§ 6.24 p.m.
§ Lord Beaverbrook rose to move, That the order laid before the House on 15th March be approved. [20th Report from the Joint Committee].
§ The noble Lord said: My Lords, the order that we are debating extends in certain respects the definition in the Financial Services Act of investment business. A separate order was laid on 25th February, subject to negative resolution procedure, restricting the scope of the definition. The order makes three changes. First, it brings palladium and platinum options into the definition of investments. It was always intended that should a market develop in such options they should be brought within the Act's 339 provisions. This will also facilitate their marketing in other jurisdictions, where reliance is placed on whether or not investments are regulated in their country of origin. Secondly, the order narrows the application of paragraph 19 of Schedule 1 where the customer is an individual or where the investment concerned is a unit in a collective investment scheme, in a long-term insurance policy, or in rights to or interests in an investment of one of those kinds.
§ Finally, the order amends the reference in the Act to a collective investment scheme to ensure that arrangements which are essentially collective investment schemes rather than deposits fall to be regulated under the Financial Services Act rather than the Banking Act. I beg to move.
§ Moved, That the order laid before the House on 15th March be approved. [20th Report from the Joint Committee.]—(Lord Beaverbrook.)
§ Lord Peston
My Lords, I shall detain the House for only a few moments on this matter. I have two topics to raise. One concerns Article 2 of the order. We welcome the article with respect to options on palladium and platinum especially as my noble friend Lord Williams of Elvel was particularly keen to see platinum introduced. Should other markets develop for options in other precious metals, will the Minister say whether the Government have it in mind to amend this order or introduce another order to deal with that matter?
Quite separate from that, perhaps I may ask a question about deposit-based pension schemes. This matter has been drawn to my attention by the Association of British Insurers. The query that I raise is whether such schemes which are offered by banks and building societies will be subject to less stringent requirements under the Social Security Act 1986. Essentially these deposit-based schemes appear at least to the investor to be similar to all other such schemes. The question arises whether it would not be in the investor's interests for all personal pensions to be defined as investments and to be subject to a similar regime. I simply ask the Minister whether he will explain the basis of the Government's view—why they feel that it is unnecessary at the moment to bring such deposit-based personal pensions within the scope of Schedule 1 of the Financial Services Act.
§ Lord Beaverbrook
My Lords, I am grateful to the noble Lord, Lord Peston. In respect of options in other metals that may become popular as investment instruments, yes, we would indeed introduce another order if this were necessary.
On the noble Lord's second point, the short answer to his question is that deposits are not investments under the terms of the Financial Services Act. But it might be helpful if I explained some of the background to this matter. The Social Security Act 1986 provided that appropriate personal pensions under that Act could take one of three forms: insurance products, authorised unit trusts or arrangements based on deposits with banks or building societies.
340 Insurance-based products would be regulated under the Insurance Companies Act 1982 and under the Financial Services Act. Unit trust products would be regulated under the Financial Services Act. The banks and the building societies running deposit-based schemes would be regulated under the Banking Act 1987 and the Building Societies Act 1986.
The main question is whether and to what extent additional measures are required on the marketing of these deposit-based products. We wish to ensure that there are broadly equivalent investor protection arrangements for deposit-based and other personal pensions bearing in mind their different characteristics and different legal frameworks.
The Secretary of State for Social Services has already made regulations under the Social Security Act 1986 on disclosure of information and on cooling off periods. He intends to make an early announcement as regards controls on advertising. There will also be compensation arrangements for deposit-based personal pensions. Given that, we see no need to bring deposit-based personal pensions within the scope of the Financial Services Act. I hope that that covers the points raised by the noble Lord. I beg to move.
§ On Question, Motion agreed to.