Financial Services Bill

HL Deb 16 October 1986 vol 480 cc913-68

3.25 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Lucas of Chilworth.)

On Question, Motion agreed to.

Schedule 2 [Requirements for recognition of self-regulating organization]:

Lord Morton of Shuna

moved Amendment No. 79: Page 188, line 28, leave out ("a sufficient number of"). The noble Lord said: This amendment is to be taken with Amendment No. 80 and relates to the composition of the recognised self-regulating organisations and therefore to Schedule 2.

As the Bill stands, on page 188 at line 26 we read: The arrangements shall not be regarded as satisfying the requirements of this paragraph unless the persons responsible for those matters include a sufficient number of persons who are independent of the organisation and its members. The purpose of the two amendments is to delete the words "a sufficient number", and to put at the end: sufficient to secure a proper balance between the interests of the organisation or its members and the interests of the public. This matter was brought to the attention of the House in Committee by the noble Lord, Lord Boyd-Carpenter, who said on the 23rd July (at col. 249 of Hansard) that he was not happy about the use of the word "sufficient". He said: I ask my noble friend who is about to reply whether he will say: sufficient for what? If one is laying down something in a statute which the courts may have to consider, surely the courts should be given some guidance as to what is the purpose, sufficiency for which in numbers is required by the clause".—[0fficial Report, 23/7/86; col. 249.] These amendments have been drafted to answer that criticism which we consider to be wholly valid. I hope that the wording is sufficiently clear. It is designed to secure a proper balance between the interests of the two sides: the public and the organisation. I hope that the Government are willing to accept those words because they are the words carefully used by the noble Lord, Lord Lucas, to define what he meant. They seem to be entirely satisfactory words and totally clear. I beg to move.

Lord Grimond

My Lords, I support the amendment. I was also present at a previous stage of the Bill when the point was raised by the noble Lord, Lord Boyd-Carpenter. It seems to me that the new wording is a considerable improvement to the Bill.

My main interest in the Bill is to see that the public are protected. I feel that is important at this moment when the public are being encouraged to invest through the Stock Exchange and in other ways. If they should find that they are at the mercy of people whose interests are, to say the least, not theirs, a rather serious setback would be suffered by all those who want to see the public increase their share ownership. I think that this passage in the Bill is important.

The word "sufficient" is vague. The amendment points to the fact that our purpose is to protect the public. It makes it clear also that the interests of the organisation are not necessarily those of the public. There is no doubt that on the whole the City's reputation is high, but recently there have been clear cases where the City's machinery has been used purely to the advantage of individuals, and the public interest has been ignored. It is not only those members of the public who are investing but the whole public of Britain which has an interest in this matter. My only slight criticism is that I still think that the proposition is pretty vague. We are not told exactly what will secure a proper balance, whether there should be a majority of independent members on the relevant committee, or what. It is, however, a step in the right direction. I hope very much therefore that the Government will accept it.

Lord Graham of Edmonton

My Lords, like other noble Lords, I await with interest the response of the Minister to the reasonable case made by my noble friend Lord Morton, who pointed out that he was doing no more than use the Minister's words, perhaps only changing their place in the Bill. The self-regulating organisation will be a very powerful body with enormous influence. The Bill, on page 188, refers to, The arrangements of the organisation with respect to the appointment, removal from office and functions of the persons responsible for making or enforcing the rules of the organisation". Throughout discussion of the Bill the House has, I believe, gone along with the general drift in favour of self-regulating organisations rather than statutory enforcement. As to protecting the investing public, we know of bodies that have been working away diligently under the guidance of the MIBOC and the SIB in trying genuinely to satisfy not merely themselves but also, I hope, the general public. The noble Lord the Minister should take on board the point made by the noble Lord, Lord Grimond. We do not want to finish up with the feeling that there is some cosy arrangement whereby a list of the great and the good, who always appear to be available and suitable and, what is more, acceptable to others, will be seen as fulfilling the requirements of the Bill. We are talking about the interests of the public. We are talking about a proper balance. Like many noble Lords, I have received representations not merely from professional bodies—the Stock Exchange, Lloyd's and the brokers—and a range of other genuine interests, such as the banks and the building societies, but also from other bodies. I mean the consumers. I have received representations from the Consumers Association, from the National Consumer Council and also from the Co-operative movement. We have heard the views of many interests.

I hope that the Minister accepts the spirit of the amendment. I hope he recognises that we want to be satisfied that, before the Bill leaves us and goes to another place, we do not finish up with an arrangement that will allow some kind of old boys' network under which those men and women who sit on the SROs may be acceptable to the organisations but will not necessarily carry the imprimatur of being acceptable to the general public. This may be a small matter. It concerns only two out of 600 amendments. But the Minister can set the tone for the remaining stages of the Bill if he recognises that he needs to respond to the wider public, the investing public, and many others who will perhaps be cynical unless he accepts the sense of the amendment.

Lord Ezra

My Lords, I should like to associate myself with those noble Lords who have spoken in favour of the amendment. At an earlier stage a number of us made it clear that we did not regard the word "sufficient" on its own as being an adequate definition of what was involved. The best definition would be "a proportion". This was, however, opposed by the Government. The next best solution would be to introduce the wording proposed by the noble Lord, Lord Morton. I hope that the Government will be prepared to accept the amendment.

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord, Lord Morton of Shuna, for explaining the purpose of his amendment. I am grateful, too, to other noble Lords who have made their feelings known. Your Lordships will recall that we have had many debates during the passage of the Bill on the provisions of Schedule 2 concerning the composition of the governing boards of the regulatory organisations. It has always been envisaged that the boards should include lay people independent of the organisation. Paragraph 5(2) of Schedule 2 was added to the Bill in another place to make this requirement explicit. The sub-paragraph requires the boards to include a sufficient number of independent people. The term is deliberately vague. It makes clear that a token independent is not enough without laying down precise requirements.

Let me reaffirm that I agree with everything that has been said about the importance of a proper representation on the boards of the organisations. I agree also that we are not talking about lay representation of one or perhaps two. There must be a sufficient number of lay people to make their presence felt and enable them to be effective spokesmen for the interests of investors and the general public. So there is nothing between us as regards the objective. What we differ upon is the need for the amendments.

I believe that paragraph 5 of Schedule 2 already achieves our joint objective. It contains the requirement that there must be a sufficient number of independent people on the governing board and that the arrangements for appointing members of the board must be such as to secure a proper balance. That is written into paragraph 5(1) of Schedule 2 at line 21 on page 188 of the Bill. It is, I believe, sufficient. It is a proper balance between the interests of the organisation or its members on the one hand and the interests of the public on the other.

The noble Lord, Lord Graham, may suggest that the case put for the amendment is quite reasonable. He may actually suggest that my agreement to the amendment would set the tone for the rest of today's debates. That may or may not be true. We feel, however, that writing in a requirement that there must be sufficient independent people—that is, in effect what one is saying—on the board, to secure this result is merely repetitious. It adds nothing at all to the intention of the sub-paragraph if it is read as a whole. I urge the House to reject the amendment.

Lord Graham of Edmonton

My Lords, before the noble Lord sits down, would he explain who determines what a proper balance is? Different people, looking at the composition of a body or board, will say that it is proper or improper, fair or unfair. It would certainly ease my mind if the Minister was able to say that there is some very superior person or body of people—it may very well be the SIB or some other organisation—that has to judge. The question of deciding what is proper in the context of fair is most important.

Lord Lucas of Chilworth

My Lords, one has to recognise first that there will be a number of regulatory organisations, probably five or six. They will be dealing with different sectors. Therefore the balance—a sufficient number—may not be the same, comparing one with another, because of the risk elements, the interest elements, in the various sectors. We cannot set down a positive number. It is just not possible.

The question that the noble Lord really asks me is this. Who is to determine what is a proper balance? In the first instance it would be the organisation itself as it is supervised by the designated agency, in all probability the SIB. But at the end of the day it is the Secretary of State. There are powers in the Bill for the Secretary of State to determine exactly that factor.

Lord Morton of Shuna

My Lords, I find it difficult to understand the Government's reasoning. If the only argument against this amendment is that it is saying the same thing twice, why not accept it? At the Committee stage there was considerable difficulty expressed—and I pointed out the views stated by very experienced noble Lords—about the word "sufficient". This is a very important protection of the public. If the words did not go further than the Government intend, they would accept them. Therefore we must assume that something extra is going in and the Government do not want that. But I have great difficulty in seeing why they do not. The noble Lord, Lord Lucas, on 23rd July, at col. 250 of the Official Report, in Committee said: My noble friend Lord Boyd-Carpenter asked, as he so frequently does, a blunt question about 'sufficient'. It is a matter of its being sufficient to secure a proper balance between the interests of the organisation or its members and the interests of the public". If that is what the noble Lord thought appropriate on 23rd July, I have difficulty in understanding why he is against accepting an amendment in those words today. I must press the amendment.

Lord Barnett

My Lords, I rise with some diffidence from my new-found position. I too am a little concerned, not only about the amendment but the way in which Ministers reply to amendments which are not in any way political. The noble Lord will have at the top of his brief the word "Reject", which I perfectly well understand. In another place some Ministers may have been prepared to say in the light of the debate we have had that there was no harm in accepting the amendment and dismissed the "Reject" on the brief. The only argument the noble Lord seemed to give us today was that in his words the amendment "adds nothing" to the Bill. But neither does it subtract from the Bill: it just helps.

Why on earth can the Minister not be reasonable? It would do no harm whatsoever. It would set the tone in a wholly non-party political sense—which I can say from these Benches—for the debates. That would be nothing but helpful both to the Government and to your Lordships' House. I therefore cannot understand why the Minister does not feel able to say later to those who have written "Reject" on his brief, "I decided because of what happened in the debate that it was perfectly reasonable to accept what is a reasonable amendment". Why on earth will the Minister not do that?

Lord Harris of Greenwich

My Lords, let me say one or two words before the noble Lord the Minister speaks again. I join with the noble Lord, Lord Barnett, in what he said. I have listened to the debate. This is my maiden speech at this stage of the line-by-line discussion of the Bill. 'But I have heard a number of noble Lords say that they believe there would be substantial advantage in getting this amendment carried. What is the argument against it advanced by the noble Lord? It is that it is repetitious. With great respect to the noble Lord that is not an argument. It is a stylistic point at best.

We have a large number of amendments to consider in this Bill. This is an entirely non-partisan issue. I can see no conceivable reason why the noble Lord should not say at the very least that he will look at the point again. However, at best I hope he will say that on reflection he will accept the amendment.

Lord Lucas of Chilworth

My Lords, with your Lordships' leave perhaps I may make a short response. In your granting me leave to speak again it gives me the opportunity of congratulating the noble Lord, Lord Barnett, upon his new appointment. I hope that he finds that where he will be sitting for some little while is as comfortable as where he has come from. However, let me assure him that I do not have "Reject" on any of the papers in front of me. I can promise him that.

Noble Lords

"Resist", my Lords!

Lord Lucas of Chilworth

My Lords, that is a conjecture which noble Lords may wish to make. I make no response.

I think that I have said all I can to help your Lordships other than perhaps to tease the noble Lord, Lord Morton of Shuna. I am reminded that lawyers so often say that unnecessary words go septic. We believe that these words are unnecessary.

3.45 p.m.

On Question, Whether the said amendment (No. 79) shall be agreed to?

Their Lordships divided: Contents, 100: Not-Contents, 92.

DIVISION NO. 1
CONTENTS
Airedale, L.	Leatherland, L.
Amherst, E.	Listowel, E.
Ampthill, L.	Llewelyn-Davies of Hastoe, B.
Ardwick, L.	Lockwood, B.
Banks, L.	McCarthy, L.
Barnett, L.	McIntosh of Haringey, L.
Beswick, L.	Mackie of Benshire, L.
Bonham-Carter, L.	Masham of Ilton, B.
Boston of Faversham, L.	Mayhew, L.
Bottomley, L.	Mishcon, L.
Burton of Coventry, B.	Molloy, L.
Carmichael of Keivingrove, L.	Morton of Shuna, L.
Chandos, V.	Nicol, B.
Chitnis, L.	Oram, L.
Clancarty, E.	Paget of Northampton, L.
Cledwyn of Penrhos, L.	Pitt of Hampstead, L.
Collison, L.	Ponsonby of Shulbrede, L.
David, B. [Teller.]	Porritt, L.
Dean of Beswick, L.	Prys-Davies, L.
Denington, B.	Rathcreedan, L.
Diamond, L.	Ritchie of Dundee, L.
Donaldson of Kingsbridge, L.	Rochester, L.
Elwyn-Jones, L.	Rugby, L.
Ennals, L.	Sainsbury, L.
Ewart-Biggs, B.	Saltoun of Abernethy, Ly.
Ezra, L.	Seebohm, L.
Fisher of Rednal, B.	Sefton of Garston, L.
Foot, L.	Serota, B.
Gallacher, L.	Shackleton, L.
Galpern, L.	Shaughnessy, L.
Gladwyn, L.	Silkin of Dulwich, L.
Graham of Edmonton, L.	Somers, L.
[Teller.]	Soper, L.
Grimond, L.	Stallard, L.
Hacking, L.	Stedman, B.
Hampton, L.	Stoddart of Swindon, L.
Harris of Greenwich, L.	Strabolgi, L.
Hayter, L.	Strauss, L.
Henderson of Brompton, L.	Taylor of Blackburn, L.
Hooson, L.	Tordoff, L.
Hughes, L.	Tryon, L.
Hunter of Newington, L.	Underhill, L.
Hylton-Foster, B.	Vernon, L.
Irving of Dartford, L.	Wallace of Coslany, L.
Jeger, B.	Whaddon, L.
Jenkins of Putney, L.	White, B.
John-Mackie, L.	Williams of Elvel, L.
Kennet, L.	Willis, L.
Kilbracken, L.	Wilson of Rievaulx, L.
Kings Norton, L.	Winterbottom, L.
Kirkhill, L.

NOT-CONTENTS
Alport, L.	Lane-fox, B.
Annan, L.	Lauderdale, E.
Auckland, L.	Layton, L.
Beaverbrook, L.	Limerick, E.
Belhaven and Stenton, L.	Lindsey and Abingdon, E.
Beloff, L.	Lloyd of Hampstead, L.
Belstead, L.	Long, V.
Boyd-Carpenter, L.	Lucas of Chilworth, L.
Bridgeman, V.	Macpherson of Drumochter,
Brougham and Vaux, L.	L.
Broxbourne, L.	Margadale, L.
Butterworth, L.	Marshall of Leeds, L.
Caccia, L.	Maude of Stratford-upon-
Caithness, E.	Avon, L.
Cameron of Lochbroom, L.	Merrivale, L.
Campbell of Alloway, L.	Mersey, V.
Campbell of Croy, L.	Molson, L.
Carnegy of Lour, B.	Mottistone, L.
Carnock, L.	Murton of Lindisfarne, L.
Chelmer, L.	Newall, L.
Constantine of Stanmore, L.	Nugent of Guildford, L.
Cottesloe, L.	O'Brien of Lothbury, L.
Craigavon, V.	Onslow, E.
Cullen of Ashbourne, L.	Orr-Ewing, L.
Dacre of Glanton, L.	Pender, L.
Davidson, V. [Teller.]	Polwarth, L.
De Freyne, L.	Portland, D.
Denham, L. [Teller.]	Reay, L.
Ebbisham, L.	Renton, L.
Eccles, V.	Rodney, L.
Effingham, E.	St. Davids, V.
Elton, L.	Saint Oswald, L.
Faithfull, B.	Sanderson of Bowden, L.
Gainford L.	Sandford, L.
Gardner of Parkes, B.	Slim, V.
Glanusk, L.	Strathspey, L.
Gray of Contin, L.	Sudeley, L.
Gridley, L.	Terrington, L.
Hailsham of Saint	Teviot, L.
Marylebone, L.	Teynham, L.
Hankey, L.	Thorneycroft, L.
Hesketh, L.	Trumpington, B.
Hives, L.	Vivian, L.
Hooper, B.	Ward of Witley, V.
Kimball, L.	Whitelaw, V.
Kinnaird, L.	Wise, L.
Kitchener, E.	Young, B.
Knollys, V.

Resolved in the affirmative, and amendment agreed to accordingly.

3.54 p.m.

Lord Morton of Shuna

moved Amendment No. 80: Page 188, line 29, at end insert ("sufficient to secure a proper balance between the interests of the organisation or its members and the interests of the public"). On Question, amendment agreed to.

[Amendment No. 80A not moved.]

Lord Morton of Shuna

moved Amendment No. 81: Page 188, line 32 at end insert ("which must include arrangements for complaints to be investigated by persons outwith the organisation and its members"). The noble Lord said: My Lords, this amendment is grouped together with Amendment No. 82 in the name of the noble Lord, Lord Lucas of Chilworth. Amendment No. 82A is an amendment to that amendment in the name of my noble friend Lord Williams and myself.

Here, we are concerned with the arrangements for investigation of complaints which are required by paragraph 6 of Schedule 2. The basic difference between Amendment No. 81 and Amendment No. 82, the government amendment, is that the amendment I am speaking to (Amendment No. 81) adds the following at the end of paragraph 6: which must include arrangements for complaints to be investigated by persons outwith the organisation and its members". Whereas, Amendment No. 82 says: the arrangements may make provision". As I see it, that is the crucial difference between the two. Otherwise, the approach is not very different.

In Amendment No. 81 there is no intention that all investigation of complaints must be done by somebody who is "outwith the organisation and its members", but only that any dissatisfied complainer must be allowed to go to somebody outside if, in his view, his complaint is not adequately dealt with. That is the idea and the purpose of Amendment No. 81.

In Amendment No. 82, as I have already indicated, the criticism we have is that it appears only to give permission to the SRO to do that if it feels it to be a good idea, but does not have to. We consider it is essential if the public is to have confidence, and it is a matter of public confidence, that there should be some independent route that they can follow.

Turning to Amendment No. 82, it says: The arrangements may make provision for the whole or part of that function to be performed by and to be the responsibility of the independent organisation.

In our view, which I suggest is the proper view the function may be performed by the independent body but the responsibility should remain with the SRO. That is the purpose of that amendment to Amendment No. 82. I beg to move Amendment No. 81.

Lord Graham of Edmonton

My Lords, I hope very much that the Minister on this occasion is in a receptive mood. Ever since I have been in either of the two Houses of Parliament, we have always been able to have good arguments on "may" or "shall". One is permissive or flexible, but that does not mean to say that it will not be used. When one looks at paragraph 6 of the Schedule, perhaps some people might believe it cannot be improved because it says: The organisation must have effective arrangements for the investigation of complaints against the organisation or its members". However, the Government felt that, although originally that was sufficient, there ought to be a satisfactory arrangement. The Government were moved to put down their own amendment which appears on the Marshalled List at Amendment No. 82. What we are concerned with here is that this could almost be a non-sequitur. The arrangements which were enshrined in Amendment No. 82 are at the behest, or the will or even the whim, of the organisation as to whether they shall or shall not trigger them off. Therefore, we are no further forward. What the amendment moved by my noble friend Lord Morton has said, is that they must include arrangements.

I should like to hear from the Minister whether his office or whether outside advisers have indicated how likely this kind of procedure is going to be called upon. We can look at that, if we look at some of the current history of existing complaints procedures and their investigations. It may very well be that we are setting up machinery which in the event may not be used very often. However, we wish to demonstrate to the widest possible number of people that the Financial Services Bill, when it becomes an Act, contains the best possible form of words to achieve the kind of things that we wish to achieve.

As regards Amendment No. 81, as my noble friend Lord Stoddart said earlier at Question Time, we want to ensure that what is done is not only fair, but is seen to be fair. We need to satisfy people who perhaps should not need to be satisfied in that way. Those Members of your Lordships' House who took part in our debates last night will recall the intense interest shown in the number of pharmacists who sat on a committee investigating the various ways in which pharmacies could either be extinguished or created. There is great sensitivity—and I think rightly—about the interests of the people who will take decisions which affect people collectively.

Our Amendment No. 81 is slightly contrary to the Minister's amendment and says that we ought to make sure that the arrangements for complaints are written in. Bearing in mind syntax or semantics, the word "must" is certainly as strong as the word "shall" and carries a stronger meaning than the word "may" which is mentioned in Amendment No. 82. Therefore, I hope that the Minister will be receptive to these ideas.

4 p.m.

Lord Grimond

My Lords, I should like very much to support the amendment for essentially the same reasons as I have advanced in previous debates on the Bill; that is, from the point of view of the public and public confidence in the running of these affairs and in the operation of the Bill generally.

It seems to me absolutely essential that the arrangements for hearing complaints should ensure that these complaints are heard by a wholly independent body and not by one which could be said to have an interest in the affairs under complaint. I do not think that the Government's amendment goes nearly far enough. The amendment ensures that an independent body will, as I see it, investigate any complaints, and in my view that is essential if the public are to have the confidence in the Bill which alone will enable it to work.

Lord Lucas of Chilworth

My Lords, I shall begin by dealing with the government amendment which I believe makes it quite clear that it is open to an RSRO to establish, possibly in conjunction with other organisations, an independent mechanism—for example, an ombudsman scheme—for the investigation of complaints against the organisation or its members. However, that mechanism would not be able to exercise the enforcement or the disciplinary functions of the regulatory organisation because that would remain the organisation's responsibility.

Generally speaking, where a function is carried out on behalf of an RSRO the ultimate responsibility must remain with that organisation. However, if the function of investigating complaints is carried out by an independent body, it may help to underline that very independence if responsibility is transferred as well. That may be particularly important in the case where the complaint is made against the organisation itself rather than one of its members. However, I do not think that that is the intention and, therefore I rather hope that Amendment No. 82A will be withdrawn.

I turn to Amendment No. 81. The amendment would make independent investigators a condition of recognition. I assure your Lordships that that is exactly the effect of that amendment: it makes independent investigators a condition of recognition. We do not see the need for that. It may well be that in a particular case an external investigation service, or at least an external element, would be preferable. However, if a wholly internal investigation service can provide adequate protection to investors, I cannot see why it should necessarily be ruled out, which would be the effect of the amendment.

Surely the key point is that the Secretary of State or the designated agency will have to be satisfied that the arrangements are effective, whether they are internal or external. We see no reason for a particular condition, a particular set of circumstances. to be imposed upon the organisations, which would be the result if the noble Lord's amendment were carried. In the light of what I have suggested to the House, I ask the noble Lord to withdraw the amendment. If the noble Lord does not feel able to do so, I certainly urge the House to reject the amendment on the grounds that I have given.

Lord Morton of Shuna

My Lords, I am very grateful for the support which I have received from the noble Lord, Lord Grimond, and from my noble friend Lord Graham. I regret that I am not willing to withdraw the amendment. I hope that my Amendment No. 81 does not mean that all complaints must be investigated by persons outwith the organisation, but that there must be included arrangements for complaints. As I have endeavoured to say, there must be a way out for a complainant who is dissatisfied on an internal complaint so that he can go to somebody outside and have an independent investigation. I am not a parliamentary draftsman and I may have drafted the amendment incorrectly, but that is the intention behind the amendment; that is what it does. It would not prevent various SROs gathering together to have one ombudsman—if I may put it like that—which would be the same situation as could happen under the arrangements spoken to by the noble Lord, Lord Lucas. My difficulty and my rooted objection to the amendment put forward by the noble Lord, Lord Lucas, is that it does not go far enough. It just includes the word "may". There is not compulsion on any SRO to have any independent form of complaints procedure. Therfore, I regret that I must press the amendment.

Lord Lucas of Chilworth

My Lords, with the leave of the House, before the noble Lord opposite finally makes up his mind, let me say that I cannot agree entirely with the line of argument that he has taken. Obviously there is support for what he is suggesting. There may possibly be areas upon which we can meet, because it seems to me that, if one suggested that there should be provision for such an independent external complaints system, one might attach it to cases where such a system was more appropriate rather than necessarily to all cases. If that does not commend itself to noble Lords opposite, I am sorry because that is as far as I believe I could go this afternoon. I am quite prepared to discuss the matter along those lines if the noble Lord feels that a discussion is likely to lead to a meeting of minds. Of course it is entirely up to the noble Lord which way he wants to proceed; I just make the offer.

Lord Morton of Shuna

My Lords, with the leave of the House, I hope that I and those on this side of the House are fully willing to meet any offer. However, I consider that the essential condition of any further discussion of this amendment in other ways is that there must be some way in which a complainant who is dissatisfied can go to somebody who is independent. That may mean that the complaint is investigated by the SRO or its committee initially and it comes to a view. The complainer may then say, "I am dissatisfied with that. I want to go to an ombudsman who is completely independent". That is is the essential point that I am seeking.

If the Government are willing to discuss that point, I shall be only too willing to withdraw this amendment and try to get a form of words that covers it.

Lord Lucas of Chilworth

My Lords, again I ask the indulgence of the House. The noble Lord, Lord Morton of Shuna, has moved a very long way from a complaints procedure under the aegis of an SRO. He says he has not. I am not a legal man, and well he knows it. But it seems to me that what he has just said suggests that there should be an appeal procedure after the SRO has considered the matter internally, or, as the Government's amendment provides, externally. The Government's amendment provides for an internal or external procedure or a joint procedure with other SROs.

The noble Lord opposite said he wanted to ensure that when the complaint had been initially considered by the SROs, there was then an independent body. That in layman's terms is an appeal procedure. He is inviting your Lordships to change the complaints system set down in the Bill, adding to it an additional layer or tier, an appeal tier. If that is his intention, I believe there should be a quite separate amendment allowing for such a tier. I do not believe that he can introduce both tiers in the one amendment.

Lord Morton of Shuna

My Lords, I crave the indulgence of the House. I should not rise again, but that is not what I said. The SRO can have its arrangements in whatever way it likes. All I am saying is that there must be an independent way out for a dissatisfied complainer. I do not think we can take this much further. I must press my amendment.

4.13 p.m.

On Question, Whether the said amendment (No. 81) shall be agreed to?

Their Lordships divided: Contents, 84; Not-Contents, 102.

DIVISION NO. 2
CONTENTS
Airedale, L.	Liewelyn-Davies of Hastoe, B.
Amherst, E.	Lloyd of Hampstead, L.
Ardwick, L.	Lockwood, B.
Banks, L.	McCarthy, L.
Beswick, L.	McIntosh of Haringey, L.
Bonham-Carter, L.	MAckie of Benshie, L.
Boston of Faversham, L.	Mayhew, L.
Burton of Coventry, B.	Mishcon, L.
Carmichael of Kelvingrove, L.	Molloy, L.
Chandos, V.	Morton of Shuna, L.
Cledwyn of Penrhos, L.	Mulley, L.
Collison, L.	Nicol, B.
David, B. [Teller.]	Paget of Northampton, L.
Dean of Beswick, L.	Pitt of Hampstead, L.
Denington, B.	Ponsoby of Shulbrede, L.
Diamond, L.	[Teller.]
Donaldson of Kingsbridge, L.	Prys-Davies
Elwyn-Jones, L.	Ritchie of Diundee, L.
Ennals, L.	Rugby, L.
Ewart-Biggs, B.	Sainsbury, L.
Ezra, L.	Seebohm, L.
Fisher of Rednal, B.	Sefton of Garston, L.
Foot, L.	Serota, B.
Gallacher, L.	Shackleton, L.
Galpern, L.	Silkin of Dulwich, L.
Graham of Edmonton, L.	Soper, L.
Grimond, L.	Stallard, L.
Hampton, L.	Stedman, B.
Hankey, L.	Stoddart of Swindon, L.
Harris of Greenwich, L.	Strabolgi, L.
Henderson of Brompton, L.	Strauss, L.
Hooson, L.	Taylor of Blackburn, L.
Hughes, L.	Tordoff, L.
Hunt, L.	Underhill, L.
Irving of Dartford, L.	Vernon, L.
Jeger, B.	Wallacae of Coslany, L.
Jenkins of Putney, L.	Wells-Pestell, L.
John-Mackie, L.	Whaddon, L.
Kennet, L.	White, B.
Kilbracken, L.	Williams of Elvel, L.
Kirkhill, L.	Willis, L.
Leatherland, L.	Winterbottom, L.
Listowel, E.

NOT-CONTENTS
Alexander of Tunis, E.	Ebbisham, L.
Alport, L.	Eccles, V.
Ampthill, L.	Elliott of Morpeth, L.
Auckland, L.	Elton, L.
Beaverbrook, L.	Faithfull, B.
Belhaven and Stenton, L.	Geinford L.
Beloff, L.	Gardner of Parkes, B.
Belstead, L.	Glanusk, L.
Bessborough, E.	Gridley, L.
Boyd-Carpenter, L.	Hailsham of Saint
Brabazon of Tara, L.	Marylebone, L.
Bridgeman, V.	Hayter, L.
Brougham and Vaux, L.	Hesketh, L.
Broxbourne, L.	Hives
Butterworth, L.	Hooper, B.
Caccia, L.	Hunter of Newington, L.
Caithness, E.	Hylton-Foster, B.
Cameron of Lochbroom, L.	Kimball, L.
Campbell of Alloway, L.	Kinnaird, L.
Campbell of Croy, L.	Knollys, V.
Carnock, L.	Lane-fox, V.
Chelmer, L.	Lauderdale, E.
Constantine of Stanmore, L.	Layton, L.
Cottesloe, L.	Limerick, E.
Cox, B.	Lindsey and Abingdon, E.
Craigavon, V.	Long, V.
Cullen of Ashbourne, L.	Lucas of Chilworth, L.
Dacre of Glanton, L.	Macpherson of Drumochter,
Davidson, V. [Teller.]	L.
De Freyne, L.	Mancroft, L.
Denham, L. [Teller.]	Margadale, L.
Duncan-Sandys, L.	Merrivale, L.

Mersey, V.	Sanderson of Bowden, L.
Molson, L.	Sandford, L.
Monk Bretton, L.	Shannon, E.
Mottistone, L.	Shaughnessy, L.
Murton of Lindisfarne, L.	Skelmersdale, L.
Nugent of Guildford, L.	Slim, V.
O'Brien of Lothbury, L.	Strathspey, L.
Onslow, E.	Sudeley, L.
Orr-Ewing, L.	Terrington, L.
Pender, L.	Teviot, L.
Polwarth, L.	Teynham, L.
Porritt, L.	Thorneycroft, L.
Portland, D.	Tranmire, L.
Reay, L.	Trumpington, B.
Renton, L.	Vaux of Harrowden, L.
Robertson of Oakridge, L.	Vivian, L.
Rodney, L.	Ward of Witley, V.
St. Davids, V.	Whitelaw, V.
Saint Oswald, L.	Wise, L.
Saltoun of Abernethy, Ly.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

4.22 p.m.

Lord Lucas of Chilworth

moved Amendment No. 82: Page 188, line 32, at end insert— ("(2) The arrangements may make provision for the whole or part of that function to be performed by and to be the reesponsibility of a body or person independent of the organisation."). The noble Lord said: My Lords, I have spoken to Amendment No. 82. I beg to move.

On Question, amendment agreed to.

[Amendment No. 82A not moved.]

Clause 13 [Alteration of rules for protection of investors]:

Lord Lucas of Chilworth

moved Amendments Nos. 83 and 84: Page 10, line 5, leave out ("and") and insert ("or"). Page 10, line 13, at end insert ("or an exempted person in respect of that business"). The noble Lord said: My Lords, in moving Amendment No. 83 I should like to speak to Amendment No. 84. I think we can dispense with these two fairly quickly. The first is a drafting amendment and the second is consequential on those amendments made to Clause 10 at an earlier stage in the Bill. I beg to move both amendments en bloc.

On Question, amendments agreed to.

Clause 15 [Authorisation by certification by recognised professional body]:

The Lord Advocate (Lord Cameron of Lochbroom)

moved Amendment No. 85: Page 11, line 37, at end insert— ("(3) A certificate issued to a partnership—

1. (a) shall be issued in the partnership name; and
2. (b) shall authorise the carrying on of investment business in that name by the partnership to which the certificate is issued, by any partnership which succeeds to that business or by any person who succeeds to that business having previously carried it on in partnership;

and, in relation to a certificate issued to a partnership constituted under the law of England and Wales or Northern Ireland or the law of any other country or territory under which a partnership is not a legal person, references in this Act to the person who holds the certificate or is certified shall be construed as references to the persons or person for the time being authorised by the certificate to carry on investment business as mentioned in paragraph (b) above."). The noble and learned Lord said: My Lords, I beg to move Amendment No. 85 and speak to Amendments Nos. 90, 99, 100, and 514. These amendments are designed to deal with a problem that arises under the law of England; namely, that a partnership does not have a legal personality, and that every time the membership of a partnerhip changes, the old partnership ceases to exist and a new one is formed. Frequently, the successor partnerhip will continue the same business in the same name.

The amendments have the effect that authorisation granted to a partnership either by the Secretary of State or designated agency or by virtue of a certificate issued by an RPB continues in force notwithstanding any subsequent change in the partners so long as, and only so long as, the business continues to be carried on in the original name. Where a partnership has been authorised by the Secretary of State or agency, the business may also be carried on in another name with the Secretary of State's or agency's consent, but not of course in the case of a certificate issued by an RPB. The amendments also provide that a sole surviving partner may continue to benefit from the authorisation if he carries the business on in the partnership name.

The notification regulations which the Secretary of State or designated agency may make under Clause 52 are however expected to require the partnership to notify any changes of partner, and RPBs are also to have similar rules. This will enable an authorisation or certificate to be withdrawn if this is appropriate in the light of a change in the partnership. In effect, therefore, the partnership and the partners are treated for authorisation purposes rather as if they were respectively a body corporate and its directors.

Under the law of England and Wales a partnership has no legal personality. The Bill is not intended to alter that position in law. The amendments make this clear. They provide that references to "authorised persons" and so on are, where appropriate. to be construed as referring, in the case where such a partnership is authorised, to the persons or person who are entitled to carry on the business under the authorisation. No corresponding amendments are needed in the case of members of RSROs because the Bill does not lay down the manner in which membership of such an organisation is to be granted to partnerships or indeed to any other kind of entity. I beg to move.

Lord Morton of Shuna

My Lords, there is something slightly strange in the noble and learned Lord and I requiring to do something that concerns only English law. Perhaps we are just showing the advantage of the Scottish partnership law.

The only serious comment I would make about this is that there is nowhere in the partnership provisions any requirements on the partnership to notify the Secretary of State, or the responsible body, of any change in partners. On the assurance that that will be included in the rules and regulations, for it is obviously essential, we would have no objection to these amendments.

Lord Cameron of Lochbroom

My Lords, I am grateful to the noble Lord opposite. As I indicated, the point is expected to be contained in the regulations, as the noble Lord has made it plain that it should be, and I think I would agree with him. Without giving an undertaking, I shall certainly bring this to the attention of my right honourable friend who will be responsible.

On Question, amendment agreed to.

Lord Morton of Shuna

moved Amendment No. 86: Page 11, line 37, at end insert— (" ( ) A person may hold more than one certificate from more than one recognised professional body.") The noble Lord said: My Lords, this is a fairly straightforward amendment. The professional bodies rules suggest, by implication, that one can be authorised by only one professional body, but there are various professions where people have dual qualifications, such as accountants and lawyers, and there may well be others. This amendment is intended only to allow for that, so that the person who has two such qualifications, who belongs to two professional bodies, may be authorised in respect of each of them. I beg to move.

Lord Cameron of Lochbroom

My Lords, I understand the concern of the noble Lord opposite in these matters. It is already possible under the Bill for a person to hold certificates issued by more than one RPB so long as each of those RPBs ensures that the conditions in paragraph 2 of Schedule 3 are met. For example, if both the English and the Scottish accountancy institutes were to be recognised professional bodies, they would be able to issue a certificate to a partnership which consisted of members of both institutes.

The only point I have to draw the noble Lord's attention to is that under paragraph 2 of Schedule 3 in the case of an individual he would only be entitled to be certified in respect of his main business. It may be that his main business is as an accountant, and, for the same reason as I indicated, he could, if he were a member of two accountants' bodies which were recognised, be able to have a certificate issued from each. I hope that answers the concern of the noble Lord opposite. I suggest that this amendment is unnecessary. Indeed, it could be confusing because it might seem to go against the policy in Schedule 3.

Lord Morton of Shuna

My Lords, on the assurance that this amendment is unnecessary I seek leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 16 [Professional bodies]:

4.30 p.m.

Lord Williams of Elvel

moved Amendment No. 87: Page 12, line 8, leave out from ("question") to ("or") in line 9. The noble Lord said: My Lords, I hope the noble and learned Lord will accept that since this clause, Clause 16, was put in by the Government at the Committee stage in your Lordships' House some of the amendments we have put forward may be of a probling nature rather than of a nature to try to change the clause in question. Amendment No. 87 comes into that category.

It is vital to see that the professional bodies have proper rules when they authorise persons to engage in investment business. I do not think we in the Opposition or Members of the Government have any difference of opinion on that point. The problem that Amendment No. 87 addresses itself to is the difficult question of the carrying on of investment business by persons practising that profession. We fully accept that the Bill has to refer to professional bodies, and in this Bill references to the rules of a professional body are references to the rules that the body has power to enforce in relation to the practice of the profession in question. There can be no doubt about that. It is no good saying that the Scottish Law Society cannot control and enforce its rules on Scottish lawyers. Nevertheless, when the rules of a professional body go further—I think this clause suggests that they should go further—and they specify the carrying on of investment business by persons practising that profession, they seem to be going further than the rules of such a body would normally go.

I wonder whether when he replies the noble and learned Lord can tell us in the first place whether it is necessary to have these words in the clause, given that it is in some sense a departure from the normal principle that professional bodies of the type we are describing have rules relating to an activity that has nothing to do with the members of that body per se. I wonder whether he can also tell me whether the expression, the carrying on of investment business by persons practising that profession", refers not only to the circumstances under which such a person may engage in investment business, but also the manner in which he is bound to conduct that investment business. The two matters are wholly different.

For example, the rules might say (I am talking about the rules of, say, the Institute of Chartered Accountants of England and Wales) that accountants can engage in investment business of advice on investments. That is one thing; but if the rules say that an accountant can engage in investment business of advice on investments and in doing so he shall obey rule this, that and the other—he shall not advise his clients to invest in United States securities, or what other rules the body may impose—then if the body has the power to impose these rules, we are moving even further from the spirit of rules of professional bodies that the Bill has in mind.

Those are the two points I should like the noble and learned Lord, or indeed any other noble Lord who wishes to ask questions on this point, to address himself to; it is a difficult phrase. In our view it marks a certain departure from existing practice, and I look forward very much to hearing what the noble and learned Lord has to say on these points. I beg to move.

Lord Cameron of Lochbroom

My Lords, I entirely appreciate the spirit in which this amendment is moved. Perhaps the noble Lord will come with me through certain other parts of the Bill, and I hope that the matter will then become plainer. If we start with the first subsection of Clause 16, we find there that, a 'professional body' means a body which regulates the practice of a profession". It then states that, references to the practice of a profession do not include references to carrying on a business consisting wholly or mainly of investment business". We start off with the fact that a practice will not include that.

But in order to be recognised one turns to Schedule 3, paragraph 3, which states that a recognised professional body, must have rules regulating the carrying on of investment business by persons certified by it". So it must not only have practice rules, which would not include such rules, but its rules must extend further.

Those rules—this takes up the point about the manner of carrying on a business—as paragraph 3 sets out, 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 1 of this Act". One finds that Clause 48 sets out the conduct of business rules. Those rules will cover the manner of carrying on of business. The answer therefore to the two points that the noble Lord put to me is that, first, the rules must contain equivalents to the conduct of busines rules; and, secondly, because of the opening words of Clause 16, it is necessary to provide that a recognised professional body in Clause 16(3) must not only have rules which have power to enforce in relation to the practice of the profession in question, but their rules must also extend to the carrying on of investment business by persons practising that profession.

I hope that I have managed to allay the concern that I fully appreciate the noble Lord had in putting down this amendment. I suggest therefore that it is not necessary, as the matter is amply covered in the Bill and these words are, in fact, necessary.

Lord Williams of Elvel

My Lords, I am most grateful to the noble and learned Lord. Perhaps I may put one or two supplementary points in the light of his explanation that I tried to follow and that I hope I followed, though it is sometimes difficult to follow these complicated matters. As I understand it, the recognised professional body will have rules and have power to enforce these rules in respect of investment business which is carried on by the members of that body. In other words, accountants can do investment business.

Furthermore, the rules will say that the accountants must obey the conduct of business rules set out in the Bill; or do the rules go further than that and say that not only must they obey the conduct of business rules set out in the Bill, but they must do some other things? That is a point on which I am not entirely clear and I should be grateful if the noble and learned Lord would enlighten me.

Lord Cameron of Lochbroom

My Lords, I turn back to page 189 of the Bill, to Schedule 3, which relates to the requirement so far as concerns the rules. These rules as regards the carrying on of business must, afford to investors protection at least equivalent to that afforded in respect of investment business by the rules and regulations for the time being in force under Chapter V…". That is to say, they may be framed in different ways, but the effect of them must be to give at least equivalent protection to investors.

It is for the professional bodies themselves to frame the rules, and they then have to satisfy the Secretary of State or the designated agency as to their being the equivalent. They do not necessarily incorporate what the Secretary of State or the designated agency may set down, but they must have at least the same effect. They can go further. There is no bar upon that. It is for the individual professional bodies to determine if they feel they ought to. I hope that that again answers the noble Lord's point.

Lord Williams of Elvel

My Lords, I am grateful to the noble and learned Lord. I now understand exactly what this clause and the schedule that he referred to are driving at. I must confess to feeling that there may be a certain circulatory element in the argument that he has put forward, but he alleviated my mind to a great extent when he said that recognised bodies might go further than the requirement under the legislation and that it was for the Secretary of State to decide what was appropriate as a rule for the recognised professional body.

Nevertheless—and I am not going to press this point—since I am not a member of a professional body as is the noble and learned Lord, I hope that he will recognise that this marks a rather radical departure from the normal rules of professional bodies. I may be quite wrong but I think that for the first time they are being asked to draw up rules covering their members in respect of businesses which are not precisely related—as the Bill says at the beginning of Clause 16, to which the noble and learned Lord drew our attention—and are not the normal business, if I may use layman's language, of the members of that body. Having said that, I am most grateful to the noble and learned Lord and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.45 p.m.

Lord Williams of Elvel

moved Amendment No. 88: Page 12, line 15, after ("it") insert ("in writing"). The noble Lord said: My Lords, I crave the indulgence of the noble and learned Lord for what is essentially a probing amendment. This is a new clause that was put in at Committee stage and we did not have an opportunity of discussing it in full at that time. In subsection (4) of this clause, we come to "guidance". In my view, guidance always give rise to considerable problems because it is never really clear what constitutes guidance. Guidance can be anything from a written letter with the proper authority of the ruling organisation of a professional body or any other body—right from that extreme down to a quiet telephone call from the chairman or president, advising the member in question that in the view of the chairman or president it would be unwise for the member of that body to persist in the sort of activity to which the chairman or president objects.

It is very difficult to record those telephone conversations. I think that the noble and learned Lord understands what I mean by "telephone conversation". Indeed, a lot of guidance of this sort is made in this informal way, and it is right that it should be so, because nothing could be worse than trying to place on the statute book the form in which guidance should be given. The whole point in using the word "guidance" rather than the word "rules" is that there is a certain flexibility; and informality is part of that flexibility.

Nevertheless, even allowing for that, it creates certain problems—and these are problems which have occurred in other clauses of the Bill—as to what exactly constitutes guidance. I think that we need, particularly in the case of recognised professional bodies, some indication, either in the form of a government reply to the amendment I am moving or in some document, exactly what is meant here by "guidance"; because nothing could be worse than to have an accountant—and I take that example again—saying, "Well, the president did ring me up to say that I shouldn't do this but, on the other hand, there was no record of that conversation. He didn't put it in writing and therefore it is not something that I should necessarily pay attention to".

This is specifically addressed to recognised professional bodies, if I may say so, rather than guidance issued by SROs or anybody else, for that, I think, is a different point. We are talking here about professional bodies governing people in the professions. That is the point that I am trying to make. When I say "in writing", at least in writing it makes it clear. Even the informal telephone call may be followed by a letter, in which case that is in writing. I hope that the noble and learned Lord understands the point I am making and the slight worries that I have in this particular instance of a professional body rather than any other organisation that is dealt with in the Bill. I beg to move.

Lord Graham of Edmonton

My Lords, I hope that the Minister accepts that this is a helpful amendment. We have traversed a lot of ground and a lot of people outside this House are pinning their hopes of the success of the Bill on the precise wording. No one better than a parliamentarian understands the value of the written word. The day after a debate all arguments about what was said—perhaps not what was meant, but what was said—can be confirmed or denied because the Official Record is precise.

We all have memories and we all have understandings or misunderstandings of conversations. Sometimes, even when notes are used in speeches, people misread them or interpolate. As my noble friend Lord Williams has pointed out, we need to get it right from the very beginning. It is one of those things, I am absolutely certain, where perhaps a word was not left out deliberately or accidentally, but perhaps without written confirmation the thought persists. I believe that my noble friend has been very cautious; but I think that, undoubtedly, whether it has been inspired by other people or by he, himself, it is a helpful suggestion and one I think that the Minister would do well to consider very favourably.

Lord Cameron of Lochbroom

My Lords, I appreciate the spirit in which this amendment was put down. I think that it is fair to say that the amendment as it stands at present—and I accept it as being a probing amendment—is related both to guidance issued and any recommendation made by a body to all or any class of its members. I have to say that so far as concerns recommendations, we have here to take account of the provisions of the Restrictive Trade Practices Act 1976 which for services supply associations—and they could well include professional bodies—provide that the agreement for the constitution of the association may include any specific recommendations, whether expressed or implied, which members have agreed to comply with. I think that the noble Lord opposite will understand that it may be in those circumstances that recommendations may not be made in writing, and for that reason the words "in writing" were not incorporated in this clause.

So far as concerns guidance, one also has regard to two other parts of the Bill. In Clause 17, on page 12, provision is made in subsection (2) that in an application, Subsections (2) to (6) of section 9 shall have effect". I also have to take into account Clause 21(6), on page 14. Provision is made there for amendment, revocation or addition to the rules of a recognised professional body. If one turns back to Clause 9—I am sorry that one has to go through what appears at first blush to be a somewhat convoluted mechanism—one finds on page 7, Clause 9(6). It reads: Every application shall be accompanied by a copy of the applicant's rules and of any guidance issued by the applicant which is intended to have continuing effect and is issued in writing or other legible form. That means, when one is looking at guidance in the context of Clause 16, it must be that guidance which is referred to.

May I say that I should like to look at this in respect of guidance? Regarding recommendations, for the reasons that I have already indicated, I cannot accept the amendment; but since the noble Lord has drawn attention to the point in relation to guidance also, I should like to consider the matter. With that undertaking perhaps the noble Lord would withdraw this amendment.

Lord Williams of Elvel

My Lords, I am most grateful to the noble and learned Lord for what he has said, and for taking us through some very difficult aspects of the Bill. He took us through with admirable clarity and distinction. I am a little unhappy that he should draw our attention to Clause 9(6) when talking about guidance issued by recognised professional bodies, because Clause 9 applies to applications for recognition from recognised self-regulating organisations, as I understand it. I hoped that I had made it perfectly plain in my introductory remarks that I regarded guidance issued by a recognised professional body as being somewhat different in character from guidance that an SRO might give. Perhaps if I did not make that plain, I should do so now.

Nevertheless, I think that my noble friend Lord Graham of Edmonton is right in saying that we should get the Bill as precise as we can because a lot of people will be relying on it. I note the noble and learned Lord's comments about the Restrictive Trade Practices Act. I was indeed aware of the problems that professional bodies run into; but if one looks at the pieces of legislation which have been repealed by this particular legislation, it does not seem beyond the wit of man to introduce an amendment to the Restrictive Trade Practices Act to accommodate this particular problem.

Having said all that, I am most grateful to the noble and learned Lord. I accept his assurance of course that he will look at it again the light of the problems that I have raised and indeed in the light of some of the problems that I believe he himself saw as he was explaining the Bill to us. I hope that at a later stage the noble and learned Lord will be able to come back with some clarificatory amendment which might help us on this. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 [Grant and refusal of recognition]:

Lord Morton of Shuna

moved Amendment No. 89: Page 12, line 31, leave out ("may") and insert ("shall"). The noble Lord said: My Lords, this amendment seeks to amend Clause 18(2) in relation to the making of recognition orders by the Secretary of State by substituting the word "shall" for "may". The difficulty here with the word "may" is that it appears to give the Secretary of State a power to prevent a profession from doing investment business. First, "professional body" means a body under Clause 16 that regulates that profession, something like the Law Society of Scotland or the Law Society in England. You cannot practise as a solicitor without being a member of the society. That body applies to the Secretary of State for a recognition order and the Secretary of State says "no", although the body has fulfilled everything that is required. If you compare that with what happens with self-regulating organisations in Clause 10(2), the distinction is pointed. It says there: Subject to subsection (4) below and to Chapter XIV of this Part of this Act, the Secretary of State shall make a recognition order if it appears to him". Why is there this distinction? Why should the Secretary of State be bound to make an order when the SRO satisfies him of the various articles if, with a profession such as accountancy or the solicitors' profession, the Secretary of State apparently can refuse to make an order? At his own whim, even if he is totally satisfied that the body is suitable and the regulations are absolutely correct, he can still say "no". There seem to be no logical reason for this distinction. I beg to move.

Lord Graham of Edmonton

My Lords, I hope the Minister recognises the danger of making fish of one and fowl of another. It is always interesting to listen to colleagues who have taken great care not so much to look for lacunae in the Bill as for contradictions and inconsistencies that may very well be capable of explanation. No doubt the Minister and his advisers have answers to what appears to me, as a layman, a strange situation—the use of the word "may" in one part of the Bill dealing with one set of organisations, and the word "shall" in another part of the Bill. In an earlier debate we sought to change the word "may"; to the word "must".

Schedule 3 refers to the requirements for recognition of a professional body. and I very much hope the Minister will be able to explain to our satisfaction the kinds of circumstances in which he would consider it to be perfectly possible and reasonable not to grant a recognition order to a professional body. On the basis that the draftsmen, guided and advised by the Minister and his colleagues, have produced wording that the Minister considers appropriate, no doubt we shall receive that explanation.

Certainly there will be professional bodies which will make a case because there is an advantage or a disadvantage, and some of them may have seen it before the enactment and others may not. At the top of page 13 we see Clause 18(4), which states: Where the Secretary of State refuses an application for a recognition order he shall give the applicant a written notice to that effect. stating the reasons for the refusal". That seems to me eminently sensible, because we do not want there to be a suggestion that you will be all right if your face fits but not if it does not. Obviously these matters are crucial to the wellbeing of professional bodies because at the end of the day we are talking about small investors as well as large investors, and they are going to be crucially affected by what I call the paraphernalia of this Bill. It will have significance.

I look forward to the enactment of the Bill, when people will say that to be recognised or not to be recognised and to be able to practise, to give advice and guidance will be very important. The Minister will not need me to tell him that there will be literally thousands of people professionally involved outside the House for whom the question of recognition or otherwise of their professional body will have a great effect not merely professionally but also financially. It could very well be that recognition or otherwise, properly and reasonably given or withheld, will make an enormous difference to their status and stature in the community, and, even more importantly, in the financial community.

I should like the Minister to give us some illustrations and name some of the bodies over which there could well be question marks. There must be some professional bodies about which there can he no question. I am not talking about anything other than this matter or suggesting that they are questionable as professions. But there will be borderline professions that the Minister, in all honesty, says are not the kind of bodies which fit neatly into the nexus of the Bill. I very much hope that he can satisfy me that there is a perfectly good reason why, as my noble friend Lord Morton pointed out, different words are being used in what the Minister will no doubt tell us are different sets of circumstances.

5 p.m.

Lord Cameron of Lochbroom

My Lords, perhaps I may explain why there is a difference between the self-regulating organisations, all of whose members will be carrying on investment business, and what is intended by this part of the Bill, dealing with RPBs. The reason why discretion has been retained for the Secretary of State or the designated agency to refuse to recognise a professional body, even if it meets the specified criteria, is that it is possible to think of an application from a professional body where very few members of that body will be carrying on investment business. I do not say that that necessarily will happen and I should have thought it is unlikely to be so. Nevertheless it is something which could happen.

Even if the professional body's enforcement procedures were satisfactory, recognition of a body might therefore be misleading to investors. That would not, of course, inhibit individuals who were members of that professional body, albeit that the body was not recognised, from being authorised persons. They could then make application to the Secretary of State in the terms of Clause 26.

We have thought carefully about this matter, and there may be occasions when it would be appropriate to refuse recognition in the circumstances to which I have referred. Obviously, if the Secretary of State's or the designated agency's decision was unreasonable, or there had been some impropriety in acting, the courts might well provide a remedy.

I was asked by the noble Lord, Lord Graham, whether I could suggest circumstances in which this discretion would be used and those are the kind of circumstances which we have very much in mind. Because it was recognised that professional bodies differ from SROs, in that it has to be simply the main part of the business and not the whole business which is comprehended—and it may well be that there would be very few members of that profession who would carry on investment business—it was thought appropriate that the Secretary of State should not be required to do this, even though enforcement rules were satisfactory.

I hope in the light of what I have said that I have given sufficient information to make plain why we see a distinction to be made between recognition of SROs and recognition of professional bodies. If there is any way in which I can assist noble Lords further, I shall be happy to do so. However, as I say, while we do not see that this discretion will be used very often, if we had the word "shall" it might well be that investors could then be misled in a way which we do not regard as being proper. It is not as though the individual who is a member of that body could not find another outlet for authorisation.

Lord Graham of Edmonton

My Lords, I am grateful to the Minister for meeting my request head-on and giving me a little flesh on the bones. However, in doing so he used the illustration of a profession where there were so few members—I am sorry, would the Minister care to—

Lord Cameron of Lochbroom

My Lords, perhaps I might make it clear. I am not suggesting a profession with very few members, although that might be the case. It may be a large profession, but perhaps only two or three members would be undertaking such business. I may not have made myself clear to the noble Lord.

Lord Graham of Edmonton

My Lords, the Minister has made himself absolutely clear but he anticipated incorrectly the point I was making. The Minister used as an illustration a profession in which there were so few members engaged in the gravamen of this Bill that it would not be right to grant recognition and status to the whole profession. He said that the individuals concerned had a means of becoming authorised persons in another way. However, I want to ask him what the damage done would be. The noble Lord, Lord Lucas, shakes his head so vigorously that I am sure he will intervene, and if I have it wrong I shall apologise. However, the point I was going to make was that if it is a professional body of standing, and it has a few members who are involved in giving investment advice or who can be caught by some of the provisions of this Bill, in the fullness of time, those few may become many.

I was simply saying that as I read Clause 18(2), even if the word "may" is changed to "shall", recognition is not automatic. It provides that: The Secretary of State shall make a recognition order if it appears to him from the information furnished by the body making the application and having regard to any other information in his possession that the requirements of sub-section (3) below and of Schedule 3 to this Act are satisfied". In other words, we are not railroading the Secretary of State or anybody else into automatically giving recognition, but we are saying that if he is satisfied in all those ways he should do so. I am puzzled that as the Bill now reads, even if he is satisfied, he may still withhold recognition. The Minister said, regarding subsection (4) on page 13, that he must reserve that right and that he will then put his argument forward in writing. I am still puzzled as to why he would not give the recognition.

The other question that I must ask the Minister concerns my assumption that the department must have a very full profile on the professions and their involvement. The illustration he gave was that there could be a profession with very few practitioners giving investment advice. If there is no research, and no bureaucracy is required to obtain that information, that is fine. On the other hand, if what the Minister is saying is that those are the sort of circumstances in which the Secretary of State would exercise his right under Clause 18(2), but in order to do so he would need to go to a lot of trouble, I ask: Why go to that trouble? If he is satisfied that the profession is bona fide in general, even though it may be suspected that not all of the members are practising, why not use this as a reasonably honest and satisfactory way of proceeding?

Lord Cameron of Lochbroom

My Lords, with the leave of the House, may I respond to that? I would simply say to the noble Lord that, over the Bill as a whole, we have taken the view that it is undesirable to have an unnecessarily large number of regulators each with its own rules. Thus with regard to self-regulating organisations there is the ability to refuse recognition on the basis that it is unnecessary to have another regulator of that kind of business.

Equally, there is power to refuse to give recognition to a professional body with few "relevant" members. Otherwise, as I said, that would lead again to a larger number of regulators, which is against our policy. It is not as though those individuals do not, for the reasons I set out, have the ability to go direct to individuals to obtain authorisation. I ought to have made that point a little clearer earlier. I apologise to the House for not having done so. But in these circumstances it is important to have this discretion here.

Lord Morton of Shuna

My Lords, I find the reasons behind this provision rather worrying and slightly astonishing. We can have a situation where there is a profession which has a few members who are doing business which qualifies under the Bill and the Secretary of State, because he does not want too many professional bodies, can say "There are only 200 in this profession who give any investment advice. I shall not recognise the professional body" and can give them the choice either of ceasing to give any form of investment advice or of going to the SIB to become individually authorised persons. It seems a very curious approach.

I still do not see why, if the professional body has fulfilled all the regulations, and if there are people who are controlled by the professional body and who are doing investment business, it is not simpler to have the professional body go through the rules, than to have each of them as individually authorised persons. It also seems strange that this almost gives the Secretary of State some power of control over which professions he likes. It is a very extraordinary suggestion that he can say to profession A, "There are not many of you doing investment business. Therefore you will not be recognised". I do not see that it matters—the recognition issue of the professional body is so crucial—when one realises that each individual member of each individual profession who wishes to give investment business has to be specially authorised by his own profession. I have tried to say that the answer seems to me wholly unsatisfactory, but I do not wish to take the opinion of the House on this issue. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 3 [Requirements for recognition of professional body]:

5.15 p.m.

Lord Cameron of Lochbroom

moved Amendment No. 90: Page 189, line 25, at end insert— (") In the application of sub-paragraphs (2) and (3) above to a certificate which is to be or has been issued to a partnership constituted under the law of England and Wales or Northern Ireland or the law of any other country or territory under which a partnership is not a legal person, references to the certified person shall be construed as references to the partnership."). The noble and learned Lord said: My Lords, I spoke to this with Amendment No. 85. I beg to move.

On Question, amendment agreed to.

Lord Williams of Elvel

moved Amendment No. 91: Page 189, line 27, after ("regulating") insert ("the manner of"). The noble Lord said: My Lords, again I hope the noble and learned Lord will appreciate that this schedule was put into the Bill at Committee stage. What I am moving is in the nature of a probing amendment which should properly have been reserved for Committee, but we did not have a chance to discuss this matter in Committee. I am now slightly turning the argument of Amendment No. 87 on its head. Noting what the noble and learned Lord said about the rules of recognised professional bodies having to state certain minimal rules, which will he satisfactory to the Secretary of State in order for him to give recognition. he went on to say that a recognised professional body might have rules in addition to those which were minimal so far as the Secretary of State was concerned.

I am moving this amendment as a method of asking the noble and learned Lord whether he feels in the case of RPBs, where we are dealing with bodies which have members who are not necessarily very expert in the business of investment, and where, with the greatest respect to accountants, solicitors and other members of professional institutions and bodies, they are perhaps unfamiliar with some of the problems, risks and dangers involved in investment business, that it would be appropriate for a professional body which wishes to achieve recognition to have a rule which would alert members or prevent them falling into the traps which investment business can bring.

We are a little concerned that this whole area of rules and guidance from recognised professional bodies to their members is perhaps one that has not been fully thought through in the light of the difficulties that we have with investment business. I hope that the noble and learned Lord will give me a satisfactory answer. Maybe the answer is that he believes they are all adults and can look after themselves. My request—and he has studied the matter—is that if there are to be rules which are minimal, then perhaps they ought to seek to prevent members of these bodies from falling into the traps that I have described. I beg to move.

Lord Cameron of Lochbroom

My Lords, again I appreciate the point being raised. I would simply say to the noble Lord opposite that there are two things that must happen here. The rules must give the protection which is set out in paragraph 3, which would obviously involve them containing the elements which are to be found in the clause to which I have referred. That would include the manner of carrying on business.

I am bound to say that the noble Lord has produced an argument which I did not think of using in response to the last amendment moved by his noble friend. But if a professional body has members who are not particularly expert in some aspect of investment business, then the rules will have to recognise that; for example, by restricting certain types of members to certain forms of business or requiring special procedures to be followed by non-experts.

This is possibly what would be required to provide rules which met the test which is to be found in paragraph 3; namely, that their rules then afford to investors protection at least equivalent—and those words are important; it is the effect of the rules read against the capacity of the individual professional body and its members—to that afforded in respect of investment business which is otherwise covered by the Secretary of State or in the designated agency's rules as set out by order. I hope that that answers the point which the noble Lord put to me.

Lord Williams of Elvel

My Lords, I am most grateful to the noble and learned Lord. As the discussion has developed many interesting points have emerged. It now appears from what the noble and learned Lord said that the Secretary of State will decide on the rules of RPBs and whether they come up to paragraph 3 of the schedule. The Secretary of State will take a view on whether the members of a particular professional body are good, bad or indifferent at the investment business. He may say: "I do not think that the chartered accountants are much good"—whoever they may be—"and therefore we must have in the rules of that body specific rules relating to those people". I think I am right in my understanding but perhaps the noble and learned Lord will correct me if I am wrong.

The second point I made is that it is not necessarily affording protection to investors that they are worried about but also affording protection to members. I would normally hate the idea of protecting people from their own folly, but this happens sometimes and the investment businesses we are considering in this Bill are not simply investment businesses which have relation to investors outside; they are investment businesses in their own right. It is not just advice on investments that is involved but committing money and all sorts of things. Therefore, I am as much concerned with the members of the profession as I am with the investors who, I agree, have equivalent protection under the rules. Those are the two points I wish to make and perhaps the noble and learned Lord would like to comment before I decide on what to do with the amendment.

Lord Cameron of Lochbroom

My Lords, I have endeavoured to answer the first point and I cannot go further. As regards the second point concerning membership, the professional body must look to itself. I am simply pointing out that the rules look to the protection to be afforded to investors. If the professional body in seeking to come forward for recognition considers it appropriate to protect its membership by limiting the individuals, however it wishes to do so, who are able within its rules to carry on investment business, that is very much a matter for the profession. I am simply saying that paragraph 3 of Schedule 3, properly within the policy of the Bill, is aimed at the protection of investors. I hope that that satisfies the noble Lord.

Lord Williams of Elvel

My Lords, I am most grateful to the noble and learned Lord for his comments, which satisfy me. I understood him correctly and I understand that it is up to an RPB to protect its members in whatever way it believes fit and it is not a matter for the Secretary of State. I am grateful to him for having made that absolutely clear, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas of Chilworth

moved Amendment No. 92: Page 189, line 33, at end insert— (" ( ) The rules under that Chapter to be taken into account for the purposes of this paragraph include the rules made under section 49 and under sections 53 and (Compensation fund) so far as not themselves applying to persons certified by the body.") The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 78, which your Lordships agreed on Tuesday night. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom

moved Amendment No. 93: Page 190, line 4, at end insert— ("(3A) The arrangements for enforcement may make provision for the whole or part of the function to be performed by and to be the responsibility of a body or person independent of the professional body"). The noble and learned Lord said: My Lords, in speaking to this amendment it will be for the convenience of the House if I speak also to Amendments Nos. 94, 95, 185, 186, 187, 466, 468, 469, 470 and 471.

These amendments reflect the fact that some of the bodies likely to apply for recognition under the Bill already have a disciplinary mechanism for their members which is independent of the body itself. In the case of the law societies, for example, there is an independent tribunal established by statute. Amendment No. 93 ensures that reliance upon such independent disciplinary mechanisms will not preclude the body from satisfying the requirement for effective enforcement arrangements. Amendments Nos. 93, 94, 185 to 187 and 466 to 471 are necessary to adapt other provisions of the Bill to accommodate the possibility of such an independent disciplinary mechanism.

The amendments also allow a recognised professional body to set up or participate in an independent mechanism much of the kind to which my noble friend referred earlier. Amendment No. 95, in the name of the noble Lords opposite, would make independent investigators a condition of recognition. We had a debate on that in another context and there is nothing I can usefully add to what was said by my noble friend in that regard. I beg to move.

Lord Morton of Shuna

My Lords, I quite accept the reasons for the word "may" in Amendment No. 93 and agree with the reasons why there should be enforcement procedures outwith the actual body. I have no objection to Amendment No. 93.

It is on Amendment No. 94 that we get into trouble and I still take the view which I previously expressed. As Amendment No. 95 states: The arrangements for investigations of complaints must include arrangements for complaints to be investigated by persons independent of the body". That is being read by the noble and learned Lord as meaning that all complaints must be investigated by independent persons, but that is not what the amendment says. It states: The arrangements for investigations of complaints must include arrangements for complaints"— not for all complaints— to be investigated by persons independent of the body". As I said before, and I do not wish to repeat myself at length, we consider that it is essential that there must be some independent way for a dissatisfied complainer. From experience this is perhaps especially known to be true, for example, of the law and accountancy professions.

I have a different objection on Amendment No. 94. I do not know what it means. The amendment refers to paragraph 5, headed "Investigation of complaints", which states: The body must have effective arrangements for the investigation of complaints relating to"— the paragraph then specifies these under subparagraphs (a) and (b). The amendment then inserts: Paragraph 4(3A) above applies also to arrangements made pursuant to this paragraph". One then refers to paragraph 4(3A) in Amendment No. 93, which states: The arrangements for enforcement may make provision for the whole or part of that function to be performed by and to be the responsibility of a body or person independent of the professional body". It does not say anything at all about the investigation of complaints; it refers to enforcement. It does not make sense. It does not cover the point that the noble and learned Lord no doubt intended that it should. Unless I have totally misread it, it does not do what he wants it to do.

For that reason, and because I prefer my Amendment No. 95, I cannot agree with Amendment No. 94, though I agree with Amendment No. 93. I support Amendment No. 95, and I have no objection to the other amendments in this group.

5.30 p.m.

Lord Graham of Edmonton

My Lords, I hope that the Minister will demonstrate, if not flexibility at least understanding as to the explanation given by my noble friend, particularly of Amendment No. 95. The noble Lord, Lord Lucas of Chilworth, in an earlier exchange drew attention to a halfway house between "may" and "shall". We were arguing between "must" and "shall". I recall the noble Lord saying earlier this afternoon that there may be circumstances where the word "appropriate", I believe he said, could apply—where "appropriate" complaints may be investigated.

What my noble friend has pointed out in Amendment No. 95 is that it says: The arrangements for investigation of complaints must include arrangements". He went out of his way to explain that that did not mean all complaints; it must include arrangements for investigating complaints, not all complaints. In other words, if one is looking for flexibility, the exercise of some discretion and a modus operandi which at least allows those who have very important and influential functions to perform to exercise some discretion, I should have thought that the words of Amendment No. 95 are sensible and reasonable. They enable those outside the House to understand that the arrangements are not rigid particularly when dealing with the investigation of complaints.

In his response I should like the Minister to spend a little time informing us about the research that has been done and the advice that has been given to him by his advisers and those involved as practitioners on the kind of experience that has been found when the Ombudsman provisions or complaints procedures which exist at the moment are called into dispute. If I had gone to the Office of Fair Trading or written to some professional bodies no doubt they could have advised me.

I am genuinely wondering whether this will be a growth industry. I can understand the Government's reluctance to put on new organisations responsibilities for doing a great many things; but I confess with a great deal of candour that I am concerned with the non-professional side of this matter; that is to say, the consumer end—or, one might say, the little man or woman. At the end of the day, as a result of reading our newspapers and watching television, we understand the raison d'être of the Gower report. That concerned the investigation of a series of dreadful incidents that had gone unpoliced or undetected until it was too late. We are not concerned about people who have millions or thousands of pounds but about those who may have only hundreds of pounds and what they can do in order to obtain redress. They may not be able to get their money back or obtain satisfaction but we should like to make sure that those very important bodies—the SROs, the professional bodies, MIBOC and SIB, who are the major overseeing authorities—are told by Parliament that it wants the ordinary person to feel comfortable and confident that the provisions of the Act, as it will become, will protect them so far as possible.

I am sure that the Minister will give a robust reply to the point made by my noble friend on the question of enforcement. I share his puzzlement as to how Amendments Nos. 93 and 94 can sit squarely with the question of the investigation of complaints, because there it is not a matter of enforcement but of procedure.

Lord Cameron of Lochbroom

My Lords, perhaps I may reply first to the latter point, and simply say that if one puts Amendment No. 94 against Amendment No. 93, it becomes quite clear in Amendment No. 94, in its reference back to paragraph 4(3A), which goes on: applies also to arrangements made pursuant to this paragraph", that the arrangements are the arrangements for the investigation of complaints, and it is those arrangements which have to be: performed by and to be the responsibility of a body or person independent of the professional body". I do not think that there is any difficulty when it is looked at in its proper context.

As regards the second point raised by the noble Lord opposite, we have discussed this matter in detaill earlier today. The arguments were admirably put forward by my noble friend and I do not think there is anything that I can usefully add to them. Our view is that the Secretary of State or designated agency will have to be satisfied that the arrangements are sufficient, whether they are internal or external. I understood that your Lordships had taken a decision on that point in an earlier context and that no suggestion has been made that professional bodies should be in a different case from those upon whom we voted earlier.

Lord Morton of Shuna

My Lords, I am surprised by the remarks of the noble and learned Lord opposite. If it is the intention to make all parts of this Act clear, and one goes to paragaph 5 and adds to it Amendment No. 94, it is certainly an appalling example of a lack of clarity, because when one goes to paragaph (3A) one is not dealing with investigation of complaints at all but dealing straightforwardly with enforcement. I should have thought that the court would ask, "What enforcement? Enforcing what?" The argument has been developed on the major issue and again I regret that we shall have to have a Division, but not on the amendment that we are now discussing—namely, Amendment No. 93—which we are not disposed to contest.

On Question, amendment agreed to.

[Amendment No. 93A not moved.]

Lord Cameron of Lochbroom

moved Amendment No. 94: Page 190, line 22, at end insert— ("(2) Paragraph 4(3A) above applies also to arrangements made pursuant to this paragraph".) On Question, amendment agreed to.

Lord Morton of Shuna moved Amendment No. 95: Page 190, line 22 at end insert ("The arrangements for investigation of complaints must include arrangements for complaints to be investigated by persons independent of the body and its members").

The noble Lord said: My Lords, I have spoken to this amendment. I beg to move.

5.38 p.m.

On Question, Whether the said amendment (No. 95) shall be agreed to?

Their Lordships divided: Contents, 53; Not-Contents, 95.

DIVISION NO. 3
CONTENTS
Airedale, L.	Gregson, L.
Amherst, E.	Hacking, L.
Ardwick, L.	Hampton, L.
Bonham-Carter, L.	Harris of Greenwich, L.
Carmichael of Kelvingrove, L.	Hooson, L.
Chandos, V.	Hughes, L.
Cledwyn of Penrhos, L.	Hunt, L.
Craigavon, V.	Kennet, L.
David, B. [Teller.]	Kilbracken, L.
Diamond, L.	Kirkhill, L.
Elwyn-Jones, L.	Listowel, E.
Ennals, L.	Llewelyn-Davies of Hastoe, B.
Ezra, L.	McIntosh of Haringey, L.
Gallacher, L.	McNair, L.
Graham of Edmonton, L.	Mayhew, L.

Mishcon, L.	Sainsbury, L.
Molloy, L.	Serota, B.
Monson, L.	Shackleton, L.
Morton of Shuna, L.	Stedman, B.
Mountevans, L.	Stoddart of Swindon, L.
Mulley, L.	Strabolgi, L.
Nicol, B.	Taylor of Blackburn, L.
Phillips, B.	Tordoff, L.
Ponsonby of Shulbrede, L.	Underhill, L.
[Teller.]	Wallace of Coslany, L.
Prys-Davies, L.	White, B.
Ritchie of Dundee, L.	Williams of Elvel, L.

NOT-CONTENTS
Aldenham, L.	Lauderdale, E.
Alexander of Tunis, E.	Layton, L.
Ampthill, L.	Limerick, E.
Arran, E.	Lindsay, E.
Auckland, L.	Lindsey and Abingdon, E.
Bancroft, L.	Long, V.
Beaverbrook, L.	Lucas of Chilworth, L.
Belhaven and Stenton, L.	Lyell, L.
Belstead, L.	McAlpine of West Green, L.
Bessborough, E.	Mancroft, L.
Blyth, L.	Margadale, L.
Boardman, L.	Marshall of Leeds, L.
Boyd-Carpenter, L.	Maude of Stratford-upon-
Brabazon of Tara, L.	Avon, L.
Bridgeman, V.	Merrivale, L.
Brougham and Vaux, L.	Mersey, V.
Broxbourne, L.	Molson, L.
Butterworth, L.	Monk Bretton, L.
Caccia, L.	Mottistone, L.
Caithness, E.	Murton of Lindisfarne, L.
Cameron of Lochbroom, L.	Nugent of Guildford, L.
Campbell of Alloway, L.	Onslow, E.
Campbell of Croy, L.	Orr-Ewing, L.
Carnock, L.	Pender, L.
Cathcart, E.	Polwarth, L.
Constantine of Stanmore, L.	Portland, D.
Cottesloe, L.	Reay, L.
Cox, B.	Renton, L.
Cross, V.	Robertson of Oakridge, L.
Dacre of Glanton, L.	Rodney, L.
Davidson, V. [Teller.]	St. Aldwyn, E.
Denham, L. [Teller.]	St.Davids, V.
Ebbisham, L.	Sanderson of Bowden, L.
Eccles, V.	Shaughnessy, L.
Elliott of Morpeth, L.	Skelmersdale, L.
Elton, L.	Slim, V.
Gainford L.	Strathspey, L.
Gardner of Parkes, B.	Sudeley, L.
Glanusk, L.	Swansea, L.
Glenarthur, L.	Terrington, L.
Hailsham of Saint	Tranmire, L.
Marylebone, L.	Trumpington, B.
Hesketh, L.	Vaux of Harrowden, L.
Hives, L.	Vivian, L.
Hooper, B.	Ward of Witley, V.
Hylton-Foster, B.	Whitelaw, V.
Kimball, L.	Wise, L.
Kinnaird, L.	Young, B.
Lane-Fox, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.45 p.m.

Clause 20 [Compliance orders]:

Lord Morton of Shuna

moved Amendment No. 96: Page 13, line 25, at end insert ("provided that he has given prior notice to the recognised professional body of his intention to do so."). The noble Lord said: My Lords, this amendment is fairly technical, but it is important. Clause 20 empowers the Secretary of State, if it appears to him that Clause 18(3) or the requirements of Schedule 3 are not satisfied or that the body has failed to comply with an obligation, instead of revoking the recognition order under Clause 19, to make an application to the court.

Our amendment merely adds: provided that he has given prior notice to the recognised professional body of his intention to do so". That would be normal fairness and would also save a certain amount of court time.

As I understand it, the clause is not an immediacy clause because the court has to go into some form of trial or proof to discover whether the situation has been made out. It would appear reasonable that before rushing into court the Secretary of State should warn the professional body of his intention. It is a short but reasonable point. I hope that it is acceptable to the Government. I beg to move.

Lord Cameron of Lochbroom

My Lords, we are not aware of any pressure from RPBs for such an amendment. I am not convinced that the amendment adds anything of value. I should not expect the Secretary of State or a designated agency to use powers under this clause unless discussions with the RPB concerned had failed to achieve the desired result.

I think that the noble Lord, Lord Morton, was suggesting that the provision would allow the professional body to reconsider its position. It would be no great protection to receive a notice of the Secretary of State's intention to go to court as no opportunity for consultation is suggested.

Application to the court is, effectively, a notice to the body that the Secretary of State is serious. No doubt at that point, if the professional body has not in earlier discussions been prepared to accede to the Secretary of State's view, it could reconsider the matter.

The noble Lord is well aware that the service of an initial writ or summons is often the first and last step in that it brings the parties to an accommodation where such has not obtained before. I do not see that the amendment achieves any useful result. The noble Lord has not suggested any. I am unwilling to clutter the Bill with unnecessary provisions. I must therefore refuse his suggestion that we accept the amendment.

Lord Morton of Shuna

My Lords, I am rather astonished that the noble and learned Lord the Lord Advocate takes that view. He recognises apparently that the Government respond to pressure and that they respond only to pressure and not to reason, which I do not think he meant to say. He also recognises, however, that the service of a writ can produce results. And so, of course, when it comes from the Secretary of State, can the threat of the service of a writ. The noble and learned Lord is considering Lord Maxwell's report on the use of judicial time. At some appropriate point I might ask the noble and learned Lord what he intends to do about it or what the Secretary of State intends to do about it. The courts are rather busy in Scotland, as in England. They become cluttered up with unnecessary actions.

Why are the Government so anxious not to have an obligation to write a letter warning a professional body that if it does not do something within a week, or whatever period may be given, they will go to court? I really do not understand this. It is perhaps the case that any amendment coming from this side has to be opposed, that it has "Resist" or "Refuse" marked on it. If it is nothing more than that, it is an unfortunate situation. We are trying to be co-operative. I see that I am getting no response. In order, therefore, not to waste the time of the House I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 [Notification requirements]:

Lord Morton of Shuna

moved Amendment No. 97: Page 13, line 43, after ("such") insert ("reasonable"). The noble Lord said: My Lords, this amendment will no doubt meet the same fate. The amendment seeks to restrain the Secretary of State's power to 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". We seek in this amendment—I wish also to speak to Amendment No. 98—to insert the word "reasonable". If this information is being asked for each day, it will put an incredible burden on any professional body. As regards Amendment No. 98, the words to which I wish to draw attention in subsection (4) are: to be verified in a specified manner". If the regulations provide for information to be given in a specified form, it seems unnecessary that they should be required to be verified in a specified manner. This is only in respect of a professional body making a return of its authorised persons, if I may so express it. I do not quite see what has to be verified and what is involved. The noble Lord, Lord Lucas of Chilworth, dealing with verification in the context of what was then Clause 48 but which is no longer Clause 48, said during the Committee stage: The obligation in Clause 48 … is on the authorised person furnishing the information to provide, when required, verification of the information he provides".—[Official, Report, 23/7/86; col. 334.] The only information that a recognised professional body can provide, or is required to provide, is: such information relating to the body, its members and persons certified". How is this information going to be verified? It is not an accountancy exercise. What is meant by, verified in a specified manner"? Is there some special form of words that the Secretary of State wants added to a list saying that the Law Society has X thousand solicitors. And, if so, why? I beg to move.

Lord Cameron of Lochbroom

My Lords, the first amendment is unnecessary. If the noble Lord turns to subsection (3), he will find that it provides that the, 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". So it must be reasonable information. As to the second matter, I can take an example. One is, of course, dealing with a whole range of recognised professional bodies. There may be a requirement for financial information to be supplied. It may well be sensible, in such circumstances, for regulations to require not only the form in which the information is provided—it may be in a specific form of accounts—but also that those accounts should be verified by the particular officer who has drawn them up. It is because there is a distinction, as I think the noble Lord will recognise, between form and verification that it is thought appropriate to have the second part of subsection (4) in the Bill. As specific information about the body and its monitoring resources, and so on, would be involved, these are the kind of areas where the wording of the Bill as it stands could be helpful. I suggest that it is a necessary part of subsection (4).

The first amendment is covered in subsection (3).

Lord Graham of Edmonton

My Lords, I am puzzled as to why the Minister should reject the word "reasonable" between the words "such" and "information" when subsection (3), in dealing further with the matter, says that the Secretary of State "may reasonably require". There is a difference. But no argument can arise over the appropriateness of the word "reasonable" that we seek to introduce when "reasonably" is already written into the Bill at the top of page 14. We are saying that the information that is requested shall be reasonable. The words are "such reasonable information". When we talk about the impact of subsection (3) at the top of page 14, it is action that the Secretary of State "may reasonably require". There is a subtle difference.

I hold the view that the Secretary of State must have enormous powers. The word "prescribed" appears often in the Bill, as in many Bills. I accept that in our legislative process it is not possible to be precise as to every aspect of carrying out the main provisions of a Bill. One has to leave to statutory instruments and other secondary legislation procedures of that kind. But what we are seeking here is very reasonable. The Minister has not said that it would be unreasonable to ask for it. The Minister talks in terms of the word "reasonable" being unnecessary. The Minister may or may not be right. People outside this House may consider it necessary to insert the word "reasonable".

I repeat that there are major matters of importance which we have yet to touch upon in the course of our discussions tonight and at other stages of the Bill. By comparison these are very minor matters. Perhaps the Minister can demonstrate some flexibility by giving ground instead of having any measures gained by this side dragged out of him. That would make a great deal of difference to the progress of the Bill during the latter stages.

Lord Morton of Shuna

My Lords, this is a fairly minor point and to save time I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 98 not moved.]

Clause 26 [Applications for authorisation]:

[Amendment No. 98A not moved.]

Clause 27 [Grant and refusal of authorisation]:

6 p.m.

Lord Cameron of Lochbroom

moved Amendment No. 99: Page 16, line 41, at end insert— ("(aa) if the applicant is a partnership, to any of the partners;"). The noble and learned Lord said: My Lords, this has already been spoken to with Amendment No. 85. I beg to move.

On Question, amendment agreed to.

[Amendment No. 99A not moved.]

The Deputy Speaker (Baroness Serota)

My Lords, before calling Amendment No. 100 I should point out that the second amendment which is numbered Amendment No. 100 should read Amendment No. 100A.

Lord Cameron of Lochbroom

moved Amendment No. 100: Page 17, line 9, leave out subsection (6) and insert— ("(6) An authorisation granted to a partnership—

1. (a) shall be granted in the partnership name; and
2. (b) shall authorise the carrying on of investment business in that name (or with the Secretary of State's consent in any other name) by the partnership to which the authorisation is granted, by any partnership which succeeds to that business or by any person who succeeds to that business having previously carried it on in partnership;

and, in relation to an authorisation granted to a partnership constituted under the law of England and Wales or Northern Ireland or the law of any other country or territory under which a partnership is not a legal person, references in this Act to the holder of the authorisation or the authorised person shall be construed as references to the persons or person for the time being authorised by the authorisation to carry on investment business as mentioned in paragraph (b) above."). The noble and learned Lord said: My Lords, I have spoken to this with Amendment No. 85. I beg to move.

On Question, amendment agreed to.

[Amendment No. 100A not moved.]

Clause 28 [Withdrawal and suspension of authorisation]:

Lord McIntosh of Haringey

moved Amendment No. 101: Page 18, line 12, at end insert— ("( ) The suspension of an authorisation of a person shall be notified to the relevant self-regulating organisation or recognised professional body and shall be made public in an appropriate manner.") The noble Lord said: My Lords, this is another of these clauses which has been substantially altered in Committee, with the addition in particular of subsection (3) of the clause which refers to the case of the holder of an authorisation for whom the withdrawal or suspension of the authorisation is under consideration when he is a member of an SRO or of a recognised professional body. The result of this amendment may not be helpful, but the intention of it is entirely helpful. It is that we should follow the logic of the amendment made by the Government in Committee and provide that the suspension of the authorisation of a person shall be notified to the relevant SRO or the recognised professional body and shall be made public in an appropriate manner.

There are many precedents for notification to the responsible body both in this and other Acts. Whether or not there are precedents, we believe that it is highly desirable that the suspension of authorisation for somebody who is undertaking investments should be made known to the public for their better protection. The purpose of this amendment speaks for itself. I believe that it is in the interests both of the SROs, the recognised professional bodies, and of the investing public in general that there should be this additional notification. It should not cause a significant additional burden or any burden that is not commensurate with the benefit to be achieved from it. I beg to move.

Lord Beaverbrook

My Lords, the noble Lord opposite and I are at one in wishing proper public notice of suspension or withdrawal of authorisation to be given. I would put it to him that the Bill as drafted meets his point. He will see from Clause 29(5) that provision is made for public notice of the Secretary of State's decision to he given if no reference to the tribunal is made and from Clause 99 that provision is made for publication of tribunal reports. Clause 100 provides that the register shall be noted when the authorisation of any person ceases for whatever reason. This provision will ensure that the public register is noted appropriately. The noble Lord will also see from Schedule 7 that a designated agency has to be able and willing to co-operate with other regulators.

I put it to the noble Lord that the cumulative effect of these provisions is effectively the same as that which he seeks to achieve by this amendment. The register can always be checked; and I am confident that the relationship between the designated agency and the other recognised bodies will be such that close communications between them will be maintained in all issues, especially those as serious as the withdrawal or suspension of authorisation. I therefore ask that your Lordships do not accept the amendment.

Lord Graham of Edmonton

My Lords, the Minister has certainly helped me to understand that the Bill contains, in different parts, a substantial element of what is covered by this amendment. But I am very pleased that it is this Minister who is dealing with the matter. Last week on our first exchange we dealt in another context with the continuing use by a body such as a travel agent of an authorisation of status after it had ceased to earn it. I was concerned that the general public may use a travel agent which had at one time enjoyed the status and protection of the ABTA symbol but which, having lost that status, has been able to trade with different directors. The public might not understand that the integrity of the organisation had been diminished.

My colleague on the Front Bench may be satisfied. We are concerned that where there has been a withdrawal of the recognition and authority which we give to people who are licensed and authorised under this Bill, we do not leave any loopholes. Public attention ought to be drawn to such withdrawal to the maximum extent.

The Minister has talked in terms of registers and of notification. We are concerned as legislators to ensure that our hands are clean. Where possible we want to provide that, when a suspension is carried out for a misdemeanour, the public is made aware of it. We may not be talking simply of the cost of a holiday, great though that may be to a person of limited means. Someone whose authority has been suspended could be dealing not simply in thousands of pounds but in a great deal of money. No doubt my noble friend on the Front Bench will tell the House whether we are satisfied with the explanation.

Lord McIntosh of Haringey

My Lords, I take this opportunity to welcome the noble Lord to the Dispatch Box for the first time on this Bill, although he has, I know, been answering questions previously.

In moving this amendment we are aware of the provisions of Chapter X of the Bill, to which the noble Lord referred. We are aware of the existence of the register and the complex and, on the whole, worthy provisions for the maintenance of the register and its availability to the public. However, as my noble friend Lord Graham said, the case of a person whose authorisation has been withdrawn or suspended is somewhat different.

If I as an investor wished to check whether the status of somebody with whom I wished to do investment business was valid or not, it would be right and proper for me to go to the register. However, as an investor dealing with a number of different authorised persons for the purpose of investment, I might not think to go to the register. I might need positively to be told in as public a manner as possible that one of the people with whom I am dealing in investment terms has done something which has caused him to be withdrawn or suspended from the register. Something more than the up-to-date maintenance and publication of a register is required in this case.

To this extent, I am not entirely satisfied with the answer given by the noble Lord, Lord Beaverbrook. Nevertheless, he made a number of complex points and referred to a number of later points in the Bill which deserve further study. In order to do that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 29 [Notice of proposed refusal, withdrawal or suspension]:

Lord Hacking

had given notice of his intention to move Amendment No. 101A: Page 18, line 18, after ("for") insert ("and identifying the information and the sources thereof in his possession upon"). The noble Lord said: My Lords, I have already addressed the House on this amendment. Therefore, I shall not move it.

[Amendment No. 101A not moved.]

Clause 31 [Authorisation in other member State.]:

Lord Lucas of Chilworth

moved Amendment No. 102: Page 19, line 39, after ("business") insert ("maintained by him"). The noble Lord said: My Lords, I have already spoken to this amendment with Amendment No. 4, on Tuesday. I beg to move.

On Question, amendment agreed to.

[Amendment 102A not moved.]

Clause 33 [Termination and suspension of authorisation]:

Lord Lucas of Chilworth

moved Amendment No. 103: Page 22, line 16, leave out subsection (7). The noble Lord said: My Lords, in moving Amendment No. 103 I would advise your Lordships that the intention of subsection (7) was that if a person who had been authorised by virtue of Clause 31 then joined an SRO, his Clause 31 authorisation would lapse. Therefore, if the SRO subsequently expelled him for a breach of its rules, he would then immediately lose his authorisation.

There is no doubt that it would be compatible with the Treaty of Rome for the person to lose his authorisation for breach of RSRO rules. However, it is possible that a person with a Clause 31 authorisation after joining an RSRO might wish to leave for a reason quite unconnected with a breach of rules. If he continued to satisfy the conditions in Clause 31, it would be incompatible with the Treaty to deny him authorisation on the grounds that he had joined an RSRO, hence lost his Clause 31 authorisation, and then left it.

The simplest solution is to delete subsection (7) so that any authorisation held by a person by virtue of Clause 31 continues notwithstanding that that person may join an RSRO or be certified by an RPB. However, if he is expelled from either of those bodies, or has his certification withdrawn for reasons to do with a breach of their rules, then that is a matter which could be taken into account by the Secretary of State in deciding whether to exercise his power to terminate or suspend the authorisation. I beg to move.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord, Lord Lucas, for his explanation of this amendment with which I agree. Therefore, we do not intend to oppose it.

On Question, amendment agreed to.

Schedule 4 [Requirements for recognition of investment exchange]:

[Amendment No. 103A not moved.]

Clause 38 [Clearing houses]:

6.15 p.m.

Lord Beaverbrook

moved Amendment No. 104: Page 24, line 43, leave out ("the facilities provided by it") and insert ("anything done by it in its capacity as a person providing clearing services"). The noble Lord said: My Lords, this is a technical amendment which makes it clear that a clearing house is exempted in respect of anything done by it in its capacity as a person providing clearing services. It has been represented to us that the existing wording of the clause was too narrow and would prevent recognised clearing houses from carrying out perfectly proper activities such as soliciting new members to use the facilities without having to become authorised to do so. I beg to move.

Lord Williams of Elvel

My Lords, I should be most grateful if the noble Lord could provide me with one or two clarifications on this amendment. I accept its general thrust; I do not think we have any quarrel with that. The problem is with the wording: anything done by it in its capacity as a person providing clearing services". "Anything" is rather a large expression. Let me say straightaway that I am not quarrelling with the thrust of the amendment, but I am uncertain about the wording.

Perhaps I may give one example to your Lordships to illustrate the doubt that I have. Let us suppose that a clearing house decides for one reason or another that it has insufficient capacity in financial terms, at a certain stage in time, to provide the facilities that it wishes to provide. The clearing house may then decide at that point that it wishes to make an issue; for example, an issue of investments that fall under Schedule 1. Would that be described as something done by the clearing house in its capacity as a person providing clearing services, or would it be described as something done by it as a person who would normally have been caught under other provisions of the Bill? It is a rather technical point.

The second example that I should like to use is when a clearing house decides that it has insufficient insurance cover for its operations as a clearing service. The clearing house decides to set up its own organisation in some form or another which will reinsure its obligations as a clearing house. That subsidiary of the clearing house is obviously placing that reinsurance so that the clearing house can provide the facilities that it is enabled to do under the Bill. Would that operation by itself be exempt under the amendment as proposed, or would it come under a different clause of the Bill and would the clearing house be caught? Those are just two examples. I could probably think of more if I put my mind to it, but I do not want to waste the time of your Lordships' House because we have a lot of work to do. I should be most grateful if the noble Lord could clarify the wording for me so I can be entirely clear on the meaning.

Lord Beaverbrook

My Lords, I think I can help the noble Lord in that the existing wording might have been considered to exclude the activities on the part of a clearing house; for example, encouraging new members to use its facilities. It is clearly proper for such activities to take place within the scope of an exemption. The expression "anything" is qualified by the words: in its capacity as a person providing a clearing service". Issuing investments does not require authorisation, so this point does not arise. In respect of the second point that the noble Lord made, acting as insurer would not be exempt under the provision and would require approval under the Insurance Companies Act.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord. I gave two examples, though I could give a whole range. I understand—and I hope that the noble Lord understands—that the wording is not entirely precise and clear. I hope that the noble Lord will take what I have said in good part and will think about the wording again so that perhaps it will be possible to come forward with wording which defines more precisely exactly what is within the exemption for clearing houses.

On Question, amendment agreed to.

Clause 39 [Grant and revocation of recognition]:

Lord Williams of Elvel

moved Amendment No. 105: Page 25, line 43, leave out ("and resources"). The noble Lord said: My Lords, I beg to move Amendment No. 105, which stands in my name and that of my noble friend Lord Morton of Shuna. Again we are dealing with a provision of a clause that was put in at Committee. The amendment is probing, in that it seeks to elicit from the Government an explanation of exactly what is meant by the word "resources" in this context.

If the clearing house has adequate arrangements then in my view it has adequate arrangements and therefore those arrangements would include resources. If there is some point that I have missed, I should be most grateful if the noble Lord would clear it up. It seems to me that when we start talking about resources we may be talking about something different. I beg to move.

Lord Beaverbrook

My Lords, I must say that I was puzzled as to why the noble Lord had tabled the amendment. However, the intention of the present wording is to ensure that the monitoring and enforcement arrangements of clearing houses are not rendered useless because inadequate resources are made available for their proper performance.

The noble Lord asked to what the word "resources" refers. It refers to all the items required for proper performance, such as manpower, money, buildings, even office equipment and so on. All recognised bodies are required to have adequate resources to enforce their rules and in that connection I refer your Lordships to paragraph 3(1) of Schedule 4 concerning investment exchanges. It is a fundamental requirement. A clearing house surely needs to have all proper resources to enforce its rules, otherwise it will not be able to discharge its function properly or expeditiously. I hope that that explains the position and I ask your Lordships not to accept the amendment.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord. I should have thought that if, as under Clause 39(4)(a), the clearing house: has financial resources sufficient for the proper performance of its functions, it implies that it has sufficient resources for the proper monitoring and enforcement of compliance, otherwise it does not seem to me to make any sense.

As for staff, computers and the rest, I should have thought that, if the clearing house has adequate arrangements, then by definition it has adequate staff, computers and so on. However, it may be that I am pursuing a point which, at a time when we want to get on with the Bill, should not be pursued and I therefore beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 105A not moved.]

The Deputy Chairman

My Lords, before calling Amendment No. 106 I must point out to your Lordships that if Amendment No. 106 is agreed to I cannot call Amendment No. 107.

Clause 40 [Overseas investment exchanges and clearing houses]:

Lord Beaverbrook

moved Amendment No. 106: Page 26, line 38, leave out from beginning to ("subject") in line 9 on page 27 and insert— ("(2) In relation to any such body or association sections 37(4) and 39(4) above shall have effect with the substitution for the requirements there mentioned of the following requirements, that is to say— (a) that the body or association is, in the country in which its head office is situated,"). The noble Lord said: My Lords, I beg to move Amendment No. 106 and for the convenience of the House I shall speak also to Amendments Nos. 108, 112 and 113. These are simplifying amendments designed to remove an unnecessary complication in the Bill's approach to overseas investment exchanges and clearing houses. As originally conceived, it was envisaged that overseas exchanges whose rules complied with the ordinary requirements should apply for ordinary recognition, and that special arrangements were required only for those exchanges whose rules were prevented from complying with the Bill's ordinary requirements by their domestic authorities.

However, it has since become apparent that this will not deal with a situation where there is no point in requiring the rules of an exchange or clearing house to comply because the protections which the Bill looks for are provided instead by the domestic law of the country concerned. Since the level of investor protection required of an exchange or clearing house recognised under Clause 40 is no lower than is required of an ordinary exchange's clearing house, we have decided that it would be most straightforward if the Clause 40 recognition procedure were open to all overseas exchanges and clearing houses.

Lord Williams of Elvel

My Lords, as I understand it, if this amendment is agreed to, Amendment No. 107 cannot be called. Therefore, with the leave of the House, I should like to speak to the group of amendments to which the noble Lord has just spoken and also to Amendment No. 107 and Amendments Nos. 109 to 111.

The amendments raise certain problems. Indeed, the noble Lord recognised that there were certain problems involved in overseas exchanges. If the amendments which we have tabled had been called—and the Government's amendment had not been called in front of our amendments—they would have addressed themselves to some of these problems. Therefore, without speaking directly to the group of amendments to which the noble Lord has spoken and without speaking directly to my amendments, I should like to make a few points.

The point about Clause 40(2)(b) is that there may be exchanges which are governed or under the influence of international organisations rather than the government or domestic authorities in the particular country concerned. International organisation may be formed. For example, one might think of the commodity exchange in Bermuda, which is growing up and which could be considered to be an international organisation which would have some authority over the exchange itself. It is a simple problem: whether or not the clause as originally put in by the Government at Committee adequately covers the point that an international organisation might be influential in an exchange.

I should like to address a further point which would have been covered by Amendment No. 109; namely, the question of whether or not an overseas exchange which seeks recognition should be required to provide some kind of indication—in other words, some kind of evidence—that the market which is serviced by that exchange operates satisfactorily.

It comes as no secret to your Lordships to know that there are a number of exchanges in various countries, and indeed offshore exchanges, where there is simply not a market in the sense that I think we would know it in this country. It seems to me important that if an exchange is to be recognised, it should be a proper exchange with a proper market. The way I tried to express that was: that the market serviced by that body or association operates satisfactorily". I recognise that purists will object to my drafting, but it is a point which I wish to raise.

Again, on the question of the overseas exchange we say: that there are no unnecessary restraints imposed by the government or any other authority in that country on the sharing of information". We have in the past had very great difficulty in sharing information between exchanges. I could give several anecdotes from my own experience about how difficult this has been; indeed there are many necessary restraints which may be imposed by countries or other bodies.

All that my original Amendment No. 110 sought to draw attention to was the problem of unnecessary restraints. I do not want to single out any particular country or area of the world where such restraints might be unnecessary but might be imposed, because I do not want to be invidious in my comments. But there are such restraints, in my view imposed unnecessarily, by various bodies and various authorities in various countries.

It may be that all these points are covered by the new arrangements which the noble Lord has described in moving the government amendments. I should be grateful if the noble Lord would reassure me on that point so that we may move on with our business.

Nevertheless, as I am sure noble Lords opposite recognise, it is difficult to frame amendments to clauses that have been put in by the Government in Committee when the clause itself will be modified by an amendment subsequently moved by the Government. I am afraid I have to confess to your Lordships that I put down certain amendments before the government amendments and I am speaking to a group that was not agreed through the usual channels. But I hope your Lordships will give me your indulgence.

6.30 p.m.

Lord Beaverbrook

My Lords, in accepting the noble Lord's point about the groupings, perhaps with the leave of the House I may also speak to the noble Lord's amendments, Nos. 107, 109, 110 and 111.

The Government accept the case for a wider eligibility test for applying for Clause 40 recognition. We do not, however, believe that there is anything to be gained by adding a reference to "international bodies". It is hard to imagine what international bodies could be relevant in this context, other than perhaps the European Community, and in that case it would be inconsistent with our obligations to impose requirements for ordinary exchanges and clearing houses which perhaps were in conflict with Community requirements.

The intentions of the second and third amendments of the noble Lords opposite are already catered for in the Bill as it stands. The Secretary of State will be obliged to look at the practices as well as the rules of an exchange or clearing house. I do not see how a market which operated unsatisfactorily could be regarded as giving investors protection equivalent to that afforded by an exchange or clearing house that is recognised under the main provisions of the Bill.

The third amendment of the noble Lord is already dealt with by the requirement that the exchange or clearing house will be able as well as willing to co-operate by sharing information with UK regulators. If there were to be any problem of the sharing of information with other firms, I think that is a matter which would have to be looked at by the Director General of Fair Trading under his powers in Chapter XIV.

The noble Lord's final amendment does not add anything to the substance of the clause. The normal interpretation of that clause would already prevent the Secretary of State being satisfied that the condition had been met if it appeared to him that it was likely that the co-operation arrangements were not likely to continue for the foreseeable future. On the other hand, adding the words proposed would produce uncertainty about the interpretation of similar, unamended, wording both elsewhere in the Bill and in the statutes. I think the short answer to the noble Lord is that his points are covered.

Lord Williams of Elvel

My Lords, with the leave of the House, perhaps I could ask one or two questions. If the noble Lord will bear with me, he said that my points were covered in the existing legislation and the existing amendments the Government are now moving. His view is that there is no international organisation which he can think of other than the Community, which is covered. Let me give my example again about Bermuda and the international organisation there. Is he satisfied that there could be no problem on that count? I do not believe it is covered. I think the noble Lord must give us an assurance that it is covered.

Is it true that the practices of a market ensure that the market is serviced by that body or association? I am talking about investments. Let me give an example. The Milan exchange has approximately 125 equities quoted on it. That exchange is a very thin and narrow market. There are many people who think that it is a perfectly proper exchange under Community supervision. But I imagine that at the end of the day the Milan exchange is very narrow and thin, and many people feel it does not service the market it is designed to service. I single out the Milan exchange; I do not mean to be invidious about Italy but that exchange has given operators a lot of problems. That is the sort of exchange I have in mind.

I accept the point about unnecessary restraints. I do not wish to pursue that but I would be grateful if the noble Lord could help me a little on questions like the Milan exchange.

Lord Beaverbrook

My Lords, with the leave of the House, I think the very point which the noble Lord makes is covered. The Bill obliges a Secretary of State to look at the practices; that is, the way in which the business of the exchange is conducted, not just under the rules but the way it actually operates in practice. He must be satisfied that investors—I emphasise "investors"—are given protection equivalent at least to that afforded by a clearing house under the main provisions of the Bill.

I would not like to comment specifically on any particular exchange, but if in any instance there is not a proper market in operation, the Secretary of State has the power to refuse recognition.

On Question, amendment agreed to.

[Amendment No. 107 not moved.]

Lord Lucas of Chilworth

moved Amendment No. 108: Page 27, line 17, leave out ("that") and insert ("this"). The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 109 to 111 not moved.]

Lord Beaverbrook

moved Amendment No. 112: Page 27, line 26, leave out ("that subsection") and insert ("paragraph (a) above"). The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Lord Beaverbrook

moved Amendment No. 113: Page 27, line 43, leave out ("(3)") and insert ("(2)"). The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Clause 42 [Lloyd's]:

Lord Williams of Elvel

moved Amendment No. 114: Page 29, line 5, leave out from ("Lloyd's") to end of line 9 and insert ("is an exempted person"). The noble Lord said: My Lords, I beg to move Amendment No. 114 standing in my name and that of my noble friend Lord Morton of Shuna with the words as on the Marshalled List. The effect of this amendment—or perhaps I ought to say the intended effect—is to ensure that the Society of Lloyd's is an exempted person, but that persons permitted by the Council of Lloyd's to act as underwriting agents of Lloyd's are not exempted persons as regards investment business.

This is a somewhat different amendment from the amendment we moved from this side at Committee stage, and I think is different from any of the amendments considered in another place. It respects the fact that discussions have been taking place for a year or more about the position of Lloyd's in the context of this Bill. It respects the fact that there is a report being made on Lloyd's the result of which your Lordships will wish to have before being in a position to discuss the whole question of Lloyd's generally.

The amendment therefore seeks to address itself to a very narrow point in relation to the business of Lloyd's. It is not only narrow as a point, it is peripheral to the main business of the Lloyd's insurance market because of course we are not seeking, by this amendment, to embrace the insurance activities of Lloyd's within the ambit of this Bill. We are not seeking to reduce the ability of the Society of Lloyd's itself to conduct investment business if it wants to. What we are doing is trying to ensure that those who are entrusted with funds, and who invest those funds on behalf of other people, are properly regulated through this Bill.

I have no intention of going back over past ground on the question of the propriety and probity of those who in the past—and which now seems to be a fairly distant past; I hope in the past and that it is over—were involved in Lloyd's. I make no suggestions that the investment activities of those who are underwriting agents are in any way anything other than perfectly proper and adequate. Nevertheless, there is here a problem.

Underwriting agents of Lloyd's invest the funds—if I may call them the flow funds—that go to and fro between premiums and claims paid out. There are substantial funds which are under the control of underwriting agents whose investment is discretionary. The underwriting agent will invest these funds in such manner as he thinks fit, obviously for the benefit of the Names he represents. In that context it seems to us that this procedure constitutes an investment business of considerable magnitude. We do not believe that the funds invested by the society itself constitute an investment business, but we believe that the funds invested and managed by the underwriting agents do constitute such a business.

If I am right in my argument that it constitutes such a business—and it may even be a collective investment scheme, if you like to define collective investment schemes in that manner; these arrangements have a lot of the characteristics of a collective investment scheme—I cannot for the life of me see why on this narrow point (and I insist that it is very narrow) this activity should not be brought within the ambit of the Bill.

I look forward to hearing what the Government have to say in answer to this because I believe that there is here a compromise solution between those of us—and I shall be perfectly frank—on this side of the House who believe that Lloyd's ought to be within the ambit of the Bill and who moved that amendment in Committee, and those on the other side of the House who believe that Lloyd's should be completely out of the Bill.

There is a compromise here, and I think that the Government would be well advised to look at this compromise and see whether it is acceptable to them, and acceptable indeed to some of the noble Lords opposite. If accepted it would allay certain anxieties that we on this side of the House and people outside this House have that the investment business—and I insist on that point, the investment business—of Lloyd's is properly controlled, and the Names on whose behalf it is conducted are properly protected as are other investors under this Bill.

I do not want to take up too much of your Lordships' time because we have to try to get a move on with this extremely complicated Bill, and not this particular discussion but a discussion about Lloyd's has been held in the other place and here on previous occasions. I do not wish to waste time going through some of the arguments that have been advanced. I concentrate on the narrow investment business conducted by the underwriting agents of Lloyd's, and in my view that investment business should be brought within the ambit of the Bill. I beg to move.

6.45 p.m.

Lord Strathalmond

My Lords, perhaps I may first say that I am not often a visitor to your Lordships' House. The last time I spoke here was in 1981, when there was a certain Bill, known as the Lloyd's Bill, coming before this House. It was given an unequivocal vote of approval by your Lordships' House at that time and it is under that Act that we now govern ourselves.

The noble Lord, Lord Williams, has raised an important point, and that is the investments of Names', and therefore syndicate, funds. Before I go any further may I apologise, being unaccustomed to your Lordships' customs, that I have not already declared two interests. I feel somewhat schizophrenic in that apparently I may become an authorised person because I am a chartered accountant, and at the moment I am not sure whether I am exempt or partially exempt, or going to be included, as an underwriting agent. I manage the affairs of some 550 members of Lloyd's through my own company, and it is no secret. We therefore supply the capacity of the Lloyd's marketplace with in excess of £100 million for underwriting purposes.

I have been in the Lloyd's market for some eight or nine years, and I hope that I can bring a little understanding to your Lordships' House of the investment activities of an underwriting agent. I believe that the noble Lord, Lord Williams, said that this was a very narrow activity.

Lord Williams of Elvel

My Lords, I am sorry to interrupt the noble Lord, but I was referring to this activity as being narrow in the context of the totality of the operations of the Lloyd's market. It is a specifically narrow section of the market. I did not for a moment mean to imply that it was not a large activity.

Lord Strathalmond

My Lords, I thank the noble Lord. I think though that we ought to revert to my mother's heritage on the other side of the Atlantic, where we refer to something as "a double whammy". That would describe an amendment which appears to be innocent to your Lordships' House but which could actually embrace another very large activity. As I understand this amendment, if it were approved and passed by your Lordships' House I would not be allowed to conduct any underwriting affairs for any of my 550 Names in any way whatsoever, and it would not only include the investment activity to which the noble Lord refers. That is my understanding. If I am wrong perhaps I may speak to the noble Lord about it later.

I come back to where we are at the moment. At present we have the 1982 Act of Parliament, and that Act has a number of by-laws under which I, as an underwriting agent, have already been registered. It seems to me that the registration process for underwriting agents is perhaps far om advance of any process which this Bill will look at, because this Bill has not yet been tried and tested in the world of commerce.

We are continuing to register agents at a great rate of knots, but unfortunately some have fallen by the wayside. It is the registration of the agents which is protecting the Names. I would suggest that it is protection of Names that we are looking at here and not protection of investors, because a Name at Lloyd's is not an investor. That has been said many times before in your Lordships' House, and I hope it is clear. They have unlimited liability and they are not just putting up £50,000-worth of stocks and shares which they might lose. It is the totality of their wealth that they might lose. It is I as the agent who protects that. As the agent I am working under a system of rules that have been tried and tested in the commercial market and not found wanting to date for the last two-and-a-half years.

There is one final thing I should like to say; I appreciate that it is late and I understand that there is much more work to do tonight. The 1982 Act, under which we govern ourselves, specifically broke down one set of what are known as Chinese walls. I seem to remember that on Second Reading of this Bill the noble Lord, Lord O'Brien, was particularly perturbed by the fact that perhaps these Chinese walls would be scaled. In my commercial sphere of activity we have separated the buyer and the seller of insurance to a great extent and there is no conflict of interest any more. If there is less conflict of interest under our 1982 Act than there could be under the Financial Services Bill, I beg your Lordships' to consider this amendment most carefully. I shall be very pleased to talk to anybody about the detailed working of the investment activities of underwriting members.

The noble Lord, Lord Williams, made one further point. If the Society of Lloyd's itself, if the House accepts this amendment, is to become an exempt person, that means that funds available for the policyholders to the tune of some £268 million will be being invested by people who are not approved under the Financial Services Bill.

At the end of the day—to sum up my rather incoherent ramblings—we have an Act of Parliament which has been tried and tested in commercial practice over the course of the last four years, and at this time with the insurance market going ahead, it would be a pity if we had to change course and find imposed upon us a whole load of regulations which are not really suited to people who are not investors but traders at Lloyd's.

The Earl of Lindsey and Abingdon

My Lords, as I did not take part in the earlier stages of this Bill I have to declare an interest as an underwriting member of Lloyd's and an agent. I wish to point out to the noble Lord, Lord Williams, that as far as I see it—I should think that most people in the Lloyd's market see it this way—a Name at Lloyd's is not an investor as such. He is an underwriter in his own individual right and accepts insurance risks as an individual, collects the premiums and pays the claims. Therefore I submit that in those circumstances a Name at Lloyd's is not to be bracketed with this Bill.

This was brought out quite plainly in the Lloyd's Act 1982. As my noble friend explained, this particular Act provided very stringent protection for the Names and the policyholders. If in the future there are any misdeeds or fraudulent activities at Lloyd's, they will be stringently dealt with under the provisions of the 1982 Act. Furthermore, I feel that it would be detrimental to the Names at Lloyd's and to the policyholders if the investment aspect of the Lloyd's market was divorced from its insurance activities, because the investment element would be brought under the Financial Services Bill, whereas the remaining activity, insurance, would remain under the Lloyd's Act. I stand to be corrected on this, but I feel that if any aspect of the Lloyd's activity is brought under the Financial Services Bill when it becomes an Act, this would have a negative effect on the private Lloyd's Act.

I do not wish to detain the House, for we have been through all this before at Committee stage. I listened very late at night to the arguments put forward by the noble Lord, Lord Bruce of Donington, when the Lloyd's exemption amendment was discussed in July. Even though the amendment of the noble Lord, Lord Williams, is worded slightly differently, we really are going over old ground again. I think that the sooner this is put to bed and buried, the better.

Viscount Chandos

My Lords, I had not intended to chew on this particular bone again, but I have been impressed by the arguments put forward by the noble Lord, Lord Williams. We spent many hours in Committee discussing the problems that the clearing banks have in proffering investment advice. The clearing banks and all banks are subject to the Banking Act—a recent Act, with a further banking Bill in the pipeline. Yet nobody has suggested that the investment management activities of the banks should not be subject to the Financial Services Bill. It seems to me that the existence of the Lloyd's Act in no way prevents the investment management activities of Lloyd's being subject to the Financial Services Bill and this in no way diminishes the power or the strength of the Lloyd's Act.

It seems to me that it is as relevant to say that the first motive of a customer of a clearing bank may be to have a current account, but coincidentally he finds himself having his investments managed by that bank in the same way as a Name at Lloyd's is certainly looking to earn income through the underwriting of insurance risks, but at the same time is having his assets managed by the Lloyd's underwriter.

I believe that the noble Lord, Lord Williams, is showing an exceptionally constructive attitude towards the problem of Lloyd's and I commend his amendment, or something similar to it, to your Lordship's House.

Lord Graham of Edmonton

My Lords, I was very interested indeed to hear the remarks of the noble Lord, Lord Strathalmond. In effect, he was making a case for special pleading. It was a very good case. I assure the noble Lord that there are other financial institutions—in this context Lloyd's is a financial institution—who could put forward exactly the same case. The noble Lord used the phrase "tried and tested". These other institutions could argue in general that they have a system; they have a monitor; they have procedures; they are very jealous about the integrity of their organisation in the market place that is very important to the national and international economies; they are seen to be beyond reproach. Yet from time to time there will be a ripple, a disturbance or an event that will cause more distress to the noble Lord and his friends than to someone like myself. The noble Lord will be more distressed than I because it has happened in his own family, as it were.

The same could be said about the banking community, the insurance community, the friendly society community and the building societies community. They could all argue that they are deeply concerned and that from time to time certain things happen. For some reason or another the Government have felt that they need to be brought within the ambit, the disciplines and the restrictions—but not Lloyd's.

I shall listen to what the Minister has to say with great care, as I always do. A great many people outside this House will not be able to understand the precise difference. I respect the background and the sincerity of the noble Lord, Lord Strathalmond, in putting forward his argument. These people will be puzzled that in the context of the City—we go back to the way in which the Gower Report on investor protection was presented—it is not possible to divorce the activities of Lloyd's, as respectable and respected as it is, by saying that, there are ways and means whereby the ordinary investing public will believe that it is possible in totality for them to be almost wholly divorced. There are ways in which we have sought painstakingly, by amendments, by the nitty gritty of legislation, to try to give protection to the people of this country who invest their money, in large or small amounts. What my noble friend Lord Williams has said is that we are not regurgitating the old arguments. He has produced a new formula. I am not talking about a compromise but about dealing with an aspect of it. In my view, he has made a very reasonable case.

The House is certainly fuller than it has been for a long time. I do not think that it is the approach of the supper break that peers have come in to celebrate; I believe it is interest in the Bill and interest in Lloyd's. Many noble Lords opposite are more frequent visitors than once every five years. I respect the honesty of the noble Lord who told us that the last time he spoke here was on issues relating to Lloyd's. I speak, when I can, from the point of view not of Lloyd's—and I respect what has been said—but from the point of view of the investing public. I believe the amendment that we are discussing is one that ought to be considered by the Government. If it is not and is not accepted, I fear that the case for giving Lloyd's a special position, a unique position, outwith that of others, will entitle other organisations to be irritated and irked. If the Government want to get the maximum collaboration across the broad front of financial institutions—but, more importantly, the general public—they ought to give a fair wind to this amendment.

7 p.m.

Lord Strathalmond

My Lords, if the noble Lord will permit me to speak one more time, he directed a number of remarks to me and perhaps I can respond to them. I did not wish to go into as much detail as this—

Lord Lucas of Chilworth

My Lords, the noble Lord, Lord Strathalmond, will forgive me but we are at the Report stage of the Bill.

Lord Strathalmond

My Lords, perhaps the House will give me leave to respond to the noble Lord. I am sorry. There are two different activities that an underwriting agent carries out. I believe that this amendment as worded will embrace both of those activities. One is the activity of trading with unlimited liability; and the other—as the noble Lord quite rightly points out—is the investment management of premiums and indeed of retained profits, which are called reserves, by either a syndicate managing agent or the underwriting agent who looks after the affairs of the members of Lloyd's.

If I may give an example, any respectable and competent underwriting agent would be a fool if one of the members who traded through him came to him and said, "May I invest the retained profits which you have retained for me to meet future losses in such-and-such a way?" not actually to say, "I am not an accredited investment agent; I am not a stockbroker; I am an underwriting agent. I pick the syndicates that you go on for your trading activities. That is my judgment; but I cannot tell you how to invest your retained money".

If we go that far, I would suggest to your Lordships that this amendment is trying to embrace both activities. I see little problem in saying that an underwriting agent may not do anything other than look after the trading activities of the Lloyd's market. If we have to differentiate between the two, I believe —and, as I have said, I am only an accountant—that this amendment embraces both. That is the distinction that I am trying to make.

Lord Cameron of Lochbroom

My Lords, I think that perhaps I ought to acknowledge at the outset that noble Lords opposite in this amendment have apparently moved some way towards the Government's position. That must be, at least to some extent, gratifying; but noble Lords, I think, still have some way to go before they complete the way to Damascus. I would hope to complete their conversion this evening and persuade them to arrive at their destination.

We on this side of the House are happy to stay in the place that we have occupied since this issue was first raised at Second Reading in another place. And why should we not? Our position is clear and logical. There has been no serious attempt in all the debates on this issue to rebut the fundamental arguments that the Government have put forward. I think that I can therefore properly and without any discourtesy to your Lordships deal with this amendment briefly because I have deployed the Government's argument at length in Committee.

The noble Lord opposite, as I have noted, said that this amendment involved a very narrow point, a peripheral matter. Let us consider it. The Bill, if it were to cover Lloyd's in the whole, would cover three particular areas: the management, on a collective basis by managing agents, of the affairs of Lloyd's syndicates would be the first area. The second area would be the process of giving advice to members and potential members of Lloyd's by members' agents. The third would be the investment management of members' insurance funds carried out both by underwriting agents and by the Society of Lloyd's.

It is only one small part of that last area that would be exempted if this amendment were passed. It was a siren voice, I suggest, that was talking about a very narrow point, about something peripheral to the Bill. If I may say so, both my noble friend Lord Lindsey and Abingdon and the noble Lord, Lord Strathalmond, were perfectly correct in putting forcefully and from the point of their experience the dangers that are implicit in this amendment.

The Government's case rests on two complementary positions. First, this Bill deals with investor protection; it does not deal with the protection of those who hold insurance policies written at Lloyd's. The regulation of Lloyd's must seek to maintain a careful balance between the interests of Lloyd's policyholders and the interest of Lloyd's names. The paramount public interest lies in insuring that insurers can meet their liabilities. I am sure that the House will recognise that Lloyd's have been entirely successful in that vital respect. A Bill such as this which is concerned with investor protection would therefore not be an appropriate vehicle for seeking to regulate Lloyd's because it is concerned with only one side of the education and, as has been pointed out already, this is not dealing with the "ordinary investing public"—and I take up the phrase used by the noble Lord, Lord Graham. It is not in similar case with what we are dealing with in this Bill.

Accordingly, that is the first of the two fundamental propositions on which the Government's case has always rested. The second is this. The Government have set up the committee under Sir Patrick Neill to examine the specific question of whether the regulatory arrangements set up at Lloyd's under the Lloyd's Act provide protection for the interests of members of Lloyd's—that is to say, Names—which is comparable to that proposed under the Bill.

Indeed, their terms of reference include the very issue which is touched upon in this amendment as much as other issues; namely, the issue of Names protection. The committee has been examining this question in detail over the past month and has looked at what has been done under the new system of regulation provided for under the Lloyd's Act and what is in prospect. It has been hearing evidence from those concerned and, indeed, from anyone who wished to put evidence before it. It is I suggest (and I agree entirely with what has been said by other noble Lords) obviously sensible to await this report before considering what further action is needed to protect the interests of members of Lloyd's.

I would say to your Lordships, and in particular to the noble Viscount, Lord Chandos, who listened at one stage to the blandishments of the noble Lord opposite, that we are not dealing with a narrow point but with one which goes fundamentally to the whole operation of Lloyd's. We say that such an amendment is in effect a wrecking amendment: what it would leave would be a bare shell. For those reasons. I ask your Lordships to reject this amendment.

Lord Williams of Elvel

My Lords, I am most grateful to noble Lords who have taken part in this debate. I tried in introducing this amendment to make two points but evidently I failed to make them clearly enough for your Lordships' satisfaction. I tried to make the point that I was not having a re-run of the old arguments we had had before.

The noble and learned Lord the Lord Advocate seemed to think I had come some way along the road to Damascus. I am bound to tell him that I did not think he was leading us towards Damascus but rather back into the discussions that we had here in Committee. I think, if I may say so, that he was addressing his remarks to the wrong points.

I thought the noble Lord, Lord Strathalmond, made an excellent contribution to the debate. He quite rightly declared his interest and I am grateful for that. It is important in your Lordships' House not only that interests should be declared but also that we should have the expertise of people who are actually operating in a market and who can tell those of us who are not directly involved how things work. I have been directly involved only in a Lloyd's broker's office and not in an underwriting agency. However, I have to say that if my amendment were accepted it would simply mean that underwriting agents would come within the ambit of the Bill and would therefore have to be authorised in order to conduct exactly the same business as they conduct at the moment.

The is nothing particularly difficult about being authorised. We have heard from noble Lords opposite a number of ways in which people can become authorised. Underwriting agents at Lloyd's might form their own SRO or they might go to the SIB, if that is the designated agency finally decided upon under the terms of the Bill. Whether underwriting agents become authorised or not is the fundamental question; and if they do not want to become authorised they can put their investment funds out to be managed by somebody who is authorised. That does not seem to me to fall into the trap the noble Lord, Lord Strathalmond, accused me of falling into, of mixing up the two activities. I believe that the two activities of underwriting agents, in this sense, can be kept separate.

The noble Earl, Lord Lindsey and Abingdon, tried to persuade me that there was an inherent harmony between the investment activities of underwriting agents and their trading activities, so that—I quote his words—one could not divorce the two. I was very impressed by the intervention of the noble Viscount, Lord Chandos, who made the point that in many financial institutions the two activities are going to have to be divorced. He mentioned the clearing banks but, as he rightly said—my noble friend Lord Graham of Edmonton also pointed this out—there are all sorts of other financial institutions, parts of which are going to have to be authorised under the Bill as it stands. I do not see that as a particular problem.

My noble friend Lord Graham of Edmonton put his finger on a problem which has exercised those of us on these Benches all along. It is this. How do members of the ordinary investing public know that they are being protected by the Bill when a large operation, such as is conducted by underwriting agents of Lloyd's, has some form of special exemption? How can we turn to people and say, "Everybody else is reasonably covered but there is one group of people who really ought to he covered but who are not"?

The noble and learned Lord finally took refuge in what I hate to have to tell him is a fairly old and stale argument; namely, that a report will come from Sir Patrick Neill and that Sir Patrick is going to he studying all these aspects. We have heard this before. I personally believe, quite frankly, that this report was commissioned at the time in order that the Lloyd's question should be taken out of the heat of the Financial Services Bill. I believe that the Neill Report will not in any way come to different conclusions from those to which we on these Benches have come—that the investment management activity of underwriting agents is not the fundamental activity of underwriting agents. It is—I describe it again—a peripheral activity which should properly be covered by the Bill, and those who wish to engage in it should be properly authorised.

We have had, as I think your Lordships will recognise, a good debate on this issue. We have had many debates on the totality of the issue. The noble and learned Lord the Lord Advocate addressed himself again to the same arguments the Government put forward in another place and again here in Committee; but I must tell him we believe that this amendment is rather different from the one we put forward during a clause stand part debate in Committee. We believe this offers the possibility of a sensible arrangement that would be acceptable to the operators in this market and—I come back to this fundamental point—would convince the outside world that your Lordships are not making exemptions for people who ought properly to be within the ambit of the Bill. I am afraid I must ask the opinion of the House if the noble and learned Lord is not prepared to accept this amendment.

7.16 p.m.

On Question, Whether the said amendment (No. 114) shall be agreed to?

Their Lordships divided: Contents, 34; Not-Contents, 76.

DIVISION NO. 4
CONTENTS
Airedale, L.	McIntosh of Haringey, L.
Avebury, L.	McNair, L.
Chandos, V.	Mishcon, L.
Cledwyn of Penrhos, L.	Molloy, L.
Elwyn-Jones, L.	Morton of Shuna, L.
Fitt, L.	Nicol, B.
Gallacher, L.	Phillips, B.
Graham of Edmonton, L.	Ponsonby of shulbrede, L.
[Teller.]	[Teller.]
Hampton, L.	Robertson of Oakridge, L.
Hanworth, V.	Serota, B.
Harris of Greenwich, L.	Shaughnessy, L.
Hooson, L.	Stoddart of Swindon, L.
Houghton of Sowerby, L.	Strabolgi, L.
Irving of Dartford, L.	Taylor of Blackburn, L.
Kilbracken, L.	Tordoff, L.
Kissin, L.	Underhill, L.
Listowel, E.	Williams of Elvel, L.

NOT-CONTENTS
Arran, E.	Hacking, L.
Auckland, L.	Halisham of Saint
Beaverbrook, L.	Marylebone, L.
Belhaven and Stenton, L.	Hesketh, L.
Bessborough, E.	Hives, L.
Boyd-Carpenter, L.	Hooper, B.
Brabazon of Tara, L.	Kimball, L.
Bridgeman, V.	Lane-Fox, B.
Broadbridge, L.	Lauderdale, E.
Brougham and Vaux, L.	Lawrence, L.
Caithness, E.	Layton, L.
Cameron of Lochbroom, L.	Limerick, E.
Carnock, L.	Lindsey and Abingdon, E.
Cathcart, E.	Long, V.
Coleraine, L.	Lucas of Chilworth, L.
Colwyn, L.	Lyell, L.
Constantine of Stanmore, L.	McAlpine of West Green, L.
Cox, B.	Mancroft, L.
Craigavon, V.	Margadale, L.
Davidson, V. [Teller.]	Marshall of Leeds, L.
Denham, L. [Teller.]	Maude of Stratford-upon-
Dilhorne, V.	Avon, L.
Ebbisham, L.	Merrivale, L.
Elliott of Morpeth, L.	Mersey, V.
Elton, L.	Monk Bretton, L.
Glanusk, L.	Monson, L.
Glenarthur, L.	Mottistone, L.

Mountevans, L.	Skelmersdale, L.
Munster, E.	Slim, V.
Murton of Lindisfarne, L.	Strathalmond, L.
Napier and Ettrick, L.	Strathclyde, L.
Onslow, E.	Swinfen, L.
Orkney, E.	Trumpington, B.
Pender, L.	Tryon, L.
Plummer of St Marylebone, L.	Vaux of Harrowden, L.
	Vivian, L.
Polwarth, L.	Ward of Witley, V.
Reay, L.	Whitelaw, V.
Renton, L.	Young, B.
Sanderson of Bowden, L.

Resolved in the negative, and amendment disagreed to accordingly.

7.24 p.m.

Lord Beaverbrook

My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.

Lord Ponsonby of Shulbrede

My Lords, before we move to the next business, perhaps the Government can indicate that we shall not return to consideration on Report until twenty-five minutes past eight o'clock.

Lord Beaverbrook

My Lords, I am happy to confirm that.