pensioners and it is certainly a most hit-and-Miss affair. I hope that the Minister will be able to speak with confidence and reassure me about some of my constituents who are on the edge and do not know whether they will still he receiving a pension, to which they are entitled and for which they have paid, in three months' time. If the Mirror Group encounters difficulties, how will they make up for that loss of pension?
I was tipped off earlier this evening that a reply had finally appeared in the Library to a parliamentary question tabled by my hon. Friend the Member for Great Grimsby (Mr. Mitchell). He asked the Chancellor of the Exchequer certain questions about the Securities and Investments Board and IMRO. I took it upon myself to take some photocopies of the reply, which was published today. It is a long reply, which makes us realise that that we are on to something very big. Normally, replies from Secretaries of State are about two sentences long, but the Chancellor's reply is about three pages long.
A couple of extracts are worth spotlighting. The right hon. Gentleman states:SIB's assessment concludes that there were serious deficiencies in the supervision of IMRO".On the following page, he states:IMRO was not, and is not, responsible for ensuring that pension fund trustees respect their wider obligations under trust law. Moreover, effective regulation must in the final analysis involve the active co-operation of the private sector".It appears that, if there is no co-operation by the private sector, there is nothing that we can do. That is outrageous.
The other document that was made available tonight is the Securities and Investments Board press release, which I have not read in great detail as it is several pages long. However, one or two points bounce out. In part, the first page states:IMRO accepts that its supervision of these Maxwell companies fell short of the standards that should he achieved by a financial services regulator.The second page contains the comment—this one really stunned me—thatit was unduly ready to rely on the good faith and professionalism of those with whom it dealt".It is like the old boy network. People were expected to do certain things and act like little gentlemen, but they did not. When people dip their fingers in the till, they do not always act like gentlemen and they are not always concerned.
The press release mentions good faith and professionalism. We are entitled to something better than that comment. The press release refers toan alertness to information in the public domain (including in the media), and an application of a spirit of critical enquiry in relation to assurances or information given.Everyone seemed to know what was going on—nudge, nudge. Nobody dared do anything because big money people threaten to take people to court if they dare to question what is going on.
One or two pages later—I wish to highlight one or two observations that I made as a layman—the press release states:as a matter of urgency, to produce proposals for strengthening:the experience, skills mix and organisation of its monitoring staff.That indicates that there was little skills mix and experience in the past. I wonder what the SIB has been doing to give IMRO such responsibilities.
My last quote from the document seems to let the cat out of the bag. The document says: 645Andrew Large, the SIB chairman, said:`The fact that such a massive fraud could be carried out reflects badly on the United Kingdom corporate financial system as a whole, as well as on a number of institutions and individuals within that system.'In other words, it reflected on a set of what I would call financial spivs. We have to make sure that such cases are not repeated. The only place that it can be done is Parliament. I do not believe that self-regulation can work when people are dealing with hundreds of millions of pounds of other people's money.
To conclude my remarks on this terrible scandal, we must call for a realistic grant from the Government. They are not faultless in the matter. They made arrangements for the Barlow Clowes victims. If anything, the Maxwell pensioners have a better case than the Barlow Clowes people had. It is not unreasonable to expect some compensation from IMRO. When I say compensation, I am not thinking about petty cash. It cannot give pensioners £2 million of £3 million and say, "That's your lot." We are talking about a massive fraud. We are talking about hundreds of millions of pounds. We should consider some form of penalty for IMRO for its incompetence and certainly its slackness in protecting the interests of the pensioners.
It will be years before ordinary working people regain confidence in pensions schemes—that is, if ever they do. What is more, I sincerely believe that the Government have some moral responsibilities in the matter. We hope that the Minister will make a statement tonight which is worthy of being passed on to the unfortunate pensioners.
§ Mr. Paul Boateng (Brent, South)
I thank my hon. Friend the Member for Manchester, Blackley (Mr. Eastham) for initiating the debate. He has done his constituents—several of whom, as he said, are affected by the Maxwell scandal—and the House a considerable service in enabling us to respond to his debate. It comes on the day after the formal response by the Securities and Investments Board to the Investment Management Regulatory Organisation report; so my hon. Friend's debate is in every way timely as well as welcome.
I shall respond to several matters which arise from my hon. Friend's speech and relate that to the SIB response. It was clear from a reading of the SIB response to the IMRO report that at one stage the SIB considered withdrawing recognition of IMRO. It decided instead that IMROshould be retained based on appropriate strengthening".That strengthening is nowhere defined in the SIB's response. It would be helpful to know how it is proposed that IMRO should be strengthened, what role the Government intend to play in that and what action they propose to take.
My hon. Friend referred, and went straight to the point in so doing, to the position in which IMRO found itself. That position is criticised by the SIB. IMRO failed to have its ear to the ground to take note of what is described as "market talk" and should have been more sceptical about the information that was given to it.
Had IMRO paid more attention to market talk, and been more sceptical, it might have been able to see what 646 other people suspected about Robert Maxwell's operations—and what IMRO clearly neither saw nor suspected —and the extent of that massive fraud. The SIB said that itviews this with particular concern as the availability of such practical knowledge and alertness inside the regulators is a key feature of our"—the United Kingdom's—regulatory system.When that is not found to be available, it undermines that system.
If the present system is to be retained, we must hear from the Government—and those who maintain that the system should be retained in more or less its present form —how we can ensure that its basis is not undermined as a result of IMRO's failures in the Maxwell case.
The purpose of the present mix of statutory and self-regulation is contained and underpinned by the belief that IMRO, and the self-regulatory mechanism, is more desirable because it is closer to the market and is therefore more able to respond to what goes on in it. If, as would appear to be the case, that closeness is no guarantee of scepticism, or of being aware of the whisperings in the market and taking action accordingly, that calls into question the basis of the present regulatory system.
SIB goes on to say that IMRO's arrangements for granting admission to new members need "further scrutiny". Again, that begs the question: what form will that scrutiny take? What will happen when it is concluded, how long will it take, has it already started and when can Parliament expect to be advised of its outcome? So long as a question mark remains over the admission of new members, the very people to whom my hon. Friend referred—those whom the regulatory system is primarily designed to protect, people who are not necessarily sophisticated and aware of the ins and outs of the market, but who are drawn into and affected by it—cannot be sure that the regulatory bodies admit new members on a basis that is satisfactory in terms of their bona fides and their providence, and their confidence in the system is undermined.
Another key matter, as the SIB points out, is that IMRO needs to strengthen its rules on the handling of private interests of board members. That is certainly so and was evident in aspects of the Maxwell scandal which, with good cause, gave rise to public concern.
We believe that the SIB is in its own way as much to blame in this matter as IMRO. It was responsible for devising the principles of self-regulation, including the system whereby the self-regulatory organisations assess their own performance rather than subjecting themselves to outside examination. That is why my hon. Friend was absolutely right to link the SIB with the debate on the role of IMRO. They cannot be separated in this matter and both must bear a degree of culpability.
We have heard and read what the SIB says about the future of IMRO—we do not believe that it can survive. By postponing the inevitable, as the SIB does by its response, it does the system of regulation no service. We need to simplify the regulatory structure. We believe that we should have just one SRO for retail investment business and one to deal with the rest of the industry. In our view, that is the only way forward and the only way in which to ensure that confidence in the system is restored.
The Government must also address a number of other important issues. We would set them a number of tasks in 647 relation to the regulation of businesses managing pension fund investments. There is no room for tardiness, no room for a wait-and-see approach. The public demand expedition in this matter and I am afraid that that has not always been apparent in the Government's approach. There has been complacency. We can only hope that the transfer of aspects of responsibility from the Department of Trade and Industry to the Treasury shows the Government's determination to get to grips with the issues.
It is good to see the Economic Secretary to the Treasury in his place at seven minutes past 4 o'clock. I am used to seeing him at this time because of our time together in the Committee considering the Finance Bill. In fact, during that Committee stage, I saw more of the hon. Gentleman than I did my spouse—much to her chagrin. I look forward to hearing what he has to say.
We need to ensure that the responsibilities of all the regulatory authorities are clear, consistent and comprehensive. We need to provide for all investment business to be scrutinised adequately and continually, not only when such businesses are initially granted a licence. We need to lay down clear requirements for the other professionals involved, especially the auditors and the custodians of pension fund assets. There should be clear and regular reports to pension fund members.
My hon. Friend referred to some of his constituents who are Maxwell pensioners and who have suffered as a result of recent events. Those pension fund members are most immediately in our minds. The Government need to introduce a package that will be of immediate assistance to them. Compassion and the desire to preserve confidence in the regulatory system, the probity of our markets and the provision of financial services demand that. All those things demand action in support of the Maxwell pensioners. We look for some answers from the Government this morning and in the days to come.
§ 4.9 am
§ The Economic Secretary to the Treasury (Mr. Anthony Nelson)
I have listened with great care to the comments of the hon. Members for Manchester, Blackley (Mr. Eastham) and for Brent, South (Mr. Boateng). I appreciate that both of them have raised the general but important issue of public confidence in occupational pensions, and they are right to request reassurance on this matter. I trust that what I shall say will reassure the constituents of the hon. Member for Blackley and the public generally about the probity of pension funds and the investment management thereof, and the supervisory arrangements for the management and administration of pension funds.
Earlier today, my right hon. Friend the Chancellor of the Exchequer announced that the Securities and Investments Board had published the summary of conclusions and findings of IMRO's review of its regulation of Maxwell companies—including Bishopsgate Investment Management Ltd, and London and Bishopsgate International Investment Management plc. The SIB has also published its assessment of its own and IMRO's performance in this affair and the action that both the SIB and IMRO are taking to rectify the shortcomings identified. The SIB's assessment concludes 648 that there were serious deficiencies in the supervision by IMRO of BIM and LBI. My right hon. Friend has placed a copy of the SIB's statement in the Library of the House.
The Government have made it clear throughout that it might not be possible for the SIB to publish the review in full. We have been advised that publication of the full review by the SIB or the Government at the present time could be severely prejudicial to criminal proceedings. The summary of findings and conclusions which the SIB has published is the most that the SIB believes it safe to publish consistent with this advice.
It may be helpful to hon. Members if I explain some of the background to this review and why it was necessary to examine thoroughly the regulatory and supervisory aspects of the investment management of Maxwell pension funds. As soon as the extent of the problems became clear last December, the SIB began conducting with IMRO a detailed review of IMRO's exercise of its regulatory responsibilities for BIM and LBI. It was essential to ensure that the review was comprehensive and thorough. The review deals with serious issues and the SIB needed to consider the findings carefully in order to assess the discharge of its responsibilities under the Financial Services Act 1986. My right hon. Friend received the SIB's assessment of its own and IM RO's performance only a few days ago, and asked the SIB to clarify a number of further issues raised by the IMRO review. The conclusions have been announced just as soon as this work was completed.
The central conclusion of the review is that IMRO fell short of the high standards which it properly expected of itself. In its own words:IMRO's verdict on itself is 'not good enough'.The review concludes that BIM and LBI were properly admitted to membership, and that IMRO's admission procedures were adequately thorough. At the same time, the review concluded that monitoring was applied over-literally and without adequate senior control and review, and that when "high risk" members were identified, this was not always followed through by adequate monitoring thereafter. IMRO also accepts there were lapses of judgment, inadequate alertness in picking up signs of possible trouble and failure to relate diverse pieces of information.
On the positive side, the review notes that IMRO's monitoring procedures have been reviewed over the past six months; that IMRO has already put in hand some organisational changes and a modified system is being introduced to identify and focus resources on areas of higher risk. The review also notes that further re-examination is being undertaken and that IMRO will increase and strengthen the resources that it devotes to monitoring. In addition, the SIB has requested the IMRO board, as a matter of urgency, to produce proposals for strengthening its monitoring and other aspects, with which I will detail later.
The Government view the shortcomings identified in the SIB's assessment with serious concern and attach importance to the need for early action to ensure that the regulatory system is implemented more effectively.
However, neither regulator nor the system of regulation can guarantee that all fraud will be prevented or identified. The Maxwell affair was, as my right hon. Friend made clear in his statement, wholly exceptional—the vast majority of pension funds have served their members well. Furthermore, the IMRO review covers a relatively limited part of the Maxwell story. Under the Financial Services 649 Act, IMRO's role in supervising pension funds was to regulate and authorise pension fund managers. IM RO was not, and is not, responsible for ensuring that pension fund trustees respect their wider obligations under trust law. Moreover, effective regulation must in the final analysis involve the active co-operation of the private sector, including the professional advisers, financial institutions and others, all of which have their own responsibilities.
IMRO's performance also raises questions about the SIB's monitoring of IMRO and its general oversight of the self-regulatory organisations under the Financial Services Act. Both those issues were raised by the hon. Member for Blackley. My right hon. Friend has therefore asked Mr. Andrew Large, the SIB's new chairman, to conduct his own review of how the SIB carries out its regulatory responsibilities.
My right hon. Friend has also discussed with the chairman of the SIB the need to strengthen the implementation in practice of regulatory standards. Mr. Large fully understands the urgency and importance of that task. My right hon. Friend has asked to be kept closely in touch with progress on the further work, reviews and improvements that are now in hand.
The SIB and IM RO are effecting a number of measures immediately. A number of changes in the senior personnel of IM RO are taking place. First, Mr. Charles Nunnely, the deputy chairman of Robert Fleming, will chair the board of IMRO until a permanent success to Mr. Nissen has been appointed, and IM RO will also be appointing a new chief executive. Secondly, IMRO has put in hand organisational changes and will strengthen its monitoring resources. Thirdly, IMRO has issued a consultation document on changes to its regime for occupational pension scheme managers. Fourthly, at SIB's behest, the IMRO board is producing, as a matter of urgency, proposals for strengthening the experience, skill and organisation of its monitoring staff, its arrangements for dealing promptly and effectively with potential and actual investor risk and its rules on board members' interests.
For its part, the SIB wil review urgently IMRO's admission procedures and practices to ensure that its arrangements are satisfactory. It will also review IMRO's approach to monitoring its members, to ensure that the lessons of this particular case are applied generally.
Under its new chairman, Mr. Andrew Large, the SIB will re-examine the conduct of its own regulatory responsibilities and how to ensure that the lessons of Maxwell are taken into account in ensuring that all the regulators supervised by the SIB meet their responsibili-ties. In addition, the SIB intends to explore wider issues which fall within the responsibility of other regulators. Those issues include: a review of the supervision of the custody of investors assets; a review with the SROs and the accountancy organisations of the relations between auditors and regulators, particularly the mechanisms by which auditors pass relevant information to the Financial Services Act regulators; and arrangements to ensure effective communication between supervisory authorities.
It is to the credit of the SIB and IM RO that they have carried out this self-critical examination of their performance, published the findings for all to examine and presented positive proposals to improve regulation in future. [Interruption.]
650 It is easy for the hon. Member for Brent, South to be somewhat derisive about that, but we would be the first to criticise bodies that presented a whitewash report of their part in any scandal or collapse. The fact that IMRO and the SIB have been self-critical and have pointed to the need for changes and improvements in some areas is to their credit. The House should be grateful for that. It is to be hoped that others in the private sector, including the professional advisers and financial institutions, will examine their own roles as thoroughly and openly.
In this and earlier debates, hon. Members have asked whether the Government have responsibilities in this matter. First, it has been suggested that the DTI should not have granted LBI a principal's license under the Prevention of Fraud (Investments) Act 1958. The hon. Member for Blackley spoke about that. I shall give him the facts. The licence came into effect on 26 April 1988 and lapsed on 29 April 1988 when the Financial Services Act came into force. The directors were notified as Andrew Smith, Kevin Maxwell and Larry Trachtenberg. Robert Maxwell did not become a director of LBI until June 1988. The DTI did not license Bishopsgate Investment Management Ltd. The grounds for refusing a licence under the legislation then in force were, in fact, very limited. Unless there were previous convictions for fraud or dishonesty, or any other circumstances likely to lead to improper conduct of business, there was not sufficient reason for refusing a licence.
Under the Financial Services Act, however, IMRO was required to satisfy itself that the applicants were "fit and proper" to carry out an investment business and that they continued to be so. The fact that LBI was licensed briefly by the DTI did not in any way reduce the obligation of IM RO to conduct rigorous checks before admitting LBI to membership or to monitor LBI's performance.
In publishing the findings and conclusions of the IMRO review, the SIB has made it clear that IMRO complied with all its normal procedures in admitting LBI to membership and did not rest on the DTI licence.
The Leader of the Opposition has made several allegations that IM RO warned the Government that it could not do its job properly because of problems over the relationship between the Financial Services Act regime and trust law. This is quite wrong. In his statement, my right hon. Friend made it clear that he has looked into these allegations. Neither he nor the SIB has found any evidence to substantiate them. IM RO and the SIB made representations to the DTI over a number of years about the legal uncertainty which they believed was created by the interaction of the Financial Services Act and trust law. However, there was no suggestion that that uncertainty posed a threat to investor protection, and the SIB's conclusion is that neither the legal uncertainties created by the relationship between the Financial Services Act and trust law nor the existence of IMRO's special occupational pensions scheme regime made any material difference to IMRO's regulation of the Maxwell pension fund companies.
Much has been said about Professor Hayton's review. What it actually says is that pension fund regulation should he left to trust law. Following Professor Hayton's report, the DTI told IM RO and the SIB not to rely solely on trust law for regulating the management of occupational pensions schemes, and that it was for them to operate the system of regulation under the Financial Services Act to deliver adequate investor protection.
651 Neither IMRO nor the SIB at any time advised the DTI that it disagreed with this advice or was unable to deliver the degree of investor protection required.
§ Mr. Boateng
Is the Minister satisfied with the current state of trust law, on which the self-regulators are obliged to rely? If he is not, when and how does he propose to reform it?
§ Mr. Nelson
The Goode committee will consider such issues in its wider review. My right hon. Friend the Secretary of State for Social Security announced the establishment of the review, which will be thorough and wide-ranging. I am sure that it will examine carefully the question of trust law and the proper ambit of statutory law. I acknowledge the importance of these issues, and it is vital that they are considered carefully and that the House subsequently has an opportunity to examine any recommendations because they will have major implications for the structure and liabilities of pension funds and their trustees. I hope that that satisfies the hon. Gentleman that the matter is continuing to be considered. It will, I am sure, be a central part of the Goode review.
It has been suggested that, in view of the shortcomings identified by the IMRO review, the Government should now pay compensation. The Government have made their position on compensation quite clear. Everyone sym-pathises with the hardship and uncertainty suffered by victims of fraud, but no Government can accept a duty to make good losses resulting from fraud or theft of savings. The taxpayer cannot guarantee to make good losses in such cases. My right hon. Friend the Secretary of State for Social Security has announced, however, a series of measures to help current and future pensioners, including emergency funding to underpin those Maxwell pensions at immediate risk.
Five positive measures are being taken to help current and future pensioners: first, emergency funding to underpin the Maxwell pensions at immediate risk is being made available by the Government; secondly, since 8 June, a special unit working with trustees and others to secure the speedy return of assets and the rebuilding of funds has been set up; thirdly, a trust is being established into which the private sector can pay voluntary contributions; fourthly, as I said, a comprehensive review of the framework of pension law is under way; and, finally, proposals have been announced on the introduction of employer debt provisions.
My right hon. Friend the Secretary of State for Social Security has made it clear that the priority must be to identify, locate and establish ownership of the stolen assets and to secure their return. The Government want to encourage and enable the financial institutions which have profited from Maxwell to assist the pensioners who have lost in this affair. Only those on the Opposition Front Bench seem to feel that this will be helped if the Government decide to make good some of the shortfall. There is no question of that.
It is clear that the chain of responsibilities had failings at many links, including trustees, banks, auditors, and investment advisers. The Government are doing all that they can to ensure that the assets of the Maxwell companies' pension funds are restored. We believe that all who have profited from Maxwell must meet their full responsibilities to help the Maxwell pensioners. Only those 652 on Opposition Front Bench seem to think that this will be helped by the Government stepping in to offer compensation.
§ Mr. Boateng
And the pensioners themselves.
§ Mr. Nelson
The position of the pensioners themselves varies. As has been said, some of them are being provided for by the acceptance of responsibility and continuation of payment of funds. Of course, for the time being, those pensioners are certainly content with that position. I acknowledge that there may be some uncertainty about what the future holds when a pension is not fully funded and is reliant on the commitment of the company involved. However, the Governnment have proposed a package of financial help and have instigated a review, which is as much as they can and should do in this instance. Such measures are to be warmly welcomed by contributors to and beneficiaries of pension funds at large and, in particular, by the Maxwell pensioners.
No doubt the Goode committee will consider whether a wider compensation scheme should be established for occupational pension schemes. In the meantime, the Government are not prepared to pre-empt the committee's discussions or anticipate its recommendations in any way.
I turn finally to the regulatory framework, to which the hon. Member for Brent, South referred in his closing remarks. Perhaps it will help some Opposition Members if I explain how it works. The Financial Services Act 1986 introduced a new framework for investor protection, including wide-ranging statutory powers and new criminal offences. Responsibility under the Act is shared between the Treasury, which is responsible for the Act as a whole, the Securities and Investments Board, to which responsibility for the discharge of statutory functions under the Act has been transferred as the designated agency, and the regulatory and practitioner bodies, including IMRO, which are recognised by the SIB to discharge its statutory functions.
IMRO is responsible for ensuring that, in carrying on investment business, its members meet standards of honesty, competence and solvency. It is the SIB'S job to be satisfied that IMRO continues to meet the criteria for self-regulatory bodies under the Act. These include having adequate arrangements and resources for the effective monitoring of its members and for enforcement and compliance with its rules and procedures. The Treasury is responsible for ensuring that the SIB is able and willing, as the designated agency under the Act, to discharge the statutory functions which have been transferred to it.
I do not accept that the Maxwell case demonstrates that the supervisory structure itself is deficient. The failings identified by IMRO and the SIB are shortcomings of implementation. The integrity and success of other businesses authorised under the Financial Services Act show that the regime can and does work well.
I acknowledge, however, that regulatory standards need to be strengthened. I have informed the House of the steps that are being taken by the SIB and IMRO, and the steps that my right hon. Friend will be taking to ensure that the operation of the regulatory system is sufficiently strengthened to deliver effective protection to investors.
I understand full well the concerns that the case has generated. My right hon. Friend the Chancellor stressed in his statement that he will be assessing the effectiveness of all the action already taken and proposed, together with 653 the outcome of the SIB's further reviews. There are, of course, other issues which need to be examined, including the role of the other trustees of the Maxwell pension funds.
The lessons will need to be carefully considered to ensure that the regulatory system is sufficiently strengthened to deliver effective protection to investors, including members of pension funds. The Government are determined that all the lessons of the Maxwell affair, in its many aspects, must be learnt and implemented. My right hon. Friend and I will assess in detail over the coming months the effectiveness of the steps already taken by the SIB and IMRO, the additional action now proposed and the outcome of the SIB's further review. My right hon. Friend has promised to report back to the House.
I have spoken at some length about the Maxwell case, the review and my right hon. Friend's statement. I have done so in response to the real concerns that have been raised by the hon. Member for Blackley and the general points that he and the hon. Member for Brent, South made about public confidence in the pension industry. I hope that what I have said provides them and a wider audience with some reassurance.