§ 8.32 p.m.
§ Lord McIntosh of Haringey rose to move, That the draft regulations laid before the House on 1st March be approved [12th Report from the Joint committee].
The noble Lord said: My Lords, the noble Baroness, Lady Anelay, can now leave. The purpose of the regulations is to transfer the function of UK competent authority for listing from the London Stock Exchange to the Financial Services Authority. The intention is that the transfer should take place on 1st May.
The future framework of official listing is dealt with in Part VI of the Financial Services and Markets Bill which your Lordships considered on Tuesday 21st March. The competent authority for listing is named in that Bill as the Financial Services Authority.
As I made clear when moving amendments to the Bill last Tuesday, the competent authority for listing performs a number of functions. Principally, it is responsible for admitting securities to the official list and making and enforcing the listing rules which govern both the admission of securities to the official list and the ongoing responsibilities of issuers of such securities. The requirement to have a competent authority and a number of the requirements which issuers of officially listed securities have to meet are laid down in the various European Community directives dealing with official listing.
The Stock Exchange has been the UK's competent authority since the concept was first introduced into UK law in 1984. The decision to make the transfer in no way reflects dissatisfaction with the past performance of the Exchange. But in the light of the Exchange's decision to demutualise, it is no longer appropriate for it to continue to exercise the competent authority function. Indeed, the Exchange itself suggested that that would be inappropriate. A demutualised Stock Exchange will be a for-profit organisation. I could go further and say that, almost certainly, it will be profitable. We consider that it would create the possibility, or at least the perception, of conflicts of interest for the statutory functions of the competent authority to be exercised by a commercial for-profit company, particularly against the background of increasing competition between stock exchanges, including new entrants to the UK market such as Nasdaq Europe and Jiway.
897 We have decided to effect the transfer initially by means of regulations made under the European Communities Act, rather than wait for the enactment and implementation of the Financial Services and Markets Bill. Indeed. I gave notice of that in debate on Tuesday of last week. There are two main reasons for this. First, it is clearly in the interests of all concerned that the transfer of responsibilities should be as smooth and seamless as possible. The transfer involves not just legislative powers but staff, IT systems, financial issues and so on. Using regulations enables us to specify in advance a particular date which assists the planning process.
Secondly, against the backdrop of the London Stock Exchange's demutualisation process, it is desirable to make the transfer as soon as possible. It would be unsatisfactory, for the Exchange as well as others, to leave it with the competent authority function for a significant period after it has been formally demutualised. Hence we consider it best to make the transfer using the powers under the European Communities Act, and 1st May is the earliest feasible date.
The effect of the regulations will be that the FSA will inherit the current functions, rights and obligations of the Exchange in its capacity as competent authority. The regulations also make transitional provisions to carry forward existing listings and listing rules and anything done or in train at the time of the transfer. Provision is included for the transfer of staff in the Exchange's listing department to the FSA.
There is one regulation to which I draw specific attention. Although the transfer is intended to take place on 1st May, Regulation 8 provides that the FSA should be able to make listing rules as soon as the regulations, once they have been agreed by both Houses, are made. The purpose of including this provision is to enable the FSA to bring the new listing rules and revocations of old listing rules into force immediately on 1st May when the transfer of functions takes effect. Certain limited changes to the listing rules are necessary to reflect the separation of admission to the official list and admission to trading on the London Stock Exchange after the FSA becomes the competent authority. In the absence of Regulation 8, there might be doubt about the FSA's powers to prepare new rules in advance and an undesirable hiatus between the transfer of functions and the new listing rules taking effect.
The Exchange, the FSA and the Treasury are all working to ensure that the transfer occurs as smoothly as possible with no loss of effectiveness for the competent authority. The draft regulations are a necessary part of the process. I commend them to the House. I beg to move.
Moved, That the draft regulations laid before the House on 1st March be approved [12th Report from the Joint Committee].—(Lord McIntosh of Haringey.)898
§ The Earl of Northesk
My Lords, I am grateful to the Minister for his explanation of the regulations. Indeed, as the noble Lord has reminded us, we covered a fair amount of the ground in some detail during our third day in Committee on the Financial Services and Markets Bill. Accordingly, I do not propose to trespass on the fine print of our ongoing scrutiny of that measure. It is enough to say that we look forward to topping and tailing Part VI when the Government table the additional amendments that the Minister advised us would be forthcoming at Report.
We on these Benches take the point, made again by the Minister tonight, that the London Stock Exchange itself does not feel it appropriate that it should continue to be the competent authority for listing because of its recent decision to demutualise. It is my interpretation that the regulations and, to an extent, their relative urgency arise in very great measure from that. While conceding that it is not immediately of relevance today, we do have reservations about the FSA being charged with two competing roles: first, to regulate financial services and markets, and, secondly, to perform the market role of maintaining the competent listing authority. Indeed, this whole issue—the question of who regulates the regulator—has been a persistent theme of our scrutiny of the Bill. No doubt that will continue.
However, for the purposes of today's proceedings, we recognise that it is important that the function of the competent authority should continue—I use the same phrase as the Minister—in as smooth and seamless a way as possible. We can therefore accept the transference of these responsibilities to the FSA.
§ Lord McIntosh of Haringey
My Lords, I am grateful to the noble Earl for his welcome for the regulations. He was admirably brief but he said more than the Opposition Front Bench said when I was moving the amendment in Committee. The only other intervention was from the Liberal Democrat Front Bench. I certainly take his point. We shall have to have a number of additional amendments. That will provide an opportunity for any noble Lords who are interested to take part in debate on any technical issues which may arise at Report stage.
On Question, Motion agreed to.