HL Deb 13 March 1992 vol 536 cc1549-51

2.40 p.m.

Lord Reay rose to move that the draft order laid before the House on 17th February be approved [14th Report from the Joint Committee].

The noble Lord said: My Lords, in speaking to this order I should like, at the same time, to speak also the Financial Services Act 1986 (Extension of Scope Act) Order 1992. I seek the approval of the House for the two orders. The first—the Financial Services Act 1986 (Investment Advertisements) (Exemption) (No. 2) Order 1992—I shall for convenience refer to as the No. 2 exemptions order and the second—the Financial Services Act 1986 (Extension of Scope of Act) Order 1992—I shall refer to as the extension of scope order.

The No. 2 exemptions order will introduce exemptions from the requirements in Section 57 of the Financial Services Act. Under that section, investment advertisements may be issued only if they have either been approved by, or issued by, persons authorised under the Act. Section 57 aims to protect investors from misleading advertisements. The Government attach importance to avoiding, wherever possible, unnecessary controls which add to the costs of legitimate business.

The No. 2 exemptions order is intended to remove certain restrictions on publishers of investment advertisements in this country where the advertisements are aimed at, and by their nature are of interest only to, professional or expert investors. In future, such advertisements will not require approval by an authorised person. That requirement has led to unnecessary delay and costs for publishers and advertisers, without any corresponding benefits for investor protection.

Article 2 of the order defines the professional and expert investors to whom advertisements may be addressed for the exemption to apply. To help publishers and advertisers, Articles 3 and 4 include indications to be taken into account in considering whether an advertisement benefits from the exemption. Article 5 exempts documents which relate to securities admitted to dealing on the markets listed in Schedules 1 and 2, where the rules of the exchange require or permit the document to be published. Article 6 exempts advertisements issued by markets listed in the schedules to the order as regards the facilities that they provide.

The extension of scope order is intended to bring back within the scope of the Financial Services Act investment advice given in pre-recorded telephone messages, screen-based systems and other electronic communications systems. Giving investment advice is an activity which may constitute investment business under the Act. Investment advice given in any television or radio programme and teletext transmission was originally exempt.

The Broadcasting Act 1990 introduced the concept of "programmes service" to the Financial Services Act. That had the effect of widening the scope of the exemption for investment advice to include advice given on 0898 telephone numbers and screen-based systems. That could have had undesirable consequences for investor protection and the present order restores the exemption to its previous more limited scope. Investment advice in programmes for transmission on televise on or radio, or on teletext, will remain exempt.

The changes before the House today will make for more effective regulation under the Act. Taken together, they will reduce unnecessary costs while maintaining adequate investor protection. As such, they have been warmly welcomed during the department's consultations. I commend them to the House.

Moved, That the draft order laid before the House on 17th February be approved [14th Report from the Joint Committee].—(Lord Reay.)

Lord Williams of Elvel

My Lords, the House is grateful to the Minister for introducing the Motion. I usually take great interest in orders under the Financial Services Act because they often contain controversial elements. However, the present orders contain no controversial elements, bar one which I shall note in passing because I do not wish to resist it.

It is the case that the extension of scope order is an order under what is known as a Henry VIII clause; in other words, it changes primary legislation by means of a statutory instrument. It would be wrong of me to let that go through without a quick remark. I know that your Lordships will have ways and means in the future to deal with such matters. As regards the substance of the orders, I agree that they are right and that they will make for better regulation in the future. I see no reason to oppose the Motion.

On Question, Motion agreed to.