SECURITIES (VALIDATION) BILL. (Hansard, 25 February 1942)

§ THE LORD CHANCELLOR

My Lords, this is quite a small measure which can be readily appreciated by anybody who reads the clauses, which are very clearly drawn. The story which is connected with it, and which makes it necessary, will not be uninteresting to some members of your Lordships' House. We have Defence Finance Regulations which impose restrictions on the transfer and acquisition of securities or of any interest n securities. The House will at once appreciate that that is necessary, otherwise you might have a transfer of funds as between the non-sterling area and the sterling area, with the possibility of serious consequences upon the standing of he pound sterling and the security of our finances. That general arrangement worked very well, but a situation arose in the course of the war which called for an amendment. It was this, that in May, 1940, it became absolutely necessary to 67 secure that this rule should also apply to securities. In July, 1940, it was extended to any attempt to transfer or get an interest in life insurance policies or endowment policies. These changes were specially connected with the overrunning of the Low Countries, where there is a very large financial interest which it was most important for us to secure should not be exploited to the disadvantage of this country. Therefore we brought securities, including life insurance policies and endowment policies, within the scope of the prohibition of the Finance Regulations, and required in these cases also that the consent of the Treasury should be obtained before there could be any question of transfer as between sterling and non-sterling areas. But, as will be readily appreciated when one reflects upon it, there is a very clear distinction between the ease with which a rule of this sort can be applied to ordinary securities—stocks and shares—and the ease with which it can be applied to life policies or endowment policies.

Any of your Lordships who happens to have had occasion, either on your own behalf or as a trustee, to sell, buy, or transfer stocks and shares, knows very well that during the war, in addition to filling up the ordinary transfer form, there is another form you have to fill up giving details as to who you are and who the other party is. All this is readily provided and very carefully supervised. That is because ordinary dealing with ordinary stocks and shares is done through stockbrokers, and the Stock Exchange knows perfectly well these Regulations and can assist in having them observed. But if a man has occasion to transfer an interest in a life policy or endowment policy he does not go to the Stock Exchange, and it may well be that in all good faith he does something or other which is a breach of the Finance Regulations because it has not been brought to his particular attention. Between May, 1940, and May, 1941, there were quite a number of cases in which people, as far as we know, in complete good faith, made transfers, especially of interests in life policies or endowment policies which, in fact, offend against the Finance Regulations. That is a very serious matter because that means that the transferor has not given a good title, and it means that the man who has acquired 68 the interest in the policy is not able to transfer a good title to anybody else.

The thing is bad from the moment the mistake is made. The only way to put that right is to provide, as is done in this Bill, that as these cases are discovered, upon its being ascertained that the case is bona fide, and that there was in fact no breach of our financial fortress, no transfer as between sterling and non-sterling areas, a certificate may be given by the Treasury to validate the title retrospectively. By that process the Treasury will spread its blessing far and wide because every subsequent holder of the interest will discover he has a good security instead of a bad one. I am sure your Lordships will warmly approve of this beneficent intention. It is a small point, but it will clear up the whole matter, and I have no doubt that your Lordships will give the Bill a Second Reading.