§ Mr. TimmsI beg to move amendment No. 408, in page 33, line 5, leave out "company" and insert "body".
§ Mr. Deputy SpeakerWith this it will be convenient to discuss Government amendments Nos. 409 to 417.
§ Mr. TimmsAs hon. Members will have realised, we are not yet able to introduce amendments to part VI and 301 other parts of the Bill to take account of the decision to transfer the competent authority function from the London stock exchange to the FSA. Changes of that sort at this stage in the Bill's progress raise complicated drafting issues, although the policy itself is relatively straightforward. We shall produce amendments consequential to the proposed transfer in another place.
The amendments make relatively minor changes to part VI, largely in response to points raised by the Law Society, to which we are grateful. The exceptions are the changes to clauses 80 and 90, which change coverage of criminal offences to ensure equal treatment of all who might breach the prohibitions of those clauses. I hope that the amendments will be widely welcomed.
§ Mr. FlightThe Opposition welcome the amendments in the main, but we wonder why the Government felt it right to follow the Law Society's recommendation to make breaches by authorised firms a criminal offence, like breaches by anyone else. That contrasts with the present position, and breaks the general rule that contraventions of regulatory rules by authorised firms are not criminal offences. It would be desirable to have the Government's thinking on that point on the record.
§ Mr. Tim Loughton (East Worthing and Shoreham)I, too, should make a couple of points because I am slightly alarmed that we have before us only a few technical amendments when we were promised in Committee that there would be more substantial and detailed amendments, particularly to clause 87 and the listing details. I too would like an answer on why amendment No. 410 provides that authorised firms should face criminal charges if they fail to publish a prospectus.
In Committee, we raised serious problems concerning the Chinese walls between the FSA' s roles as a competent authority and as a regulator. The balance seems not to be right. If the FSA fails to act on listing particulars in a listing application within six months, the application will be deemed to have failed, regardless of the fact that that may be entirely down to the incompetence of officials acting for the FSA.
The amendment seems to swing the scales the other way, in that criminal charges can be brought against authorised firms which issue prospectuses, while incompetence from the FSA is subject to full immunity. I refer the House to the questions that we put in Standing Committee A on the listing particulars; they are recorded in my contribution to the Committee's proceedings on 28 October 1999, in Hansard, from column 607 onwards. The Minister promised us further details, and we assumed that we would have received them by this stage.
We need further information as to how the fine income from listing abuse will be used. Will it be rebated against fees or against the legal aid scheme? In France, for example, that income goes straight to the Treasury rather than to the equivalent of the FSA. How will the Chinese walls work, between the competent authority bringing in more revenue in its role as rule maker and enforcing the rule book? There will be a temptation to relax the rules in order that more companies should be in the listing, thus providing more listing revenue for the FSA in its role as competent authority.
That raises the issue that, currently, the stock exchange, as the competent authority, is effectively monitored by the regulator—the FSA. Who will monitor the FSA when it acts 302 as the competent authority? Those additional powers are open to abuse. How will those additional roles be resourced? As we shall see when we discuss later clauses, that is a most important question, given the extra functions that the FSA is apparently taking on.
What happens if the FSA loses its role as the competent authority? There are many questions. It has been many months since the late summer, when it was announced that the role of the stock exchange as competent authority was to be given over to the FSA. It is disappointing that we can consider only a few technical amendments at present, when much more meat should have been provided for us on Report. I very much want an answer to the questions that we have raised on amendment No. 410.
§ Mr. TimmsThe whole House welcomes the moves towards competition in this matter. We welcome NASDAQ's announcement that it wants to establish its European base in London. We also welcome other initiatives.
Some far-reaching amendments will be needed to allow us to introduce competition. In Committee, my hon. Friend the Economic Secretary to the Treasury pointed out that we should table such amendments in due course. As I said earlier, we cannot yet do that, but we shall be able to do so in another place.
The hon. Members for Arundel and South Downs (Mr. Flight) and for East Worthing and Shoreham (Mr. Loughton) asked questions about amendment No. 410 and clause 80. Clause 80 provides that it is unlawful to offer securities to the public in the UK, prior to the publication of a prospectus, in circumstances where clause 79 requires such a prospectus. It sets out the consequences of such an unlawful action, dealing differently with authorised persons and all other people.
If an authorised person engages in an unlawful offer of that sort, he is treated as having contravened rules, and may be subject to disciplinary action by the FSA. If any other person takes similar action, he will be guilty of a criminal offence and will be liable to a fine or to imprisonment.
We reviewed the case for that stark difference in treatment and concluded that we should not continue to distinguish between the authorised and the unauthorised in that way. The amendments subject all persons to the same offence and to the same penalties. That outcome could have been achieved by providing that both should be regarded as contravening FSA rules—that too would have been consistent.
However, it is a fundamental principle that only those persons who want to undertake financial services business should be the subject of FSA rules. It is hard to see how the system could work in any other way. How would the FSA discipline people breaking its rules who were not authorised? It would obviously not be able to withdraw authorisation.
In answer to the question, "Why introduce a criminal offence?", we are primarily driven by consistency. There is a lack of clarity as to whether the offence, when committed by an authorised person, would be regarded as a criminal matter under the European convention on human rights. As I noted, it is difficult to understand why behaviour committed by unregulated persons should be criminal, but when committed by regulated persons—who should be more expert—it is not. The amendments make matters more consistent.
303 Who will look after the FSA? The FSA will be accountable to Treasury Ministers—as the stock exchange is at present. However, there will be a much fuller consideration of those matters when amendments are tabled in the other place.
Amendment agreed to.