§ ("REQUIREMENTS FOR RECOGNITION OF PROFESSIONAL BODY
§ Statutory status
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1. The body must:—
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§ Certification
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2.— (1) The body must have rules, practices and arrangements for securing that no person can be certified by the body for the purposes of Part I of this Act unless the following conditions are satisfied.
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§ Safeguards for investors
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3. The body must have rules regulating the carrying on of investment business by persons certified by it; and those rules must in respect of investment business of any kind regulated by them afford to investors protection at least equivalent to that afforded in respect of investment business of that kind by the rules and regulations for the time being in force under Chapter V of Part I of this Act.
§ Monitoring and enforcement
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4.—(1) The body must have adequate arrangements and resources for the effective monitoring of the continued compliance by persons certified by it with the conditions mentioned in paragraph 2 above and rules, practices and arrangements for the withdrawal or suspension of certification (subject to appropriate transitional provisions) in the event of any of those conditions ceasing to be satisfied.
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(2) The body must have adequate arrangements and resources for the effective monitoring and enforcement of compliance by persons certified by it with the rules of the body relating to the carrying on of investment business and with any rules or regulations to which those persons are subject under Chapter V of Part I of this Act in respect of business of a kind regulated by the body.
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(3) The arrangements for enforcement must include provision for the withdrawal or suspension of certification and may include provision for disciplining members of the body who manage or control a certified person.
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(4) The arrangements for enforcement must be such as to secure a proper balance between the interests of persons certified by the body and the interests of the public; and the arrangements shall not be regarded as satisfying that requirement unless the persons responsible for enforcement include a sufficient number of persons who are independent of the body and its members and of persons certified by it.
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(5) The arrangements for monitoring may make provision for that function to be performed on behalf of the body (and without affecting its responsibility) by any other body or person who is able and willing to perform it.
§ Investigation of complaints
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5. The body must have effective arrangements for the investigation of complaints relating to—
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§ Promotion and maintenance of standards
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6. The body must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of investment business and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility for the supervision or regulation of investment business or other financial services.").
§ The noble and learned Lord said: In speaking to this amendment, I should like, with the leave of the Committee, to speak also to amendments Nos. 84, 84A, 86 to 92, 104, 128, 139, 141, 144, 145, 148, 163, 164, 171, 174, 219, 226 to 229, 232, 233, 238, 245, 340, 346 to 348, 354 to 356, 361, 363 to 368, 382, 385 to 387, 389, and 392 to 400.
§ I wish that I could be as brief in what I have to say, but it would be helpful, I believe, to give some background to the overall purpose of the amendments. The Government recognise that a large number of professional people—solicitors, accountants, surveyors and so on—engage in investment business incidentally to the practice of their professions. 253 Indeed, in some cases, the investment business that they carry on has come to be regarded as an ancillary service that someone practising the profession in question is widely expected to provide. Clearly, there has to be a system of regulation for investment business carried on in this way. But it did not seem to us necessary that many thousands of professionals should be effectively forced into joining recognised self-regulating organisations if other arrangements could be equally effective. In particular, it seems sensible to build on the professional monitoring and disciplinary arrangements that the main professional bodies already have if this could provide adequate investor protection. That principle underlay our original proposals and indeed has not changed.
§ Clauses 15 and 16 as originally drafted provided for the authorisation of individual members of recognised professional bodies who were practising their profession on their own account or in partnership. This was because, at present, membership of such bodies is generally confined to individuals and the bodies' disciplinary sanctions are generally available only against individual members. However, it has been suggested that it would be desirable to allow in the Bill for the authorisation of other forms of practice, particularly corporate practices. The Royal Institute of Chartered Surveyors already allows its members to practise in corporate form. The Committee will be well aware that there are similar developments under way in other professional bodies. The Government accept that it would not be desirable to stand in the way of such developments. The first two new clauses, Amendments Nos. 84 and 84A, allow authorisation to be conferred on corporate practices as well as partner-ships and individuals practising on their own account. This apparently simple change—
Lord Bruce of DoningtonThe noble and learned Lord referred to the first of the two new clauses and mentioned Amendment No. 84. Is he dealing, too, with Amendment No. 79 to which I understand he is speaking?
§ Lord Cameron of LochbroomI think that Amendment No. 79 is a schedule. It is unfortunate that on the Marshalled List the schedule comes before the clauses. I am very grateful to the noble Lord.
The first two new clauses allow authorisation to be conferred on corporate practices as well as on partner-ships and individuals. This apparently simple change necessitates a large number of amendments to take account of the fact that the firm certified by a recognised professional body may not itself be a member of the body, although it must be subject to the body's rules.
The second purpose of the amendments is to clarify and extend the requirements for recognition. Some critics have suggested that the special regime for professional bodies will be what is sometimes termed a "soft option". We have always made clear that that was not our intention. The Committee will recognise that the new schedule—which is the amendment to which I am immediately speaking—includes many requirements which are derived from the correspond-ing provisions of Schedule 2 for recognised self- 254 regulating organisations. I particularly should like to draw the Committee's attention to paragraph 3. It is there made clear that the investment business rules of the body must satisfy the same equivalence test as the rules of recognised self-regulating organisations. I also draw attention to paragraph 4 which sets out the requirement for compliance of the rules to be effectively maintained and enforced.
The third main change is introduced by the third new clause, which is Amendment No. 88. That gives the Secretary of State or the designated agency an intermediate sanction, short of revocation under Clause 19, against a recognised body which fails to comply with a requirement for recognition or, indeed, with any obligation, such as an obligation to provide information to which it is subject by virtue of the Bill. The sanction is a powerful one. If a recognised body were to disregard an order of the court, it would be in contempt and liable to punishment accordingly.
It will also not have escaped the Committee's attention that while there are close similarities between the provisions relating to recognised professional bodies and those for recognised self-regulating organisations, there are two major provisions relating to the latter which have no parallel for recognised professional bodies. These are the provisions in Clause 13 for the Secretary of State or designated agency to change the rules of a recognised self-regulating organisation's rules in certain circumstances; and secondly, the immunity from liability in damages which is conferred by Clause 156.
The reason for these differences in both cases is the same. Recognised professional bodies will be regulating a limited range of investment activities on a limited scale. The power to change a recognised self-regulating organisation's rules is designed for use in circumstances where a major new abuse needs to be dealt with rapidly. But given the limited kind and scale of the business the recognised professional bodies will be regulating, it seems unlikely that such circumstances will arise in their case. Similarly, there seems to be much less risk of major claims against the body of the kind that we feared in the case of recognised self-regulating organisations and which persuaded us that it was desirable to provide immunity in their case. It would certainly be anomalous, I suggest to the Members of the Committee, to provide these bodies with immunity in relation to regulation of incidental aspects of their members' business when they do not have it, and indeed do not appear to have needed it, in relation to the regulation of their main professional business.
These amendments represent the outcome of detailed consultation with the professional bodies which are most likely to apply for recognition. I believe that they are now in general satisfied with them. They will enable a greater range of businesses to be authorised by this route while ensuring fully adequate protection to investors. I beg to move.
§ Lord DenningMay I say how much this is to be welcomed. There is the tendency nowadays in some professional bodies for them to attain corporate capacity. I think that is dealt with in one provision with regard to the Law Society which has not been put into effect yet. If these professional bodies are to come 255 in as recognised professional bodies, it is certainly very important that there should be rules attaching to them that are properly enforced.
If they conduct investment business, it must be only incidental to their main business. I remember cases in the past where solicitors used to carry on investment business on a large scale. Defendants have come before the courts saying that they were not really solicitors but moneylenders; they are caught by the moneylenders Act. We had many cases of that kind. They are to involve themselves in investment business, or to advise on investments, only when it is incidental to their main professional activity. It is therefore very important that there should be proper rules to regulate the way in which they conduct any incidental investment business. I believe those provisions are here.
With regard to the self-regulating organisations, the new Clause 156 expressly states that they are not to be liable for damages for negligence. It is their legal immunity. On Second Reading we said how good that was to enable the self-regulating bodies to be able to carry on without fear of actions for negligence being taken against them. Although it is not yet provided in Clause 156—the immunity is only at the moment for the self-regulating organisations—I expect an amendment will come later for the immunity also to apply to these self-regulating professions.
Subject to those details it seems to me that this amendment to put professional bodies on a basis so as to be properly regulated is most desirable.
§ 6 p.m.
Lord Bruce of DoningtonI should like to endorse in general what the noble and learned Lord has just said about the desirability of proper rules and regulations being laid down which cover those prospective recognised professional bodies who may apply to the Secretary of State for recognition. But before doing so I have to issue a mild protest. This is a non-controversial Bill. It is highly technical. The amendments which we are now discussing, including Amendments Nos. 79, 84, 89 and so on, came into our hands only very recently—in my own case last Friday. This does not give adequate opportunity to study them in very great detail. I have spent many hours seeking to trace them through myself. My own way of proceeding is not normally slow, but I have not yet completed the task.
The noble and learned Lord listed a series of amendments to which he was speaking which exceed the list with which we were originally provided. He announced the amendments to which he was speaking so fast that I found it impossible to list them while he was talking. This is not a satisfactory position. I quite understand that in a Bill of this kind the Government have to do their best to respond to the representations that were made in Committee in another place. They must have time to phrase the appropriate amendments to give effect to the undertakings that were given in Committee in another place. I also fully understand that in that process it is necessary to consult the prospective recognised professional bodies to see whether a suitable accommodation can be 256 arrived at between those bodies and the Government, bearing in mind that it is the Government's responsibility to govern and that they must not devote themselves exclusively to those sectional interests that quite properly represent their views to them. Here, I must declare an interest in that I am a member of the Institute of Chartered Accountants, which is one of the prospective bodies applying for recognition.
I am bound to say that so extensive are the amendments, which cover additions to schedules, then switch to amendments to clauses and then switch to new clauses after existing clauses, that it makes the Bill very difficult to comprehend as a whole. Therefore, it is certainly the case that these matters will have to be discussed far more extensively on Report than would otherwise have been the case. It would have been far better if the Government had not rushed this Bill so as to get its Committee stage completed before the Recess. The Bill is not a controversial Bill in the ordinary party sense of the term, and one really cannot see the urgency for this highly complex measure being pressed through at such a speed, and necessitating late sittings.
I shall refer only to three or four of the amendments on which I have some observations to make. I would refer the Committee to Amendment No. 79, and specifically to paragraph 2(3), which says:
Where the certified person is an individual his main business must be the practice of the profession regulated by the certifying body and he must be practising that profession otherwise than in partnership; and where the certified person is not an individual that person's main business must be the practice of the profession or professions regulated by the recognised professional body or bodies of which the individual or individuals mentioned in subparagraph (2)(b) above are members".I hope that the precise meaning of that is very clear to us all. However, I would refer to the noble and learned Lord's initial observation that we have to take into account surveyors of incorporated practices, and, with respect, I am bound to point out to the noble and learned Lord that this particular section carries no reference to incorporated practices. It may well be that further consideration will have to be given to that part of the schedule.As regards Amendment No. 84, I am happy to inform the noble and learned Lord that so far as I can see, we are in agreement with him. It does not appear—at any rate now—to call for any special treatment. Turning to Amendment No. 86, which deals with an amendment to Clause 18, perhaps I may read to Members of the Committee the wording of the proposed subsection (2A) which is incorporated in the amendment. It states:
The body must have rules which impose acceptable limits on the kinds of investment business which may be carried on by persons certified by it and the circumstances in which they may carry on such business and which preclude a person certified by that body from carrying on any investment business outside those limits unless he is an authorised person otherwise than by virtue of the certification or an exempted person in respect of that business.With the greatest possible respect and in complete sympathy with the noble and learned Lord's general intention, I would make the observation that that is not drafted with the utmost clarity. Perhaps I may ask the noble and learned Lord to say what they cannot do and list it as A, B, C, D, and E. In that way, I think that the noble and learned Lord will probably achieve exactly the same purpose but in a less convoluted manner.257 Turning to the remaining amendments—or those that I could hear, because the noble and learned Lord read out the list very rapidly—I am bound to say that I think it is only fair that the recognised professional bodies concerned should be given an opportunity, once the Government have passed these amendments, of reviewing their effect in its totality against the ever-changing nature of the Bill itself. In that way adequate opportunity may be given to re-examine these matters on Report and, if necessary, to make more detailed amendments at that particular stage, though I sincerely hope that that will not be necessary.
I know that the noble and learned Lord is very pressed in relation to these particular matters, but perhaps I may urge him that when the proceedings on Committee are completed he takes steps to ensure that the printed text of the Bill as amended in Committee is made available with the utmost speed, so that the consultations to which I have referred may take place within adequate time before the Report stage, and so that at the Report stage we can amend those particular amendments which so far we have not had an opportunity of considering in detail.
§ Lord EzraI should like to associate myself with the mild strictures indicated by the noble Lord, Lord Bruce of Donington. We are here presented with over 50 amendments by the Government en bloc, and at such short notice it is very difficult for us to give them proper consideration. Those of us who prepared ourselves for the debates on this Bill have taken a great deal of trouble to consult outside organisations of relevant knowledge and experience so as to guide us in making a proper contribution to these debates. To be presented with these 50 amendments in this way has made it quite impossible for any sort of consultation. Therefore, I can only agree entirely with the noble Lord, Lord Bruce, that, when the Bill is amended in the light of the discussions at the Committee stage, we should have plenty of time to take the amended version to our various advisers. That means that inevitably we shall have a longer Report stage than might otherwise have been necessary.
§ Lord Cameron of LochbroomI have obviously taken note of the remarks that have been made about the tabling of amendments. I understand that the main amendments were tabled last Tuesday and that briefing notes on the government amendments have been made available through the Whip's office. The briefing note on this group of amendments has been available for some days and it spells out all the consequential and transitional provisions that are included in this group as well as the substantive provisions. However, obviously I take note of what has been said by noble Lords opposite.
Perhaps I may just respond to one or two of the detailed points which were raised. As regards immunity, which I think was raised by the noble and learned Lord, Lord Denning, that would be deferred until we come to Amendment No. 358. Paragraph 2(3) in the schedule deals with the intention that these bodies should only certify and regulate practices which undertake investment business incidental to their profession. I think that the noble Lord, Lord Bruce, was concerned about the matter of authorisation of bodies corporate, and that can be found in subsection '2) of Amendment No. 84.
258 So far as the substantial number of amendments is concerned—and I am sorry I read out the list at such length—in fact the main and very substantial proportion of them are simply amendments which showed references from members of these bodies to certified persons in the later clauses of the Act. Certainly I would hope that with the Recess, when they are incorporated within the Bill as amended, there will be ample time for consultation with professional bodies. I would simply say that it is the main amendments to which the noble Lord opposite spoke particularly which present, as it were, the full meaning of these amendments.
Lord Bruce of DoningtonIn the case of contentious legislation I have been known to express myself somewhat forcibly on the arguments that are involved. In this particular case, I think it will be agreed that I raised a very mild protest at the way in which this whole business has been handled. The noble Lord opposite offered no contrition in respect of that. The noble Lord seemed to think that because some of the amendments were available last Tuesday, and the explanatory notes and the remainder of the amendments arrived on Friday, that is somehow adequate time; or at any rate that is what he implied. Having expressed my objections mildly, I must now express them strongly. This is not the way in which the Committee should be treated on a Bill of this kind, and I express the hope at least that some expression of contrition will come from the Government for the way they have treated the Committee over the whole of the Bill so far.
§ Lord Cameron of LochbroomI obviously regret that the noble Lord feels as strongly as he does. His was a mild protest at the start, and I merely took note of it. Certainly I regret that the noble Lord did not have sufficient time. Of course, these matters are dealt with through the usual channels. I merely pointed out that we have endeavoured to assist by making the Notes on Clauses available. However, I take note of what the noble Lord has said.
§ On Question, amendment agreed to.
§ Clause 11 agreed to.
§ Clause 12 [Compliance orders]:
§ 6.15 p.m.
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Lord Silkin of Dulwich moved Amendment No. 80:
Page 9, line 36, after ("steps") insert ("including any alteration to its rules proposed by the organisation where the Court is satisfied that such alteration would result in the rules satisfying subsection (3) of section 10 or the requirement in question, as the case may be.)").
§ The noble and learned Lord said: I beg to move Amendment No. 80 standing in my name and that of my noble friend Lord Williams of Elvel. I am glad to say that, with the permission of the Committee, I wish to speak only to Amendments Nos. 81, 82 and 83.
§ These amendments are concerned with Clauses 10, 11, 12 and 13 of the Bill. Clause 10, the Committee will recall, is the clause which provides for the grant and refusal of recognition in the form of a recognition order to an SRO, and lays down certain conditions for that recognition. Clause 11 provides for the power of 259 the Secretary of State to revoke the recognition order where the conditions concerned have not been complied with either by action or by the rules of the organisation.
§ Clause 12 comes to a different method of dealing with the same situation in that it provides that the Secretary of State, instead of revoking the recognition order under Clause 11, may make an application to the court under Clause 12. It goes on to provide that if the court decides that the requirement has not been met, or the condition not satisfied, then it may order the organisation to take such steps as the court directs for securing that the requirement or condition is satisfied, or the obligation complied with, as the case may be.
§ Clause 13 provides yet a third possible way of dealing with this situation in that the Secretary of State, instead of using his powers under Clause 11 to revoke, or Clause 12 to make an application to the court, may direct the organisation to alter, or may himself alter, its rules to bring it into compliance with the requirements. That clause then provides that if the SRO fails to comply with that direction, the Secretary of State may go to the court and obtain an order by way of mandamus or, in Scotland, specific performance, requiring the SRO to give effect to the direction.
§ This clause provides a futher recourse to the court, in this case by the SRO itself. Under subsection (5), it provides that an SRO whose rules have been altered in this way may apply to the court. It also provides that if the court is satisfied that the rules without the alteration satisfy the requirements mentioned, or alternatively that other alterations proposed by the organisation would result in the rules satisfying the requirement, then the court can set aside the alteration or the direction, as the case may be, and it can order the organisation to make the alteration proposed.
§ I shall come to subsection (8) later, because it is not wholly or directly connected with the point I am now making. One has a number of different methods by which the matter can be put right where one has the situation of a requirement not being met in the rules. What is peculiar about this group of clauses, particularly Clauses 12 and 13, is that there are a number of different methods of reference to the court which seem to provide different results.
§ Thus, on the application of the Secretary of State to the court under Clause 12, one has a power in the court to require the SRO to take such steps as the court directs to secure the requirement is complied with. In the case of Clause 12, one has, first of all, provision for an order by way of mandamus and, following that, provision for the SRO itself to apply to the court, and for the court then to allow alterations to be made to the rules, not necessarily those which the Secretary of State requires, but alterations which the SRO itself thinks would give effect to the compliance with the requirements where the court agrees. But that power is not provided for in Clause 12, and I am not altogether clear why.
§ The amendments to which I am speaking now, and that which I am moving, No. 80, seek to assimilate these various procedures to one another so that, first of all, there is no duplicity of court proceedings. In 260 relation to Clause 12, for example, if the Secretary of State uses the mandamus provision, it enables the SRO upon that provision to ask the court for whatever remedies can be made in any of these clauses. It excludes altogether the provision which enables the SRO to go to the court. Take the view—which I suggest is the right one—that if you have a mandamus provision so that the Secretary of State is required to go to the court, if the SRO does not wish to comply with the direction, if it does not think it right to comply with the direction, then upon the application for the mandamus it ought to be possible for the court to exercise all the powers that it otherwise could to order that the rule be altered, or that it be in accordance with the direction of the Secretary of State, or that it be altered in accordance with the proposal put forward by the SRO, provided that the court is satisfied that that would fulfil the purpose.
§ I should be grateful if the noble and learned Lord the Lord Advocate, who I imagine is to reply, or the noble Lord the Minister, if he is to reply, would explain why it is thought necessary to have so many different recourses to the court in these clauses, and whether one could not simplify it in the sort of way—I do not say necessarily exactly as I propose in my various amendments—which follows the principle of avoiding both an excess of litigation and also different forms of litigation which may produce totally different results.
§
The remaining amendment is Amendment No. 83. That is on slightly different lines from those I have spoken to up to now. It refers to a subsection that I find very odd. It is the subsection in Clause 13 which makes this provision:
The fact that the rules of a recognised organisation have been altered by or pursuant to a direction given by the Secretary of State or pursuant to an order made by the court, under this section shall not preclude their subsequent alteration or revocation by that organisation.",
§ that is to say, the self-regulating organisation.
§ You have a direction by the Secretary of State saying, "Alter your rules", or an order by the court saying, "Alter your rules". The SRO must do so; but under subsection (8) it can then make a new alteration apparently going back to the first provision of the rules. On the face of it it looks as though one can have a perpetual game of ping-pong between the SRO and either the Secretary of State or the court, as the case may be. I am sure that is not intended, but that is how it appears to read. I should be grateful if the Minister could explain the point of that. I beg to move.
§ Lord Lucas of ChilworthI am quite sure that the noble and learned Lord opposite will appreciate that in legal matters I certainly do not have any of the knowledge or indeed wealth of experience that he has, but I shall do my best to explain our intention in these arrangements. Perhaps I may turn in my explanation to the noble Lord's first amendment in the group. It might be helpful were I to say that the powers of the court under Clause 12(2) already allow it to give a direction of the kind specified in the noble Lord's amendment. Therefore, I do not think that anything is to be gained here.
Perhaps I may now turn to Amendments Nos. 81 and 82, the first two to Clause 13. They relate to the mechanism by which a recognised self-regulating 261 organisation may ask the court to set aside a rule change made by the Secretary of State or designated agency. I think it is important to bear in mind that the provisions of this clause have to strike a delicate balance. On the one hand, it is I think generally agreed that the Secretary of State or designated agency must have the ability to move quickly to change an organisation's rules when investor protection requires it.
On the other hand, if the organisation is to maintain authority over its members and the prestige necessary to attract the right kind of personnel it will need to fulfil its role, it must have a considerable degree of autonomy and must feel itself free of day-to-day interference. The provisions of this clause we believe strike the right balance between these objectives, but they do have to be viewed as a package. As a package they have been accepted by both the SIB and the self-regulating organisations which are so arranging their affairs so as formally to apply for recognition. Therefore, all of them have been brought along with this, and they have accepted this package.
Any change to one of the elements of the package would upset the balance. The change that the noble Lord proposes would be particularly damaging as it would deprive the self-regulating organisation of its right to ask the court to review a rule change imposed by SIB. To get a review it would have to defy SIB and wait for SIB to take action against it. This would hardly be conducive to good relations. It would leave the investors without the benefit of the rule change in the meantime.
So far as Amendment No. 83 is concerned (the third amendment to Clause 13) I ought to start by explaining the purpose of subsection (8). The real purpose here is to prevent a rule, once changed by the Secretary of State or designated agency, from being set in stone despite later changes in circumstances in which a change would be not only acceptable but positively desirable. If a recognised self-regulating organisation were to use this provision in an attempt to frustrate a change of rule imposed by the Secretary of State or designated agency, there would be a number of safeguards available.
For instance, an application could be made to the court under Clause 12 for an order directing the organisation not to change the imposed rules; and I understand that a breach of such an order would constitute contempt of court. And, of course, behaviour of this kind by a self-regulating organisation would form grounds for the revocation of its recognition under Clause 11. We believe that these sanctions will be an adequate safeguard against abuse of the ability to change rules by virtue of subsection (8).
It must be recognised that the variety of ways of referring to the court is important. These routes were quite intentional. The provisions are intended to deal with different circumstances. The availability of mandamus or specific performance in Clause 13 is to ensure that the Secretary of State's direction is enforce-able. Quite frankly, we hope that it never would happen, that an SRO would defy a direction and trigger the proceedings. But the three different routes all have different, but at the same time, 262 complementary purposes, and that is the reason it is set down in this way. I hope that is helpful to the noble and learned Lord, Lord Silkin.
§ 6.30 p.m.
§ Lord Silkin of DulwichI am grateful to the Minister for his explanation. He has explained—I am not sure whether wholly satisfactorily: I shall need to read what he has said in the Official Report before making my mind clear on that—the need for a number of different ways of reaching the court. I am still not wholly convinced that could not be simplified and if it can it is clearly desirable to simpify it. However, we shall look at that. What 1 do not think he has answered is why there should be different varying remedies in relation to the powers of the court when one reaches the court. In other words, why, by whatever route one reaches the court, should not the court have exactly the same powers under each of these clauses? It is manifest from the provisions set out, which are different in the clauses concerned, that it must be intended that there should be different remedies according to which route is taken. That I do not follow and I hope the Minister will undertake (even if he feels that the agreed balance prevents him from entering the number of different ways of approaching the court) to consider that to see whether it can be simplified so that the same remedies are available in each case.
§ Lord Cameron of LochbroomPerhaps I may assist the noble and learned Lord. I think the reason for what appear to be different remedies is that if one deals with Clause 13, one is dealing with an application by the Secretary of State to enforce an order or a direction which he himself has made. Therefore, it is appropri-ate as I understand it in English procedure to seek a mandamus and in Scotland an order for specific performance.
Clause 12 deals with different situations, not the failure to obey a direction of the Secretary of State, but a failure to satisfy a requirement or a failure to comply with an obligation under Clause 12(1). In those circumstances in which the failure may have arisen, it must mean that the court must have a certain discretion about how it is to secure that that require-ment is satisfied or that that obligation is complied with. Hence one finds in subsection (2) that the discretion given is a discretion to the court to take such steps as the court directs to secure the object which is that the requirement is satisfied or the obligation complied with. In certain circumstances it may simply be a direction, but in other circumstances one could see that it would set out specific steps that have to be taken; a much more specific order.
§ Lord Silkin of DulwichI thank the noble and learned Lord for that helpful explanation. At the same time the dispute between the Secretary of State or the SIB, as the case may be, and the SRO may precisely be whether the rule that has been made brings the SRO into compliance with the requirements. The SRO says "Yes", the SIB says "No", and the SRO says "We shall adhere to our rule. We do not agree with you". They may be right. They are then taken to court by way of mandamus and that at that stage they cannot 263 say to the court. "We are prepared to amend our rule in a way which we think, if there is any doubt at all, will bring it into conformity". The court has no power to order that that amended rule be substituted. That is the major point I have in mind. I hope the noble and learned Lord the Lord Advocate will look at that. On the assumption from his appearance he is prepared to do so, I ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 12 agreed to.
§ Clause 13 [Alteration of rules for protection of investors]:
§ [Amendments Nos. 81 to 83 not moved.]
§ Clause 13 agreed to.
§ Clause 14 agreed to.
§ Clause 15 [Authorisation by membership of recognised professional body]:
§ On Question, Whether Clause 15 shall stand Part of the Bill?
§ Lord Cameron of LochbroomI spoke to the new clauses which are contained in Amendments Nos. 84 and 84A and in the light of those I beg to move that Clause 15 shall not stand part of the Bill.
§ Clause 15 disagreed to.
§ Clause 16 [Professional bodies]:
§ On Question, Whether Clause 16 shall stand part of the Bill.
§ Lord Cameron of LochbroomIn like manner I beg to move that Clause 16 shall not stand Part of the Bill.
§ Clause 16 disagreed to.
§
Lord Cameron of Lochbroom moved Amendment No. 84:
After Clause 16, insert the following new clause:
§ Authorisation by certification by recognised professional body. ("Persons authorised by recognised professional bodies.
§
§ The noble and learned Lord said: Amendments Nos. 84 and 84A have already been spoken to.
§ On Question, amendment agreed to.
§
Lord Cameron of Lochbroom moved Amendment No. 84A:
Insert the following new Clause:
§ ("Professional bodies.
§
§ On Question, amendment agreed to.
§ Clause 17 agreed to.
§ Clause 18 [Grant and refusal of recognition]:
§ [Amendment No. 85 not moved].
§ Lord Lucas of Chilworth moved Amendment No. 86:
§
Page 12, line 39, leave out from ("that") to end of line 18 on page 13 and insert ("the requirements of subsection (2A) below and of Schedule (Requirements for recognition of professional body) to this Act are satisfied as respects that body.
§
(2A) The body must have rules which impose acceptable limits on the kinds of investment business which may be carried on by persons certified by it and the circumstances in which they may carry on such business and which preclude a person certified by that body from carrying on any investment business outside those limits unless he is an authorised person otherwise than by virtue of the certification or an exempted person in respect of that business.").
§ The noble Lord said: Amendments Nos. 86 to 90 have already been spoken to.
§ On Question, amendment agreed to.
The Deputy ChairmanI cannot now call Amendment No. 86A.
Clause 18, as amended, agreed to.
Clause 19 [Revocation of recognition]:
§
Lord Lucas of Chilworth moved Amendment No. 87:
Page 13, line 27, leave out ("any of the requirements of subsection (2) of that section are") and insert ("section 18(2A) above or any requirement of Schedule (Requirements for recognition of professional body) to this Act is").
§ On Question, amendment agreed to.
§ Clause 19, as amended, agreed to.
§
Lord Lucas of Chilworth moved Amendment No. 88:
After Clause 19, insert the following new clause:
§ ("Compliance orders.
§ .—(1) If at any time it appears to the Secretary of State—
- (a) that subsection (2A) of section 18 above or any requirement of Schedule (Requirements for recognition of professional body) to this Act is not satisfied in the case of a recognised professional body; or
- (b) that such a body has failed to comply with any obligation to which it is subject by virtue of this Act,
§ (2) If on any such application the court decides that subsection (2A) of section 18 above or the requirement in question is not satisfied or, as the case may be, that the body has failed to comply 265 with the obligation in question it may order the body to take such steps as the court directs for securing that that subsection or requirement is satisfied or that that obligation is complied with.
§ (3) The jurisdiction conferred by this section shall be exercisable by the High Court and the Court of Session.").
§ On Question, amendment agreed to.
§ Clause 20 [Notification requirements]:
§
Lord Lucas of Chilworth moved Amendment No. 89:
Page 13, line 36, leave out subsections (1) to (3) and insert—
§
("(1) The Secretary of State may make regulations requiring a recognised professional body to give him forthwith notice of the occurrence of such events relating to the body, its members or persons certified by it as are specified in the regulations and such information in respect of those events as is so specified.
(2) The Secretary of State may make regulations requiring a recognised professional body to furnish him at such times or in respect of such periods as are specified in the regulations with such information relating to the body, its members and persons certified by it as is so specified.
(3) The notices and information required to be given or furnished under the foregoing provisions of this section shall be such as the Secretary of State may reasonably require for the exercise of his functions under this Act.
(3 A) Regulations under the foregoing provisions of this section may require information to be given in a specified form and to be verified in a specified manner.
(3B) Any notice or information required to be given or furnished under the foregoing provisions of this section shall be given in writing or in such other manner as the Secretary of State may approve.").
§ On Question, amendment agreed to.
§
Lord Lucas of Chilworth moved Amendment No. 90:
Page 14, line 14, after ("but") insert ("(a)").
§ On Question, amendment agreed to.
§
Lord Lucas of Chilworth moved Amendment No. 91:
Page 14, line 18, at end insert ("; and
(b) notice need not be given in respect of any rule or guidance, or rules or guidance of any description, in the case of which the Secretary of State has waived compliance with this subsection by notice in writing to the body concerned; and any such waiver may be varied or revoked by a further notice in writing.").
§ On Question, amendment agreed to.
§
Lord Lucas of Chilworth moved Amendment No.92:
Page 14, line 19, after ("of) insert (", or of regulations under,").
On Question, amendment agreed to.
§
Lord Hacking moved Amendment No. 93:
Page 14, line 19, at end insert ("and shall not be actionable except at the suit of the Secretary of State".).
§
The noble Lord said: I am sorry to stop the Committee in its grand gallop through so many amendments, but perhaps I may ask the Committee to pause for a short time on Amendment No. 93 which stands in my name. Clause 20 requires that recognised professional bodies notify the Secretary of State if they prohibit one of their members from carrying on an investment business or rescind such prohibition. Subsection (5) states:
Contravention of this section [or any regulations made under it] shall not be an offence".
§ Previously, subsection (5) stated that a contravention would, however, be actionable at the suit of any person who suffered loss or was otherwise adversely affected. The latter provision was deleted, as I understand it, during the passage of the Bill in another place.
§ Subsection (5) is now silent as to whether the contravention is actionable. However, in view of the absence of any penalty for contravention, it is likely, I submit, that as a matter of general law a person who suffers loss as a result of a breach of statutory duty would have a right of action against a recognised professional body. If no immunity is granted to recognised professional bodies—and this is a subject to which the noble Lord, Lord Bruce, and I will come back again in this Committee—on the lines of the immunity afforded to SROs, it is important, in my submission, that subsection (5) should make clear that no right of action arises against a recognised professional body in respect of a contravention, at least in so far as the general public are concerned. That is the purpose of my amendment. I beg to move.
§ Lord DenningI hope that later on it will not be actionable at all, that there will be immunity similar to that for SROs for professional bodies, that is, immunity from civil action. In case that is not carried at a later stage, I would certainly welcome this amendment. It should not be actionable except at the suit of the Secretary of State. In other words, I hope that later on it will not be actionable at all. Meanwhile, let this pass through.
§ Lord Cameron of LochbroomWhen this clause was amended in another place, we deliberately did not go further, say, expressly to remove remedies which were available at common law. I would suggest to the Committee (as I stated earlier) that we would be going too far in doing this in regard to the recognised professional bodies. There may be some doubt as to whether such remedies would be granted to an individual, but it should be open to someone who is suffering loss as a result of a failure to notify—for example, one thinks of a member whose name has been omitted from the register of authorised persons—to seek a remedy from the courts.
If the amendment were accepted he would be deprived of that option and his only recourse in those circumstances would be to persuade the Secretary of State to act; and it might be difficult to see why in such circumstances the Secretary of State should have any interest to secure that. For those reasons, I would suggest to the Committee that this amendment should not be accepted. Perhaps the noble Lord might like to think about what I have said and perhaps withdraw it.
§ Lord DenningI think that later on when, after Amendment No. 156, we come to deal with the liabilities of recognised professional bodies, the real debate can take place.
§ Lord HackingI readily adopt the proposal by the noble and learned Lord, Lord Denning, that the appropriate time to come back to this subject—and I do not accept the argument presented by the noble and learned Lord the Lord Advocate; but perhaps I may 267 leave that aside for a moment—will be when we come to Clause 156. So, may the gallop continue! I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 20, as amended, agreed to.
§ Clause 21 [Authorised insurers]:
§ 6.45 p.m.
§
Lord Williams of Elvel moved Amendment No. 94:
Page 14, line 28, at end insert—
("provided that such investment business is conducted in the same manner as it would be if that body were a member of the relevant self-regulating organisation")
§ The noble Lord said: I beg to move Amendment No. 94 which stands on the Marshalled List in my name and that of my noble friend Lord Bruce of Donington. It may be for the convenience of the Committee if I were to speak also to Amendment No. 95.
§ We are here dealing with insurance companies and (in Amendment No. 95) friendly societies which, to a certain extent, come outside the provisions relating to authorised persons conducting investment business. There has been considerable debate about whether these companies or friendly societies should be within the ambit of the Bill. The Government decided that they should not be within the ambit of the Bill. Nevertheless, there is a certain amount of feeling in various quarters that the rules which apply to other people who are conducting similar investment business should apply to insurance companies and to friendly societies.
§ I am sure that noble Lords opposite are aware of the controversy that surrounds this matter. I believe that insurance companies and, equally, friendly societies ought in some measure—and our amendments try to stipulate in what measure—be required to set rules which ensure that the conduct of their investment business is exactly the same and is conducted on the same lines as if they were members of the relevant self-regulating organisation. I beg to move.
§ Lord Lucas of ChilworthI shall do my best to give the noble Lord some explanation because I fear that the amendments are based on a misunderstanding about how the insurance companies and the friendly societies are treated under the Bill. Both these organisations, the insurance companies and the friendly societies, are already subject to statutory systems of authorisation and regulation. These are designed to protect the policyholders from the risk of their insolvency. Clearly, there will continue to be a need for such regulation after the regulatory system in this Bill has come into effect.
The treatment of insurance companies and friendly societies in the Bill reflects the need to integrate in a sensible fashion parallel systems of authorisation and regulation where the activities covered are common and central to the business of insurance companies and friendly societies.
Clauses 21 and 22 of the Bill now provide automatic authorisation for, respectively, insurance companies and friendly societies whose activities fall within the 268 scope of the Bill. This automatic authorisation is provided for two reasons. First, as I have sought to explain, there are already regulatory systems for these businesses and they already have to satisfy the authorities about their fitness to carry on the business. Once authorised, they will be subjected to stringent supervision, in the case of insurance companies, by the Secretary of State, and, and in the case of friendly societies, by the Chief Registrar of Friendly Societies.
We believe that it would not be desirable if insurance companies and friendly societies were to be placed in a position in which they had to satisfy more than one authorising body in order to carry on their business. In particular, it would be unfortunate if there were to be any conflict between the requirements for authorisation under the Bill and the regulation of the solvency of insurance companies and friendly societies.
The second reason arises out of our European Community obligations. There is a Community directive which lays down how bodies carrying on insurance businesses should be authorised and regulated. We have, as I have said, such authorising and regulatory systems for insurance companies and friendly societies, but we could not impose a further authorisation requirement because the directive prohibits any restrictions on the establishment of insurance businesses except those required or permitted by the directive itself. It follows therefore that making the further requirement which the noble Lord seeks would be contrary to our obligations under the Community directive.
The amendments and the way in which the noble Lord, Lord Williams, presented them and his justification seem perhaps misconceived in that insurance companies and friendly societies are not exempt from all rules made under the Bill. They receive automatic authorisation, but will still be subject to regulation. Schedules 8 and 9 to the Bill restrict the rule-making power over insurance companies and friendly societies so as not to interfere with the system for the regulation of their solvency; but there remains a substantial area in which the rules will apply.
In particular, the marketing and promotion of policies by insurance companies and friendly societies will be regulated under the Bill. That will be so whether or not the company or the society is a member of a self-regulating organisation. If it is not, rules made by the Secretary of State or the designated agency will apply. I think that is fairly straightforward. I noticed the noble Lord winced at one moment and I think I can guess why, but I believe he will find that fairly clear in regard to the need to meet our obligations in the Community.
§ Lord Williams of ElvelI am most grateful to the noble Lord for I find it admirably clear; but it does not answer the point I was trying to make. The noble Lord will be aware that there has been extensive correspon-dence between the chairman of the City Capital Markets Committee and the noble Lord's honourable friend on the question of how insurance companies manage their investments. His honourable friend in another place has indicated, I think, that there will be some form of letter or assurance under these arrange- 269 ments to make sure that, even though they get automatic authorisation, insurance companies will be required to conduct their investment management more or less similarly to other organisations.
What I am seeking to do is to make sure that this is absolutely crystal clear because, as the chairman of the City Capital Markets Committee has pointed out in the correspondence with the noble Lord's honourable friend, which has lasted quite a long time, to have certain investment management businesses carefully controlled under the authorisation principle and to have others given automatic authorisation without having similar rules creates an imbalance. It means that many people who manage great volumes of funds are not necessarily bound by the same rules as those who are managing investments as authorised persons. That is the point I was trying to make.
§ Lord Lucas of ChilworthI am grateful to the noble Lord. I suggest to him that since there is an amendment down in my name (No. 260) which puts forward proposals for dealing with the way in which insurance companies manage their funds, it might be better if we were to discuss the particular point which the noble Lord, Lord Williams, is now raising when we come to my amendment rather than connect it with the way in which insurance companies and friendly societies generally are dealt with in the Bill, which is really what his amendment seeks to do.
§ Lord Williams of ElvelI am very happy to discuss this question at whatever point the noble Lord the Minister seeks to discuss it. In fact, as he will notice, I have put down another amendment to one of the schedules which seeks to achieve the same thing. I am perfectly happy to discuss it when we reach Amendment No. 260. I would only plead in my defence that these amendments are coming along at a very rapid rate and sometimes it is rather difficult to catch up with all the Government amendments that are coming through.
I apologise to the noble Lord the Minister if I have raised a point which properly should be dealt with after Clause 115. In the light of what the noble Lord has said, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 21 agreed to.
§ Lord Williams of ElvelI am sorry to interrupt at this stage, but did I also understand the noble Lord to say that there was a subsequent Government amendment tabled on similar lines as regards friendly societies, as well as insurance companies?
§ Lord Lucas of ChilworthNo; it is to deal only with insurance companies.
§ Lord Williams of ElvelThen, with the leave of the Committee, I should like to discuss the question of the funds of friendly societies, because I would make exactly the same arguments about friendly societies and the way they manage their funds.
§ The Deputy Chairman of Committees (Lord Nugent of Guildford)In order to get the Question before the committee, I shall call Amendment No. 95, so that the noble Lord, Lord Williams, can address his remarks to that.
Clause 22 [Registered friendly societies]:
§
Lord Williams of Elvel moved Amendment No. 95:
Page 14, line 40, at end insert ("provided that such investment business is conducted in the same manner as it would be if that body were a member of the relevant self-regulating organisation")
§ The noble Lord said: I am most grateful to the noble Lord the Deputy Chairman of Committees. The arguments are essentially the same. I do not want to go through the speech I have made which the noble Lord the Minister told me was quite out of place and which he said I should make at a later stage. Nevertheless, even at this stage I must make this point about any organisations such as friendly societies which manage very large volumes of funds. While perhaps they should not be subject to the same rules—because I understand what the noble Lord the Minister has said about automatic authorisation—they should at least have rules regarding their investment management which are consistent and coherent with those which pertain in the case of authorised persons. Having made my speech, I am afraid for the second time, I beg to move.
§ Lord Lucas of ChilworthI would prefer to take this point on board when we discuss the insurance companies, purely and simply because I think there will have to be much greater consideration of the need for similar provisions for friendly societies. Up to now we have not thought that the need was similar to that of insurance companies. The noble Lord, Lord Williams, makes the point that in his view there is an equal need. I will just have to take that on board and give further consideration to it.
§ Lord Williams of ElvelI am most grateful to the noble Lord the Minister for his words, and in the light of his assurance that he will take this on board and that we will discuss it at a later stage of the Bill I beg leave to withdraw my amendment.
§ Amendment, by leave, withdrawn.
§ On Question, Whether Clause 22 shall stand Part of the Bill?
§ Lord Graham of EdmontonI am sorry to appear tiresome, but the Minister will recall that during the Second Reading on 1lth July, at col. 632, I made a brief reference to Clause 22. What I understood, following exchanges in the Standing Committee between the Minister in charge of the Bill and my honourable friend Bryan Gould, was that some clarity and understanding had been reached on the import of Clause 22 to friendly societies, because that is what the clause deals with, and also to those friendly societies which have what are known as branch societies, where they are not only centralised, but have in addition many branches.
271 The Minister will recall that he was kind enough to say at col. 654 of the Official Report of 1lth July 1986:
I understand that officials in my department have today written to the friendly societies liaison committee concerning the authorisation of the business of branches of friendly societies, which was the point of concern. The letter seeks to assure them that Clause 22 authorises such business. No doubt if the noble Lord has further questions he will come back to us, perhaps directly rather than by way of amendment".As the Committee knows, and as the Marshalled List indicates, this matter is not important enough to put down amendments and I merely seek clarification.I understand that correspondence has taken place but that the friendly societies liaison committee would very much like the Minister to indicate that nothing in Clause 22 is intended to affect the relationship of branch societies with the order, the nature of that relationship being governed by the Friendly Societies Act 1974. If the Minister can indicate that that is correct and has his approval, that will certainly be satisfactory to the friendly societies.
§ 7 p.m.
§ Lord Lucas of ChilworthI am most grateful to the noble Lord, Lord Graham, for indicating his intention to raise this point about the impact which the provisions of this Bill—in particular, Clause 22—will have purely on the relationship between the central office and the branches of orders of friendly societies. It is not the intention that this provision should alter that relationship. I think all that the noble Lord, Lord Graham, wants from me is that assurance, which I gladly give.
§ Lord Graham of EdmontonI am most grateful.
§ Clause 22 agreed to.
§ Clause 23 [Operators and trustees of recognised schemes]:
§ On Question, Whether Clause 23 shall stand part of the Bill?
§ Lord Williams of ElvelI should like to seek clarification on something which I am afraid I do not understand; it is on Clause 23(b). From the Notes on Clauses and from what is in the Bill, I think I understand Clause 23(a), but I do not quite understand how an authorised person under Clause 78 can be authorised to conduct,
investment business which is carried on by him in connection with or for the purposes of that scheme".It seems to me a very wide definition of an authorisation that is given to somebody under a collective investment scheme, which Clause 78 refers to as an overseas scheme. I wonder whether the noble Lord the Minister could very kindly help me on that point.
§ Lord Lucas of ChilworthI shall try to help the noble Lord. This clause is essential to give effect to our obligations under the undertakings for collective investment in the transferable securities directive. It 272 confers on the operator or trustee of a collective investment scheme, which is authorised in another EC member state in accordance with the provisions of that directive and recognised under Clause 78, automatic authorisation in respect of two categories of investment business.
The directive that was adopted last year is intended to harmonise the laws applying to certain collective investment undertakings, in order to facilitate intra-Community trade. However, when selling units in another member state the operator must comply with local marketing laws.
The directive will be implemented in this Bill. Clause 78 provides for the recognition of UCITS based in other member states which satisfies the require-ments of that clause. The requirements will limit the application of that clause to UCITS which come within the scope of the directive, though it would be possible to extend the use of that clause to other collective investment undertakings, subject to future harmonisation directives. Recognition under Clause 78 may be refused only where the manner in which the units are to be marketed breaches our marketing rules.
The automatic authorisation under this clause follows the requirements of the directive, and the automatic authorisation is limited to only that kind of investment business. If, however, they conduct other investment business not connected with the operation of the UCITS scheme, then the operator or trustee must obtain authorisation under one of the other ways provided by the Bill. It is because the authorisation is so limited that, by virtue of Clause 78, the application to them of the conduct of business rules under Clause 45 is similarly limited.
The clause extends to activities carried on,
in connection with or for the purposes of that scheme".In addition to providing authorisation under the Bill actually to operate the scheme, the clause also covers any investment activities which are a necessary and incidental part of operating the scheme. They must arise directly from the operation of the scheme. An example might be a share exchange scheme operated by a UCITS operator—where shares may be exchanged for units of UCITS. That would not be part of operating the scheme, but would be in connection with its operation. The conduct of business rules would extend to these incidental activities, and that is provided for in Clause 78(7). I think that that answers the specific question that the noble Lord raised.
§ Lord Williams of ElvelNot quite. I am sorry to come back to the noble Lord. Does the noble Lord mean that any operator of a scheme approved under Clause 78 in a Community country can conduct any investment business as defined in Schedule 1 to the Bill, so long as it is,
in connection with or for the purposes of that scheme?In other words, can he deal, can he underwrite, can he procure underwriting, can he procure dealing and can he do all the things that are listed in the schedule as investment businesses, if he is an authorised person under the clause?
§ Lord Lucas of ChilworthYes, he can do those things provided, as I have already said, that it is part of the scheme. It has to be related to that. I do not think I can expand any further, because one would have to find a situation where the activity was conducted away from the scheme, in which case the person would not be able to operate. He can do all the things that the noble Lord suggests, provided that it is in connection with the scheme.
Acting as trustee of a scheme could, under the terms of the scheme, result in the trustee or the company to which the noble Lord referred undertaking investment activities. Provided that what the trustee does is in connection with the operation of the scheme, the directive to which I have referred prevents us from requiring that person to be separately authorised.
In fact, it is likely that the trustee's activities would be in connection with the buying and selling of securities, or acting in the capacity of a principal. Those are activities which are not to be caught by the Bill, except in certain circumstances which I do not think are likely to occur. However, though unlikely, it is conceivable that by being authorised under Clause 23 the operator or the trustee could do things in connection with the operation of the scheme which can only be undertaken by authorised persons.
Because of the limit in Clause 78(7) the conduct of business rules would not apply. As an example, there might be an offer made to the general public to buy shares for the scheme. It is unlikely that such would ever occur. Unit trust managers and others buy shares in quantity on the markets and they do not go around making such private offers. However, even if that were to occur, the ordinary rules on cold calling would apply, although the advertising provisions of the conduct of business rules would not.
That in turn would not mean that the designated agency could take no action. There are various powers under Chapter VI that could be used if it was considered that investors' interests were at risk. They could prevent the UCITS operator from continuing to advertise for shares. So an effective action could be taken to deal with any situation that might arise. In addition, the United Kingdom authorities would be able to take up the matter with the home state authority under the terms of the directive. The fact that a UCITS operator had advertised for shares in a way that was considered to put investors' interests at risk would undoubtedly call into question the fitness of the person to continue to be involved in that operation.
§ Lord Williams of ElvelI am most grateful to the noble Lord. I do not want to weary the Committee with my argument, but I shall summarise if I can the stage that we have reached. I shall take the example of Robeco, which is a Dutch unit trust. As I understand it, Robeco would be recognised. Its operator would therefore be automatically authorised. As a Dutch unit trust, Robeco's operator would be allowed to conduct investment business in connection with or for the purposes of Robeco MV. Specifically in Clause 75 of the Bill, the Government wish to place restrictions on the activities of authorised unit trust schemes in the United Kingdom. So the operator of a Dutch unit trust 274 could do all sorts of things under the Bill which the operator, if one may put it like that, of a United Kingdom unit trust would not be able to do. Am I clear about that, and is my understanding correct? If it is, perhaps we shall have to accept it, but it does seem rather an odd situation.
Lord MorrisI hope that I may be helpful, but I doubt it. I believe that the underlying purpose of the provision is that it is restrictive in that the trustee or the operator of the scheme has a fiduciary duty to those who benefit from the scheme to ensure that he stays strictly within the terms of the scheme, and that paragraphs (a) and (b) are observed. I am sure that is understood. I am not absolutely certain how that fits in with Clause 78 because I have become rather lost, but I believe that the fundamental reason for the provision is as I have described it.
§ Lord Lucas of ChilworthMy noble friend may be absolutely right, but I fear that I did not quite manage to put the two together. The noble Lord, Lord Williams, is not correct in his understanding. The case that he quoted could not benefit from Clause 23 because it is not part of the undertakings for the collective investment and transferable securities scheme itself. I am given to understand that they dc not belong.
Foreign UCITS are controlled by their own home authorities. That is a directive requirement. So at the end of the day—and this is the point where the noble Lord opposite was wrong—there will be no disadvan-tage to a home-based unit trust as against a foreign-based unit trust because the directive is binding across all members. The foreign UCITS are controlled by the home authorities. We would have to be satisfied—and because we have the directive, we are already satisfied—that the home control was equally good as our own control. So the companies would be on a level footing.
The noble Lord, Lord Williams, indicates his dissent. He must make his point much clearer. I have tried very hard and I have given four different answers.
§ Lord Lucas of ChilworthI have given four supporting answers. It is no use the noble Lord, Lord Bruce, laughing like that. The noble Lord, Lord Williams, has raised a number of issues and I have given him answers to each of them. I suggest to the noble Lord that he has not made his point clear enough for me to give the answer which he is seeking.
§ Lord Williams of ElvelI am sorry if my expositior has been less clear than the Minister requires. I shall read in Hansard what he has said. I still believe that there is a serious point here to which the noble Lord would do well to give his attention.
§ Clause 23 agreed to.
275The Deputy Chairman of CommitteesIf no noble Lord has an objection, I propose to put the Question, That Clauses 24 and 25 stand part of the Bill.
§ Clauses 24 and 25 agreed to.
§ Lord SkelmersdaleIn moving that the House do now resume I suggest that we do not return to this Committee stage until a quarter past eight. I beg to move.
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.