COMMONS AMENDMENTS (Hansard, 11 November 1976)

§ Lord WINTERBOTTOM
My Lords, I beg to move that this House doth agree with the Commons in their 844 Amendment No. 49. This is, I think, the only completely new Amendment which we have to consider in this House tonight and we think it a matter of some importance. From now on, I hope that the going will be downhill all the way. Perhaps I ought to explain to noble Lords its significance. We are now talking about an unlisted oversea mutual investment fund and such a fund is threatening to challenge in the courts the Department's interpretation of paragraph 6 of the Fourth Schedule to the 1948 Act. The Fourth Schedule sets out the matters to be specified in a prospectus and paragraph 6 requires there to be stated, "the amount payable" on each share on application and allotment. It has always been the Department's view that "the amount payable" meant the total amount payable on each share, including any amount payable by way of premium. A mutual fund is unable to specify the precise amount payable as the price of its shares fluctuates from day to day and is thus unable to issue a prospectus which complies with this requirement. This provision has prevented overseas mutuals (other than those exempted from the Fourth Schedule requirements by virtue of listing on the Stock Exchange) from operating in this country. However, if the present challenge to the Department's interpretation were upheld, overseas mutuals would be able to operate here without being subject to any effective supervision. I am certain from past experience that this could be highly detrimental to the interests of investors.
The Government have therefore decided to take this opportunity to put the interpretation of the relevant points beyond doubt. The interpretation of the expression of the amount payable is important for all Compnay prospectuses. It is not only related to the question of the position of overseas mutuals but it is a problem about such mutuals which makes the point urgent. For this reason, we are including this new clause in the Bill. I beg to move.

§ Lord LYELL
My Lords, as the noble Lord, Lord Winterbottom, has pointed 845 out, we regard this as a matter of some importance. He has been kind enough to point out that it is the only new paragraph in the Bill which certainly we felt did not receive the fullest discussion in another place when it was introduced. The noble Lord has said, and, indeed, the Minister in another place said, it was considered the matter which was urgent. If this was the case, there might be some reason for the time-scale when the Amendment was introduced in another place (it was about this time in the night or possibly a little later). The Government said in another place, and indeed the noble Lord has said tonight, that this measure is deemed to be necessary because a concept has been challenged. We regret slightly that the Government have not been able to he a little more specific than the answer given even this evening by the noble Lord about this Amendment, and the particular case which has given rise to the need for the Amendment.
We understand that the cases, which gave rise to this Amendment were in no sense scandalous, were in no sense improper, and that from the researches that we have been able to make this fund seems to be a properly constituted and, indeed, reputable fund.
The noble Lord will agree it is indeed most unusual to move an Amendment of this importance and magnitude even on Report in another place, when the Bill has virually completed its passage through Parliament. We think the interpretation of "amount payable" had been under consideration, or under challenge, for a reasonable amount of time. We wondered why it was necessary to move so swiftly and in such a manner. We hasten to point out it was not in an underhand manner, but at half past 12 at night on Report stage. That shows a great deal of urgency. Possibly the degree of urgency is only a matter which divides this side and the other. As the noble Lord pointed out earlier, this is not the time to differ. I suggest that we differ slightly on the need to close up this loophole. We should like to see some further discussion, but this is not possible and we accept the Amendment.

§ Lord WINTERBOTTOM
My Lords, I thank the noble Lord for his courteous acceptance of my rather shortened explanation. I agree with him that the way 846 this was introduced at a late hour of the night precluded study of the problem with a proper debate with informed study of the background situation. I should underline that nothing whatever has been improperly done by the company in question that is proposing to launch this particular mutual fund. The Government had good reason to believe that a formal challenge of the Department's interpretation of paragraph (6) was shortly to have been made in the Courts arising from this situation. They did not wish this to happen, and for this reason they—perhaps a little too rapidly—moved this clause into the Bill to clarify the position so application to Court might not be necessary. I think the House will agree there is no question of impropriety on the part of anyone in this matter.