§ Consideration of amendments on Report resumed on Schedule 8.
§ The Deputy Speaker (Lord Hayter)My Lords, I should point out that if Amendment No. 67 is agreed to I cannot call Amendment No. 68.
§ Lord Young of Graffham moved Amendment No. 67:
§
Page 180, line 14, leave out from beginning to end of line 10 on page 181 and insert—
("(b) that the firm is controlled by individuals who hold an appropriate qualification or firms which would themselves be eligible for appointment as a company auditor ("qualified persons").
(3) a firm shall be treated as controlled by qualified persons if, and only if—
5.— (1) This paragraph explains the references in paragraph 4(3)(a) and (b) to a majority of the members of the firm or its management body.
(2) Where under the firms' constitution matters are decided upon by the exercise of voting rights at a general meeting of the firm, a majority of members of the firm means members having a majority of such voting rights.
(3) In any other case, a majority of the members of the firm means members having such rights under the constitution of the firm as enable them to direct its overall policy or to alter its constitution.
(4) Where matters are decided upon at meetings of the management body of a firm by the exercise of voting rights, a majority of the members of the body means members having a majority of such voting rights.
(5) In any other case, a majority of the members of the body means members having such rights under the constitution of the firm as enable them to direct the policy of the body or to alter the body's constitution.
6. — (1) The following provisions supplement paragraph 5 as regards the references to voting rights and other rights.
(2) References to voting rights are to rights to vote on all or substantially all matters at general meetings or, as the case may be, at meetings of the management body.
(3) Voting rights which a person is entitled to require should not be exercised shall not be regarded as held by anyone; and voting rights which a person is entitled to require to be exercised in any particular manner shall be regarded as held by him and not by anyone else.
542
(4) Rights which are exercisable only in certain circumstances shall be taken into account only when the circumstances have arisen, and for so long as they continue to obtain, or when the circumstances are within the control of the person having the rights.
(5) Rights shall be treated as held by a person if they are held on his behalf and shall not be treated as held by a person if—
(6) Rights held by or on behalf of a subsidiary undertaking shall be attributed to the parent undertaking.").
§ The noble Lord said: My Lords, the Government said in Committee, in response to an amendment from the noble Lord, Lord Benson, that we would bring forward an amendment to implement the requirement in the directive that a majority of the voting rights in an auditing firm are held by qualified persons. This amendment has that effect, but, as your Lordships will see, the opportunity has been taken to align the treatment of partnerships with the treatment of bodies corporate.
§ The only other significant changes brought about by the amendment are these. In a case in which management of the affairs of a corporate auditor has been delegated to a committee of directors, it is no longer necessary for a majority of all the directors of an auditing firm to be qualified persons. In addition, if a partnership is so structured that a majority of qualified persons will have control over the conduct of the partnership's affairs, it will no longer be necessary for a majority of the partners to be qualified persons. I beg to move.
§ Lord Williams of ElvelMy Lords, I am grateful to the Secretary of State for moving Amendment No. 67. I hope that the noble Lord who said before the adjournment that he had something to say about Amendment No. 68 will do so.
We have no difficulty with Amendment No. 67. There has been a slightly arcane difference of opinion between the department and the various institutes, which we imagine will be recognised bodies.
§ Lord Young of GraffhamMy Lords, with permission, I shall say a word or two about Amendment No. 68. It may be helpful if I repeat the Government's policy on the question of the control and ownership of auditing firms by qualified persons. Our policy is that the legislation should reproduce the minimum requirements in the directive—and this is accomplished by paragraph 4 of this schedule—but that professional bodies should in principle be able to go beyond those minimum requirements provided they satisfy the competition test in the Bill.
Put simply, that test requires me as Secretary of State to satisfy myself before recognising a supervisory body that its rules and practices are either not significantly anti-competitive or are no more so than is reasonably justifiable for the purposes of Part II of the Bill.
Doubt has been expressed as to whether the provisions of the Bill are apt to enable a reasonable 543 and balanced view to be arrived at on this question. In particular, it is not certain that the provisions of the Bill would enable any justification for such rules to found if they were judged to be anti-competitive.
We are considering whether there is anything in this point. If we decide that there is, we will consider how the Bill might be amended. We have in fact raised this question with the Institute of Chartered Accountants but it has not put any suggestions to us on it, although I understand that the noble Lord's amendment was inspired by it. We do not think that it is a very happy amendment, but we shall certainly discuss the question with the institutes and bring forward an appropriate amendment if it is agreed that there is a problem. On that understanding, I hope that the noble Lord will feel able to withdraw his amendment.
§ Lord Williams of ElvelMy Lords, before the noble Lord sits down, could he give us some sort of timing on when the amendment will be brought forward?
§ Lord BensonMy Lords, I am more than grateful to the Secretary of State for what he has said.
§ Lord Young of GraffhamMy Lords, I cannot give a timing. I hope that it may be possible to bring forward the amendment before the Bill goes to another place, but if not I shall ensure that we will have an opportunity to discuss the matter at a later stage.
§ Lord CockfieldMy Lords, there is a point made by my noble friend that should be questioned. He said that the objective was to include the minimum amount of control that was required by the directive. We are looking at a safeguard. The position is that on a safeguard it is always open to a member state to provide for more than the minimum amount of safeguard. That was the point which was debated by the noble and learned Lord, Lord Roskill, and myself on 6th March.
It is relevant when one comes to look at the amendments standing in the name of the noble Lord, Lord Benson, because he is endeavouring to include a safeguard over and above the minimum level of safeguard that the directive requires. We should be cautious before we accept that it is a principle of policy that we provide only the minimum level of safeguard.
§ Lord Young of GraffhamMy Lords, our policy has been, as I have explained in regard to one or two similar matters, that we provide the minimum. It is open to the appropriate body to provide more safeguards than would be satisfactory provided that the Secretary of State for the time being is satisfied that those are not anti-competitive. It is that test which is the appropriate test. We see the directive applying the minimum standard, but it is open to others to go beyond that minimum standard.
§ Lord Williams of ElvelMy Lords, before the noble Lord sits down, perhaps I may ask him whether it is always Her Majesty's Government's policy to provide minimum safeguards only under directives.
§ Lord Young of GraffhamMy Lords, no, of course not. The noble Lord, Lord Williams of Elvel, is well aware of that. When looking at the control and ownership of auditing firms by qualified persons and similar matters, we must ensure that the provisions included are for the protection and safeguard of the client, the investor and the creditors of firms. We must ensure that those safeguards do not, by their operation, become anti-competitive. Minimum standards are set within the Community. Those standards must pass the anti-competitive test.
§ On Question, amendment agreed to.
§ [Amendments Nos. 69 to 72 not moved.]
The Deputy SpeakerMy Lords, if Amendment No. 73 is accepted, I cannot call Amendments Nos. 74 and 75.
§ Lord Benson moved Amendment No. 73:
§
Page 182, leave out lines 15 and 16 and insert—
("10.—(1) The body must have rules and practices which enable it to monitor and enforce compliance with its rules.").
§ The noble Lord said: My Lords, the amendment is on a different subject—monitoring. Monitoring is a new word which has crept into the control and organisation of the professions and which arises out of the Bill. In Committee, I explained the great problems that arise about the word "monitoring". I do not propose to repeat all those matters.
§ It was noticeable in Committee that many Members also spoke with anxiety about monitoring. They suggested that clarification and an explanation were needed as to what was involved. That anxiety still remains, particularly with members of my profession. That is why the amendment has been put down. It is important on this occasion because, under the Green Papers dealing with the legal profession, the same words—"arrangements … for… monitoring"—are used.
§ What will be difficult for my profession will be even more difficult for the legal profession because the monitoring involved there is monitoring of advocacy. How one monitors advocacy has not been explained in the Green Papers. Discussions have been taking place at official level to determine what "monitoring" means. I have studied the record of those discussions. It is plain that neither the Government nor my profession are clear about what is meant. It is unsatisfactory that anything should be put on the statute book when neither the Government making the laws nor the public which has to comply with them are clear what "monitoring" means.
§ It is in the hope that we can get the term clarified that the amendment is put down. I did not press the matter to a Division in Committee because discussions were taking place. They are continuing. If "monitoring' means taking precautions to see that the rules of the governing body are complied with—which is what I think it means—then that is not a new subject. It has been established for over a 100 years.
545§ There are five factors which long experience has dictated apply in such circumstances. The first is that no auditing firm, indeed no business in the world, can operate successfuly if it is subject to continual surveillance and interruption by an outside body. It is wildly impracticable and hopelessly expensive. Secondly, the governing body must have the right but not the obligation to satisfy itself that the procedures of the auditing firm—the routine procedures by which its staff and partners operate—are so designed as to cause it to comply with the rules of the governing body.
§ The third factor is that the governing body must have the right but not the obligation to satisfy itself when the occasion arises that those routine procedures which ought to be adopted have been adopted. The fourth point is that if the situation arises either by suspicion or by obvious fact that there has been default by an auditing firm, then either or both of those rights must be exercised and the appropriate disciplinary action must be taken. The fifth factor which is important in this context is that a great deal of accountants' business is making judgments. No amount of monitoring today will undo an error of judgment made yesterday; nor will it prevent an error of judgment being made tomorrow.
§ Those five factors have governed my profession for the past 109 years: they have operated satisfactorily to a greater or lesser degree. I ask in the amendment for some assurances from the Government that the dialogue taking place between the profession and the Government should be continued so that both may eventually discover and decide exactly what is meant by "monitoring" and how it will operate. When they have reached that agreement, all I request is that the wording of the Bill should be tailored so that it properly reflects the agreement reached. I beg to move the amendment.
§ 8.15 p.m.
§ Lord Williams of ElvelMy Lords, I wish to speak to Amendment No. 73 moved by the noble Lord, Lord Benson, and also, for the convenience of the House, to my Amendments Nos. 74, 75 and 76. This group of amendments tries to achieve the same objective. Schedule 8 to the Bill seems to impose on the recognised body a duty to have adequate arrangements and resources for the effective monitoring both of technical standards and of competence among its members. I am reluctant to accept that it should be written into statute that any organisation, be it the institutes of England, Wales or Scotland, or any other organisation, should have tasks imposed on them which it is impossible for them to fulfil. It seems to me that what paragraph 10 of Schedule 8 to the Bill imposes is impossible for the institute to fulfil.
Given that there are over 10,000 firms or individuals qualified as auditors, the only way in which one can monitor technical standards is by some sort of spot check arrangement. With so many different entities, that is almost impossible to achieve. Competence must be maintained. It cannot be maintained unless the body in question is in a passive 546 situation and can reply to complaints. It is very difficult to say to 10,000 people every week, "Are you competent?" People change, as we know.
I hope very much that the Government will recognise that paragraph 10 of the schedule as at present drafted simply imposes impossible tasks. I am afraid it is no good officials saying, "It does not matter what the statute says, you jus do whatever you can". As a House we are required to "monitor" —if I may use that expression—this statute. I have no brief from the accounting profession. As a Member of this House, I support what the noble Lord, Lord Benson, said. I believe that the Government ought to examine the proposal again. I hope very much that the Secretary of State will respond to that invitation.
§ Lord Young of GraffhamMy Lords, in common with the noble Lord, Lord Williams of Elvel, I shall speak to Amendments Nos. 73, 74, 75 and 76. As has been mentioned, this matter was debated in Committee. Since then my officials nave, as was promised at that time, discussed "monitoring" further with the profession. Before describing the profession's proposals, I think it might be helpful for me to say a few words about the intentions behind the monitoring and enforcement provisions in paragraph 10 of Schedule 8.
As your Lordships will be aware, the eighth directive requires us to ensure that only persons fulfilling certain conditions are entitled in law to carry out company audits. We are also obliged to ensure that there are adequate guarantees in place to ensure that company audits are carried out independently and with integrity. The principal means by which we have attempted to give the necessary legal guarantee that the provisions of the directive will be enforced in the United Kingdom is by requiring the professional bodies which apply for recognition as supervisory bodies in Great Britain to have rules and practices on the matters covered by the directive.
However there seems to us to be little point in securing that there are appropriate rules and practices in place and then making no provision to secure that the rules and practices are actually enforced. Further, we do not think that we should properly be implementing the directive—which, being an instrument of Community law, would be interpreted in terms of the purposes which it was directed at securing—if we did not make adequate provision in this respect. A proper supervisory system in this field ought to involve more than just a body laying down a set of rules and making no effort to secure that those rules are observed, other than taking up whatever complaints it receives. In the auditing field, relying on taking up complaints would be unsatisfactory, partly because the layman may not have the expertise to spot that the auditor is falling down on his job and partly because the people with whom the auditor is dealing, the company's management not the shareholders—this is a very important point—may be entirely happy that the auditor is not, for example, acting independently and with integrity.
547 So we think there ought to be some sort of pro-active system of monitoring. However, we are determined that that system will not be a bureaucratic or onerous one. I yield to no one in your Lordships' House in my determination to avoid unnecessary regulatory burdens on business, and the professional bodies can be assured that, when the time comes to assess their applications for recognition, I shall not be expecting them to have an army of inspectors in the field. That would not anyway be required by the provisions of paragraph 10. We think that it should be perfectly possible to satisfy the purposes of the directive and ensure the integrity of the supervisory system, but at the same time avoid the dangers of over-regulation.
Your Lordships may wish to know about the meetings which officials have had with the institutes of chartered accountants to discuss monitoring and enforcement. The discussion was an initial, exploratory one, and did not go into a great deal of detail. We certainly intend to have further discussions with the professional bodies and hope to work with them to ensure that a sensible system of monitoring emerges. But as your Lordships will appreciate, it is for the professional bodies to come forward with proposals which seem to them to fit the requirements and suit their circumstances. It is not for the Government to set a blueprint. It is for the bodies to consider what is appropriate to enable them to fulfil their responsibilities for securing that standards are maintained in practice. We shall then consider the adequacy of the professional bodies' proposals in judging their applications for recognition.
The institutes' initial thoughts are that they would propose to build as far as possible on firms' own procedures. As many of your Lordships may well know, many accountancy firms already have internal systems of quality control, which involve in particular the checking of compliance with technical and ethical requirements. The institutes are considering whether firms should be required to file periodic returns which would include answers to questions designed to establish what a firm's procedures are for checking compliance with the rules of the recognised supervisory body. Further questions would then be asked and, if appropriate, monitoring visits paid to see whether the returns indicated a need for further investigation or whether there was any other reason to believe that matters might not be satisfactory.
This approach seems to me to be an entirely sensible one. It builds upon the existing procedure within firms; and it provides some focus for investigations. But your Lordships will appreciate that the proposals need to be fleshed out. For example, the form of the questions has yet to be determined. It would clearly not be enough to ask a firm if it had appropriate procedures in place, and then inevitably receive back the message that every firm indeed had such procedures so the matter need not be taken further. There is also the question of what arrangements and resources a body has to deal with the monitoring returns. The returns should not be left piling up in an empty room to be scrutinised in due 548 course by one part-time assistant. We should also consider whether the returns should enable a firm in any circumstances to avoid a monitoring visit in perpetuity. But, as I have said, the approach seems an acceptable one in principle. It is the practice which needs to be worked out. It is certainly not ruled out by the present provisions of paragraph 10, but obviously the details of the scheme will be crucial in this respect. Having listened to my remarks, I hope the noble Lord will feel able to withdraw the amendment.
§ Lord Williams of ElvelMy Lords, does not the noble Lord recognise from what he has said, even before it is fleshed out, to use his own words, that he is starting to institute an enormous bureaucracy which involves forms being filled out and spot checks being made? This will impose an enormous burden on firms, and indeed on the institutes in their capacity to recognise bodies.
§ Lord Young of GraffhamMy Lords, if it is a bureaucracy it is a bureaucracy of the profession and not of government. It will be something that the profession itself will look at. If we are to place such regard—I believe it is high regard—on the work that the institutes' members do, there should be some method of ensuring that the members themselves follow an adequate system of checking to ensure that their results are accurate and that the auditor is acting independently and with integrity. We are not saying that every auditor should be checked on every single matter but that the institute, if that is the recognised body, sets up a procedure whereby it can point out to some of its members that a system of checking is there.
I am a solicitor and at one time I was in practice. At that time the Law Society had a system for ensuring that clients' money and office money were kept separate. The society had a system for checking on that money. But the system was no more than that. This provision involves no more than the Law Society's system of checking. This system should not, and will not, be bureaucratic. That is the purpose of our discussions.
§ Lord BensonMy Lords, I have been anxious on this subject, as I have already explained to the House, both in Committee and at this stage. I am pleased to note from what the noble Lord, Lord Young of Graffham, has said that the discussions will continue. I do not think there is any point in my pursuing this matter until those discussions have been taken a stage further. I hope that the Bill may then be tailored, if necessary, to meet the outcome of those discussions. On that basis, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 74 to 77 not moved.]
§ Lord Strathclyde moved Amendment No. 78:
§
Page 183, line 4, at end insert—
("(2) The body must have rules and practices designed to secure that where an auditors' report is signed under section 235A(1) of the Companies Act 1985 by or on behalf of a person whose name appears in the register of auditors, and in relation to whom that body is stated to be the relevant supervisory body, the title "Registered Auditor" is added after the signature.").
§ The noble Lord said: My Lords, the Government accepted in Committee the criticism that it was excessive for failure to use the title "registered auditor" to be a criminal offence, and we said that we would bring forward amendments to remove the offence and replace it with a requirement that a recognised supervisory body has rules and practices to secure that its auditing members use the title in the appropriate circumstances. Breach of those rules would then be a matter for the body's internal disciplinary procedures. These amendments give effect to that commitment. I beg to move.
§ Lord Williams of ElvelMy Lords, we are glad that the Government have produced these amendments. We support them.
§ On Question, amendment agreed to.
§ Schedule 9 [Recognition of professional qualification]:
§ Lord Young of Graffham moved Amendment No. 79:
§ Page 185, line 16, leave out from beginning to ("not") and insert—
§ ("Course of theoretical instruction
§ 4A. The qualification must be restricted to persons who have completed a course of theoretical instruction in the subjects prescribed for the purposes of paragraph 5 or have a sufficient period of professional experience.
§ Sufficient period of professional experience
§ 4B.—(1) The references in paragraphs 4 and 4A to a sufficient period of professional experience are to").
§ The noble Lord said: My Lords, these amendments take advantage of concessions in the directive in favour of people with sufficient professional experience which the Bill has not fully implemented hitherto. The directive allows us to admit people with sufficient professional experience on to the training course even though they have not attained university entrance level, and the Bill at present reflects this. The directive also allows these people to obtain a qualification without having to undergo the course of theoretical instruction. The directive allows periods of theoretical instruction which a person has undergone before entry on the course to count towards the period of professional experience provided that the conditions described in paragraph 4(4) of the schedule are met.
§ As someone who in a much earlier age qualified as a solicitor without going to university as a prequalification—I attended university later while I was qualifying—I can only thoroughly commend these amendments. I beg to move.
§ On Question, amendment agreed to.
§ 8.30 p.m.
§ Lord Strathclyde moved Amendment No. 80:
§ Page 185, line 28, leave out from ("required") to end of line 30 and insert ("in the case of persons satisfying the requirement in paragraph 4A by virtue of having a sufficient period of professional experience must not be shorter than the course of theoretical instruction referred to in that paragraph and the practical training required in the case of persons satisfying the requirement of that paragraph by virtue of having completed such a course.").
§ On Question, amendment agreed to.
550§ Lord Strathclyde moved Amendment No 81:
§ Page 185, line 32, leave out ("completed a course of theoretical instruction and").
§ On Question, amendment agreed to.
§ [Amendment No. 82 not moved.]
§ Clause 32 [The register of auditors]:
§ Lord Williams of Elvel moved Amendment No. 83:
§ Page 45, line 3, leave out ("jointly").
§ The noble Lord said: My Lords, we discussed the joint register in Committee. The Government undertook to look at the problem bearing in mind the procedural and logistic difficulties for the various recognised bodies—as they will become—in maintaining a joint register. The Government (I think that it was the noble Lord, Lord Stratchlyde) indicated that to leave out the word "jointly" and to have separate registers for the individual recognised bodies might be in contravention of the directive. I should be grateful if the noble Lord could enlighten us on that point because it seems almost impossible to have a joint register for the various recognised bodies in the United Kingdom.
§ Lord StrathclydeMy Lords, an identical amendment was discussed in Committee. We recognise that the professional bodies are not very happy with the idea that the responsibility to maintain the register should be a joint one. My noble friend Lord Brabazon of Tara said in Committee that the Government would consider whether a way could be found of meeting the bodies' concerns while still implementing the directive.
One possibility which has occurred to us is that the recognised supervisory bodies might be placed under a duty individually to maintain a register of all auditors. They would then also have to be placed under a duty to supply the relevant information to each other so that they could discharge their responsibilities as to the register. I understand that that approach would be acceptable to the Institute of Chartered Accountants, but I should like there to be further discussion on this matter before we decide on any change. First, I believe that the certified accountants ought to be consulted on any proposals. Secondly, I should like the possibility of the information covered by Clause 33 being incorporated into the register to be explored with the professional bodies. Thirdly, I want further thought to be given to whether there are other ways of meeting the directive's requirements while avoiding some of the bureaucracy in the approach I have outlined.
I hope that your Lordships will agree that further consideration ought to be given to this issue.
§ Lord Williams of ElvelMy Lords. I am most grateful to the noble Lord. I am sure that he understands the point that I tried to make in Committee and am trying to make now. We hope very much that the Government will complete the consultations they have embarked on as quickly as possible so that we have an opportunity to discuss 551 what they finally propose. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 34 [Matters to be notified to the Secretary of State]:
§ Lord Young of Graffham moved Amendment No. 84:
§ Page 46, line 9, leave out subsections (5) and (6).
§ The noble Lord said: My Lords, in moving Amendment No. 84 I should like to speak also to Amendments Nos. 88, 89, 91 and 92. These amendments concern the operation of the competition regime when many of the Secretary of State's powers have been transferred to a statutory body set up under Clause 44. The Bill already reserves to the Secretary of State certain of the competition functions in those circumstances, for it is he who must have the final say as to whether a supervisory or qualifying body's rules have a significantly anti-competitive effect, and if so, whether that effect is reasonably justifiable for the purposes of the part. However, there are certain problems arising from the fact that some of the functions would be exercisable by the statutory body and others simultaneously by the Secretary of State.
§ For example, Clause 44(2)(a) reserves to the Secretary of State the function of deciding whether a recognition order should be revoked on grounds relating to competition, but the function of revoking the order on those grounds would be transferred by the delegation order to the statutory body and there is no mechanism enabling the Secretary of State to direct the body to take the appropriate action. Rather than make the rather complex and difficult amendments to the Bill which we think would be required to resolve all those problems, we have decided to take a power to make regulations to deal with them at the appropriate time. That seems sensible in the circumstances. I beg to move.
§ On Question, amendment agreed to.
§ Clause 38 [Duty to use the title "registered auditor"]:
§ Lord Strathclyde moved Amendment No. 85:
§ Leave out Clause 38.
§ On Question, amendment agreed to.
§ Clause 40 [Offences by bodies corporate, partnerships and unincorporated associations]:
§ Lord Benson moved Amendment No. 86:
§
Page 48, line 22, leave out subsection (3) and insert—
("(3) Where an offence under this Part committed by a partnership is proved to have been committed with the consent or connivance of a partner, he as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.").
§ The noble Lord said: My Lords, this amendment deals with the question of offences by either a company or a partnership. Under Clause 40(1) if a company commits an offence any officer of the company who consents to or connives at the 552 committing of that offence is also guilty. There can be no objection to that and no objection is raised to it in this amendment.
§ However, when it comes to a partnership a different situation arises. Under Clause 40(3) if an offence is committed by a partnership all the partners are automatically guilty unless a partner can prove his innocence. That arrangement appears to be objectionable on three grounds, each of which appears to be conclusive. Together they seem unanswerable. The first is that the clause itself is contradictory. Clause 40(1) puts the matter one way but when it comes to a partnership the matter is put another way. It is wrong to have inconsistencies of that character in the same clause.
§ The second point is that Clause 40(3) appears to conflict with the basic rule of British justice that a man is deemed to be innocent unless he is proved guilty. This says exactly the opposite: he is deemed to be guilty unless he proves he is innocent. It seems quite wrong that a Bill of this kind should override a fundamental right of British justice.
§ The third reason is that I think that it is totally impracticable. Most of the large firms have up to 200 partners. Should they be caught under this clause there could be two partners who committed the offence but 198 partners will stand in the dock and have to prove their innocence. Each one will be represented by barristers and solicitors and the jury will have to make an individual decision as to whether each one has satisfied the court of his innocence. Such a procedure is not capable of contemplation. There is no courtroom in the country which will hold 200 partners, all proving their innocence.
§ I suggest that there is no reason why subsections (1) and (3) should not be made the same. This is not a pernickety point of wording. I have the most specific legal advice that this is an issue which ought to be taken up, and I believe that that advice has been furnished to the Government. I hope therefore that the Government will be able to satisfy this point. I beg to move.
§ Lord StrathclydeMy Lords, I am not sure that I would agree with the noble Lord that this is a matter of reverting to the usual burden of proof. First, this is a standard provision that can be found in several statutes which provide for the prosecution of offences that have been committed by partnerships and unincorporated associations. Secondly, there is authority for the proposition that, particularly in the case of offences which do not involve an element of mens rea, partners who are ignorant of their co-partners wrongdoing may nevertheless be guilty of the offence. If that is the case so far as partnerships are concerned, it seems likely that similar principles apply in the case of unincorporated associations. That being so, it might reasonably be said that the Bill as it stands places partners in a better position than they might otherwise be since it provides them with a specific defence.
However, we have received representations on this matter and are considering them. As noble Lords will realise from what I said about these being standard 553 provisions, we need to consult others on their appropriateness, but we shall certainly get in touch with the Institute of Chartered Accountants when we have considered the matter further. I hope that the noble Lord is able to accept that assurance and withdraw his amendment.
§ Lord BensonMy Lords, on the basis of that assurance, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 87 not moved.]
§ Clause 44 [Delegation of functions of Secretary of State]:
§ Lord Strathclyde moved Amendment No. 88:
§ Page 50, line 12, leave out from ("(a)") to end of line 16 and insert ("such functions under Part I of Schedule 11 (prevention of restrictive practices) as are excepted by regulations under section 45,").
§ On Question, amendment agreed to.
§ Clause 45 [Restrictive practices]:
§ Lord Strathclyde moved Amendment No. 89:
§
Page 50, line 42, at end insert—
("(2) The Secretary of State may make provision by regulations as to the discharge of the functions under paragraphs 1 to 6 of that Schedule when a delegation order is in force.
(3) The regulations may—
(4) The regulations shall contain such provision as appears to the Secretary of State to be necessary or expedient for reserving to him the decision—
(5) For that purpose the regulations may—
(6) Regulations under theis section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
§ On Question, amendment agreed to.
§ Lord Young of Graffham moved Amendment No. 90:
§ After Clause 45, insert the following new clause:
§ ("Exemption from liability for damages
§ . — (1) Neither a recognised supervisory body, nor any of its officers or employees or members of its governing body, shall be liable in damages for anything done or omitted in the discharge or purported discharge of functions to which this subsection applies, unless the act or omission is shown to have been in bad faith.
§ (2) Subsection (1) applies to the functions of the body so far as relating to, or to matters arising out of—
- (a) such rules, practices, powers and arrangements of the body to which the requirements of Part 11 of Schedule 8 apply, or
- (b) the obligations with which paragraph 15 of that Schedule requires the body to comply,
- (c) any guidance issued by the body, or
- (d) the obligations to which the body is subject by virtue of this part.
§ (3) Neither a body established by a delegation order, nor any of its members, officers or employees, shall be. in damages for anything done or omitted in the discharge or purported discharge of the functions exercisable by virtue of the order, unless the act or omission is shown to have been in bad faith.").
§ The noble Lord said: My Lords, noble Lords will recall that we said in Committee that we would consider carefully the case put fo7ward by the Institute of Chartered Accountants that the Bill should confer immunity from liability in damages on recognised supervisory bodies. A number of noble Lords supported the institute's case and we have taken account of the arguments put forward. As will be apparent from the clause, we concluded that it would be appropriate to grant the special protection to recognised supervisory bodies. We consider that the same arguments apply to the case of any statutory body that might be set up under Clause 44 and we therefore propose that it should have similar protection. In those circumstances, I beg to move.
§ Lord Williams of ElvelMy Lords, after our discussions in Committee, I think that the Government recognised that this was the right solution. I am glad that they have brought forward this amendment, which we support.
§ Lord BensonMy Lords, I should like to thank the noble Lord, Lord Young of Graffham, for taking the trouble to bring forward this amendment. It has considerably relieved the anxiety in our minds and we are grateful for the way it has been handled.
§ On Question, amendment agreed to.
§ Schedule 11 [Supervisory and qualifying bodies: restrictive practices]:
§ Lord Strathclyde moved Amendments Nos. 91 and 92:
§ Page 189, line 50, at end insert—
§ ("Notification of changes to rules or guidance
§ 1A. — (1) Where a recognised supervisory or qualifying body amends, revokes or adds to its rules or guidance in a manner which may reasonably be regarded as likely—
- (a) to restrict, distort or prevent competition to any significant extent, or
- (b) otherwise to affect the question whether the recognition order granted to the body should continue in force,
§ (2) Notice need not be given under sub-paragraph (I) of the revocation of guidance not intended to have continuing effect or issued otherwise than in writing or other legible form, or of any amendment or addition to guidance which does not result in or consist of guidance which is intended to have continuing effect and is issued in writing or other legible form.").
§ Page 190, line 9, leave out from ("under") to ("together") in line 10 and insert ("paragraph 1A").
§ On Question, amendments agreed to.
§ Lord Strathclyde moved Amendment No. 93:
§ Page 193, line 2, leave out ("term") and insert ("terms").
§ The noble Lord said: My Lords, this is just a drafting amendment. I beg to move.
§ On Question, amendment agreed to.
555§ Clause 52 [Production of documents and evidence to inspectors]:
§ Lord Strathclyde moved Amendments Nos. 94 to 97:
§
Page 53, line 31, at end insert—
("() In subsection (1) (duty of officers to assist inspectors), for "books and documents" substitute "documents".").
§ Page 53, line 38, leave out ("books and").
§ Page 54, line 2, leave out ("books and").
§ Page 54, line 4, leave out from ("form") to ("a") in line 5 and insert ("the power to require its production includes power to require the production of').
§ The noble Lord said: My Lords, in moving these amendments I should like to speak also to Amendments Nos. 100, 101, 103, 105, 106, 107, 109, 110, 111, 121, 122, 124, 125, 126, 127, 132, 134, 151 and 153. Parts of Amendments Nos. 116 and 128 deal with similar changes, but I propose to speak to them separately. During the Committee stage debate on Part III of the Bill on 14th February, I undertook to consider further the points raised by the noble Lord, Lord Mishcon, on Clause 59—now Clause 60 of the Bill, as amended—relating to the various uses of the words "books and papers", "books and documents", and "documents" alone in the Companies Act, as to be amended by the Bill.
§ As I said at the time, we do not consider that the differences in the references are of consequence. However, we accept that the drafting would be improved if the various references were to be harmonised, not only in the Companies Act but also on related provisions in the Insurance Companies Act, the Financial Services Act, and in Clauses 73 and 78 of the Bill. Amendments Nos. 94, 95, 96, 97, 101, 103, 105, 107, 134 and 151 deal directly with that harmonisation, substituting the word "documents" for the various references to books, papers and documents as currently employed.
§ Amendments Nos. 110 and 111 are consequential and are simply intended to remove the reference to "books and papers" in Schedule 24 to the Companies Act 1985, which concerns the punishment of offences, in the entry related to what is now Section 448(5) of that Act. I hope noble Lords will agree that this measure clarifies and simplifies the provisions. I beg to move.
§ Lord Williams of ElvelMy Lords, I am grateful to the noble Lord for this group of amendments, which certainly clears up a curious drafting anomaly in the Bill.
§ On Question, amendments agreed to.
§ 8.45 p.m.
§ Clause 55 [Expenses of investigating a company's affairs]:
§ Lord Strathclyde moved Amendment No. 98:
§
Page 55, line 2, leave out from ("report") to end of line 3 and insert—
("(4) For subsection (5) substitute—
(5) Where inspectors were appointed—
the applicant or applicants for the investigation is or are liable to such extent (if any) as the Secretary of State may direct.".").
§ The noble Lord said: My Lords, in moving this amendment I should like to speak also to Amendments Nos. 98, 99, 119 and 150. In Committee, the noble Lord, Lord Mishcon, tabled an amendment to Clause 58—then Clause 57—which was designed to preserve Section 442(3) to enable the Secretary of State to recover costs from the applicants. My noble friend the Secretary of State said then that he thought there might be merit in amending the provisions of that section on lines similar to Section 431. After further consideration, I have concluded that there is merit in such a proposal and I am bringing forward these amendments accordingly. I hope that this meets with the approval of noble Lords. I beg to move.
§ On Question, amendment agreed to.
§ Clause 58 [Investigation of company ownership]:
§ Lord Strathclyde moved Amendment No. 99:
§
Page 55, line 39 leave out from ("ownership),") to end of line 40 and insert ("for subsection (3) (investigation on application by members of company) substitute—
(3) If an application for investigation under this section with respect to particular shares or debentures of a company is made to the Secretary of State by members of the company, and the number of applicants or the amount of shares held by them is not less than that required for an application for the appointment of inspectors under section 431(2)(a) or (b), then, subject to the following provisions, the Secretary of State shall appoint inspectors to conduct the investigation applied for.
(3A) The Secretary of State shall not appoint inspectors if he is satisfied that the application is vexatious; and where inspectors are appointed their terms of appointment shall exclude any matter in so far as the Secretary of State is satisfied that it is unreasonable for it to be investigated.
(3B) The Secretary of State may, before appointing inspectors require the applicant or applicants to give security, to an amount not exceeding £5,000, or such other sum as he may by order specify, for payment of the costs of the investigation.
An order under this subsection shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(3C) If on an application under subsection (3) it appears to the Secretary of State that the powers conferred by section 444 are sufficient for the purposes of investigating the matters which inspectors would be appointed to investigate, he may instead conduct the investigation under that section.".").
§ On Question, amendment agreed to.
§ Clause 59 [Secretary of State's power to require production of documents]:
§ Lord Strathclyde moved Amendments 100 and 101:
§
Page 55, line 42, at end insert—
("() For "books or papers", wherever occurring, substitute "documents".").
§ Page 55, line 44, leave out ("books and papers") and insert ("documents").
§ On Question, amendments agreed to.
§ Lord Strathclyde moved Amendment No. 102:
§ Page 55, line 45, leave out from first ("person") to end of line and insert (", after "the officer" in the first place where it occurs insert "or other person" and for "the officer" in the second place where it occurs substitute "he (the officer or other person)".").
§ The noble Lord said: My Lords, this is a minor technical amendment. I beg to move.
§ On Question, amendment agreed to.
557§ Lord Strathclyde moved Amendment No. 103:
§ Page 56, line 1, leave out ("books and papers") and insert ("documents").
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 104:
§
Page 56, line 3, at end insert—
("() In subsection (6), for the second sentence substitute—
Sections 732 (restriction on prosecutions), 733 (liability of individuals for corporate default) and 734 (criminal proceedings against unincorporated bodies) apply to this offence.".").
§ The noble Lord said: My Lords, in moving this amendment I should like to speak also to Amendments Nos. 108, 113, 116, 117 and 152. These are minor and technical amendments. I beg to move.
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendments Nos. 105 to 107:
§ Page 56, line 5, leave out ("books or papers") and insert ("documents").
§ Page 56, line 7, leave out from ("form") to ("a") in line 8 and insert ("the power to require its production includes power to require the production of").
§
Page 56, line 8, at end insert—
("() In Schedule 24 to the Companies Act 1985 (punishment of offences), in the entry relating to section 447(6), for "books and papers" substitute "documents".").
§ On Question, amendments agreed to.
§ Clause 60 [Entry and search of premises]:
§ Lord Strathclyde moved Amendment No. 108:
§ Page 57, line 30, leave out from ("732") to ("apply") in line 31 and insert ("(restriction on prosecutions), 733 (liability of individuals for corporate default) and 734 (criminal proceedings against unincorporated bodies)").
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendments Nos. 109 to 111:
§ Page 57, line 45, leave out from ("form") to end of line 48.
§ Page 58, line 2, after ("448(5)") insert ("—(a)").
§ Page 58, line 3, at end insert (", and
§
(b) for the entry in the second column substitute—
Obstructing the exercise of any rights conferred by a warrant or failing to comply with a requirement imposed under subsection (3)(d).".").
§ On Question, amendments agreed to.
§ Clause 61 [Provision for security of information obtained]:
§ Lord Strathclyde moved Amendment No. 112:
§ Page 58, line 18, leave out ("section 74") and insert ("Part III").
§ The noble Lord said: My Lords, with this I shall speak also to Amendments Nos. 123 and 136. These amendments are minor and technical. They amend the Companies Act, the Financial Services Act and Clause 78 of the Bill, relating to information obtained under the powers to assist overseas regulators, so as to provide gateways for the disclosure of restricted information for the purpose of enabling or assisting the Secretary of State's exercise of functions under Part III of the Bill. I beg to move.
§ On Question, amendment agreed to.
558§ Lord Strathclyde moved Amendment No. 113:
§
Page 58, line 41, at end insert—
("() In subsection (2), for the second sentence substitute—
Sections 732 (restriction on prosecutions), 733 (liability of individuals for corporate default) arid 734 (criminal proceedings against unincorporated bodies) apply to this offence.".").
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendments. Nos. 114 and 115:
§
Page 59, line 2, at end insert—
("(bb) any person authorised to exercise powers under section 44 of the Insurance Companies Act 1982, section 447 of this Act, section 106 of the Financial Services Act 1986 or section 75 of the Companies 1989,").
§ Page 59, line 23, leave out from ("authority") to end of line 28.
§ The noble Lord said: My Lords, I beg to move Amendments Nos. 114 and 115. They are technical amendments. Their effect is that inspectors appointed under the Companies Act may disclose information not only to other investigators but also to officers and servants of such investigators.
§ On Question, amendments agreed to.
§ Lord Strathclyde moved Amendments Nos. 116 and 117:
§ After Clause 61, insert the following new clause:
§ ("Punishment for destroying, mutilating, &c. company documents.
§ .—(1) Section 450 of the Companies Act 1985 (punishment for destroying, mutilating, &c. company documents) is amended as follows.
§
(2) For subsection (4) substitute—
(4) Sections 732 (restriction on prosecutions), 733 (liability of individuals for corporate default) and 734 (criminal proceedings against unincorporated bodies) apply to an offence under this section.".
§
(2) After that subsection insert—
(5) In this section "document" includes information recorded in any form.".").
§ After Clause 61, insert the following new clause:
§ ("Punishment for furnishing false information.
§
In section 451 of the Companies Act 1985 (punishment for furnishing false information), for the second sentence substitute—
Sections 732 (restriction on prosecutions), 733 (liability of individuals for corporate default) and 734 (criminal proceedings against unincorporated bodies) apply to this offence.".").
§ On Question, amendments agreed to.
§ Clause 62 [Disclosure of information by Secretary of State or inspector]:
§ Lord Strathclyde moved Amendment No. 118:
§
Page 60, line 8, at end insert—
("() Any information which may by virtue of subsection (3) be disclosed to any person may be disclosed to any officer or servant of that person.").
§ The noble Lord said: My Lords, this is a technical amendment. Its effect is that inspectors appointed under the Companies Act may disclose information not only to other investigators but also to officers and servants of such investigators. I beg to move.
§ Lord Williams of ElvelMy Lords, can the noble Lord help us by defining in these circumstances who an officer or servant is?
§ Lord StrathclydeMy Lords, as I said, this is a technical amendment bringing in those who are officers or servants. In this definition, officers or servants are those instructed by the investigators to carry out whatever duties there may be.
§ Lord Williams of ElvelMy Lords, before the noble Lord sits down, I am sure that he will recognise that there is a problem here. It may be technical, but an inspector can divulge or disclose information to anybody, provided that he or she can claim that he or she is an officer or servant. Before allowing this to go through on the nod, as it were, I should like to be assured that there is some provision that an officer or servant is defined quite clearly in law so that not everyone can walk in from the street and claim to be an officer or servant of an inspector and obtain information which the inspector has available.
§ Lord StrathclydeMy Lords, I agree with the noble Lord. I would never wish matters to be pushed through the House on the nod. He has asked a pertinent question. The concept of an officer or servant is well understood in law. It is a phrase used elsewhere. It does not have a meaning here different from that in any other statute. I therefore hope that the noble Lord will be put at ease.
§ Lord TordoffMy Lords, will the noble Lord explain what meaning it has in other statutes?
§ Lord StrathclydeMy Lords, without intending to be in the least facetious, it has exactly the same meaning in other statutes as it has here.
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 119:
§
Page 60, line 8, at end insert—
("() The Secretary of State may, if he thinks fit, disclose any information obtained under section 444 to—
§ On Question, amendment agreed to.
§ Clause 64 [Investigation of oversea companies]:
§ Lord Strathclyde moved Amendment No. 120:
§ Page 60, line 40, leave out from ("(c)") to ("power") in line 41 and insert ("sections 442 to 445 (investigation of company ownership and").
§ The noble Lord said: My Lords, this is a minor technical amendment. I beg to move.
§ On Question, amendment agreed to.
§ Clause 66 [Investigations into affairs of persons carrying on investment business]:
§ Lord Strathclyde moved Amendment No. 121:
§
Page 61, line 44, at end insert—
("() In subsection (9) (interpretation), in the definition of "documents", for "references to its production include references to producing" substitute "the power to require its production includes power to require the production of'.").
§ On Question, amendment agreed to
560§ Clause 67 [Investigations into insider dealing]:
§ Lord Strathclyde moved Amendment No. 122:
§
Page 63, line 4, at end insert—
("() In subsection (10) (definition of "documents") for "references to its production include references to producing" substitute "the power to require its production includes power to require the production of'.").
§ On Question, amendment agreed to.
§ Clause 68 [Restrictions on disclosure of information]:
§ Lord Strathclyde moved Amendment No. 123:
§
Page 63, line 24, at end insert—
("(a) in paragraph (c), after "insolvency" insert "or by Part III of the Companies Act 1989".").
§ On Question, amendment agreed to.
§ Clause 69 [Entry and search of premises]:
§ Lord Strathclyde moved Amendment No. 124:
§
Page 64, line 43, at end insert—
("() In subsection (9) (definition of "documents"), omit the words from "and, in relation" to the end.").
§ On Question, amendment agreed to.
§ Clause 70 [Amendments of the Insurance Companies Act 1982]:
§ Lord Strathclyde moved Amendments Nos. 125 to 127:
§ Page 65, line 7, leave out ("and section 44A").
§ Page 65, line 9, leave out from ("form") to ("a") in line 10 and insert ("the power to require its production includes power to require the production of").
§
Page 66, line 30, at end insert—
("() In this section "document" includes information recorded in any form.").
§ On Question, amendments agreed to.
§ Lord Strathclyde moved Amendment No. 128:
§
Page 66, line 33, leave out subsection (5) and insert—
("(5) In section 71 (offences and penalties), after subsection (2) insert—
(2A) A person who intentionally obstructs the exercise of any rights conferred by a warrant issued under section 44A above or fails without reasonable excuse to comply with any requirement imposed in accordance with subsection (3)(d) of that section is guilty of an offence and liable—
(6) In section 71(6) (defence to failure to comply with requirement to produce books or papers) for "books our papers" substitute "documents".").
§ The noble Lord said: My Lords, the purpose of Amendment No. 128 is to bring the penalty for the offence of failing to comply with the exercise of powers authorised by a warrant issued under Section 44A of the Insurance Companies Act 1982, as inserted by Clause 70(3) of the Bill, into line with the penalties for analogous offences in relation to search and entry powers in the Companies Act and the Financial Services Act. It provides for a person found guilty of such an offence to be liable on conviction on indictment to a fine, and on summary conviction to a fine not exceeding the statutory maximum.
561§ This amendment also has the effect of substituting the word "document" for books and papers in Section 71(6) of the Insurance Companies Act. It is a minor drafting amendment on the lines that we agreed on Amendment No. 94. I beg to move.
§ On Question, amendment agreed to.
§ Clause 73 [Request for assistance by overseas regulatory authority]:
§ Lord Strathclyde moved Amendment No. 129:
§
Page 67, line 10, leave out subsections (2) and (3) and insert—
("(2) An "overseas regulatory authority" means an authority which in a country or territory outside the United Kingdom exercises—
An order under paragraph (c) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(3) The Secretary of State shall not exercise the powers conferred by section 74 unless he is satisfied that the assistance requested by the overseas regulatory authority is for the purposes of its regulatory functions.
An authority's "regulatory functions" means any functions falling within subsection (2) and any other functions relating to companies or financial services.").
§ The noble Lord said: My Lords, in moving this amendment I should also like to speak to Amendment No. 131. The amended subsections provide that the Secretary of State can by order add to the list of functions in Clause 73(2) which, if exercised by an authority in the country or territory outside the United Kingdom, mean that the authority is an overseas regulatory authority which is eligible to make requests to the Secretary of State to exercise his powers under Clause 74. Any function added to the list, however, must in the opinion of the Secretary of State relate to companies or financial services. Any order under this new provision must be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
§ This new order-making power is, in the Government's view, necessary to ensure that we are able to assist overseas authorities who exercise functions which do not correspond to the functions in Clause 73(2)(a) and (b) but which—and this is an important limitation to the power—nonetheless relate to companies or financial services. Without this power we believe that we could find ourselves with insufficient flexibility to assist overseas authorities exercising regulatory functions in certain cases, even though it was in the public interest to do so.
562§ The order-making power, however, provides a parliamentary safeguard which would not apply if the clause simply defined an overseas regulatory authority as any overseas authority exercising one or more regulatory functions as defined in subsection (3).
§ The definition of "regulatory functions" in Clause 73(3) is amended to make clear that they include any of the functions falling within new subsection (2) of Section 73. New subsection (7) of Clause 73 makes clear that references in the clause to financial services include, in particular, investment business, insurance and banking. This new subsection replaces the similar provision in the existing Clause 73(3) but covers the additional reference to financial services in new subsection (2)(c). The new subsections also contain some consequential drafting amendments which have no substantive effect. I beg to move.
§ 9 p.m.
§ Lord Williams of ElvelMy Lords, overseas regulatory authorities have been the object of some debate in Committee and also of correspondence between Government Ministers and myself. I accept that the amendment that the noble Lord is moving goes some way to meet our problems; but it raises the problem of banking, which is a rather specialised activity—information on banking should not be divulged to anybody except under the proper circumstances. I question whether, in the context of this Bill, banking can properly be defined as a financial service in the same way as investment business can be, because they have different aspects of confidentiality. I hope that the noble Lord will be able to satisfy me on that point.
§ Lord StrathclydeMy Lords, subsection (2) specifies functions in detail. This is to ensure that the question of whether or not an overseas authority qualifies for the purposes of these provisions can be determined with reasonable certainty. However, it would be undesirable for the Secretary of State to be limited in his ability to provide assistance solely for the purpose of a function in subsection (2). It would reduce the scope for providing assistance and focus consideration of whether the powers can and should be exercised on the relatively sterile question of whether the information was being sought for a function which corresponded to a particular function exercised in the United Kingdom. It is important that the authority should not be seeking the information in question for some purpose other than for the purpose of its regulatory functions in the companies and financial services sphere. Otherwise, the object of exercising these powers could be wholly at large. But the main consideration as to whether to exercise the powers should focus on matters of the kind instanced in subsection (4).
The noble Lord, Lord Williams, made a specific point concerning banking. I am not entirely clear why the amendment raises this problem. Banking information, for example, is already given special protection in Clause 75(4). Generally, that information is protected by Clause 77. Therefore, I hope that the noble Lord, Lord Williams, will see that the problem that he indicates does not arise.
§ Lord Williams of ElvelI understand that banking information is protected under other parts of the Bill. However, we are dealing here in this amendment with what are known as financial services. Amendment No. 131, to which the noble Lord was speaking, includes investment business, insurance and banking. Perhaps the noble Lord can give an assurance that the banking part of Amendment No. 131 is covered by the protection in the rest of the Bill, and that banking secrecy will not thereby be violated in respect of overseas regulatory authority inquiries.
§ Lord StrathclydeMy Lords, generally speaking, I agree with what the noble Lord, Lord Williams, has said. However, as the noble Lord knows, there are different forms of banking. Therefore some aspects of banking will come under the new subsection and other aspects of banking will quite clearly fall under the secrecy applications in other parts of the Bill.
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 130:
§
Page 68, line 7, at end insert—
("(6) The Secretary of State may decline to exercise those powers unless the overseas regulatory authority undertakes to make such contribution towards the costs of their exercise as the Secretary of State considers appropriate.").
§ The noble Lord said: My Lords, this amendment makes it clear that the Secretary of State can request an overseas regulatory authority which asks him to exercise the powers in Clause 74 to contribute towards the costs. I beg to move.
§ Lord Williams of ElvelMy Lords, if I may say so, this is an extraordinary amendment; that the Secretary of State may decline to help an overseas regulatory authority by the use of his powers unless the overseas regulatory authority coughs up some money. Suppose that the Securities and Exchange Commission, to give an example, comes along and says that it would like to do this, that and the other, and asks for help. Are we seriously proposing that the Secretary of State should say to the Securities and Exchange Commission, "You must pay me £3.53 and then I will give you the information you require"? Is that really what the Government intend?
§ Lord StrathclydeMy Lords, I think that the noble Lord, Lord Williams, is generally right, but he confuses the matter in this respect, that it is not that the Secretary of State would or should, but that he may. The intention here is that the costs or expense of exercising the new powers will generally be borne out of the department's budget. However, if the Secretary of State sees fit, he might request a contribution towards the costs from the requesting authority. It is envisaged that the basis for any such contribution would be set before the United Kingdom investigation began.
With regard to the noble Lord's point about the United States, there is already provision for costs for some investigations of that type.
§ Lord Williams of ElvelMy Lords, leaving aside the position of the United States, if this amendment is accepted by your Lordships, is the Secretary of 564 State entitled to refuse to exercise his powers in favour of an overseas regulatory authority, if that regulatory authority refuses to pay the Bill?
§ Lord StrathclydeMy Lords, it would be extremely unlikely but, in the event, that would be the case.
§ Lord Williams of ElvelMy Lords, before the Minister sits down can he say whether it is consistent with our obligations in the European Community?
§ Lord StrathclydeMy Lords, yes, it almost certainly is. There are a variety of options for members and this would fall under those.
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 131:
§
Page 68, line7, at end insert—
("(7) References in this section to financial services include, in particular, investment business, insurance and banking.").
§ On Question, amendment agreed to.
§ Clause 74 [Power to require information, documents or other assistance]:
§ Lord Strathclyde moved Amendment No. 132:
§ Page 68, line 37, leave out from ("form") to ("a") and insert ("the power to require its production includes power to require the production of").
§ On Question, amendment agreed to.
§ Clause 75 [Exercise of powers by officer, &c.]:
§ Lord Strathclyde moved Amendment No. 133:
§ Page 68, line 42, leave out from ("for") to end of line 2 on page 69 and insert ("the purpose of investigating—
- (a) the affairs, or any aspects of the affairs, of a person specified in the authority, or
- (b) a subject-matter so specified,
§ The noble Lord said: My Lords, Clause 75(1) provides that the Secretary of State may authorise an officer of his or any other competent person to exercise the powers in Clause 74 on his behalf. Clause 75(2) requires that any such authority must be for specific purposes defined by reference either to the persons who are the subject of the inquiries being carried out by, or on behalf of, the requesting overseas authority or to the subject matter of those inquiries.
§ The amendment is intended to make it clear that the authority has to state only the affairs or subject matter being investigated by the overseas authority and that no further details are required. I beg to move.
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 134:
§
Page 69, line 14, at end insert—
("In this subsection "documents" has the same meaning as in section 74.").
§ On Question, amendment agreed to.
565§ Clause 78 [Exceptions from restrictions on disclosure]:
§ Lord Strathclyde moved Amendment No. 135:
§ Page 71, leave out lines 3 to 5.
§ The noble Lord said: My Lords, I should also like to speak to Amendment No. 139. At present, Clause 78(1)(d) permits disclosure of information to which Clause 77 applies for the purpose of enabling or assisting an overseas regulatory authority to exercise its regulatory functions but the disclosure must be to such an authority.
§ The amendments involve the deletion of Clause 78(1)(d) and the addition, in Clause 78(4), of a wider gateway which permits disclosure to any person for the above purpose. This is analogous both to the existing parallel gateways in Section 449(1)(m) of the Companies Act 1985 and Section 180(6) of the Financial Services Act 1986, and to the proposed amendments to those gateways in Clauses 61(2)(g) and 68(3)(c) of this Bill. I beg to move.
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 136:
§ Page 71, line 32, column 2, at end insert ("or this Part of this Act").
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 137:
§ Page 71, line 33, column 1, leave out ("by the Secretary of State") and insert ("under Part XIV of the Companies Act 1985 or section 94 or 177 of the Financial Services Act 1986").
§ The noble Lord said: My Lords, I should also like to speak to Amendment No. 138. At present the second entry in the table in Clause 78(4) allows for disclosure of information to which Clause 77 applies only for the purpose of enabling or assisting inspectors appointed under the specified provisions by the Secretary of State. By virtue of Section 114 of the Financial Services Act, the function of appointing inspectors under Section 94 of that Act is transfer- 566 able to a designated agency and is among those functions which have been transferred to the Securities and Investments Board on the basis that it is exercisable by the Secretary of State concurrently. I beg to move.
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No. 138:
§ Page 71, line 33, column 2, leave out from ("under") to end of line 36 and insert ("that Part or that section").
§ On Question, amendment agreed to.
§ Lord Strathclyde moved Amendment No 139:
§ Page 71, line 43, at end insert—
| ("An overseas regulatory authority. | Its regulatory functions (within the meaning of section 73 of this Act)."). |
§ On Question, amendment agreed to.
§ Lord HenleyMy Lords, I beg to move that consideration on Report be now adjourned.
§ Moved accordingly and, on Question, Motion agreed to.