HL Deb 15 March 1988 vol 494 cc1119-21

8.53 p.m.

Lord Brabazon of Tara rose to move, That the draft order laid before the House on 24th February be approved [19th Report from the Joint Committee.].

The noble Lord said: My Lords, this order transfers certain functions relating to collective investment schemes to the Securities and Investments Board. The Act envisaged that powers conferred on the Secretary of State would be transferred to the Securities and Investments Board provided it met the requirements laid out in the Act. Almost a year ago, Parliament approved the transfer of wide-ranging powers for regulating investment businesses to the board. The purpose of this order is to transfer most of the transferable functions in relation to collective investment schemes. Before laying the draft delegation order, my noble friend is required by the Act to satisfy himself: that the board is able and willing to carry out the functions to be transferred; that it fulfils the requirements in Schedule 7 to the Act; that the regulations and any rules and guidance which it proposes to make afford an adequate level of protection for investors and comply with the requirement in Schedule B that they promote high standards of integrity and fair dealing in the conduct of investment business. My noble friend is also required to be satisfied as to the acceptability of the regulations in competition terms.

The board made a formal request for transfer of functions on 31st December 1987, which was accompanied by its proposed regulations entitled Collective Investment Schemes. It supplemented this application with further regulations on fees and certain amendments to the regulations in the light of comments and also certain supplementary information. Copies of all these documents were placed in the Library. We subsequently received reports on these documents from the Director-General of Fair Trading and also from a number of interested parties.

The administrative functions that are the subject of the delegation order are essentially the authorisation of United Kingdom authorised unit trust schemes, the recognition of overseas schemes—but not the designation of individual countries or territories—and powers of intervention. The legislative functions cover all such functions under Chapter VIII other than designation of countries and territories, the investment and borrowing powers of authorised unit trust schemes and similar powers in relation to single property schemes and the minor function of prescribing the period within which applications under Section 87 must be determined. The board's proposed regulations cover such matters as how far unauthorised schemes can be promoted, and a number of matters as to the running of authorised schemes, such as scheme expenses, powers and duties of auditors, periodic reports and the content of trust deeds. The board's proposed regulations also deal with the requirements of scheme particulars and what facilities have to be maintained in the United Kingdom by recognised overseas schemes.

Having considered all the material submitted, including the regulations which the board proposes to make, my noble friend has concluded that the board fulfils the conditions and requirements laid in the Act for a transfer of the functions referred to in the draft order. I beg to move.

Moved, That the draft order laid before the House on 24th February be approved [19th Report from the Joint Committee.]—(Lord Brabazon of Tara.)

Lord Williams of Elvel

My Lords, the House will again be grateful to the noble Lord for moving the acceptance of the draft order. It would have saved a lot of trouble if we had had a statutory body in the first place rather than an organisation which is alleged to be a private body to which certain functions can be delegated. Nevertheless, I shall pass over that point as it is an old argument.

I have two specific questions on the order. With the problem of what I shall refer to, I hope without disrespect to your Lordships' House, as LAUTRO, the self-regulatory organisation that is not yet in place but yet has supervision of collective investment schemes or certain organisations that run collective investment schemes, is the noble Lord satisfied that, in the absence of a properly constituted LAUTRO, whose rules have been approved by the SIB, there will be no complications in the authorisation of collective investment schemes under this delegation order? How will it all work?

I note that on page 6 of my typescript of the order reference is made to the Authorised Unit Trust Scheme (Pricing of Units and Dealings by Trustee and Manager) Regulations 1988. Do the Government endorse the pricing instructions on unit trusts that the SIB has issued? Can the noble Lord please say why the Government endorse these pricing instructions, which go rather contrary to the traditional practice in the market for unit trusts?

Lord Brabazon of Tara

My Lords, on the noble Lord's point about LAUTRO, the Director-General of Fair Trading's report is being considered. It is only the first part of the director-general's report. The Secretary of State must have the director-general's complete report before reaching a decision on whether or not to consent to LAUTRO's recognition. Any change in LAUTRO's rules is a matter for LAUTRO. The Secretary of State's role is confined to giving or withholding consent. Should LAUTRO decide to change its rules, it will have to satisfy the SIB and be subject to a further report from the Director-General of Fair Trading. LAUTRO has nothing to do with the authorisation of schemes. That is for the SIB. Unit trust managers will also be members of IMRO and will get their authorisation in that way. The SIB has not made any regulations for pricing, but Section 114(7) of the Act prevents the Secretary of State from making a delegation order transferring a function of making regulations unless the designated agency has furnished him with a copy of regulations which it proposes to make in exercise of those functions.

The SIB has supplied the Secretary of State with a copy of the regulations which it proposes to make under Section 81 of the Act. He is satisfied, on the basis of those regulations and in the light of the regulations that he has himself made dealing with certain matters not dealt with in SIB's proposed regulations, that the relevant criteria are met. Since the SIB does not at present propose to make any regulations as to the matters dealt with in the authorised unit trust scheme (the pricing of units and dealing by manager and trustee regulations), and subject to the draft delegation order being approved by this House and another place, it is therefore open to the Secretary of State to transfer to the SIB all or any of the functions of making regulations under Section 81 of the Act. I hope that what I have said covers the two points raised by the noble Lord.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord and I shall certainly read through what he has said; I hope he will also read through what I have said on the subject. If he has any arriére-pensées about his reply, perhaps he would be kind enough to write to me.

On Question, Motion agreed to.