§ 426 Page 204, line 42, at end insert —
§ 'Taking account of costs of compliance
§ 15A. The body must have satisfactory arrangements for taking account, in framing its rules, of the cost to those to whom the rules would apply of complying with those rules and any other controls to which they are subject.'.
§ Lord StrathclydeMy Lords, I beg to move that the House do o agree with the Commons in their Amendment No. 426. This amendment requires a recognised supervisory body to have satisfactory arrangements for taking account of costs of compliance in its rules for any other controls to which its members are subject. An analogous requirement is placed by Amendment No. 306 upon recognised bodies under the FSA. Both amendments reflect the Government's concern that the proper assessment of the costs is made before a decision on rules are made.
§ Moved, That the House do agree with the Commons in the said amendment. —(Lord Strathclyde.)
§ Lord Williams of ElvelMy Lords, there is a difference between those governing the bodies which spend the majority of their time in business other than the investment business and the SROs which govern organisations which spend almost the totality of their time in the investment business. Therefore, I am much more doubtful about the costs of compliance argument in the case of recognised supervisory bodies than I am in the case of SROs. I am not tremendously persuaded by the argument in the case of SROs.
Perhaps I may take an example. The Institute of Chartered Accountants of England and Wales being a recognised supervisory body, if a firm of accountants decides to go into the investment business, I see no reason whatever why the institute should have satisfactory arrangements for taking account, in framing its rules, of the cost to that firm of accountants of going into the investment business.
1151 I should have thought it perfectly ordinary and proper, if the firm wishes to go into the investment business, for it to assess what the costs of compliance are under the rules as set out by the institute and to decide whether or not, in the light of that assessment, it wishes to continue or go into that business at all. I find this provision much more objectionable than that in the case of SROs.
§ Lord StrathclydeMy Lords, the noble Lord is very fair in what he said. The Government believe that it is vital for regulatory bodies to pay proper regard to the direct and indirect costs of complying with the rules. It is all too easy, even for practitioner-based bodies, to decide upon an approach to a regulatory problem without having assessed the costs of the various alternatives. Unless costs are properly assessed, the regulatory system risks being more burdensome than necessary.
This amendment simply requires the bodies to have satisfactory arrangements for taking account of the costs of the rules and other controls. I assure the noble Lord, Lord Williams, that there is no possibility of this requirement undermining the other criteria which recognised supervisory bodies have to satisfy. That is because paragraph 2(2) of Schedule 8 states that the Secretary of State may not make a recognition order unless it appears to him that the requirements in Part II of the schedule are satisfied. Therefore, the body will not be able to excuse inadequate supervision on the grounds that it is too expensive to achieve. This new requirement is simply to ensure that the recognised supervisory body takes account of compliance costs in framing the rules and so satisfies the other requirements of the Bill in the most cost-effective way.
§ On Question, Motion agreed to.