Sitting of 28 July 1986

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Sheffield.

The Elgin Marbles
Lord Jenkins of Putney: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government by whom the present trustees of the British Museum were appointed.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, the appointment of British Museum trustees is made under the provisions of the British Museum Act 1963, Section 1(1), as amended by the Transfer of Functions (Arts, Libraries and National Heritage) Order 1986. There are up to 25 trustees, of whom one is appointed by the Sovereign and 15 by the Prime Minister; four are appointed by the Lord President of the Council on the nomination of the presidents of the Royal Society, the Royal Academy, the British Academy and the Society of Antiquaries of London, and five by the trustees of the British Museum.
Lord Jenkins of Putney: My Lords, I am grateful to the noble Lord for that comprehensive information. Can he say whether the director of the museum was representing the views of the trustees when on television he referred to an attempt to return the Elgin Marbles as "cultural fascism"?
Lord Belstead: My Lords, I confess that I did not have the pleasure of seeing the programme to which the noble Lord refers. But I believe that the trustees and the director concur in their views on the return of the marbles.
Lord Jenkins of Putney: My Lords, would it not have been better had the director expressed himself in less controversial terms? Is the Minister aware that there is a wide body of opinion in favour of the return of the marbles to Greece?
Lord Belstead: My Lords, I think that that is an opinion which is not shared by the museum trustees, by the director or indeed by Her Majesty's Government.
Lord Nugent of Guildford: My Lords, if the political colour of the government of Greece were to change back to the extreme Right, as it was some years ago, does my noble friend think that there would be the same body of opinion supporting the return of the Elgin Marbles?
Lord Belstead: My Lords, that is a hypothetical question, but it is nonetheless an interesting one, and as always I am grateful to my noble friend.
Lord Strabolgi: My Lords, is it true that the Elgin Marbles could not be returned to Greece without an Act of Parliament?
Lord Belstead: That is true, my Lords.
Lord Jenkins of Putney: My Lords, will the noble Lord accept that I shall do my best to go in the direction indicated by my noble friend?
Lord Belstead: My Lords, perhaps we ought to finish the exchange by reminding ourselves that in 1983 the noble Lord brought forward a Bill which would have had that effect and your Lordships' House did not agree to it having a Second Reading.
Lord Boyd-Carpenter: My Lords, was it not only the activity of the then Lord Elgin which caused the marbles still to be in existence and had it been left to the Greeks would they not have been destroyed?
Lord Belstead: My Lords, I do not think I ought to comment on that interesting question. But I am grateful to my noble friend for giving me the opportunity to say that the sculptures have been admirably looked after by the British Museum.

Haringey Council: School Lessons
2.40 p.m.
Lord Monson: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they approve of Haringey Borough Council's plans for compulsory lessons intended to promote "positive images" of homosexuality in nursery, primary and secondary schools in the borough, and whether parents who withdraw their children from such lessons would be liable for prosecution.
The Earl of Swinton: My Lords, my right honourable friend the Secretary of State was disturbed to see press reports of Haringey council's plans. He is making inquiries of the authority to establish the facts and to discover how it proposes to pursue its policy statement with its schools. I cannot comment on the legal position before the facts are clear. The Government would certainly deplore any attempt to encourage homosexual behaviour among school pupils.
Lord Monson: My Lords, I thank the noble Earl for that partly reassuring reply. But does he agree that, although most of us could not care less what other adults do in the privacy of their own homes, and are proud that it was this House which took the lead 21 years ago in starting to reform the draconian laws on male homosexuality then prevailing, it is a very different matter when small children are indoctrinated with the idea that homosexuality is every bit as

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praiseworthy and desirable as heterosexuality? Does he further agree that such indoctrination is definitely not what the vast majority of parents in this country want for their children?
The Earl of Swinton: My Lords, I concur with everything that the noble Lord says.
Viscount Buckmaster: My Lords, is the noble Earl prepared to disclose to the House that, of the letters received by his department in response to the Government's amendment to the Education Bill on sex education in schools, some 90 per cent. were in favour of the amendment? Does he agree that that represents widespread opposition in the country to the type of instruction described in the Question?
The Earl of Swinton: My Lords, I cannot give the figures as to how many letters have been received by my department on the amendment. There are a number of amendments down for the Report stage of the Bill in another place.
Lord Molloy: My Lords, if the Secretary of State was shocked by the press reports, ought they not to be thoroughly investigated, especially if they are causing grave disturbance throughout the country?
The Earl of Swinton: My Lords, I said that my right honourable friend was making inquiries of the authority to establish the facts. There have been a number of rather exaggerated press reports. On the other hand, I think that the council policy statement, which was agreed on 15th July, is pretty horrific as it stands.
Lord Simon of Glaisdale: My Lords, are we not rather more concerned with priorities in education than with sexual mores? Has the noble Earl had his attention drawn to a notable article by my noble friend Lord Annan in which he pointed out that there are two world languages—English and mathematics? Would it not be preferable to concentrate on giving a thorough grounding in those subjects? Has the Secretary of State any reserve powers in that regard?
The Earl of Swinton: My Lords, I agree with the noble Lord that mathematics and English are important. I also tend to agree that sensible sex and health education is important. I believe that this is very much a matter for local education authorities. The Government broadly take the view that a balanced curriculum is sensible.
Lord Paget of Northampton: My Lords, the noble Viscount said that 90 per cent. of the correspondents were in favour of the amendment. Does that indicate anything more than that 90 per cent. of the correspondents were homosexuals?
The Earl of Swinton: My Lords, I find myself utterly confused by what the noble Lord, Lord Paget, has said. I think that the noble Viscount sitting behind him was trying to indicate just the opposite when he was talking about the amendment that he moved during the recent passage of the Education Bill and not that he was in favour of what Haringey was doing.
Lord Elwyn-Jones: My Lords, would parents who withdrew their children from such lessons really be liable for prosecution? What prosecution authority would bring such a fantastic case?
The Earl of Swinton: My Lords, the noble and learned Lord has asked me a hypothetical question. The Education Acts lay down a sequence of legal procedures leading to criminal proceedings in the event of parents failing to comply with statutory requirements. It would be for the LEA and ultimately the courts to decide upon action in an individual case in the light of all the circumstances.
Lord Mellish: My Lords, is this not one of the barmy councils which barred a number of newspapers from being placed in libraries and yet still allowed Gay-News to be placed there? I do not know what criterion gave them that authority. The Government said that they were writing to those authorities—and I believe that this is one of them—about the barring of such newspapers. What has happened to all that correspon-dence and what is happening now?
The Earl of Swinton: My Lords, I do not have the least idea.
Lord Ritchie of Dundee: My Lords, does the Minister agree that further discussion of this question is a waste of time until we know the facts?
The Earl of Swinton: My Lords, I am very grateful to the noble Lord. I think that that is what I said in my original Answer.
Lord Mackie of Benshie: My Lords, can the noble Earl say whether this is a Conservative council?
The Earl of Swinton: My Lords, I do not think so.
The Lord Bishop of Sheffield: My Lords, does the noble Earl agree that matters of this nature, which impinge in many ways on questions of morality and which are of general public concern, highlight the wisdom of local education authorities having co-opted representatives from the Churches and other concerned bodies?
The Earl of Swinton: My Lords, I think that I should have to think about that.

Health Education
2.46 p.m.
Baroness Lane-Fox: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will make a statement on Her Majesty's inspectors' guidance to schools on health education and related matters.
The Earl of Swinton: My Lords, the Government welcomes the recent publication of the HMI discussion document Health Education from 5 to 16 as a valuable contribution to the development of good

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practice in this field. The document encourages schools and teachers to give due importance to health education. Young people need to be given the knowledge and skills needed to make responsible choices.
Baroness Lane-Fox: My Lords, I thank my noble friend the Minister for that helpful reply. Do the Government have plans to co-ordinate health education programmes in schools?
The Earl of Swinton: My Lords, the Government have encouraged LEAs and schools, through the White Paper Better Schools and the provisions pf the current Education Bill, to think carefully about their curricular aims and policies in all areas. That should help to avoid any discontinuity or repetition. The particular need for effective health education co-ordination is one of the main messages of this discussion document. It is one which the Government hope will receive due consideration at local level where responsibility rests for the detailed organisation and content of the curriculum.
Baroness Masham of Ilton: My Lords, may I ask my noble kinsman whether he is aware that there is great interest throughout the country in the prevention of ill-health? What plans do the Government have for instructing teachers in teacher training colleges on how to teach children that important subject?
The Earl of Swinton: My Lords, a range of relevant training opportunities exist for serving teachers at national and local level. They may not always be labelled "health education", but they deal with health-related issues within the broader context of personal, social, educational and pastoral care. The proposed new arrangements for the planning and funding of in-service training will encourage LEAs to plan training for teachers in general more systematically.
Baroness Fisher of Rednal: My Lords, will the noble Earl bear in mind in regard to health education for girls that there is a need to ensure that the vaccine to prevent German measles is given, and will he also bear in mind the need to extend the rubella campaign, so that children are not born blind and deaf?
The Earl of Swinton: My Lords, that is an important point. I am very grateful to the noble Baroness for raising it.
Lord Ritchie of Dundee: My Lords, do the Government have any plans to implement the recommendations in the HMI report that the sale of junk foods on school premises should be prohibited?
The Earl of Swinton: My Lords, we have no plans at present to issue a policy statement on health education, although I do not rule out the possibility of doing so at some future time should that seem appropriate. We shall watch with interest the education service response to the HMI discussion paper. We have indicated our intention shortly to issue a draft circular on the issues associated with sex education in schools. If any noble Lords feel strongly
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about anything, HMIs would be grateful to hear their response to this discussion paper and would welcome any comments.
Baroness Lane-Fox: My Lords, can my noble friend the Minister say whether there are any plans to extend the concern about health education to schools by involving parents in the school programmes?
The Earl of Swinton: My Lords, we have announed our intention to amend regulations to require schools to publish details of their health education provision. This makes clear the Government's expectation that all schools will offer health education and will ensure that parents are fully informed about the provision offered.

Voluntary Organisations in London: Funding
2.50 p.m.
Baroness Ewart-Biggs: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many voluntary organisations failed to receive replace-ment funding following the abolition of the GLC and how many have been forced to close as a result.
Lord Skelmersdale: My Lords, local authorities and voluntary organisations are under no obligation to report decisions on grants to Her Majesty's Government. I cannot therefore give precise figures. However, out of an estimated 2,500 groups funded by the Greater London Council, the London Voluntary Service Council has estimated that 44 organisations or projects have ceased in the Greater London area.
Baroness Ewart-Biggs: My Lords, I am grateful to the noble Lord for that Answer. Would he not agree, however, that a serious number of organisations have ceased to give their services to the most vulnerable sections of the community in London? Is he aware that an even greater number of voluntary organisations are struggling to exist and are doubtful about their future funding? In view of the fact that the Minister stated in this House in May 1985 that a trust would be set up endowed with the proceeds of the sale of GLC assets, will the noble Lord say how much has been collected from the sale of those assets, how much will be put into the trust and when the voluntary organisations will be able to claim grants from that trust?
Lord Skelmersdale: My Lords, as I sought to indicate in my original Answer, decisions on grants to voluntary bodies have been passed from the GLC to the boroughs. It is they who must justify those decisions. I am sure that some boroughs have taken decisions that I might not have taken, and indeed vice versa. Obviously, I can do nothing about that. As for the general scheme that has come to be known as the Richmond Scheme, I cannot fail to observe that there is no overall political control of that scheme and that the Alliance appears to be voting with the Labour party in this matter.

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As regards the Trust for London, it is intended that the Government will be in a position to direct funds from the London Residuary Body during this financial year. I am afraid that I am not yet in a position to say anything as regards the sum of the funds.
Baroness Ewart-Biggs: My Lords, is the noble Lord not able to tell the House what funds have accrued from the sale of GLC assets?
Lord Skelmersdale: My Lords, only a small amount of time has elapsed since the London Residuary Body was set up. Sales are proceeding. If I gave an answer today, I have no doubt that by next week the figure would be totally different.
Baroness Gardner of Parkes: My Lords, is it not a fact that funds remain available at this moment and that a meeting of the appeal committee of the London boroughs' grants sub-committee is to take place on 30th July? Is it not also a fact that with the Labour control that is being exercised, even under the chairmanship of an Alliance chairman, still very Left-wing bodies are being funded while some good causes are being refused? Will the noble Lord comment upon the grant that was refused to the Hotel and Catering Industry Training Board—a scheme that was agreed with the trade unions and the Manpower Services Commission, that was previously funded by the GLC under the top-up scheme and that was recommended by the officers for a grant of £33,600? Will he comment on the fact that this was refused, whereas others—and I shall name them—
Noble Lords: Reading!
Baroness Gardner of Parkes:—I have to look at this to be accurate, my Lords,—whereas others were passed? This is, I believe, very important.
Noble Lords: Too long!
Baroness Gardner of Parkes: My Lords, I should like, then, to come back on a second question. I was going to ask why such things were refused when the Lesbian Line and the Black Lesbian Gay Group are still being given their grant.
Lord Skelmersdale: My Lords, with the greatest respect to my noble friend, I do not think that I can do better than refer her to the answer I gave to the supplementary question of the noble Baroness opposite. However, all these things will become much clearer. I was aware of the appeals meeting. I assume that this means (although I do not actually know) that there is still some money for future donations. I understand that the London Voluntary Service Council is shortly to publish some research on this very subject. This is perhaps an occasion when an earlier supplementary from the noble Lord, Lord Ritchie of Dundee, might be borne in mind.
Lord Graham of Edmonton: My Lords, does the noble Lord not recall that when these matters were before the House the Minister expressed every confidence that the bodies that deserved to be
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supported would be supported in the future? Reference has been made, apparently disparagingly, to Left-wing councils or Left-wing causes being detrimental. Should not the Minister know what is going on and be aware, in particular, that, if money is short, this means inevitably that councils will have to pick up the tab?
Can the Minister say what is the effect of the taper in these matters? Is it not a fact that the taper means that, the greater the shortfall, the greater the likelihood that the local authority will have to pay double—an increase of 50 per cent. and not 25 per cent. of the shortfall? Does the noble Lord not recognise that the House expects from him greater knowledge of what is going on?
Lord Skelmersdale: My Lords, I can tell the noble Lord that the taper does not make the slightest bit of difference for the simple reason that the precept, as stated during discussion of the Bill in this House and in another place, has been divided pro rata among the boroughs. As I said just now, although I am very interested to hear the views of the noble Lord, Lord Graham, and of my noble friend Lady Gardner of Parkes, the LVSC is shortly to publish some research on the subject. We shall then all be in a very much better position to make up our minds.
Lord Avebury: My Lords, is the noble Lord aware that in making grants to voluntary organisations for the purpose of small computer systems the GLC insisted that in every case they should buy IBM PCs, XTs and ATs, instead of compatibles that would have been available at 50 or 60 per cent. of the cost? Can the Minister say what body should be approached by a voluntary organisation which has a shortfall of funds, having received a grant from the GLC to buy IBM kit and wanting to take the sensible decision of buying some compatibles and keeping the money for something else?
Lord Skelmersdale: No, my Lords, I must confess that I was not aware of the GLC's policy on computers vis-à-vis the voluntary bodies to which the noble Lord, Lord Avebury, has just referred. The correct avenue, in the case of a one-borough voluntary service, is the borough. If it spans more than one borough it is, of course, the Richmond Scheme.
Baroness David: My Lords, will the Minister urge his department to implement at once the Widdicombe recommendation published in a report recently that the 2p limit on Section 137 should be raised because the boroughs in the area of the old GLC and the districts in the area of the "met" counties are getting only half what they got under Section 137?
Lord Skelmersdale: No, my Lords, I do not think that I would, for the simple reason that the Widdicombe inquiry was a very comprehensive look at the financing arrangements of the whole of local government. I do not believe that particular bits of it which appeal to particular parties or individuals should be, as it were, plucked like plums out of a Christmas pudding.
Lord Taylor of Blackburn: My Lords, may I ask the noble Lord what progress has been made on the sale of County Hall? When the sale does take place, will the proceeds go into this fund?
Lord Skelmersdale: My Lords, I do not think that that is relevant to this Question.
Baroness Ewart-Biggs: My Lords, may I press the Minister once more and ask this question? Will he not accept that voluntary organisations have to have some idea about their future planning? Although it takes a little time to get this organised, more and more of them will have to close their doors unless something is known of the future. Will the noble Lord give an assurance that he will do his best to ensure that the money which should revert to the London boroughs following the Law Lords' ruling in April on the forward funding is returned to them by the London Residuary Body as soon as possible?
Lord Skelmersdale: My Lords, in my limited experience of these matters both as an ex-small businessman, and an ex-chairman of a voluntary body, I know that the two groups are equally paranoid on the subject of future funding. There is nothing new in this. On the case to which the noble Baroness refers I know perfectly well that I am not in a position to give that kind of commitment this afternoon.

Business
3.2 p.m.
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Financial Services Bill will be adjourned for a period at approximately 7 p.m., and that during this adjournment the Apple and Pear Development Council Order 1986, the Road Races (Northern Ireland) Order 1986 and the Criminal Justice (Northen Ireland) Order 1986 will be taken.

Lockington Rail Accident
3.3 p.m.
The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness): My Lords, with the leave of the House, I shall now make a Statement on the Lockington rail accident. The Statement is as follows:
A serious accident happened shortly after 10 a.m. on Saturday, 26th July, at an unmanned automatic open level crossing at Lockington about four miles north of Beverley, Humberside. The 09.33 Bridlington to Hull passenger train, a 4-coach diesel multiple-unit, struck a van on the crossing and all four coaches became derailed. I deeply regret that eight passengers and one of the occupants of the van were killed or died of their injuries. A total of 51 people were injured, 10 of them seriously. My right honourable friend, the Secretary of State for Transport, has expressed his sorrow at this tragic accident, and his sympathy to the relatives of those killed and to the injured. I am sure that your Lordships will wish to join me in echoing
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those sentiments. The House will also join me in paying tribute to the work of the emergency services.
My right honourable friend has announced that there will be a full public inquiry into the accident and the report will be published. Until the inquiry has been completed, I believe that it would be wrong to speculate further about the possible cause of this accident.
I have to make a general statement about this type of level crossing. Automatic crossings are generally much safer than manned crossings. This particular type was recommended by an expert working party in 1978. But there have been two previous accidents causing fatalities on this type of crossing in the last two months. The chief inspecting officer of railways has told my right honourable friend that he will not recommend approval of further automatic open crossings pending a re-examination of their safety record.
My Lords, that concludes the Statement.
Lord Underhill: My Lords, the House will recognise the need for this Statement to be made, and will appreciate the fact that the noble Earl has given the Statement. I am sure the whole House will echo the Minister's expressions of sympathy to the relatives of those who have died and to the large number who have suffered injury, and will wish to give encouragement to those who are still injured and in hospital. The seriousness of the figures show the importance of consideration of this item. I am also pleased that the Statement pays tribute to the work of the emergency services. We have come to expect high service from the rescue services—rail, police and the fire service—and it would appear that on this occasion they have come up to all our expectations.
I fully agree with the Minister that it is too early for speculations and conjectures to be made. However, I hope that the inquiry which is to be held will take into consideration what I understand is very strong local opinion. I understand that there is strong local opinion that to make this crossing an unmanned crossing was a condition for continuing the rail service which was regarded as so important to the area. I understand that all local opinion was opposed to this becoming an unmanned crossing. I am also pleased with the general Statement that there is to be a thorough inquiry into this accident. We have come to expect rail accident inquiries to be of a very high standard, and I am certain that this will be so on this occasion. It is open to question whether or not what is said in the general Statement is correct— that,
"automatic crossings are generally much safer than manned crossings".
We know that from an economic point of view it is of great benefit to British Rail, saving some £11 million a year in wages. But the general Statement refers to,
"two previous accidents causing fatalities on this type of crossing in the last two months".
Can I ask the Minister whether inquiries have been held, and what recommendations have arisen from those inquiries? If the inquiries have not yet been held, are they still taking place, or will they take place?

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I am also pleased to note that the Statement concludes that the chief inspecting officer of railways has told the Secretary of State that,
"he will not recommend approval of further automatic open crossings pending a re-examination of their safety record".
When a previous serious accident took place—I believe in Staffordshire—certain changes were recommended. Were those changes put into effect? Have those changes any bearing at all on this recent tragic accident?
When the Statement refers to "open crossings", does that mean that there were only warning bells and lights and no type of barrier whatever? I hope that the inquiry will go into this aspect. If there were no barriers of any type, what will be the future policy on crossings without barriers?
We shall also hope that the inquiry will look into the question of why in this case there was derailment of coaches. Was it due to the make up of the unit, as has been speculated in some areas, with the question of lighter coaches at the front? We shall also hope that the inquiry will look into the question of the type of warning signs on approaching crossings of this character. Is there a general policy regarding having warning flashing lights ahead of crossings? Until the inquiry is held we shall not have the answers to those questions, but we shall look forward to recommen-dations, not simply as to the cause of the accident, but for the future.
Lord Harris of Greenwich: My Lords, we should like to associate ourselves with what has been said about the admirable work carried out by the emergency services, by members of the railway staff, by the fire service and the police.
I should like to ask the noble Earl two questions. The first is in relation to the last sentence of the Statement that he made concerning the position of the chief inspecting officer of railways. The Statement said that,
"he will not recommend approval of further automatic open crossings pending a re-examination of their safety record".
May I ask the noble Earl whether his department is in discussion with British Rail about those cases where such approval has been given, and where it is likely that there will be a change over to the automatic system over the next 12 months or so. Will he agree that it would be sensible for British Rail to stop any conversion process until this inquiry has published its report?
The second question is in relation to the suggestion that there were very heavy casualties because the light passenger coach was at the front of this train, and that a previous Department of Transport inquiry suggested that it is far safer for the heavy power unit to be at the front, pulling the train rather than pushing it. Will the noble Earl institute urgent discussions with British Rail about their practice in this matter until the report of the inquiry is published?
The Earl of Caithness: My Lords, the noble Lord, Lord Underhill, raised a number of points and hoped that they would be taken into account in the inquiry. I assure him that I shall pass them on to my right
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honourable friend the Minister of State responsible for railways. As regards the two previous accidents this year, I point out that there were no inquiries because the cause of the accidents was clear and therefore there was no need for an inquiry to take place.
Turning to the remarks of the noble Lord. Lord Harris of Greenwich, concerning crossings for which approval has been given but in respect of which conversion has not been implemented, it will be up to British Rail to decide what to do next. However, I have no doubt that they will have noted what has been said today in this Chamber by the noble Lord and myself. On the noble Lord's second point concerning the light passenger coach at the front of the train, it would be entirely inappropriate for me to comment on that aspect at this stage.
Lord Mowbray and Stourton: My Lords, I should like to ask my noble friend whether the French railway system—which is generally acknowledged to be probably the finest in Europe—ever has these flashing lights without any form of barrier being used? Is it not a fact that motorists are possibly so accustomed to flashing amber lights on motorways which in the end turn out to mean nothing that when they just see flashing lights, even though they be red, without a barrier, they may not have the desired effect?
The Earl of Caithness: My Lords, one would of course advise all motorists to take note of flashing lights, particularly when they are red flashing lights at an automatic level crossing. I do not know about the French system; but I know that in preparing the specialist report on this matter in 1978 evidence was taken from European countries, and visits were made to the Netherlands, France, West Germany and Switzerland.
Lord Tordoff: My Lords, it is still not clear—and I wonder whether the Minister will answer this question—whether there were any physical barriers at this crossing, and whether, if there were barriers, they were full or half barriers. In relation to the general statement about automatic crossings, does the Minister have any figures on whether the level of accidents at ungated or half-gated crossings diverges from the average figure?
The Earl of Caithness: My Lords, I do not know the answer to the noble Lord's second point; but I shall write to him. As regards the noble Lord's first point, the crossing was an automatic open level crossing, and therefore there were no half barriers or full barriers.
Lord Monson: My Lords, further to the second point made by the noble Lord, Lord Harris of Greenwich, will not the Minister agree that there was another fatal accident in Scotland some months ago in which the front carriages of the train were derailed but the engine was at the rear rather than at the front. Is not that an inherently dangerous practice at speeds of more than 35 or 40 miles per hour, and should the practice not therefore be banned?
The Earl of Caithness: My Lords, I recall the accident and refer the noble Lord to the report of it.
Lord Molloy: My Lords, in so far as this was an automated crossing and the inquiry may discover something that went wrong, would it be possible to ask British Rail to make sure that all other automatic crossings throughout the country are immediately examined rather than simply waiting for an inquiry to tell us what went wrong?
The Earl of Caithness: My Lords, as I hope the noble Lord will be aware, British Rail check their automatic crossings on a very regular basis.
Lord Elwyn-Jones: My Lords, were the recommendations which followed the Hixon inquiry into the railway crossing accident in Staffordshire, to which my noble friend referred, carried out? To my recollection, having taken part in that inquiry, it was a similar type of crossing—an unmanned crossing—and a number of recommendations were made. It may well be that they were carried out. Having probed the question further, it may be convenient for a moment to pass before the noble Earl receives the answer which may be of some interest, if not of importance, to the House!
The Earl of Caithness: My Lords, perhaps I may write to the noble and learned Lord on that point and put a copy of my reply in the Library.
Lord Elwyn-Jones: My Lords, if it is of any assistance to the noble Earl, I think that it was at the time when I had the pleasure of holding the office of Attorney-General.
3.15 p.m.
Baroness Masham of Ilton: My Lords, as I come from Yorkshire, I should like to ask whether the Minister is aware that there are now very many concerned people? We are approaching the height of the holiday season. What advice can be given to drivers of cars who are frightened about crossing at these open crossings? How many open crossings are there in this country?
The Earl of Caithness: My Lords, there are 42 crossings which are similar to that at Lockington. As regards what advice one can give to motorists, I think that the answer is to watch the lights extremely carefully, and if there are any lights that are flashing then motorists must stop and not try to beat the train. Similarly, with half barriers, they must not try and weave their way in between the barriers. Of course we are very concerned that motorists should not be alarmed about what can be a perfectly safe crossing if treated properly.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that I was a little puzzled by an answer which he gave to an earlier question when he said that a previous incident had not been inquired into because it was obvious what had happened? Surely somebody looked into it and there is some report somewhere, even though there was not a public inquiry? May we have a little further explanation as to why, if an incident happened, there was not an inquiry?
The Earl of Caithness: My Lords, I believe that there was no cause for a public inquiry. However, I believe that a report was naturally made of the incident.
Lord Cledwyn of Penrhos: My Lords, there will obviously be a good deal of public concern about this tragic accident. Is the noble Earl able to tell the House how many automatic open crossings there are in Britain at present? Will he further say how long the examination will take as opposed to the public inquiry? One supposes that will take quite a while.
The Earl of Caithness: My Lords, I can repeat to the noble Lord, Lord Cledwyn of Penrhos, that there are 42 crossings like that at Lockington. Concerning the inquiry into the safety of these types of barrier, we shall pursue that with the utmost haste and without further delay.

Financial Services Bill
3.17 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 67 [Interpretation]:
[Amendment No. 186 not moved.]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 187:
Page 49, line 37, leave out paragraph (b) and insert
("(b)) that the property in question is managed as a whole by or on behalf of the operator of the scheme.")
The noble Lord said: In moving Amendment No. 187. it may be for the convenience of the Committee if I also speak to Amendment No. 188. These two amendments have been brought forward in response to representations that certain elements of the definition of "collective investment scheme" required clarification and that the necessarily wide definition in Clause 67(1) goes rather too far.
The change of substance is in the second amendment which will exclude from the definition of "collective investment scheme" certain arrangements which consist of a series of discretionary investment management contracts on standard terms the manager of which buys and sells investments for more than one portfolio at the same time. This amendment is the one foreshadowed in the Chancellor's announcement last Thursday in the context of personal equity plans.
The common management arrangements which are excluded from the definition—and hence from the controls imposed by this chapter—are ones in which there is no pooling of the participants' interests but where the investor remains the owner of his investments and is entitled to withdraw them from the arrangement at any time.
I should emphasise that, perhaps contrary to the impression given in press reports over the past few days, we are not talking about conventional unit trust-type pooling schemes but about arrangements under which the investor owns particular investments which are. for convenience, managed for him along with the investments of other investors.
Although excluded from Chapter VII, these arrangements will not be removed from the scope of the Bill. This is because the exclusion relates only to securities and other investments under the Bill. Accordingly, a person operating such arrangements will be managing investments and thus will require to be authorised. His investment management activities will be subject to the conduct of business rules. I beg to move.
Lord Williams of Elvel: I shall wait to comment on this amendment until we come to the Question, Whether Clause 67 shall stand part?
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 188:
Page 50, line 3, at end insert—
(" () Arrangements are not a collective investment scheme if—

(a) the property to which the arrangements relate (other than cash awaiting investment) consists of investments falling within any of paragraphs I to 5, 6 (so far as relating to units in authorised unit trust schemes and recognised schemes) and 10 of Schedule 1 to this Act:

(b) each participant is the owner of a particular part of that property and entitled to withdraw it at any time; and

(c) the arrangements do not have the characteristics mentioned in paragraph (a) of subsection (3) above and have those mentioned in paragraph (b) of that subsection only because the parts of the property belonging to different participants are not bought and sold separately except where a person becomes or ceases to be a participant.").

On Question, amendment agreed to.
[Amendment No. 189 not moved.]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 190:
Page 50, line 10, at end insert—
("(bb)) arrangements where each of the participants is a body corporate in the same group as the operator.
(bbb) arrangements where—

(i) each of the participants is a bond fide employee or former employee (or the wife, husband, widow, widower, child or step-child under the age of eighteen of such an employee or former employee) of a body corporate in the same group as the operator; and

(ii) the property to which the arrangements relate consists of shares or debentures (as defined in paragraph 19(2) of Schedule 1 to this Act) in or of a member of that group;").

The noble Lord said: In moving Amendment No.190 perhaps I may also speak to Amendments Nos.191 and 192. I commend to the Committee these amendments, which modify the definition of a collective investment scheme, first, by excluding from its scope certain internal arrangements operated within groups of companies (including employee share schemes) and specifically excluding building societies and industrial and provident societies from the wide definition; and, secondly, by enlarging the scope of the
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definition of an open-ended investment company to include investment companies which in practice redeem their shares when requested to do so even though they offer no guarantees of redemption. I beg to move.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 191 and 192:
Page 50, line 33, leave out from ("body") to ("shall") in line 35 and insert ("incorporated under the law of. or of any part of. the United Kingdom relating to building societies or industrial and provident societies or registered under any such law relating to friendly societies, and no other body corporate other than an open-ended investment company;").
Page 51. line 9. after ("repurchased") insert (". or which (otherwise than under Chapter VII of Part V of the Companies Act 1985 or the corresponding Northern Ireland provision) are redeemed or repurchased from them,").
The noble Lord said: I beg to move Amendments Nos. 191 and 192, to which I have just spoken.
On Question, amendments agreed to.
On Question, Whether Clause 67, as amended, shall stand part of the Bill?
Lord Williams of Elvel: We have come to a part of the Bill which is of particular interest to the Committee, because whereas in previous parts of the Bill we may have been dealing with professional business, we are now dealing with investment schemes which are widely available to the general public. It is therefore important—indeed, more than ever important—that the provisions of the Bill should be right, and properly understood.
In the course of the Committee on this Bill we have tried to maintain a constructive opposition. I announced at the beginning of the Committee proceedings that we were not here to obstruct the Bill but that we were here to act in our position as a responsible Opposition to revise where necessary and to attempt to put into the Bill where we thought necessary provisions that would make the Bill a better Bill.
We have in front of us in the third Marshalled List—and I remind the Committee that we are in the third day of a four-day Committee—22 new government clauses. One of these clauses, I must tell the Government, was received by me—and, indeed, was tabled after the last day of Committee last Wednesday—when I came back from the weekend at 11 o'clock last night. Twenty-two new clauses constitute a major new Bill. If we have a Bill which starts off with 177 clauses, as this one did, and a number of schedules, and we then get 22 new clauses, that seems to me to be a major amendment of the Bill.
We in the Opposition have two difficulties. We have difficulties in resources and we have difficulties in time. We have difficulties in resources because in order to understand what the Government are getting at in these new clauses we have to consult elsewhere, we having no civil servants at our disposal; and difficulties in time in that through the usual channels we have agreed that we shall try hard to get this Bill through the Committee of your Lordships' House in four days. If we have to deal with 22 new clauses—and I leave aside the whole number of government amendments to

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clauses of which the noble Lord, Lord Lucas, has just moved two or three, or even six—it is difficult for us to respond in a constructive manner, performing our role as the Opposition in a revising Chamber, and it starts to look as though this Committee is being used as some sort of sausage machine.
The Government have simply put down new clauses, maybe as a result of commitments in another place and maybe as a result of commitments to people who have made representations or of discussions that have taken place. The only way that I think we can deal with this, as the Opposition, is for us to comment briefly on what the Government have put down but to reserve our position entirely when the Bill comes back on Report. I can think of no other way of handling this.
Baroness Seear: I should like to reinforce what the noble Lord, Lord Williams, has said. This is a complicated Bill which requires a great deal of study. The way in which the Government are handling it in putting down new clauses, let alone a great long list of amendments, makes it practically impossible for the Opposition to do their job properly. We protest that this is no way in which to put a major Bill through your Lordships' House.
Lord Denning: May I add a word from this Bench? It is most difficult to follow any Bill when you have no previous notice of it, but here, not only was there obscurity in the Bill itself as it originally stood but how are we to understand amendments which are only received an hour or two before the Committee sits to consider them? It is impossible to consider them or to make any constructive suggestion about them. But I equally understand that this is a most important Bill for the City of London, and that it is most important that it should get through without undue delay. Therefore, although I support the Bill itself I must make that protest meanwhile in the hope that the Bill can be better considered on Report.
Lord Williams of Elvel: I am most grateful for the interventions of the noble Baroness, Lady Seear, and the noble and learned Lord, Lord Denning. The noble and learned Lord is quite right. This is an important Bill, and it is important to the City of London. However, may I say to the noble and learned Lord—and I am sure he would agree with me—that it is vitally important that this Bill should be right. It is not a question of getting through any Bill: it is a question of getting through a Bill that is right.
Therefore, I would lay emphasis on what the noble and learned Lord has just said about the difficulty of the Committee being able to consider amendments and new clauses which come before us very late in the time of the Bill. After all, the Bill went through the whole process in another place; it was not guillotined. It went through Standing Committee and it went through Report and all the processes, and it has come through two days of our Committee. Yet we are still getting Government amendments and new clauses, and I have no doubt that we shall get some more.
However, let me pass on to Clause 67. As I said when I started, in the case of collective investment schemes—and here we are talking essentially about
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unit trusts and investment trusts—we are dealing with not just professional activities. We are dealing with instruments that will be sold, and sold in numbers and at great length, to the public at large. We must have some clear understanding of what exactly the Government intend in their legislation.
The Committee might think, since our discussion on I think Monday of last week on what constitutes an investment, that the definition of "investment" would be carried through to collective investment schemes. Indeed, it was the noble and learned Lord, Lord Denning, himself who opposed my amendment. I refer to Clause 1, and the definition of "investment." Perhaps I may read the provision:
"In this Act, unless the context otherwise requires, 'investment* means any asset, right or interest falling within any paragraph in Part I of Schedule 1 to this Act".
The noble and learned Lord, Lord Denning, rightly pointed out earlier that in many statutes there should be the provision "unless the context otherwise requires". Nevertheless when discussing "collective investment schemes" it is in my view reasonable to suppose that the investments about which we are talking should have the same definition as those which are contained for professionals in Schedule 1. This is not the case. Collective investment schemes deal with investments which are much wider than the investments defined in Schedule 1 to the Bill. In making that rather bald statement I must say that I have tried very hard to understand what this clause is about. If I come to any wrong conclusions, I apologise to the Committee and I am sure the Minister will correct me; but if I come to the wrong conclusions, then the popular understanding may well be wrong. We must not only have right legislation; it must be understood.
The definition of "investment" under "collective investment schemes" which is set out in Clause 67(1) is "property of any description". In the Notes on Clauses it specifically says that this goes much wider than the investments described in Schedule 1. "Property of any description" means property of any kind. It means real property, and the noble Lord, Lord Ezra tried at an earlier stage of the Committee to introduce the idea of commercial buildings as being an investment under Schedule 1. As I understand it, commercial buildings are included in the definition of investment for collective investment schemes. I also understand that residential buildings are also so included. I also understand that works of art are so included—precious metals, jewellery, all sorts of things which are not Schedule 1 investments. I understand that because I personally know of a lot of collective investment schemes. I think it is quite right that the Bill should be drafted like this. The collective investment schemes I know of specialise in these particular items and assets and should properly be called investment schemes.
I start off with a problem: will the public at large understand that investment for the purposes of Clause 67 and Chapter VII of this Bill is different from the definition of investment as defined by Schedule 1? If that is not made entirely clear, in my view the public will be deceived.
There are two types of collective investment scheme defined in Clause 67. There is the unit trust. I think the

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Committee will be fairly familiar with what is constituted by a unit trust. It is now a well-known phenomenon. It is what I personally, using the language of financial institutions, would describe as an open-ended investment institution; but I shall come to that definition in a minute. I have no particular questions on the definition of a unit trust because it has been set up in previous statutes, and this is just bringing up to date what has been set out previously.
There is a second form of collective investment scheme, which is described as an open-ended investment company. Apparently in Clause 67(6):
"No body corporate, other than an open-ended investment company, and no body registered under the enactments relating to friendly societies, shall be regarded as constituting a collective investment scheme".
The noble Lord has moved an amendment refining some of this. I have two problems with the definition of "open-ended investment company", apart from the general problem that the use of the word "open-ended" is contrary to the normal use of "open-ended" in financial language. "Open-ended", in the 20 years that I have been around in this business, means a company or a trust with variable capital that may be extended or retracted. Indeed, in the United States they are called "mutual funds". These are regarded as open-ended. In the Republic of France, they are called sociétés investitoires á capitaux variables, which means literally variable capital. A company is essentially a closed-end operation. In other words, its capital is fixed. I accept that in subsection (7)(b):
"the rights of the participants are represented by shares in or securities of that body which … the participants are entitled to have redeemed or repurchased by, or out of funds provided by. that body".
Clearly here we have something resembling open-ended. We have a body which can redeem or repurchase out of its own funds, and hence its capital to that extent is open-ended.
Then we go on to subsection (7)(b)(ii) where it is stated,
"the body ensures [that those shares) can be sold by the participants on an investment exchange"
and we come to something which is not open-ended at all. All we are saying here is that an investment trust—because that is what we are talking about—shall ensure that its shares can be sold on the investment exchange. That is nothing to do with open-ended. What it means is that an investment trust—I shall ask the Minister in a moment why we cannot use the expression "investment trust", which has been quite carefully defined in the Income and Corporation Taxes Act 1970—will ensure (note the word) that its shares can be sold by participants.
I assume that by "ensure" the Minister and the Government mean that it is enough to ensure a listing on the appropriate stock exchange. But that does not satisfy the word "ensure", which as I understand it in the English language means "to make sure". If there is no market in the shares, the company cannot ensure that the shares can be sold. Perhaps "ensure" does not have that meaning, and no doubt the noble and learned Lord, Lord Denning, will instruct me on this that the courts would say "ensuring" means simply that shares are listed on the appropriate exchange and
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it does not matter whether there are any buyers or sellers.
Later in the subsection we come to an even more obscure definition, because not only must the investment company ensure that its shares can be sold by participants on an investment exchange, but it must ensure that those shares,
"can be sold … at a price related to the value of the property to which they relate".
Any share is sold at a price related to the property to which the share relates. Indeed, one might say that the shares of any industrial company are sold at a price in some way related to the value. It may be 10 per cent. of net asset value; it may be 100 per cent. of net asset value; it may be at 10 times earnings or 50 times earnings, or whatever valuation one likes to put on it. But if I may say so, it is wholly tautologous to say that at an investment exchange prices are fixed at a price, "related to the value of the property to which they relate"
All prices are fixed in some way, in some undefined relationship—the relationship is not defined—to the underlying property to which they relate.
I believe that that sentence is meaningless. I have further difficulties with this because this definition seems to me to embrace bodies corporate which are indeed not investment trusts, but have a price which is quoted on the basis of a percentage of the net asset value of the company. Most property companies fall into this category. Perhaps I may mention one such company. British Land plc ensures (if that is the correct definition) that its shares can be sold by participants on an investment exchange at a price related to the value of the properties to which they relate. British Land has a net asset value which it publishes regularly, and under that definition it would appear to me, if I am not misunderstanding what the Government have in mind, that British Land would become an open-ended investment company. I therefore have problems with that definition.
If I may turn backwards, I should like to consider subsection (5) and the exemptions. The exemptions under subsection (5)(a) start with,
"arrangements operated by a person otherwise than by way of business".
In other words, that subsection means that any arrangement and any scheme which is operated by any person, unless he is doing that as some sort of business, will be exempt. Up and down the land, as the Committee will know, there are things called "investment clubs". People get together, perhaps in the pub on a Sunday, and they say, "There are five of us here; we will pool our funds and have Lord Williams, who is an expert in this business, handle our investments on our behalf. As I understand it, if Lord Williams then says, "I am not taking any money for this; it is a purely gratuitous operation on behalf of this investment club", that investment club is exempt from the collective investment scheme provisions. If, on the other hand, Lord Williams is rather mean-minded and says, "I will manage your investments on your behalf but I will take a flat fee or perhaps 10 per cent. of the profits and, by the way, I happen to be an authorised person in the investment business in my own right", it appears, from what the Bill says, that that will become a collective investment scheme with all the problems that flow from the remainder of Chapter VII.

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I now wish to turn to subsection 5(b) which concerns,
"arrangements where each of the participants carries on a business other than investment business and enters into the arrangements for commercial purposes related to that business".
This is clearly designed, as the Notes on Clauses say, to avoid joint ventures coming into the collective investment scheme category. However, what happens if the participants are engaged in investment business perfectly legitimately? As the noble Lord, Lord Boardman, would point out to me if he were in his place, there are one or two, such as banks, who enter into arrangements for commercial purposes such as factoring. These are indeed commercial operations; nevertheless, as I read the Bill (although no doubt the noble Lord will tell me I am mistaken) the factoring joint venture would fall into the collective investment scheme definition.
Perhaps I may now turn to subsection 5(e). I understand from the Notes on Clauses that this subsection is drawn so as to exclude time-sharing arrangements. These are arrangements where people buy part of a property, wherever it may be, and from time to time they go there and from time to time other people go there. In the slightly Victorian words of the Bill as drafted, they,
"share in the use or enjoyment of a particular property".
There are other arrangements that fall into that category which are not necessarily time sharing. As a rather extreme example I would mention the business of marketing stallion shares, where stallions are marketed in the state of Kentucky and in Ireland and, indeed, more and more in this country, and shares are bought in stallions. A signal example of this was the late-lamented Shergar. Perhaps I may also mention the Forties and Claymore units sale which might fall into this category. I shall leave that question open because I am unsure of the answer.
I now wish to turn to subsection 5(f) where the arrangements specifically exclude American deposit receipts and indeed European deposit receipts which are mentioned in Schedule 1 as being investments. American deposit receipts are perfectly simple instruments. They are designed to represent shares in, say, British companies which can be traded in New York, which requires what are known as "heavier" shares than the London market. That is a straight-forward and transparent arrangement. The same is true of European deposit receipts which are issued for a different purpose. Europeans, for one reason or another, tend not to like to have their names on share certificates. They like to have bearer certificates because with bearer certificates nobody quite knows the identity of the ultimate owner. For a small honorarium I can arrange for your Lordships a collective investment scheme which invests in ADRs and EDRs which will, as I understand it, be exempt from the collective investment scheme arrangements under this fund. My honorarium will not be great because it is something any competent lawyer could devise. But we have in these definitions and in these exemptions things which, in my view, are not fully thought through.
I understand that the Government have to implement in our law the Directive on Undertakings
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for Collective Investment in Transferable Securities, known as UCITS. However, this does not have to come into force until the middle of 1989 and my suggestion to the Government is that they should take back the definition of what constitutes collective investment schemes under UCITS and bring forward something which your Lordships can understand and which I can understand and, more importantly, which the public at large can understand. I believe that the public at large will not be able to understand Clause 67, and it is for those reasons that I wish to oppose the Question that Clause 67 stand part of the Bill.
Lord Tryon: It would be a great help to the Committee and certainly to me if the Minister could, at a fairly early stage, tell us what an open-ended investment company is. Despite my experience in the City, I am completely lost. I do not believe that it can include an investment trust, because otherwise there are many other points, as the noble Lord, Lord Williams of Elvel, has pointed out, which do not add up to the rules governing an investment trust. Perhaps the Minister can answer that point.
Lord Lucas of Chilworth: May I, at the outset, apologise to the noble Lord, Lord Williams of Elvel, and to the Committee for the fact that some of the amendments that the Government tabled were tabled late last week. In fact, only four of those involved substantive change and all but one were tabled by Wednesday. The other one was tabled on Thursday.
I realise that it has been difficult not only for the official Opposition but also for other Members of your Lordships' Committee, including ourselves, to keep up with the changes. I wish to repeat that many of these changes were as a result of what I described the other evening to the noble Lord, Lord McIntosh of Haringey, as the open-door policy in that we, like the rest of the Committee, want to get this Bill as nearly right as is humanly possible using the revising facilities of your Lordships' House. I do not believe that there have been any amendments of substance that have been tabled at short notice. All of these amendments have come about as a result of consultations; these have been kept going over the last few months and have, at the end of the day, resulted in amendments being tabled.
I recognise straightaway that it is the wish of the noble Lord, Lord Williams of Elvel, who is speaking from the Opposition Front Bench on the Bill, to meet what I think is a good-hearted and certainly open-hearted desire to complete the Committee stage in four days. This has so far proved extremely difficult, and no doubt the next few hours today and the hours that are to follow tomorrow will prove just as difficult. Nevertheless, I am assured by the noble Lord opposite—and I hope that he will be reassured by my words—that there is good intent and good will on both sides so far as this Bill is concerned, and we must do the best we possibly can. I have no doubt that on Report there will be a number of matters that perhaps will have to be examined in greater depth, if not necessarily amended, and we shall have the opportunity, perhaps over the next few weeks, to give consideration as to whether some of these rather long and rather complicated new clauses will need to be amended further. I am rather hopeful that they will

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not have to be amended once there is an understanding.
I turn to the debate on clause stand part and some of the matters which the noble Lord, Lord Williams, has raised. This clause defines collective investment schemes which are the subject matter of this part of the Bill. The wide definition is certainly complex, but there are really three essential elements. first, there is a participation by persons in profits or income, secondly, the participants do not have day-to-day management control; and, thirdly, there is either pooling of contributions and of profits or income, or the operator of the scheme manages the property of the scheme as a whole.
This definition is very wide and it was designed so. It is necessary in order to include all of the schemes and all of the arrangements which have an element of pooling and collectivity. However, I think the definition is very clear because we have specifically and quite explicitly excluded from its scope all of those arrangements which we do not wish to regulate here, either because they are not strictly investment or because they are already subject to regulation. In addition, the definition has the great benefit of being flexible. The Clause 2 power to amend the definition of "investment" can be used to amend definitions in this clause.
Much of the argument that I advanced when we discussed Clause 1 of the Bill which sets out definitions of "investment" I am not going to repeat here, but I advance again. Unless we have some central core of what we mean by these things, there is no opportunity to add or delete as we go along.
There were a number of specific points that the noble Lord mentioned. I am not sure whether he mentioned them to test the water, so to speak, or whether he genuinely wanted to know, for example, why time sharing was excluded. It is excluded because essentially we do not believe that time sharing is an investment product. We think it would be wrong to regulate it as such.
Lord Williams of Elvel: I did not ask why time sharing is excluded. I understand perfectly why time sharing is excluded. I was not asking that question, although I might ask a supplementary question. If there are two properties in a time-sharing scheme, that would appear to come into a direct investment scheme, while if there were only one, that would appear to be excluded.
Lord Lucas of Chilworth: If the noble Lord would let me finish, perhaps I could complete the answer. The exemption for time-sharing arrangements will apply only if the predominant purpose of a scheme is the personal use or enjoyment of the property. If the rights in a time-sharing scheme are sold as an investment, they most certainly will have to be included in the Bill.
The noble Lord also asked a number of other questions—
Lord Tordoff: I am sorry to interrupt the noble Lord. I wonder whether he can explain what he meant by his last words on time sharing. To me they did not seem to make too much sense.
Lord Lucas of Chilworth: What I said was that the exemption for time sharing will apply only if the predominant purpose of a scheme is personal use or the enjoyment of the property, whether it be a house, a boat, a flat, or whatever it may be. If the rights in the time-sharing arrangement are sold as an investment, they will be included in the Bill. It is quite simple. It depends upon what product is sold. If the time-sharing scheme is sold as an investment, it is included in the Bill. If the scheme is sold as the right to enjoy for a week or a fortnight the boat in the Med or the cabin in the Cotswolds, it will be excluded. If the noble Lord, Lord McIntosh, wishes to address a question to me on that, I shall be quite happy to give way—presumably he does not.
The noble Lord, Lord Williams, asked me about investment clubs. If a fee is taken for the running of such a club and that fee is taken by way of business, the scheme will be included. The effect will be that membership of the club may not be offered to the public unless it becomes an authorised unit trust scheme.
The noble Lord asked about open-ended investment companies and the redemption of units at a price related to the value of the property. He questioned the words,
"at a price related to the value of the property".
The relation of the unit price to the value of the property will be laid down in regulations to be laid under Clause 73. These will set out the charges which may be made by the manager. The relationship will thus be fixed, as the relationship has been fixed for a great number of years—I think somewhere around 40 years—by the Board of Trade price formula.
An open-ended company, as the noble Lord. Lord Williams, indicated, is just like a unit trust company except that it is a company and issues and redeems shares in itself. Hence, it is a variable capital company—which is exactly what he said; it is so, rather than consisting of units. The principle is the same as unit trusts, although the legal form is rather different.
There have been a number of schemes based elsewhere in the European Community which are covered by the directive and which are open-ended companies such as have been described. They have to be included. The property is shares. The idea is that a scheme, instead of redeeming, may deal in its own shares on the Stock Exchange to keep the price in line with asset values.
Here, I should perhaps say something about the unitisation of properties, which we touched upon in our deliberations some little while ago. I think that it is right that I should refer to a commitment given in another place by my honourable and learned friend the Minister to consider whether we should amend the Bill to enable a particular type of unitised scheme to be promoted to the general public. I refer here to proposals which have been developed by the Royal Institute of Chartered Surveyors and Mercantile House. We propose, subject to further consultation with those concerned, to bring forward amendments at a later stage, and we envisage that these will exclude this type of scheme from Chapter VII and regulated by other means.

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Lastly, the noble Lord, Lord Williams, referred again to subsection (5)(a), which deals with arrangements operated by a person otherwise than by way of business. I think we have fully debated what we mean by the phrase "by way of business". I seem to recall that the noble Lord spoke about his dealing in regard to the Paris Racing Club. I think the noble Lord in fact referred to the Paris Racing Club and that it was within the context of whether, if he sold shares, he would be in business. I do not think I can add any further explanation to what I said at that time. The noble Lord referred to a number of other points in this connection, but I do not propose to take them one by one because I think that then the Committee would be here until long after teatime, and we have a long way to go. I think it might be better if I wrote to him at some length and explained exactly what is meant. I hope that will help the Committee to believe that the clause is a necessary part of the Bill and should stand part of it.
4 p.m.
Baroness Seear: I am very sorry to come back to this question of the time share, because we are not trying to be difficult but it is something about which there is great development. Some noble Lords will know—because I tell them boringly often—that I have a cottage which I sometimes let. Suppose I sell half of that cottage, say, to my noble friend Lord Tordoff (which I have no intention of doing) and when I am not there I let. and when he is not there he lets. Is that a collective investment? I am genuinely asking a question: I am not selling it to my noble friend.
Lord Lucas of Chilworth: If the noble Baroness does this by way of business, it most certainly is. On the other hand, she may do it out of the goodness of her heart. The noble Baroness may be in the business of doing this regularly—we discussed all this very much earlier, when we debated the phrase "by way of business"—but if it is a one-off or an occasional occurrence it cannot be considered to be "by way of business". In other words, if the noble Baroness owns a number of cottages and does this regularly, engaging in a business of letting to her friends who can then enjoy a variety of benefits, then it is a business and then it is regulated by this Bill.
Lord Mackie of Benshie: Does that mean that everyone who has a cottage and lets it occasionally is in business?
Lord Lucas of Chilworth: No, it does not.
Lord Tryon: Before the noble Lord sits down, may I ask a question? Does a United Kingdom-registered quoted investment trust company come within the scope of this clause, or not? The noble Lord, Lord Williams, suggested that it might well do so. If that is so. then I do not think half the rest of the clause makes any sense at all, because different laws would apply to such companies. Could we have an answer to that, please?
Lord Lucas of Chilworth: I am sorry I did not give an answer to the noble Lord, Lord Tryon. No, they are not included.
The Duke of Atholl: May I point out to my noble friend that an extra "by" has crept into subsection (5)(a)? It reads as printed:
"arrangements operated by a person otherwise than by by way of business;".
It seems to me rather "over-byed".
Lord Lucas of Chilworth: Perhaps it is a longstop.
Lord Williams of Elvel: Before replying to the noble Lord, may I ask him about something he said? I understood him to say that the relationship between the share price for an open-ended investment company and the value of the property to which those shares relate would be fixed by order. Is my understanding right, or did I mishear the noble Lord?
Lord Lucas of Chilworth: The noble Lord's understanding is quite correct, under regulations in Clause 73.
Lord Williams of Elvel: I am grateful for that piece of information, and also for the information the noble Lord gave to the noble Lord, Lord Tryon, that investment trusts are not included in open-ended investment companies, because I cannot for the life of me see what open-ended companies are if they are not investment trusts.
I do not really believe that the Government have got this right. I believe there is plenty of time before Report stage and before the UCITS directive has to be put into effect for collective investment schemes to be properly defined in a manner which will be understandable to our courts, understandable to your Lordships' Chamber and, above all, understandable to the people who are investing in them. Therefore, I continue to oppose the Question that Clause 67 stand part of the Bill.
4.5 p.m.
On Question, Whether Clause 67, as amended, shall stand part of the Bill?
Their Lordships divided: Contents, 98; Not-Contents, 71.

DIVISION NO.1

CONTENTS

Alport, L.

Cullen of Ashbourne, L.

Ampthill, L.

Dacre of Glanton, L.

Annan, L.

Davidson, V.

Atholl, D.

De Freyne, L.

Auckland, L.

Denham, L. [Teller.]

Bauer, L.

Derwent, L.

Beloff, L.

Dilhorne, V.

Belstead, L.

Drumalbyn, L.

Bessborough, E.

Ellenborough, L.

Birdwood, L.

Elles, B.

Boardman, L.

Elliot of Harwood, B.

Boyd-Carpenter, L.

Elliott of Morpeth, L.

Brabazon of Tara, L.

Elton, L.

Brougham and Vaux, L.

Fraser of Kilmorack, L.

Buckinghamshire, E.

Glanusk, L.

Butterworth, L.

Glenarthur, L.

Caithness, E.

Gray of Contin, L.

Campbell of Alloway, L.

Gridley, L.

Carnock, L.

Grimthorpe, L.

Colville of Culross, V.

Hailsham of Saint

Constantine of Stanmore, L.

Marylebone, L.

Cottesloe, L.

Halsbury, E.

577

Hanson, L.

Murton of Lindisfarne, L.

Harmar-Nicholls, L.

Newall, L.

Henderson of Brompton, L.

Northesk, E.

Hives, L.

Nugent of Guildford, L.

Holderness, L.

O'Brien of Lothbury, L.

Hooper, B.

Orr-Ewing, L.

Killearn, L.

Peyton of Yeovil, L.

Kinnoull, E.

Rankeillour, L.

Knollys, V.

Reay, L.

Lane-Fox, B.

Rodney, L.

Lauderdale, E.

Romney, E.

Layton, L.

St. Davids, V.

Limerick, E.

Sanderson of Bowden, L.

Lindsay, E.

Seebohm, L.

Long, V.

Sempill, Ly.

Lucas of Chilworth, L.

Stodart of Leaston, L.

Luke, L.

Strathspey, L.

Lyell, L.

Sudeley, L.

McFadzean, L.

Swinton, E. [Teller.]

Macleod of Borve, B.

Terrington, L.

Mancroft, L.

Trenchard, V.

Manton, L.

Vaux of Harrowden, L.

Margadale, L.

Vickers, B.

Maude of Stratford-upon-

Vivian, L.

Avon, L.

Whitelaw, V.

Merrivale, L.

Wise, L.

Milverton, L.

Wynford, L.

Mowbray and Stourton, L.

Young, B.

NOT-CONTENTS

Addington, L.

Kilmarnock, L.

Airedale, L.

Kinloss, Ly.

Ardwick, L.

Leatherland, L.

Aylestone, L.

Listowel, E.

Beswick, L.

Llewelyn-Davies of Hastoe, B.

Blyton, L.

Lloyd of Kilgerran, L.

Bottomley, L.

Longford, E.

Brockway, L.

McIntosh of Haringey, L.

Bruce of Donington, L.

Mackie of Benshie, L.

Caradon, L.

McNair, L.

Carmichael of Kelvingrove, L.

Manchester, D.

Chitnis, L.

Mishcon, L.

Cledwyn of Penrhos, L.

Molloy, L.

David, B. [Teller.]

Morton of Shuna, L.

Davies of Penrhys, L.

Nicol, B.

Dean of Beswick, L.

Ponsonby of Shulbrede, L.

Denington, B.

[Teller.]

Denning. L.

Rathcreedan, L.

Diamond, L.

Ritchie of Dundee, L.

Donaldson of Kingsbridge, L.

Seear, B.

Elwyn-Jones, L.

Shackleton, L.

Ewart-Biggs, B.

Shepherd, L.

Fisher of Rednal, B.

Silkin of Dulwich, L.

Fletcher, L.

Stedman, B.

Gallacher, L.

Stewart of Fulham, L.

Gladwyn, L.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Strabolgi, L.

Greenway, L.

Taylor of Blackburn, L.

Grey, E.

Taylor of Mansfield, L.

Hampton, L.

Tordoff, L.

Hanworth, V.

Tryon, L.

Harris of Greenwich, L.

Underhill, L.

Hayter, L.

Wallace of Coslany, L.

Ilchester, E.

Wells-Pestell, L.

Jenkins of Putney, L.

Wigoder, L.

John-Mackie, L.

Williams of Elvel, L.

Resolved in the affirmative, and Clause 67, as amended agreed to accordingly.
4.13 p.m.
Clauses 68 and 69 agreed to.
Clause 70 [Authorisation orders]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 193:
Page 53, line 27, leave out from ("misleading") to end of line 29.
The noble Lord said: I beg to move Amendment No. 193 standing in my name on the Marshalled List, and it may be for the convenience of the Committee if I speak to Amendments Nos. 194 and 195. We are dealing here with the authorisation orders for a collective investment scheme, and I refer your Lordships, first, to subsection (5) of Clause 70, where the Bill as drafted states:
"the purposes of the scheme must be reasonably capable of being successfully carried into effect".
I can see a number of problems here. The SIB, as I think it will be, who will be giving the authorisation on behalf of the Secretary of State—and I hope I have that right—will have to decide whether a collective investment scheme has purposes that are reasonably capable of being successfully carried into effect.
There have been many collective schemes, the purposes of which, first, are simply to make money—and I do not know whether the SIB will be qualified to pronounce on that—and which, secondly, may change from time to time. They may start off by saying, "We are in the business of natural resources", and then, as we have seen recently on a number of occasions, "We have stopped being in the business of natural resources and have gone into some other business". I put it to your Lordships that if the SIB, at any given point of time, were asked to pronounce on whether a scheme was reasonably capable of being successfully carried into effect, this would be loading a burden on the SIB which I think it would find extremely difficult to carry.
If I may go on to Amendment No. 194, this, again, comes back to the question that the price should be,
"related to the net value of the property to which the units relate and determined in accordance with the scheme".
My amendment is to insert the word "equivalent" instead of the word "related", really as a probing amendment to find out what relation is intended by the Government. I think that the noble Lord the Minister may have given me half an answer in our last debate. I hope very much that he will give us a full answer to this now, because to say that something is related to something else does not mean any more than saying that the whisky bottles sold in Glasgow are related to the number of bishops in Jamaica. But that is not a cause and effect problem.
If I may go on to Amendment No. 195, line 33 on page 53 of the Bill as drafted reads:
"but a scheme shall be treated as complying with this subsection if it requires the manager to ensure that a participant is able to sell his units on an investment exchange at a price not significantly different from that mentioned in this subsection".
Again I come back to the word "ensure". What does that mean? And what do the words,
"not significantly different from that mentioned in this subsection",
mean? I shall be most grateful if the noble Lord can help us on this. I beg to move.
Lord Lucas of Chilworth: All these amendments relate to the criteria for the authorisation of unit trust schemes, and I regret that I shall have to resist all three; but perhaps the explanations might help the noble Lord, Lord Williams, to accept my suggestion.
The requirement in Clause 70(5) that,
"the purpose of the scheme must be reasonably capable of being successfully carried into effect",

579
will be judged by the Secretary of State, or indeed the designated agency—that is the specific point which the noble Lord raised—and it is there to ensure that a scheme which has no prospect of achieving its investment objectives is not authorised. This might be because the scheme intends to invest in a very special-ised market even though it is thought that that market does not exist. For example, and perhaps being a little frivolous, there is the widget industry. The fact that there are not widget companies to provide an adequate spread of investment risk might be a very good reason for that judgment to be made. At the same time, there has to be a judgment taking into account the requirements of the Clause 73 regulations.
On the noble Lord's second amendment, which he described as probing, the requirement that the redemption price must be related to the net value of the property rather than equivalent to it recognises that—and I think this is the point—in calculating this price the starting point is the net value of the fund and that there are then deductions before arriving at the final redemption price of units. These deductions take account of the dealing costs which are likely to be incurred because of the need to realise investments to meet the redemption request, which it is only fair should be met. by the person redeeming his units. Managers, as now, will not be completely free to decide the size of these deductions. The regulations to be made under Clause 73 will govern the way in which issue and redemption prices are calculated.
Clause 70(6) allows an alternative means of providing for redemption—indirectly on an investment exchange. This is by way of a paving provision, which reflects an alternative redemption method allowed by the UCITS (unit trust) Directive. Whether or not this approach to redemption will be allowed will again be determined by the regulations to be made under Clause 73. The proposed regulations will be the subject of a consultative document in the near future.
The noble Lord asked what we meant by the word "ensure". I rather thought that I had explained earlier that certain schemes may intervene on The Stock Exchange to maintain share prices instead of redemption. They will not be authorised unless there is a guarantee that the manager will act in such a way. That is a fairly reasonable example of what is meant by that description of "ensure".
Lord Williams of Elvel: I am most grateful to the noble Lord for his response. I now understand that we are dealing with organisations that can intervene with their own funds on the stock market to keep their shares up or down as the case may be. It is, if I may say so, a somewhat surprising concept beyond the stabilisation period which is normal in terms of new issues. Nevertheless, if that is what the noble Lord says, then so be it. I understand that we shall get a consultation document on the latter part of subsection (6) and that the consultation document will no doubt answer all my questions. I am a little concerned that we are writing into statute things that we will not know until the consultative document appears. But I understand that if you are going to have a statute you might as well write in the UCITS Directive and see
580
what it says afterwards. In the light of all that, and in the spirit of getting on with the Committee's business, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 194 and 195 not moved.]
Clause 70 agreed to.
Clause 71 [Revocation of authorization]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 196:
Page 54, line 14, at end insert ("or has contravened any prohibition or requirement imposed under this Act").
The noble Lord said: I spoke to Amendments Nos. 196, 197 and 198 when we were discussing Amendment No. 98. I beg to move.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 197 and 198:
Page 54, line 21, after ("rules") insert (", prohibitions and requirements").
Page 54, line 22, at end insert ("and any prohibition or requirement imposed by virtue of those rules.").
On Question, amendments agreed to.
Clause 71, as amended, agreed to.
Clause 72 agreed to.
On Question, Whether Clause 73 shall stand part of the Bill?
Lord Williams of Elvel: I have a simple question about Clause 73. Will the regulations that the Secretary of State or the designated agency makes stipulate the ownership of management companies of authorised unit trust schemes and the level which other operators in the investment business may hold?
Lord Lucas of Chilworth: The department will be publishing within the next two weeks or so a document inviting views on the scope and nature of the regulations governing authorised unit trust schemes which would be made under this clause. It will need to take into account the provisions of the UCITS Directive and the consultative document will also seek views on the various options available under the directive. A number of regulations will be covered in practice; but on that to which the noble Lord refers specifically, the answer is, no.
Lord Williams of Elvel:I am grateful to the noble Lord for his indication that a consultative document on yet another clause will be published. I hate to come back on this question, looking as I do at the noble Earl, Lord Limerick, who is a very distinguished figure in an institution which has a large holding in a management company of a unit trust scheme—but I do not wish to single out the noble Earl, there are other people involved. Indeed, there are other banks which have ownership in management companies of unit trusts.
I wonder whether in the consultative document the noble Lord will accept that the whole question of the relationship between management companies and the ownership of management companies—I speak of management companies of unit trust schemes—could be looked at.
Lord Lucas of Chilworth: There has been no indication given to us until the noble Lord mentioned it that this area should be looked at. I can only repeat that it still is not our intention so to do.
Lord Monson: I take it that we are discussing the Motion, That Clause 73 stand part of the Bill.
Noble Lords: Yes.
Lord Monson: Thank you. I think these things have gone rather faster than I expected. There seems to be one serious omission from the list of requirements contained in Clause 73. There is no obligation to inform the customer clearly how much he is paying for the services of unit trust managers. More often than not the front end loading, normally called the initial charge, of 5 per cent. or so and the annual management fee, which has crept up in recent years from 0.5 percent. or 0.75 percent. to 1 percent. or 1.5 per cent., is given in minuscule 3 point or 4 point type. It escapes the notice, I suspect, of many prospective purchasers of unit trusts. I wonder whether the noble Lord will consider at the next stage of the Bill introducing a requirement that these charges should be advertised in the same sized type face as the rest of the advertisement.
Lord Lucas of Chilworth:In answering specifically the noble Lord, Lord Monson, I recognise what he says. Matters of this kind will be subject to the conduct of rules, as, of course, will every other organisation.
Clause 73 agreed to.
On Question, Whether Clause 74 shall stand part of the Bill?
Lord Williams of Elvel: I have a very simple question. Clause 74(2) refers to the trustees giving notice to the Secretary of State of any proposal to replace the manager of the scheme. Would the trustees also be obliged to notify the Secretary of State if the existing manager of the scheme—the company managing the unit trust in question—were bought by somebody else—in other words, if there was a change of ownership or control?
Lord Lucas of Chilworth: I understand that that would be so.
Lord Williams of Elvel: I am most grateful to the noble Lord for his assurance.
Clause 74 agreed to.
Clause 75 [Restrictions on activities of manager]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 199:
Page 56, line 34, leave out paragraph (b).
The noble Lord said: The clause deals with the restrictions on the activities of a manager of a unit trust. In Clause 75(2)(b), the activities in which the manager shall not engage are specified as,
"activities for the purposes of or in connection with those mentioned in paragraph (a) above".
The problem that I have with Clause 75—and I hope that the noble Lord recognises that this is the major
582
thrust of a number of the amendments that I have put down—is the relationship between the managing company of the unit trust, the owners of that managing company, and the unit trust itself.
There are many unit trusts whose management companies are owned by organisations who do other than run unit trusts. I can mention in front of the noble Earl, Lord Limerick, Kleinwort Benson, which has a large holding in M&G. Fleming's has a large holding in S&P. Schroeder's runs its own unit trust organisation, and so do Baring's and a number of other organisations. The question that I put to the noble Lord is this: what restriction, if any, is placed on those organisations that own the management company of a unit trust, as opposed to the management company of a unit trust itself? How would any such restriction be enforced?
4.30 p.m.
Lord Lucas of Chilworth: If the Committee accepted this amendment, it would limit unnecessarily the activities that the manager of an authorised trust scheme could carry on. Clause 75 gives effect to a provision of the UCITS directive, which places limits on the activities that a manager of a unit trust may undertake. The aim of that provision is to try to ensure that all the activities of the manager are regulated in some way. That is a common provision in such directives, certainly in the absence of a wider, harmonised regulatory framework at Community level.
The directive allows incidental activities to be carried on by unit trust managers—for example, the operation of a share exchange scheme—but only where they are carried on in connection with or for the purpose of the manager's activities as a manager of a collective scheme. There is therefore no need to delete subsection (2)(b) as the noble Lord proposes.
I suspect that there is behind this amendment a suggestion that there may be concern about a conflict of interests arising when the investment business is undertaking dealing and management activities. In the first place, those are issues that will be regulated by conduct of business rules. Secondly, the deletion of subsection (2)(b) would not be an effective way of seeking to avoid such a conflict by primary legislation. It would just impose unnecessary restrictions on the unit trust manager. I believe that explanation fully answers the noble Lord's questions.
Lord Williams of Elvel: I am grateful to the noble Lord, although his was in a sense a half answer. The half of his answer that was right was that I am dealing with questions of conflicts of interest between people who own management companies of unit trust schemes and the unit trusts themselves. It must be fundamental—and as I understand it, this is in this legislation—that unit trusts shall be independent, self-standing bodies that will not be subject to pressures from people who might own the management company.
It so happens that many management companies of unit trusts are either owned outright or have large shareholdings owned by organisations that do other business, such as underwriting or the marketing of securities. At present, there is a gentleman's agreement

583
between those management companies and the shareholders that there will not be too much pressure placed on one side and not too much placed on the other. If the noble Lord is saying that such an agreement is the one that the Government favour, then that is an answer. I am not sure that it is a terribly satisfactory answer, but it is an answer.
The noble Lord is correct in saying that I am addressing myself to the problem of conflict of interests between people who set up to undertake one kind of business and who then manage funds on behalf of third parties, and who may use those funds in the future to help them with their other business. That is the point I am trying to put across. If the noble Lord will give me the other half of the answer, I shall be most grateful.
Lord Lucas of Chilworth: I suggest to the noble Lord that such a situation will be regulated by the conduct of business rules. That is where we rest on that aspect. There will be no more concrete a rule. We discussed that matter when the noble Lord, Lord O'Brien, participated in our debate when the noble Lord opposite spoke earlier to Clause 23. We felt then, and we still feel, that the conduct of business rules will provide a sufficiently robust barrier to ensure that the various interests are not in conflict.
Lord Williams of Elvel: I am most grateful to the noble Lord. We shall wait to see what the conduct of business rules actually state. If they are unsatisfactory then we shall have to return to this point in some manner or form. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 75 agreed to.
Clause 76 agreed to.
Clause 77 [Publication of scheme particulars]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 200:
Page 57, line 13, at end insert "(; or").
The noble Lord said: In speaking to Amendment No. 200, it may be for the convenience of the Committee if I speak also to Amendments Nos. 201, 202 and 203. The amendments all make minor adjustments to Clause 77, which requires the publication of scheme particulars—that is, a document giving information about an authorised or recognised collective investment scheme. The amendments reflect representations made by both the Stock Exchange and the Law Society, and they have mainly concerned Parts IV and V, which we shall be discussing later.
The fact that "scheme particulars" must be continuously available will make it unnecessary for the regulations to require a significant mistake to be corrected. The fact that the documents continue to be published and that there is liability for publishing untrue or misleading information—such as a significant mistake—will mean that in practice the publisher will be obliged to correct it without the regulations saying anything. The publisher will find himself liable if he does not.
Conversely, it seems reasonable that the publisher should be put to the trouble of changing the document to accommodate a new matter only when the new matter is significant. Finally, the amendment to Clause 79(3) is intended to clarify that, for example, the person who types the document should not be held liable for any untruths within it. The regulations will specify who is responsible for the scheme particulars. In practice, that is most likely to be the manager or the operator of the scheme. I beg to move.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 201 to 203:
Page 57, line 14, after ("a") insert "(significant").
Page 57, line 17, leave out from "(prepared") to end of line 20.
Page 57, line 23, leave out ("the preparation of).
On Question, amendments agreed to.
Clause 77, as amended, agreed to.
Clause 78 [Schemes constituted in other member Stares]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 204:
Page 58, leave out line 4 and insert ("that the protection offered to the investor does not").
The noble Lord said: It seems to us important that the public understand what is being offered under Clause 78. Even though a scheme is recognised by an official body in the United Kingdom, it does not offer the same protection that a recognised unit trust scheme in the United Kingdom offers. We believe that in the authorisation that is given, that information should be set out, so that those who purchase such schemes should be under no illusion about what they are purchasing. I beg to move.
Lord Lucas of Chilworth: The effect of this amendment would be directly contrary to our obligations under the UCITS directive which this clause seeks to implement. Under that directive a UCITS authorised in any member state in accordance with the directive is free to market its units in any of the other member states. We are not allowed to make a second judgment as to the protection which the schemes offers to investors. The only ground for refusing to allow a UCITS which wishes to market in the United Kingdom to do so is that the proposed method of marketing appears to contravene United Kingdom marketing laws.
Lord Williams of Elvel: I am grateful to the noble Lord for his explanation. I did not know what he has just told the Committee and I understand that, however unsatisfactory it may be, it probably has to be contained in our statute. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 205:
Page 58, line 34, after ("operator") insert ("or trustee").
The noble Lord said: This amendment is consequential on an amendment made in another

585
place to Clause 23. It makes clear that in accordance with the UCITS directive the rules made under Clause 45 apply only to activities which the trustee undertakes in relation to the marketing of the UCITS in the United Kingdom and matters incidental to such marketing. I beg to move.
On Question, amendment agreed to.
Clause 78, as amended, agreed to.
Clause 79 [Schemes authorised in designated countries or territories]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 206:
Page 59, line 20, leave out ("(other than those excluded by virtue of subsection (1)(b) above)") and insert ("of the class to be specified by the order").
The noble Lord said: This amendment is consequential on an amendment made in another place to Clause 79(1)(b). It provides a procedure whereby the Secretary of State may designate a country if he is satisfied that its law on the authorisation and supervision of collective investment schemes affords United Kingdom investors with protection at least equivalent to Chapter VII of the Bill. The designation may be for some types of schemes only. In essence that is what this amendment seeks to do. I beg to move.
On Question, amendment agreed to.
4.45 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 207:
Page 59, line 24, at end insert ("and any order under this section shall contain a statement to this effect").
The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 210. We are dealing here with schemes which are authorised in designated countries or territories, and these seem to be somewhat different from those schemes which are authorised under Clause 78.
On my previous amendment I asked for a health warning to be put on schemes authorised under Clause 78. I am now asking for a similar health warning to be put on schemes authorised under Clause 79 in the form of—if I may put it this way—a statement to the effect that this is what it is rather than what it might be or what the promoters might necessarily hold it out to be.
The noble Lord might say that this is contrary to the UCITS directive, in which case I shall have to withdraw, but it does not seem much to ask that a proper statement be made about what is being offered to the public. The same point is true in respect of Amendment No. 210. I beg to move.
Lord Lucas of Chilworth: I am grateful to the noble Lord, Lord Williams. The amendments draw attention fairly sharply to a change of some significance which the Bill makes. Although the noble Lord asks whether there can be a health warning I think that because of this significant change I should reply at some length so that there is no misunderstanding.
586
The Bill requires foreign schemes to be recognised if they are to be promoted to the general public. We do not feel that the two amendments to which the noble Lord, Lord Williams, has just spoken do anything to protect investors. The first amendment seems to have no real effect. An order made by the Secretary of State under the clause can be made only if he is satisfied that the law of the country concerned gives investors in the United Kingdom protection at least equivalent to that of authorised unit trust schemes. There is no need to state that fact in the order as the noble Lord proposes.
The second amendment makes the assumption that the protection afforded to investors in a scheme recognised under Clause 80 will be less than with Clause 79 schemes. Certainly the two clauses work differently, but it does not follow that there will be different standards. Clause 79 operates in relation to all schemes of a specified class authorised in a designated country, whereas Clause 80 requires schemes to apply individually to the agency for recognition. However, the standards expected of the two kinds of schemes will be the same. These standards will be those of authorised unit trust schemes. Under Clause 79 the designated country must have a system which affords protection equivalent to that standard. For Clause 80 schemes they must provide protection which is adequate by reference to that standard. It will be for the Secretary of State or the designated agency—who will set the standards for authorised schemes—to judge "adequacy" on a case-by-case basis.
I agree with the noble Lord, Lord Williams, that it is important for investors to know that the scheme in which they invest is a foreign one and that, although investors are adequately protected, the UK authorities have less control compared to a UK-based authorised scheme. We believe that this can be achieved much more effectively through the regulations which require schemes recognised under Clauses 79 and 80 to publish scheme particulars. In the case of such schemes I would expect there to be a requirement that the particulars disclose, in suitably prominent terms, that the scheme is a foreign one. Investors will therefore have the health warning that the noble Lord is looking for, and I hope that that will reasssure him.
Lord Williams of Elvel: I am grateful to the noble Lord for his very full response. I think the proper thing for me to do is to read in the Official Report what he said and, if necessary, come back on Report. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 208:
Page 59, line 39, leave out subsections (5) and (6).
The noble Lord said: In moving this amendment I shall speak to Amendment No. 211 and also Amendment No. 213—a new clause: "Refusal and revocation of recognition."
I realise that Amendment No. 213 is a fairly long new clause which may need studying. Perhaps I may briefly explain its purpose. The two amendments and

587
the consequent new clause correct an omission in Clause 79 as it stands now. The circumstances in which the Secretary of State or the designated agency may revoke the recognition of a scheme under the clause are not stated, and we feel that it is desirable that they should be. This is achieved by bringing together, in a single new clause, the provisions governing the refusal and revocation of recognition of schemes under both Clauses 79 and 80. I hope that the Committee will agree that that is a useful clarification of those provisions. I beg to move.
Lord Williams of Elvel: The noble Lord said that he was speaking also to Amendments Nos. 211 and 213. I accept that these are extremely complicated questions. This is a whole new clause. I should prefer to read the provisions quietly and come back to the matter with any amendments that we may have when we come to the Report stage in your Lordships' House.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 209:
Page 60, line 7, after ("operator") insert ("and, in the case of an operator who is not an authorised person, references to publishing particulars as references to causing them to be published")
The noble Lord said: If I may, I shall speak also to Amendment No. 212.
I commend these amendments to the Committee. They make it clear that the "scheme particulars" of recognised schemes should be published only by someone who is an authorised person. These documents will constitute "investment advertisements" and the general rule is that only authorised persons should issue advertisements. Where the operator of a recognised scheme is not authorised (as sometimes may be the case), he must arrange for the "scheme particulars" to be published by an authorised person. I beg to move.
On Question, amendment agreed to. Clause 79, as amended, agreed to.
Clause 80 [Other overseas schemes]:
[Amendment No. 210 not moved.]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 211:
Page 61, line 21, leave out from ("section") to end of line 23.
The noble Lord said: I spoke to this with Amendment No. 208 a few moments ago. I beg to move.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 212:
Page 61, line 35, at end insert ("and. in the case of an operator who is not an authorised person, references to publishing particulars as references to causing them to be published.")
On Question, amendment agreed to.
Clause 80, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 213:
After Clause 80, insert the following new clause:
("Refusal and revocation of recognition

.—(1) The Secretary of State may at any time direct that a scheme shall cease to be recognised by virtue of section 79 above or revoke an order under section 80 above if it appears to him—

(a)that is it undesirable in the interests of the participants or potential participants in the United Kingdom that the scheme should continue to be recognised;

(b) without prejudice to paragraph (a) above, that the operator or trustee of the scheme has contravened any provision of this Act or any rules or regulations made under it or. in purported compliance with any such provision, has furnished the Secretary of State with false, inaccurate or misleading information or has contravened any prohibition or requirement imposed under this Act; or

(c) in the case of an order under section 80 that any of the requirements for the making of the order are no longer satisfied.

(2) For the purposes of subsection (1)(a) above the Secretary of State may take into account any matter relating to the scheme, the operator or trustee, a director or controller of the operator or trustee or any person employed by or associated with the operator trustee in connection with the scheme.

(3) In the case of an operator or trustee who is a member of a recognised self-regulating organisation the rules, prohibitions and requirements referred to in subsection (l)(b) above include the rules of that organisation and any prohibition or requirements imposed by virtue of those rules.

(4) The Secretary of State may give such a direction or revoke such an order as is mentioned in subsection (1) above at the request of the operator or trustee of the scheme: but he may refuse to do so if he considers that any matter concerning the scheme should be investigated as preliminary to a decision on the question whether the direction would be given or the order revoked or that the direction of revocation would not be in the interests of the participants.

(5) Where the Secretary of State proposes—

(a) to notify the operator of a scheme under section 79(3) above; or

(b) to give such a direction or to refuse to make or to revoke such an order as is mentioned in subsection (1) above.

he shall give the operator written notice of his intention to do so, stating the reasons for which he proposes to act and giving particulars of the rights conferred by subsection (6) below.

(6) A person on whom a notice is served under subsection (5) above may. within twenty-one days of the date of service, make written representations to the Secretary of State and. if desired, oral representations to a person appointed for that purpose by the Secretary of State.

(7) The Secretary of State shall have regard to any representations made in accordance with subsection (6) above in determining whether to give the direction or revoke the order, as the case may be.

On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 214:
Insert the following new clause:
("Facilities and information in the United Kingdom.

(1) The Secretary of State may make regulations requiring operators of recognised schemes to maintain in the United Kingdom. or in such pan or parts of it as may be specified in the regulations, such facilities for such purposes as may be so specified.

(2) The Secretary of State may by notice in writing require the operator of any recognised scheme to include such explanatory information as is specified in the notice in any investment advertisement issued or caused to be issued by him in the United Kingdom in which the scheme is named.").

The noble Lord said: With this I shall speak also to Amendment No. 220.
These amendments introduce two new investor protection powers which the Secretary of State or the designated agency may exercise in relation to any recognised foreign scheme. The Secretary of State or the agency may, by regulations, require the operator of such a scheme to provide specified facilities in the United Kingdom; for example, to enable participants to redeem their units here without the trouble of becoming involved in dealing directly with the foreign offices of the operator of the scheme. In addition, the Secretary of State or the agency may direct the operator to add an appropriate note in investment advertisements, brochures or other advertising material where, for example, the name of the scheme is likely to be confusing to investors here.
The sanction for contravention of those requirements will be the same as that for contravention of any other provision of this chapter and could for schemes under Clauses 79 and 80 include revocation of their recognition. I beg to move.
Lord Williams of Elvel: I have to make the same response as I made before on new clauses. We shall have to study them and if we have any problems we shall have to move amendments on Report.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 215:
Insert ihe following new clause:
("Directions Powers of intervention.

.—(1) If it appears to the Secretary of State—

(a) that any of the requirements for the making of an order declaring a scheme to be an authorised unit trust scheme are no longer satisfied;

(b) that the exercise of the power conferred by this subsection is desirable in the interests of participants or potential participants in the scheme, or

(c) without prejudice to paragraph (b) above, that the manager or trustee of such a scheme has contravened any provision of this Act or any rules or regulations made under it or. in purported compliance with any such provision, has furnished the Secretary of State with false, inaccurate or misleading information or has contravened any prohibition or requirement imposed under this Act,

he may give a direction under subsection (2) below.

(2) A direction under this subsection may—

(a) require the manager of the scheme to cease the issue or redemption, or both the issue and redemption, of units under the scheme on date specified in the direction until such further date as is specified in that or another direction;

(b) require the manager and trustee of the scheme to wind it up by such date as is specified in the direction or, if no date is specified, as soon as practicable.

(3) The revocation of the order declaring an authorised unit trust scheme to be such a scheme shall not affect the operation of any direction under subsection (2) above which is then in force; and a direction may be given under that subsection in relation to a scheme in the case of which the order declaring it to be an authorised unit trust scheme has been revoked if a direction under that subsection was already in force at the time of revocation.

(4) Sections 55, 56 and 57 above shall have effect in relation to a contravention of a direction under subsection (2) above as they have effect in relation to any such contravention as is mentioned in those sections.

(5) If it appears to the Secretary of State—

(a) that the exercise of the power conferred by this subsection is desirable in the interests of participants or potential
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participants in a scheme recognised under section 7') or 80 above who are in the United Kingdom;

(b) without prejudice to paragraph (a) above, that the operator of such a scheme has contravened any provision of this Act or any rules or regulations made under it or. in purported compliance with any such provision, has furnished the Secretary of State with false, inaccurate or misleading information or has contravened any prohibition or requirement imposed under this Act; or

(c) that any of the requirements for the recognition of a scheme under section 80 above are no longer satisfied. he may direct that the scheme shall not be a recognised scheme for a specified period or until the occurrence of a specified event or until specified conditions are complied with.

(6) For the purposes of subsections (1)(b) and (5)(a) above the Secretary of State may take into account any matter relating to the scheme, the manager, operator or trustee, a director or controller of the manager, operator or trustee or any person employed by or associated with the manager, operator or trustee in connection with the scheme.

(7) In the case of a manager, operator or trustee who is a member of a recognised self-regulating organisation the rules, prohibitions and requirements referred to in subsections (l)(c) and (5)(b) above include the rules of that organisation and any prohibition or requirement imposed by virtue of those rules.

(8) The Secretary of State may, either of his own motion or on the application of the manager, trustee or operator of the scheme concerned withdraw or vary a direction given under this section if it appears to the Secretary of State that it is no longer necessary for the direction to take effect or continue in force or, as the case may be, that it should take effect or continue in force in a different form.").

The noble Lord said: In speaking to this amendment, I should like also to speak to Amendments Nos. 216, 217 and 230.
I recognise that we are talking about another new and very long clause. If I speak briefly to set the scene, that may enable members of the Committee to give the amendments the proper consideration which I suspect that they will want to at a different time.
These new clauses introduce new and important powers over collective investment schemes that are promoted to the general public. The amendments are being introduced in response to representations— notably by the Securities and Investments Board but also by the Law Society—that such powers of intervention are needed to ensure the effective regulation of authorised unit trust schemes.
The powers would enable the agency, which will be responsible for authorising schemes and will have power to withdraw that authorisation, to take appropriate action to protect participants' interests where necessary. In the case of authorised schemes, this could range from requiring the issue of units to be suspended to applying to the court for the removal and replacement of the manager and the trustee. It is important that the agency should have the flexibility to act in respect of schemes which it has authorised, and these powers will undoubtedly reinforce that ability, especially in cases where it does not have direct regulatory responsibility for the manager and the trustee.
The new clauses also introduce a similar, although more modest, power in relation to schemes recognised under Clauses 79 and 80. The fact that such schemes are based overseas rules out the Secretary of State or the designated agency having a wider range of powers. Nevertheless, we feel that the extra power to suspend recognition should be a useful addition to the armoury of regulator}' control. I beg to move.
Lord Williams of Elvel: I am most grateful to the noble Lord for introducing these new clauses, which are almost tantamount to a new Bill. We shall have to look at them carefully. Again, it is impossible for me to respond at this stage, as I am sure he recognises. If necessary, we shall move amendments on Report.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 216 and 217:
Insert the following new clause:
("Notice of directions

.—(1) The power to give a direction under section (Directions) above in relation to a scheme shall be exercisable by written notice served by the Secretary of State on the manager and trustee or. as the case may be, on the operator of the scheme and any such notice shall take effect on such date as is specified in the notice.

(2) If the Secretary of State refuses to withdraw or vary a direction on the application of the manager, trustee or operator of the scheme concerned he shall serve that person with a written notice of refusal.

(3) A notice giving a direction, or varying it otherwise than on the application of the manager, trustee or operator concerned, or refusing to withdraw or vary a direction on the application of such a person shall state the reasons for which the direction was given or varied or, as the case may be. why the application was refused.

(4) The Secretary of State may give public notice of a direction given by him under section (Directions) above and of any withdrawal or variation of such a direction; and any such notice may. if the Secretary of State thinks fit. include a statement of the reasons for which the direction was given, withdrawn or varied.").

Insert the following new clause:
("Applications to the court

.—(1) In any case in which the Secretary of State has power to give a direction under section (Directions) (2) above in relation to an authorised unit trust scheme or, by virtue of subsection (3) of that section, in relation to a scheme which has been such a scheme, he may apply to the court—

(a) for an order removing the manager or trustee, or both the manager and trustee, of the scheme and replacing either or both of them with a person or persons nominated by him and appearing to him to satisfy the requirements of section 70 above: or

(b) if it appears to the Secretary of State that no. or no suitable, person satisfying those requirements is available, for an order removing the manager or trustee, or both the manager and trustee, and appointing an authorised person to wind the scheme up.

(2) On an application under this section the court may make such order as it thinks fit; and the court may, on the application of the Secretary of State, rescind any such order as is mentioned in paragraph (b) of subsection (1) above and substitute such an order as is mentioned in paragraph (a) of that subsection.

(3) The Secretary of State shall give written notice of the making of an application under this section to the manager and trustee of the scheme concerned and take such steps as he considers appropriate for bringing the making of the application to the attention of the participants.

(4) The jurisdiction conferred by this section shall be exercisable by the High Court and Court of Session.

(5) Section 75 above shall not apply to a manager appointed by an order made on an application under subsection (1)(b) above.").

On Question, amendments agreed to.
Clause 81 [Investigations]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved the Amendment No. 218:
Page 63, line 4, at end insert—
("() Any such report shall be written or printed as the Secretary of State may direct and the Secretary of State may, if he thinks fit—

(a) furnish a copy, on request and on payment of the prescribed fee, to the manager, trustee or operator or any participant in a scheme under investigation or any other person whose conduct is referred to in the report; and

(b) cause the report to be published.").

The noble Lord said: This amendment introduces provisions concerning the publication of reports by inspectors appointed under Clause 81 to investigate the affairs of a collective investment scheme. It makes the same provision in this regard as the Companies Act 1985 does in relation to the reports of company inspectors. I beg to move.
5 p.m.
Lord Morton of Shuna: I have not checked with the Companies Act, but I should be surprised if it is in the same wording. It appears to us that this poor inspector is being directed to produce a written rather than a printed report. Does the Minister really mean that? The amendment provides:
"Any such report shall be written or printed as the Secretary of State may direct".
It sounds rather like doing lines at school.
It appears that the inspector has to furnish a copy before the report is published. Is that what is meant? The purpose of the amendment would seem to be suitable, but surely it could be worded in a happier way. What is the necessity for "written or printed"? Why can it not be published as the Secretary of State may direct?
Lord Lucas of Chilworth: The purpose is to make clear, first, in what circumstances the Secretary of State may publish a report made by an inspector who has investigated the affairs of a collective investment scheme or its manager, operator or the trustee. The effect is that the,
"Secretary of State may, if he thinks fit", publish the report or send copies on request and on payment of a fee to the manager, trustee, operator or any participant in a scheme, or any other person mentioned in the report.
Whether it should be written or printed is somewhat obscure. I do not have the 1985 Act at my elbow and so I would not challenge the noble Lord, Lord Morton of Shuna, on whether the words are different from those in that Act. The purpose is the same. If I were allowed a guess this afternoon, I would guess that the words "written or printed" meant that the report can be published in a variety of different ways. It is probably to take care of modern, technological advances such as print outs and things of that nature.
On Question, amendment agreed to.
Clause 81, as amended, agreed to.
Clause 82 [Contraventions]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 219:
Page 63, line 10, after ("or") insert ("certification by a").
The noble Lord said: I spoke to this amendment with Amendment No. 79. I beg to move.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 220:
Page 63, line 11, at end insert—
(" (2) Subsection (1) above applies also to any contravention by the operator of a recognised scheme of a requirement imposed under section (Futilities and information in the United Kingdom) (2) above."')
On Question, amendment agreed to.
Clause 82, as amended, agreed to.
Clause 83 [The Financial Services Tribunal]:
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 221:
Page 63, line 22, at end insert ("and such persons shall include persons qualified in Scots law.")
The noble Lord said: May I speak to this amendment and Amendment No. 223 which is linked with the same purpose? This is a matter which I raised on Second Reading. The provisions relating to Scottish cases are wholly inadequate. The provisions are that the chairman of the tribunal shall be a person with,
"legal qualifications appointed by the Lord Chancellor after consultation with the Lord Advocate".
That is all.
It is essential that in a Scottish case the tribunal should be chaired by a person qualified in Scots law and should sit in Scotland. The amendment brings in the second part of Amendment No. 223 in which I have attempted to define what is a Scottish case. It perhaps illustrates the difficulty. The person upon whom a notice is to be served may have a place of business or residence in Glasgow, Edinburgh or Aberdeen. Why in what may be a totally Scottish business should he be forced, apparently openly, to come down to London as the defendant or accused to appear before lawyers who have no knowledge of Scots law?
I am sure that the Committee recognises that considerable financial interests have their places of business in Scotland. It is necessary that that should be recognised rather than merely have the vague suggestion that the Lord Advocate consulting the Lord Chancellor should clear up difficulties. I think the subsection is a copy of what is in taxes legislation and which does not work. Special commissioners arrive in Scotland to deal with matters and they do not know the differences between Scottish law of trusts and English law of trusts. I beg to move.
Lord Brabazon of Tara: I do not consider that these two amendments, which are concerned with Scotland, are necessary. As the noble Lord, Lord Morton of Shuna, pointed out, the clause provides that my noble and learned friend the Lord Chancellor consults the Lord Advocate on appointments of legally qualified persons to the tribunal panel. I can give the assurance that my noble and learned friend the Lord Advocate can be trusted to suggest a Scottish lawyer without an express instruction to do so. I am sure that that would hold good for any Lord Advocate in the future.
There are also difficulties, as the noble Lord, Lord Morton of Shuna, said, about defining Scottish cases in the way proposed by the other amendment. If a notice is served on an authorised business, it may be
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necessary to serve several copies of the notice on employees, for example. If any one of the recipients is served with a notice in Scotland, it would be a Scottish case. That cannot be right.
Perhaps a more suitable definition can be found, but the question of where the tribunal is to sit can be left to the procedural rules. The choice of tribunal chairman is a matter which is better decided in the circumstances of a particular case. If a case does not raise particular points of Scottish law, it may occasionally be desirable to appoint an English lawyer as chairman if, for example, that enabled there to be a speedier start to the case. That could work both ways, with the appointment perhaps of a Scottish lawyer to an English case.
For those reasons I do not feel that the amendments are necessary . I hope that the noble Lord will feel able to withdraw them.
Lord Morton of Shuna: It may well be that the present Lord Advocate and any successor would "suggest" to the Lord Chancellor. That may well happen; I suspect that it would. That does not necessarily take one far, as the noble Lord. Lord Brabazon, will no doubt appreciate. The Lord Advocate can suggest, but it is the Lord Chancellor who appoints. All the Lord Chancellor need do is to consult. There is no necessity to have anybody qualified in Scots law on the tribunal. This is a matter about which, as the Government are well aware, the Law Society of Scotland and others are very worried. Subject to reserving the right to come back at a later stage of the Bill I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 222:
Page 63, line 27, at end insert—
("(2A) When deciding who should be appointed under the provisions in subsection (2)(b)above the Secretary of Slate shall consult organisations representing those employed by authorised bodies").
The noble Lord said: Those who are following the Bill closely will appreciate that the amendment deals with the composition of the financial services tribunal. We are talking about the establishment of a panel of not fewer than 10 persons to serve as members of the tribunal. Clause 83(2)(a) and (b) contains words to which I take no exception relating to the kind of people to be borne in mind when these appointments are made. My amendment seeks to add in a small way what might be said to be special pleading for a special category of person. Clause 83(2)(b) says,
"persons appointed by the Secretary of State who appear to him to be qualified by experience or otherwise to deal with the cases that may be referred to the Tribunal".
I am saying that,
"When deciding who should be appointed under the provisions of subsection (2)(b) above the Secretary of State shall consult organisations representing those employed by authorised bodies".
This is, if I may say so, a benign amendment. It is an amendment that I shall be happy to withdraw following a short exchange with the Minister. I wish the Minister first to understand that all I am seeking is consultation. The Minister and his advisers may

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respond by saying that if there is consultation with one organisation, there has to be consultation with all. How can one know those who will feel aggrieved if the Bill lays down consultation with a particular group of individuals but not others? I do not believe that any other group of people can claim to be so affected by the provisions of the Bill as those employed by the authorised bodies. I have no wish for a moment to belittle the enormous sums of money, the high finance and the very great matters that are being considered. I am, however, talking about the livelihood and careers of individuals and the ability of a decision of the tribunal to deprive individuals of their livelihood.
The Minister will be aware that in discussions in another place and earlier, in respect of how to bring some sense of fairness and equity into these matters, we have talked in terms of a centralised register of those who sell insurance. The Minister has laid great stress—I can understand his reasons—on Clause 54 of the Bill. Clause 54 states:
"If it appears to the Secretary of State that any individual is not a fit and proper person to be employed in connection with investment business or investment business of a particular kind he may direct that he shall not, without the written consent of the Secretary of State, be employed in connection with investment business".
That is, of course, the black list. It is possible under the Bill—I do not quibble about this—for a person who falls foul of the rules and regulations, in effect, to have his ability to earn a living withdrawn. Of course, he has to commit what the Minister and myself agree are very serious misdemeanours. I take no exception to that. To find out what can be visited upon an individual who is held under Clause 54 to be derelict, we need to turn to Schedule 4. We find in the schedule the kind of punishment that can be meted out. Schedule 4, relating to the Financial Services Tribunal, states at line 38 on page 157,
"Any person who without reasonable excuse refuses or fails to attend in obedience to a summons issued by the Tribunal or to give evidence; or alters, suppresses, conceals or destroys or refuses to produce a document which he may be required to produce for the purposes of proceedings before the Tribunal, shall be guilty of an offence".
I come to the point that I want to make. Given that under this procedure an individual is found guilty of an offence, what in fact can be visited upon him? Again, under Schedule 4 paragraph 5(4)(a)the Bill states:
"on conviction on indictment to imprisonment to a term not exceeding two years or to a fine or to both".
and then, under (b):
"on summary conviction, to a fine not exceeding the statutory maximum".
I believe that those who can have that kind of punishment visited upon them are in a special category. I am asking that the Minister, in making up the number of people who, in his opinion, are qualified to serve on the tribunal, should consider a range of matters, including those to which I have referred. Surely, it is not unreasonable that those who represent the interests of people working in the business should have a voice. I am not talking about voices. I am talking about a voice on the tribunal that will look at these matters. This is, I believe, a reasonable request. I hope that the Minister can indicate that when the 10
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individuals—men or women—of experience are called upon or invited to serve it will be possible for those employed in the industry at least to be considered. My amendment simply asks that they should be consulted.
Of course, I should like the Minister to go further. I would hope that when consultation took place, the Minister would be favourably impressed by the case that was made and that these organisations would find that they were sitting on the tribunal, having a voice in looking after the interests of those employed in the business and also discharging their duties in an impartial manner on a range of matters. My noble friend Lady Turner is, unfortunately, not able to be present. However, the Minister will recall that my noble friend made a great many points at Second reading expressing the views of the confederation of trade unions in the insurance industry. My noble friend has asked me to indicate her support and general interest on these matters. I know that she will be interested in what the Minister has to say. I beg to move.
5.15 p.m.
Lord Brabazon of Tara: I am grateful to the noble Lord, Lord Graham of Edmonton, for his explanation of the amendment. I am bound to say, however, that we do not believe that it would be appropriate to consult organisations representing employees. There is possibly a misunderstanding about the primary purpose of the tribunal. The tribunal is to consider issues directly affecting the business; yet there is no requirement that organisations representing investment business should be consulted; nor should there be. The tribunal will not be adjudicating between employers and employees. There is no need for its composition to strike a balance between them. It would not be appropriate therefore for the Secretary of State to consult employee representatives or other outside interests before making appointments to the panel.
There is only one exception in respect of other tribunals. That is the industrial tribunal. It is an exception because its role is to adjudicate between employers and employees. The whole purpose of appointing practitioners to the tribunal alongside lawyers is to ensure that the tribunal is better able to understand what are often likely to be complex cases, turning in part on what is best market practice. The practitioners on the tribunal will in no sense be representing either employers or employees.
I have to say to the noble Lord that, while one may have sympathy with the case for the employees, that is certainly not the kind of situation where there should be a statutory representative on the tribunal. I therefore cannot accept the amendment of the noble Lord.
Lord Graham of Edmonton: It could very well be—and not for the first time—that there is misunderstanding about the purposes of parts of this Bill. Do I understand the Minister to say that the consequences resulting from Clause 54 will form no part of the remit of those who serve on tribunals? Clause 54 relates to the employment of prohibited persons, as the Minister knows. I put forward my arguments on the premise that part of the responsibilities of those on the tribunals will be to take

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account of, to adjudicate, to arbitrate or to give effect to, Clause 54. The Minister tells me that is not so; but if that is so I make this simple point. If one talks of having a friend in court—that is the tribunal—or one simply wants to make sure that the body of 10 people are representative of all types of people affected by the Bill, surely those who are employed are entitled to such representation?
I listened with care to the Minister. We are talking about the professionals who are running the business. This is not an industrial court nexus with employers and employees. If this indicates that the remit of those on the tribunal is wholly outwith anything to do with the implementation of Clause 54—I shall not say that I am content—then I am content to leave it until we read what the Minister has said. However, if giving effect to Clause 54 is to be part of the remit of those on the tribunal, in my view there ought to be someone there, not to represent the employees, but who, among his qualifications, has knowledge of their experience. Perhaps the Minister can help me?
Lord Brabazon of Tara: I should like to intervene. I want to make it clear that I did not say the operation of Clause 54 was not covered with the tribunal. If the noble Lord understood me to say that, I must correct that straight away. Clause 54's disqualification directions against employers is only one of the categories of case which can be referred to the tribunals. Clause 54 cases may not be adjudicating between employer and employee. They will be considering his conduct and whether he has complied with the rules. I should like to make that quite clear.
Lord Graham of Edmonton: I am grateful to the Minister. No one better understands the situation of an employee selling insurance than someone representing their interests. If we have 10 good and true men or women who are looking at the way in which these matters work out in practice—as I see it, that is to be the remit of the tribunal—surely they would be better served if at least one of them had some recent experience of life at that sharp end? The other nine may be better qualified on a range of other matters, but no one will be as well qualified to understand as someone representing those who work in the industry. They will understand, and not condone or plead the case for them. We are not arguing about the industrial tribunal nexus. We are talking about the application of the provisions of Clause 54 and others.
I do not intend to press this amendment in any way. I believe that there is a strong argument for the Minister to consult with the representatives of those employed in the industry before constituting the tribunal. If it appears that in this tribunal there is no one with experience of those who work in the industry then the Minister must understand that those who work in the industry will feel that this is a rough kind of justice when the livelihood of their members is at stake and can be taken away. The Minister ought to understand that with all the problems on his plate he can avoid that one very easily, not by additional representation, but by agreeing to consult.
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Perhaps I shall come back at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave withdrawn.
[Amendment No. 223 not moved.]
Clause 83 agreed to.
Schedule 4 [The Financial Services Tribunal]:
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 224:
Page 158, line 9, at end insert—
("() A person shall not under this paragraph be required to disclose any information or produce any document which he would be entitled to refuse to disclose or produce on grounds of legal professional privilege in proceedings in the High Court or on grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session except that a lawyer may be required to furnish the name and address of his client.").
The noble Lord said: This amendment relates to the procedure of the tribunal and to the evidence given. The tribunal may by paragraph 5 require a person to give evidence.
"Any person who without reasonable excuse—refuses or fails to give evidence",
shall be guilty of an offence. I read that briefly.
Clause 81(5)—with which we dealt some 20 minutes ago—enshrines the provisions relating to confidentiality and legal privilege in relation to investigations by reporters into the working of unit trusts. This amendment is seeking to put in the same clause specifically to protect the legal profession if someone has to give evidence in relation to somebody to whom they have given advice before the tribunal. It is in my view necessary that this provision should be made.
The Government may no doubt respond that this might be a reasonable excuse under Schedule 4, paragraph 5(1). However, when we have the provision about privilege set out in Clause 81(5), in my submission it would be better to add this provision to the schedule to make it entirely clear that the legal privilege still exists. Otherwise, any lawyer summoned would be caught in a catch-22 situation. He would either be struck off for giving evidence and revealing what is confidential, or he is in contempt of the tribunal and liable on conviction to a term of imprisonment of two years or a fine or both. I hope that the Government will see fit to accept this amendment.
Lord Brabazon of Tara: I am happy to say that the noble Lord has made a very good case indeed for his amendment. We are very pleased to be able to accept it.
On Question, amendment agreed to.
Schedule 4, as amended, agreed to.
5.30 p.m.
Clause 84 [References to the Tribunal]:
Lord Taylor of Gryfe Lord Taylor of Gryfe moved Amendment No. 224A:
Page 64, line 5, at end insert—
("() who has been refused recognition under section 18 above;").
The noble Lord said: Like other noble Lords, I am in some difficulty about this amendment as the Bill has been substantially rewritten, particularly regarding the recognition of professional bodies. I tabled Amendment No. 86A on 23rd July; but as the Minister announced at that time that this particular schedule was to be rewritten, the amendment was not called. This amendment relates to the same problem. If it is not technically in order, perhaps the Minister will guide me as to how the issue which it raises can best be dealt with so that we may return to it on Report.
The amendment relates to the question of recognition of professional bodies. I was invited by the Institute of Chartered Secretaries and Administrators to table this amendment so that there may be an appeals procedure against non-recognition of what may be a reputable and worthy organisation. It is in order to provide for such appeals procedure that the amendment is submitted. I hope that the Minister will guide me as to whether it is appropriate and acceptable, and that he will look at his revised schedule on Report to see where best this proposal could be introduced. I beg to move.
Lord Brabazon of Tara: At present I am not quite sure to what the noble Lord was referring when he suggested that we were to revise the schedule; but I shall certainly look into the matter. I have to say that in any case we cannot sympathise with the main drift of the amendment.
The purpose of the tribunal is to provide a safeguard against the Secretary of State or agency when using executive powers against a particular authorised business or individual. It will be concerned with powers which can directly affect the ability of the people concerned to earn a living through investment business.
The decision to refuse a recognition order to a professional body would not have this direct effect on people's livelihoods. If one professional body is not recognised, businesses may be able to seek authorisation from another or from a recognised self-regulating organisation. In all cases authorisation may be sought from the Secretary of State or agency.
The need for a safeguard against loss of livelihood does not therefore arise in this case on refusal of a recognition order. The decision to refuse recognition involves assessment of many complex and wide-ranging criteria, and that is best left to those who are continuously involved in regulation.
I am now advised that the Government amendments to the recognition of professional body clauses, which we discussed last Wednesday, would have no effect on the amendment and would not achieve what the noble Lord is seeking to achieve. Therefore, I must ask the noble Lord to withdraw the amendment.
Lord Taylor of Gryfe: I shall beg leave to withdraw the amendment. As the noble Lord has just said, last Wednesday (at 5.45 p.m., col. 251 of the Official Report) we discussed the new schedule on the requirements for recognition of professional bodies. The rewriting took up one and a half columns of the
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Official Report. It is extremely difficult to draft appropriate amendments when new schedules are introduced. That has been a common feature of our discussions on this Bill. However, I shall certainly look at what the Minister has said and see where is the appropriate place to introduce this particular concern. I thank the Minister and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 84 agreed to.
Clause 85 [Decisions on references by applicant or authorised person etc.]:
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 225:
Page 65, line 39, leave out ("accordingly") and insert ("forthwith in accordance with the Tribunal's report")
The noble Lord said: The purpose of this amendment depends on my understanding of the meaning of Clause 85(1) being correct. Therefore, I had better make clear what I understand that clause to mean. As I understand it, once the tribunal has reported, the Secretary of State has to decide the question in accordance with the tribunal's report. In other words, the Secretary of State has no review provision; he has to come out with a judgment which is the tribunal's judgment.
The difficulty about the present wording of the clause, which the amendment seeks to correct, is that there is no time limit. It just says that the Secretary of State shall decide the matter accordingly. Of course, what may well have happened under the tribunal procedure is that a person—it could be either a body or an individual—has been prohibited from carrying on his business. The tribunal may decide that is wrong and the appropriate decision is that the matter should be recalled. It makes a great deal of difference to the person who should be allowed to continue in business to get that decision through quickly. If. for one bureaucratic reason or another, the Secretary of State does not decide the matter accordingly within a matter of weeks or months, it may cause severe financial loss to the individual who has been, as it were, acquitted by the tribunal.
Therefore, the amendment suggests that the Secretary of State is to decide the matter,
"forthwith in accordance with the Tribunal's report".
From what I understand to be the department's intentions, I think that the amendment expresses what the department hopes will happen. I beg to move.
Lord Brabazon of Tara: I am bound to say to the noble Lord, Lord Morton of Shuna, that the intention in the Bill as drafted is precisely as he has just described in that it should be reported as soon as possible. I am also grateful to the noble Lord for having moved the amendment because it expresses the position in better words than the Bill as drafted at present. Therefore, once more I am pleased to accept the noble Lord's amendment.
On Question, amendment agreed to.
Clause 85, as amended, agreed to.
Clauses 86 to 88 agreed to.
Clause 89 [Register of authorised persons and recognised organisations etc.]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 226 to 230:
Page 68, line 18, leave out ("other than section 15").
Page 68, line 26, leave out paragraph (f).
Page 68, line 35, leave out from first ("organisation") to end of line 37 and insert ("or certification by a recognised professional body, the name and address of the organisation or body; ").
Page 69, line 5, leave out ("15 or").
Page 69, line 19, at end insert ("and. in either case, such other information as the Secretary of State may determine.")
The noble Lord said: I beg to move Amendment No. 226 together with Amendments Nos. 227, 228 and 229 because I spoke to those amendments with Amendment No. 79. For the convenience of the Lord Chairman, I should also like to move Amendment No. 230 because I spoke to that a few moments ago with Amendment No. 215.
On Question, amendments agreed to.
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 231:
Page 69, line 21, after ("of) insert ("the reasons for and extent of the disqualification direction and").
The noble Lord said: As the Bill stands, this provision entitles a person to discover whether a disqualification direction is in force in relation to a particular person. However, unless he can satisfy the Secretary of State that he has good reason for seeking the information, he will not be able to inspect the list to find out the extent of the disqualification or the reasons for the disqualification. It appears that there is no real reason why that should not be open to the public. It is open to the person involved, but why should the public not be able to know the reasons for the disqualification and the extent of the disqualification? It is a very simple point. I beg to move.
Lord Lucas of Chilworth: I have to confess that I am not able to give the noble Lord an answer. I had noted that the noble Lord had already spoken to this and dealt with it on an earlier amendment. I had assumed that this amendment was not going to be moved. I just wonder how I can deal with it other than to say that I had better give due consideration to what the noble Lord has said in this matter.
Lord Morton of Shuna: Subject to one correction I think that the noble Lord is correct. This point was discussed on Wednesday when, unfortunately, I was not able to be present. It was mentioned by my noble friend Lord McIntosh of Haringey. In the hope that the noble Lord will look at this again I shall withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 232 and 233:
Page 69, line 40, at end insert ("or").
Page 69, line 43, leave out from ("effect") to end of line 2 on page 70.
The noble Lord said: I beg to move Amendments Nos. 232 and 233. I spoke to these with Amendment No. 79. I beg to move.
On Question, amendments agreed to. Clause 89, as amended, agreed to.
Clause 90 [Inspection of register]:
Lord Williams of Elvel Lord Williams of Elvel had given notice of his intention to move Amendments Nos. 234 and 235:
Page 70, line 10, leave out from ("register") to end of line.
Page 70, line 15, leave out subsections (2), (3) and (4).
Lord Morton of Shuna: These amendments are linked to Amendment No. 231. and therefore I do not propose to move them.
[Amendments Nos. 234 and 235 not moved.]
5.45 p.m.
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 236:
Page 70, line 33, at end insert ("at least one of such places being in Scotland").
The noble Lord said: This amendment is a completely separate provision. There is no provision in Clause 90, which is the clause of the Bill regarding inspection, as to where the places will be. They are just such,
"times and places as the Secretary of Stale may appoint".
All that is intended to be added is,
"at least one of such places being in Scotland".
I hope that that will be the intention, but it might as well be on the face of the Bill. I beg to move.
Lord Lucas of Chilworth: I apologise to the noble Lord, Lord Morton, for my confusion a few moments ago. May I say formally that we shall give consideration to what he said about Amendment No. 231, and take Amendments Nos. 234 and 235, and it I may, I shall write to him in full on how we feel about them.
Turning to the amendment before the Committee, of course I entirely agree that there should be facilities in Scotland for inspecting the register. Scotland is an important financial centre and it must have ready access to the register. However, I fear that I cannot agree to the amendment. Were I to do so, I am sure that I should call down on my head the wrath of those people in Cardiff, Belfast, Manchester, Birmingham and all the other financial centres who might feel unfairly discriminated against.
The important point here is that people in all parts of the United Kingdom should have ready access to the register. I know that this is what the Securities and Investment Board, who will be responsible for maintaining the register if functions are indeed transferred to them, are planning. They have already said that they intend to publish the details of the register annually, with more regular updates. It is therefore possible to envisage a situation where such lists are stocked by the larger libraries or other public reference points.
I think that in this age of electronic communication the designated agency—or SIB, who may well be the

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designated agency—have said that they intend to make the register available in a computer readable form on a continuous basis. I do not believe it is too difficult to envisage a situation where arrangements can be made for public access to computer terminals situated in suitable locations throughout the United Kingdom and linked to the central register. I am sure that those responsible will read what has been said this evening and certainly will ensure that the closer locations include places in Scotland as well as in the financial centres elsewhere in the United Kingdom.
Lord Morton of Shuna: That reply is not entirely satisfactory. If I may put on my Scottish hat rather than a party hat, I would say that Scotland is a separate jurisdiction and has a separate legal system, and it should be recognised as such. There are tendencies in this Bill not to do so. The Government have made certain improvements as they have gone along, but when by statute, there is a Registrar of Companies in Scotland I can see no reason why the Government are so afraid of putting in the amendment I have suggested. Subject to the remark that I may come back to this at a later stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 90 agreed to.
Clause 91 [Power to call for information]:
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 237:
Page 71, line 10, leave out ("verified") and insert ("reported on").
The noble Lord said: I move this amendment which is in the name of my noble friend Lord Bruce of Donington. It really is a case of pure semantics. My information is that the word "verified" is not a term of art in accountancy and that the words "reported on" are ones that accountants understand. It seems that Clause 91(3) is basically a matter for accountants and that it would be better to give them words they at least understand the meaning of. I beg to move.
Lord Lucas of Chilworth: I know that I spoke to this with Amendment No. 140 in relation to Clause 48 when we were dealing with much the same point. I can offer the noble Lord opposite nothing more than I offered then, and that was of course to stick to the words which we felt put the position rather more clearly.
Lord Morton of Shuna: Certainly I do not wish to divide on this amendment and so I beg leave to withdraw it.
Amendment, by leave, withdrawn,
Clause 91 agreed to,
Clause 92 [Investigation powers]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 238:
Page 71, line 28, after ("or") insert ("a person certified by a").
The noble Lord said: I spoke to Amendment No. 238 with Amendment No. 79. I beg to move.
On Question, amendment agreed to,
Clause 92, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 239:
After Clause 93, insert the following new clause—
("CHAPTER IXA
AUDITORS
Appointment of auditors.

.—(1) The Secretary of State may make rules requiring a person who is authorised to carry on investment business by virtue of section 24 or 30 above and who, apart from the rules, is not required by or under any enactment to appoint an auditor to appoint as an auditor a person satisfying such conditions as to qualifications and otherwise as may be specified in or imposed under the rules.

(2) Rules under this section may make provision—

(a) specifying the manner in which and the time within which an auditor is to be appointed:

(b) requiring the Secretary of State to be notified of any such appointment and enabling the Secretary of State to make an appointment if no appointment is made or notified as required by the rules;

(c) with respect to the remuneration of an auditor appointed under the rules:

(d) with respect to the term of office, removal and resignation of any such auditor:

(e) requiring any such auditor who is removed, resigns or not reappointed to notify the Secretary of State whether there are any circumstances connected with his ceasing to hold office which he considers should be brought to the Secretary of State's attention.

(3) An auditor appointed under the rules shall in accordance with the rules examine and report on the accounts of the authorised person in question and shall for that purpose have such duties and powers as are specified in the rules.").

The noble Lord said: I beg to move Amendment No. 239, and speak at the same time to Amendments Nos. 240, 241, 242, 243, 246 and 349. All these clauses, to which I shall speak together, concern the role of auditors in the financial services sector.
My honourable friend the Parliamentary Under-secretary for Corporate and Consumer Affairs announced the policy to which these provisions give effect in another place on 9th June. We believe that they provide a framework within which a constructive relationship between auditors and supervisors can develop, without undermining the auditor's relation-ship with his client or transferring responsibility for regulation from the supervisor to the auditor. I should stress that I accept that it is the supervisor's job to supervise. He lays down the rules, monitors compliance with them and enforces them. He decides what checks are necessary if he is to fulfil his task. These proposals do not change that responsibility. But the supervisor can do his job much more effectively if communications with an auditor are so facilitated that the supervisor can benefit from the knowledge of an investment business which the auditor, in the course of his work, will develop.
The first new clause provides that rules may be made requiring those businesses, authorised directly by the Secretary of State or under the Clause 30 arrangements in the Bill, to appoint an auditor. It will be possible for these rule-making powers to be transferred to a designated agency. The intention is to

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ensure that all investment businesses, however they are constituted, can be required to appoint an auditor who will be able to enter into that constructive relationship with a supervisor from which benefit may flow. It is not intended that the exercise of these rule-making powers should cut across other statutory provision concerning auditors. So these rules will not apply to those investment businesses already required to appoint auditors under other statutes: the most obvious example of this is the Companies Act; and so this provision will apply to investment businesses which are not companies. But many investment businesses will not be companies and it is right to be able to require them to have an auditor in office.
The new clause also contains what on first sight seems a formidable list of the contents of rules concerning the appointment of such auditors. I should point out to the Committee that the content of rules parallels those provisions concerning the appointment of auditors in the Companies Act. It is not intended that an entirely new set of provisions concerning the appointment and role of auditors should be created.
The scope of the clause does not extend to businesses which are authorised entirely by virtue of SRO or RPB membership. It will be for those bodies to determine whether they wish to impose such a requirement. But they will have to match the standard of investment protection available under the conduct of business rules which, as the Committee agreed last week, will include provisions concerning the keeping of accounts. They will also have to have adequate arrangements for enforcing compliance with their rules. Many SROs and RPBs may conclude that this is best achieved by insisting that their members appoint an auditor. But they will be able to make other arrangements—and some may find this a more attractive proposition provided that these arrangements achieve effective enforcement of their rules.
The power for the Secretary of State to require a second examination of information supplied by a business on which an auditor has reported is intended to enable work of an apparently sub-standard nature to be checked by another person. This is not intended to reflect on the high standard of professionalism set by the major accountancy bodies in the United Kingdom. But the Bill does not enable the Secretary of State or the designated agency to dictate who shall be an auditor for an investment business, and there should be some route open to the regulator to take a second opinion if he has any doubts.
The third clause concerns communications made by the auditor to the Secretary of State or, if appropriate, to a SRO or a RPB. Information may be given at the request of the appropriate supervisor, in response to a question put by him or, occasionally, at the auditor's initiative. Usually such reports will be made with the knowledge of the business concerned, but on some occasions it may be appropriate for the business not to be informed. The clause provides that the auditor in making such a report in good faith shall not contravene any duty to which the auditor may be subject. So the auditor will not be liable for any loss suffered as a result of his report. This provision is intended to remove any inhibition which an auditor
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might otherwise feel kept him from discussing matters with a supervisor.
It is intended that the circumstances in which an auditor should be expected to give information to a supervisor—especially on his own initiative—will be defined very carefully. This will ensure that the individual auditor knows where he stands and will not feel obliged to volunteer much irrelevant information to the supervisor in order to safeguard his position. I hope that these circumstances will be set out in professional guidance agreed between the supervisor and the professional body. I feel confident that both sides will approach the task of agreeing this guidance positively.
Contravention of the terms of such guidance would be subject to whatever disciplinary proceedings the relevant professional body decides to impose. So in essence we are looking for the professional bodies as well as the agency to fix guidelines which are acceptable to those who will be practising. If by any misfortune there are some professional bodies which either do not want or cannot agree on terms of guidance, it will be possible for the Secretary of State to make rules specifying the circumstances in which auditors should communicate with the supervisor. This is a reserve power which it is hoped will not need to be exercised. The Secretary of State will alone be able to make such rules. The function will not be transferred to a designated agency. If an auditor fails to make reports in accordance with these rules, it will be possible for him to be disqualified from auditing authorised businesses: I want to emphasise that this sanction applies when the auditor is subject to rules made by the Secretary of State, not in the case where satisfactory guidance is in place.
I hope that that is a sufficiently broad explanation of this rather long clause. I commend the provisions of the clauses in these amendments to the Committee. I beg to move.
Lord Morton of Shuna: As my noble friend Lord Williams of Elvel said in relation to earlier new clauses, on this side of the Committee we have not had time to study in full these clauses in this difficult area or to have consultation with those interested in them. Therefore, I intend to say nothing more than that we may come back on this at Report stage.
Lord Diamond: Before the matter is left at this stage can the Minister say what kind of consultations were made with the professional bodies before these clauses were framed? I am particularly concerned with regard to the very difficult issue of an auditor being put in the invidious position of having to disclose information against a client who pays him for doing it. As the noble Lord will be aware, most auditors charge on a time basis. The only product they have to sell is skilled use of time. Let us suppose that an auditor is required to spend seven hours, for example, reporting to the Secretary of State on matters about which the Secretary of State has inquired. Under the statutory compulsion that it is proposed should be laid down in this Bill the auditor will incur a considerable charge. Under the Bill the Secretary of State and the

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Government are requiring an auditor to spend time, to incur charges, to be paid for by his client, presumably, in giving information which his client does not know about, and which, if he did know about, he would not wish to be given. Therefore, I ask the Minister what consultation took place before this particular scheme was put forward.
6 p.m.
Lord Lucas of Chilworth: I am grateful to the noble Lord, Lord Diamond, for putting his question so simply. May I preface my answer by reminding the Committee that the provisions we are discussing now are concerned with very carefully defined circumstances? This is not a general reporting duty. The business will be aware of what the auditor should report, and only the business which is behaving improperly need worry. Against that background I have to tell the noble Lord and the Committee that we had very, very extensive discussions over a number of months with all the bodies concerned and those extensive consultations going over many, many months did include matters dealing with disclosure of information. My understanding is that generally the profession appreciates that there is a responsibility upon them. I understand that generally they accept that responsibility; naturally they wish to make sure that it is not a general reporting duty.
I appreciate what the noble Lord, Lord Diamond, has said about time. 1 am afraid that the answer to that question is that the client will in fact have to pay for the time consumed. However, as I believe I said earlier, the client will normally know about the information being given. It may be that during a meeting with a supervisor, and then only rarely, an auditor would disclose something behind the back of his client. I do not think one seeks that kind of situation. Perhaps one might imagine, if fraud was suspected at an extremely senior level where the law might have to take a different course, that that might pose different kinds of problems. However, I believe that the guidance which the profession have agreed to give (and they are indeed already doing that) should take care of the eventualities which the noble Lord poses.
Lord Diamond: It will be obvious to the noble Lord that I have not had the opportunity of consulting my own professional body as to their reaction to this. The presumption is, since they have not written to me objecting strongly, that they do not object strongly. Nevertheless, I have grave anxieties about this and I am bound to draw the Minister's attention to one or two things which he said. For example, he said that he did not think there would be many occasions when an auditor would be put under compulsion and that that would only occur when things had gone wrong. However, that cannot be the case. Of course the Secretary of State will want to know whether things have gone wrong simply because they will appear to have gone wrong. The whole purpose of requiring further information from the auditor will be either to confirm the Secretary of State in his suspicions or to contradict those suspicions.
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Until the information is available he will not know what has happened. Indeed, there would be no point in getting such information if the Secretary of State was clear as to whether the matter fell on one side of the line or the other with regard to improper conduct.
The Minister said something which did not coincide entirely with what I understood him to say in introducing the clause; namely, there would not be many occasions on which the auditor would have to disclose information behind the back of his client. It is a very curious situation when an auditor is required at the expense of his client to give information to the Secretary of State to the possible detriment of his client. It is a very unusual situation.
If matters went further and there was a prosecution in the courts, of course an auditor would then be required to disclose information. He does not have the privilege in such matters that legal representatives have. To my distress and unhappiness, such privilege is limited to lawyers, and accountants must tell the truth in court about their clients whether it is to the benefit of that client or the reverse. I understand that very well, but the court knows how to look after such privileges and a judge is there to see that justice is done and that the procedure is both just and fair.
However, that is not the case where the Secretary of State is examining an auditor in private. Therefore, I am bound to say that I am very glad that the noble Lord who is moving this amendment stated that he had not had time to consider it and that he might have to come back to it at Report stage. There are many things which I think are not yet clear or satisfactory.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 240 to 243:
After Clause 93, insert the following new clause:—
("Power to require second audit.

.—(1) If in any case it appears to the Secretary of State that there is good reason to do so he may direct any person who is authorised to carry on investment business by virtue of section 24 or 30 above to submit for further examination by a person approved by the Secretary of State—

(a) any accounts on which that person's auditor has reported or any information given under section 48 or 91 above which has been verified by that auditor: or

(b) such matters contained in any such accounts or informa-tion as are specified in the direction;

and the person making the further examination shall report his conclusions to the Secretary of State.

(2) Any further examination and report required by a direction under this section shall be at the expense of the authorised person concerned and shall be carried out and made within such time as is specified in the direction or within such further time as the Secretary of State may allow.

(3) The person carrying out an examination under this section shall have all the powers that were available to the auditor, and it shall be the duty of the auditor to afford him all such assistance as he may require.

(4) Where a report made under this section relates to accounts which under any enactment are required to be sent to or made available for inspection by any person or to be delivered for registration, the report, or any part of it (or a note that such a report has been made) may be similarly sent, made available or delivered by the Secretary of State.").

After Clause 93, insert the following new clause—
("Communication by auditor with supervisory authorities.

.—(1) No duty to which an auditor of an authorised person may be subject shall be regarded as contravened by reason of his

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communicating good faith to the Secretary of State, whether or not in response to a request from him, any information or opinion on a matter of which the auditor has become aware in his capacity as auditor of that person and which is relevant to any functions of the Secretary of State under this Act.

(2) If it appears to the Secretary of State that any auditor or class of auditor to whom subsection (1) above applies is not subject to satisfactory rules made or guidance issued by a professional body specifying circumstances in which matters are to be communicated to the Secretary of State as mentioned in that subsection the Secretary of State may himself make rules applying to that auditor or that class of auditor and specifying such circumstances; and it shall be the duty of an auditor to whom the rules made by the Secretary of State apply to communicate a matter to the Secretary of Stale in the circumstances specified by the rules.

(3) The matters to be communicated to the Secretary of State in accordance with any such rules or guidance may include matters relating to persons other than the authorised person.

(4) This section applies to—

(a) the communication by an auditor to a recognised self-regulating organisation or recognised professional body of matters relevant to its function of determining whether a person is a fit and proper person to carry on investment business: and

(b) the communication to such an organisation or body or any other authority or person of matters relevant to its or his function of determining whether a person is complying with the rules applicable to his conduct of investment business,

as it applies to the communication to the Secretary of State of matters relevant to his functions under this Act.").

After Clause 93, insert the following new clause—
(' 'Overseas business.

.—(1) A person incorporated or having his head office outside the United Kingdom who is authorised as mentioned in subsection (1) of section (Appointment of auditors) above may. whether or not he is required to appoint an auditor apart from the rules made under that subsection, appoint an auditor in accordance with those rules in respect of the investment business carried on by him in the United Kingdom and in that event that person shall be treated for the purposes of this Chapter as the auditor of that person.

(2) In the case of a person to be appointed as auditor of a person incorporated or having his head office outside the United Kingdom the conditions as to qualifications imposed by or under the rules made under that section may be regarded as satisfied by qualifications obtained outside the United Kingdom which appear to the Secretary of State to be equivalent.

(3) A person incorporated or having his head office outside the United Kingdom shall not be regarded for the purposes of section 24 above as a fit and proper person to carry on investment business unless—

(a) he has appointed an auditor in accordance with rules made under section (Appointment of auditors) above in respect of the investment business carried on by him in the United Kingdom; or

(b) he has an auditor having qualifications, powers and duties appearing to the Secretary of State to be equivalent to those applying to an auditor appointed in accordance with those rules.

and, in either case, the auditor is able and willing to communicate with the Secretary of State and other bodies and persons as mentioned in section (Communication by auditor with supervisory authorities) above.")

After Clause 93, insert the following new clause—
("Offences and enforcement.

.—(1) Any authorised person and any officer, controller or manager of an authorised person, who knowingly or recklessly furnishes an auditor appointed under the rules made under section (Appointment of auditors) or a person carrying out an examination under section (Power to require second audit) above with information which the auditor or that person requires or is entitled to require and which is false or misleading in a material particular shall be guilty of an offence and liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both;

610

(b) on summary conviction, to imprisonment for term not exceeding six months or to a fine not exceeding the statutory maximum or to both.

(2) The duty of an auditor under section (Power to require second audit) (3) above shall be enforceable by mandamus or. In Scotland, by an order for specific performance under section 91 of the Court of Session Act 1868.

(3) If it appears to the Secretary of State that an auditor has failed to comply with the duty mentioned in section (Communication by auditor with supervisory authorities) (2) above, the Secretary of State may disqualify him from being the auditor of an authorised person or any class of authorised person; but the Secretary of State may remove any disqualification imposed under this subsection if satisfied that the person in question will in future comply with that duty.

(4) An authorised person shall not appoint as auditor a person disqualified under subsection (3) above; and a person who is an authorised person by virtue of membership of a recognised self- regulating organisation or certification by a recognized professional body who contravenes this subection shall be treated as having contravened the rules of the organisation or body.")

On Question, amendments agreed to.
Clause 96 [Power to transfer functions to designated agency]:
Lord Silkin of Dulwich Lord Silkin of Dulwich moved Amendment No. 243A:
Page 75, line 29, leave out paragraph (a) and insert:
("(a) that a body corporate has been established which is able and willing to discharge all the functions to which this section applied in respect to persons generally or to any such class of persons as is referred to in subsection (11) below:").
The noble Lord said: With this amendment, and others which I shall invite the Committee to consider at the same time, we come to the very important Chapter XI concerning transfer of functions to designated agencies, and in particular to Clause 96. The history of how Clause 96 comes to be in the form in which it comes before your Lordships is unusual and I think the clause itself was described by the noble and learned Lord the Lord Advocate at Second Reading as a novel one. The clause makes provision, as it stands at the moment, for the Securities and Investments Board Limited to be the first body to which, by order, functions shall be transferred by the Secretary of State. That is to say, it records the intention of the Government that when the Bill becomes law the Securities and Investments Board Limited should be established as what I think it is fair to call a quango in the full sense of the word—a quasi-autonomous non-governmental organisation. That is indeed what it appears to be. It will be designated as having the task of assuming many and indeed most of the functions of the Secretary of State himself in relation to organising the SROs.
That arose in an unusual way. The Bill as it originally appeared, as I understand it, had in it no reference to the Securities and Investments Board Limited although it existed as a company and although, in the course of debates in another place, there was pressure from this side of the Chamber for a statutory body to be set up which, as I understand it, had a good deal of support. But at the end of the day, I am informed as a result of a compromise proposed by Government supporters, the clause was redrafted in the way in which it now appears, not so much setting up the Securities and Investments Board Limited but taking it as being the body which would be the first to which the functions of the Secretarv of State under this

611
chapter would be delegated. So we have a position in which this board or company will have extremely important statutory powers while at the same time not being, as the Bill provides at present, a public body as such—to which, indeed, refer the provisions of the schedule to which a later amendment is linked. We seek to correct that.
Yet the body will have virtually all the powers, as I mentioned, of the Secretary of State himself. In fact, if I have correctly followed the provisions of Clause 96 in particular, especially in subsection (5), which exclude certain functions which the SIB are not to have, they are functions, I think, relating to court proceedings, and in certain cases the clause provides that the functions can only be exercised (or the Secretary of State may order that the functions can only be exercised) by the designated agency, the SIB, together with the Secretary of State himself.
What is the point of these various differences is very difficult to understand. There are further difficulties of comprehension as far as I am concerned inasmuch as the clause commences, as it stands at the moment, with the condition that it must appear to the Secretary of State,
"that a body corporate has been established which is able and willing to discharge all or any of the functions to which this section applies".
Provided that that is satisfied, then the rest of the clause and the consequential matters follow. Why is it sufficient that the body corporate is able and willing to discharge any of the functions? Why not all of them—or, at any rate, all that are material to particular classes of SROs. Because of that difference, the amendment which we are now discussing has been put down. We seek to change it to read:
"that body corporate has been established which is able and willing to discharge all the functions to which this section applies in respect to persons generally or to any such class of persons as is referred to in subsection (11) below"—
that is to say, the relevant SROs that will form part of the SIB's or the other designated agencies' empires.
The other amendments to which I wish to speak in connection with this one, if I may enumerate them, are Nos. 243B, 247A, 248A, 254C, 254D, 254E, 254F and 254G. These are in each case designed to follow through the logic of what we seek to do in the amendment I am speaking to; that is to say, to provide that in the circumstances of the designation the SIB or other designated body should have under its control all the functions which the Secretary of State would have under his control with the exception of those which are expressly excepted in subsection (5), and should not be left with part of those functions; and, when it comes to Clause 97, which deals with the resumption of the transferred functions, that there again, while the Secretary of State might take back all the functions of designated agencies, he would not be entitled to take back only some of them, leaving the designated agency in part with the relevant function.
The effect of that, we accept and assert, would be that the designated agency would enjoy virtually the full status, I must not say of a "statutory body" for it would be a statutory body in any event as it is enshrined in the statute, but of a public body with the relevant functions, subject only to the Secretary of State's power to divest it entirely of those functions or
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to do so in relation to any specific group of SROs. It would not be left in this rather peculiar and, I suggest, compromise half-and-half state in which I described it as being a quango, or whatever description one would give to it. It appears to be almost on probation, as far as we can see quite unnecessarily; and it would be much better for Parliament to decide, if we are not going to set up a new body, that this is going to be the body which will control the operation of this machinery with all the powers that the Secretary of State would have if he were the controlling body.
In that respect, this is a perfectly familiar situation in a field with which perhaps I am more familiar than I am with this one. One finds a similar situation in relation to the Director of Public Prosecutions. He has very wide powers indeed, but he is answerable to the Attorney-General. Here, too, the SIB would have very wide powers but in the end, because it is necessary that such a body with such powers should be answerable to Parliament, it would be answerable through the Secretary of State. The Secretary of State would be the Minister who would be required to speak for it and explain its actions if they were called in question.
I do not wish to weary the Committee by going through these amendments one by one. I think that for the most part they speak for themselves and that they are seeking to give effect to the broad principle which I have suggested is the right one. I shall be more than interested to hear whether the Government accept this as being the correct principle and whether they are prepared to give further consideration to the matter. After all. the clause as it now stands was, as I said, very much a compromise in another place, and no doubt compromises can be looked at again. If neither of those possibilities is the position, I shall be very interested to learn how the Government distinguish between the body which is at present envisaged under Clause 96 and a full-scale public body which I have suggested as the right approach. I beg to move.
Lord Lucas of Chilworth: I am very grateful to the noble and learned Lord for his explanation of this rather long list of amendments. I wonder whether I may start by saying—and I may actually repeat it— that we are not talking here about a quango. We have made it quite clear that this is to be a private sector body. If we were to accept any of the amendments the noble and learned Lord has proposed, it would remove an important element of the flexibility in the provisions for transferring functions to a designated agency, or whatever particular name or set of initials we use for it at this time. If the amendments were accepted, they would make it quite impossible for the Secretary of State to give to the agency some functions relating to a class of persons while retaining for himself others relating to those persons.
We do not yet know whether it will be desirable to transfer all the transferable functions to the designated agency. It will depend very largely on whether any body seeking to become a designated agency meets the criteria laid down in the Bill. For example, it may be that the body will not want to take on the whole range of functions. Equally, it might well be that when the Secretary of State comes to consider the body's proposals he will conclude that the body is unable to discharge a particular function.

613
We have identified only a few of the transferable functions which we would be unwilling to transfer. Two aspects of the power to make rules for authorised unit trusts may be retained by the Secretary of State. They concern permitted investments and investment limits. The power to prosecute may be transferred gradually and there may be some offences, such as those concerned with fraud, which will not be transferred.
The effect of the amendments would be that if the body's proposals were inadequate in respect of a single function, or if the body did not wish to assume a single function, it would not be possible to leave only that function out of the package. Unless he could carve out a group of functions relating to a specified class of persons, the Secretary of State would be prevented from transferring any of the functions. He would then be obliged to look for another body or to exercise the functions himself. That would not be a satisfactory outcome.
Similar considerations arise on the amendments to Clause 97. These amendments would remove an element of flexibility in the provisions for resuming functions from the agency. The existing Clause 97 strikes a careful balance between the need for flexibility in resuming functions and the objective that the Secretary of State should not be able to intervene at a highly detailed level in the operation of the agency.
The power to resume functions is one of the most important ways of securing the accountability of the agency. The Secretary of State will have to answer in Parliament for his use of the power or for a decision not to use it. and it provides a means whereby both the Secretary of State and Parliament can put effective pressure on the agency to improve its standards. For the power to work most effectively some element of flexibility really is necessary.
The new subsection (6) to Clause 96 is really unnecessary. The Bill already has the effect that if any function is transferred, any duties or obligations relating to it which the Secretary of State would have undertaken would also be transferred to that agency. I do not think either that it is necessary to provide that the draft rules and guidance of the agency should accompany the delegation order when it is laid before Parliament. I would take this opportunity to assure the Committee that the final draft will be publicly available when any delegation order is laid. As to reservations made under Clause 96(7), the Secretary of State will be able to give his reasons in the debate on the delegation order.
There is in fact nothing sinister in the Government wishing to retain flexibility in transferring functions. We hope that it will be possible to transfer almost all the functions which the Bill makes it possible to transfer. But when the Securities and Investment Board and the Secretary of State come to consider the detailed arrangements which have to be made they may well identify minor matters which are best left to the Secretary of State. They may indeed find that there are some functions which the agency is simply unable or unwilling to discharge in accordance with the criteria set out in the Bill.
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We cannot be sure at this time, and certainly not until proposals are fully worked out by the board, exactly which functions will be transferred and which functions will not, because there is still much practical work to be done. In the meantime, as we are considering this Bill, I believe it would be quite wrong to limit the flexibility with which the transfer of functions is handled. Clause 96(11) provides that no transfer of functions may take place without the approval of both Houses of Parliament. So again I suggest to the Committee that there will be ample opportunity to debate the detailed arrangements for transfer, and of course at that time the approval of your Lordships will be necessary.
All these amendments are unacceptable to the Government. In effect the amendments, in particular Amendments Nos. 254F and 254G, seek to reverse a central feature of the Government's policy. The noble and learned Lord opposite explained that. The central feature of the Government's policy is that the regulatory body at the heart of the regime shall be a private sector body. If we accepted Amendments Nos. 254F and 254G, that would turn this body into a Crown body—the quango which the noble and learned Lord described. We need a body which can operate flexibly, rapidly and effectively, free of bureaucratic control. These amendments would make the expenditure of the agency public expenditure, subject to all the controls that would normally involve. The amendments would mean that the chairman and members of the governing body would become crown servants, as would the agency staff. Their pay, pensions and other conditions of service would be set, as a matter of policy, by the Treasury. Furthermore, the strong presumption is that they would be not merely Crown servants, but civil servants, and be treated accordingly. We do not believe that this is the way to secure the needed participation of expert practitioners from the City at either board or staff level.
When we commenced our deliberations the noble Lord, Lord Williams, began by saying at col. 42 of Hansard:
"We should have a body at the top that carries the same authority as did the Takeover Panel—in other words, the authority of government".—[Official Report, 21/7/86; col. 42.]
I find that a curious argument because the Takeover Panel does not derive its authority from the Government. It derived and continues to derive its authority from the commitment of the practitioners who set it up.
6.30 p.m.
Lord Williams of Elvel: I am sorry to intervene, but the noble Lord has mentioned my name and what I said. I specifically said that at the time the Takeover Panel was set up in 1968 it derived its authority from the Bank of England, and at that time the Bank of England had very great authority in the markets. The Bank of England has no longer such authority in the markets, which is why I am saying that a commission is required, an SIB, which has that same authority over a wide range as that which in my view the Bank of England no longer has.
Lord Lucas of Chilworth: That may well be so, but I was merely suggesting that the Takeover Panel today derives its authority from the commitment of its practitioners; those who set it up, largely, and who continue to operate it.
Lord Williams of Elvel: Perhaps we may reserve this discussion of the authority of the Takeover Panel and its consequences until we come to that amendment.
Lord Lucas of Chilworth: I am quite happy to do that. I used the quotation to illustrate the curiosity of the argument that is before us now, that this regulatory authority should have a governmental or a quango element, as the noble and learned Lord suggested it should be.
Lord Silkin of Dulwichx: The Minister must not mislead the Committee. I said very clearly that as it is at the moment it appears to be a quango—a quasi autonomous non-governmental organisation. We want it to be a public body. It would not be non-governmental.
Lord Williams of Elvel: Like the Bank of England.
Lord Lucas of Chilworth: Both noble Lords have said exactly the same thing twice over. When the noble and learned Lord, Lord Silkin, was speaking to us earlier he said that he saw this as a quango. I wrote down, "No, it is not a quango; it is a private sector body". That is how we see the operation; quite distinct from the way the noble and learned Lord apparently sees it.
When we framed our proposals for a designated agency we wanted to draw on the commitment of practitioners. So we see this as an agency, as a body, created by the City. The Securities and Investments Board Limited was set up last year by Sir Kenneth Berrill and Sir Martin Jacomb. We believe that as a result it will enjoy greater support in the City and hence be more effective. We are not entirely relying on voluntary commitment, although that is of prime importance. The Bill provides for a wide range of statutory powers to be given to the agency. So the commitment will be reinforced by the authority of statute.
It is not necessary to give the agency the authority of government, as was suggested by the noble Lord, Lord Williams, in his recent intervention when he described to me the origin of the Takeover Panel, which included the Bank of England and indeed the authority of the government. We do not see it that way at all. We see the voluntary commitment reinforced by the authority of statute. We do not believe it is necessary to give the agency the authority as such of government. To make the agency an arm or an agent of the government machine, as these amendments propose, would be quite undesirable, because it could not operate free from the expenditure controls which apply in the public sector—controls which, I suspect, will apply for some while yet.
The Bill already provides for a strong body at the heart of the new regulatory regime. To turn it in any
616
shape or form into a Crown body, far from strengthening it, would weaken its effectiveness. Nothing would be gained. Flexibility would be lost. The commitment of the City to supporting its work could well be lost.
For those reasons we see our solution as being the better solution in bringing protection to the investors. That is what the Bill is about. It is not about a Government authority: it is about protecting investors, such protection being devised and monitored by the practitioners themselves—and, added to that, within a statutory framework.
Lord Boardman: I support what my noble friend the Minister has said. My only purpose in intervening is to not let go unchallenged the comments of the noble Lord, Lord Williams, who referred to the Bank of England as now lacking any authority. I hope that—
Lord Williams of Elvel: I am sorry to intervene so early in the noble Lord's intervention, but I did not say that the Bank of England lacked any authority. I said that the Bank of England, which had the authority to set up the Takeover Panel as a direct dependency of the Bank in 1968, did not in my view have the authority to supervise the SIB or to set up direct dependencies today. That is why I would resist the idea that the SIB should be a dependency of the Bank of England. I believe that the SIB should be a dependency of the Crown. That was the argument I was making. Whereas in 1968 the Bank was very powerful in that area, we are now on a wider canvas and I think the SIB should be based on the Crown.
Lord Boardman: I accept that my noble friend is comparing the authority at one time with the authority at another. I think it would be a waste of the time of the Committee to enter that argument, but I believe it would have been most unfortunate if it had been left on the record that the Bank of England's authority had been diminished in the way in which I thought the noble Lord, Lord Willaims, had suggested. I believe that its authority is very great, not only within the City of London but far beyond, and the respect in which it is held throughout the world is very great. It would be a pity if anything was said which eroded that.
Lord Williams of Elvel: I would certainly accept what the noble Lord, Lord Boardman, has said. If I said or implied in any way that the Bank of England's authority over the banks under its supervision, or the Bank of England's general status, had been undermined, I certainly withdraw the remark I made. What I was trying to imply was that the Takeover Panel was created, as the noble Lord, Lord O'Brien, will tell us if he intervenes, under certain circumstances in 1968 when the Bank of England enjoyed a role in life slightly different from the role it enjoys at the moment. Perhaps I may refer to the regulation of the London Metal Exchange, over which, when I knew it, the Bank of England had very little authority other than that there was a small commodities division inside the bank which looked after certain matters. As Professor Gower pointed out,

617
the London Metal Exchange and other commodity markets were substantially unregulated.
While not meaning to reflect on the authority of the Bank of England, or to diminish its status in any way, I was arguing, and I shall continue to argue, that the Bank of England is not the body that should be supervising the SIB. The body that should be supervising the SIB, and from which the SIB should derive its authority, is the Crown. I persist in that argument.
Lord O'Brien of Lothbury: I am afraid that I returned to the Committee after a brief absence and in the middle of this debate and so I cannot claim to know all that has been said. However, the Bank of England and the Takeover Panel has been mentioned, and the noble Lord, Lord Boardman. has put the question in context. It must be remembered that in 1968 the Takeover Panel was an effective instrument in a fairly narrow field, and it still is today. We are here talking about a SIB operating over the whole field of securities business.
Although it is a long time since I had anything to do with the Takeover Panel, I believe that it still operates very effectively. Like all regulatory systems, it has its troubles from time to time, but I do not believe that it has fallen into disrepute or has disappointed myself as its creator. However, it is a fairly small affair, and I believe it is one that should be largely left undisturbed in the overall context of supervision of the securities industry.
The SIB is a much bigger affair. The Bank of England will undoubtedly exercise much influence. That does not mean to say that it exercises control. The bank is a very curious institution. It is effectively the controller of the banking system and nothing more. But over its nearly 300 years of existence its influence, which is very great, has spread into many areas—into industry, the commodity markets and the securities business because it is an influential body. Some of its influence has been highly informal, and perhaps, some would say, over-extended. Be that as it may, the Bank of England is there, and I still believe that it does a very good job in that position. I would be very much against the SIB being something that was an arm of government specifically laid down by statute. I feel that it should be the peak of a practitioner-regulated system, if one does not like self-regulation—and I believe that some people do not.
Lord Grimond: I may return to ponder a little on exactly what is the SIB. We have been assured by the Government that it is not, as the noble and learned Lord, Lord Silkin, suggested, a quango. It has been described by the Government as a private sector body. The Government say also that it derives authority from statute, which is undoubtedly true, but that it does not derive authority from the Government.
The point that interests me is exactly what powers Parliament will have over the SIB. The Minister pointed out that subsection (10) lays down that:
"No delegation order shall be made unless a draft of it has been laid before … each House of Parliament".
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We all know that the consideration of orders by both Houses of Parliament is in many respects unsatisfactory. Am I right in thinking that that is the only power Parliament will have over the SIB? That is to say. once a delegation order has been made, and once that body has been set up, the Government intend to treat it as they do any other limited company. Am I right in thinking that it will be a private sector company answerable to the City and possibly to the Bank of England but not directly answerable to Parliament? I am not certain that such is what the Minister intended, because he seemed to be saying at one point that the SIB's authority derives from statute and that certainly there was public interest in its doings. I am interested to know how that public interest will be expressed. I am interested to know how the Minister's power over that body. which I believe is undoubted, will be examined by Parliament.
If the Minister argues that such is rather wide of the amendment, all I can say is that the discussion has gone fairly wide already, to discuss the commodity markets and the role of the Bank of England, which arc very big matters indeed. I would have thought that my points are as relevant to the amendment as many of the others that have been made. I shall be grateful to the Minister if he can clear up exactly what will be the nature of this private sector body and what powers, if any, Parliament will have over it.
6.45 p.m.
Lord Lucas of Chilworth: For example, am change in Clause 1, which defines investments, will have to be approved by the Secretary of State and will have to be put before Parliament. Other matters that we have been discussing would have to come before Parliament by way of both affirmative and negative resolutions. The appointments to the body are made by the Secretary of State and by the Governor of the Bank of England, which will give one arm of authority. There will be a requirement to provide an annual report, and that will have to be laid before Parliament and could of course be debated in the usual way. There will be power for the Secretary of State to remove all functions or blocks of functions under Clause 97, which we shall be reaching shortly.
The Secretary of State himself will be answerable to Parliament on all those powers. So I believe that however unsatisfactory the noble Lord. Lord Grimond, may find some of the procedures through Parliament, there is an adequate route for the Government to be informed through the powers retained by the Secretary of State and for the Secretary of State's answerability to Parliament as well as for both the Government and Parliament to hold some of the reins in their hands.
Lord Grimond: I thank the Minister very much for that reply, but it seems to show that the SIB is by no means a normal private sector body. That is the point that I had in mind.
Lord Silkin of Dulwich: I am grateful to noble Lords who have contributed to this debate, particularly those who have brought a great deal of knowledge of the City

619
of London with them. I may say that I am particularly grateful to the noble Lord, Lord Grimond, because his remarks illustrated the weakness of the position in which the Government now find themselves, by virtue of the compromise that they accepted in another place.
What is being set up is neither fish nor fowl. The virtues claimed for it are of a private company that is a practioner-recruited body, whereas the truth is that the SIB could not exist without the statutory powers that are being given to it under the Bill. It is in almost all respects in the same position as a public body created by statute. The difference ascribed by the Minister was in part the desirability of having flexibility. I accept that there is that need. However, I find it very difficult to understand why at this stage, after all the discussion in the debates in another place in reaching the compromise I mentioned, the Government could need further time to ascertain which functions the SIB or other designated agency must have in order to do its job properly that are not already apparent on the face of it.
The only other virtue of the system proposed by the Minister is that the SIB would not be bound by Treasury control on expenditure. I wonder how important that really is to such a body. Is not the reality the point made—admittedly not supporting me—by the noble Lord, Lord O'Brien, that the great difference between the Takeover Panel and the SIB, or other designated agency, is that the Takeover Panel could quite properly operate because it was operating over a very small field, as the noble Lord said, but that in the SIB we have a body which will operate over the whole field of control of the SROs? As the Minister rightly said, the whole purpose of this system is to protect the investor. It is done through a tiered system, with the SROs and above the SROs, to control them, another body. This in the Bill is the SIB. Then above that other body we have the powers of the Secretary of State and, as we learned from the reply of the Minister to the noble Lord, Lord Grimond, the Secretary of State we have Parliament exercising its powers of supervision. How it properly fits into that scheme that the SIB should be this private sector body which, in everything except name, is a statutory body—because it would not exist without the statutory powers that are being granted to it—I find it very difficult to see.
In this case at any rate, it seems to me that the issues are very clearly before the Committee. It is one thing or the other, and we wish to test the opinion of the Committee upon that.
6.51 p.m.
On Question, Whether the said amendment (No. 243A) shall be agreed to?
Their Lordships divided: Contents, 56; Not-Contents, 102.

DIVISION NO.2

CONTENTS

Amherst. E.

Boston of Faversham, L.

Ardwick, L.

Brockway, L.

Barnett, L.

Carmichael of Kelvingrove, L.

Birk, B.

Cledwyn of Penrhos, L.

Blyton, L.

David, B. [Teller.]

620

Davies of Penrhys, L.

Pitt of Hampstead, L.

Dean of Beswick, L.

Ponsonby of Shulbrede, L.

Gallacher, L.

[Teller.]

Graham of Edmonton, L.

Prys-Davies, L.

Gregson, L.

Rhodes, L.

Grimond, L.

Seear, B.

Hampton, L.

Shackleton, L.

Hatch of Lusby, L.

Silkin of Dulwich, L.

Hooson, L.

Stallard, L.

Houghton of Sowerby, L.

Stedman, B.

Howie of Troon, L.

Stewart of Fulham, L.

Jeger, B.

Stoddart of Swindon, L.

John-Mackie, L.

Taylor of Blackburn, L.

Kennet, L.

Taylor of Gryfe, L.

Kilbracken, L.

Taylor of Mansfield, L.

Kirkhill, L.

Tordoff, L.

Llewelyn-Davies of Hastoe, B.

Underhill, L.

Lloyd of Kilgerran, L.

Wells-Pestell, L.

Lovell-Davis, L.

Whaddon, L.

McIntosh of Haringey, L.

White, B.

Mackie of Benshie, L.

Williams of Elvel, L.

McNair,. L.

Wilson of Rievaulx, L.

Morton of Shuna, L.

Ypres, E.

Nicol, B.

NOT-CONTENTS

Ampthill, L.

Layton, L.

Atholl, D.

Long, V.

Bauer, L.

Lucas of Chilworth, L.

Beaverbrook, L.

Lyell, L.

Belhaven and Stenton, L.

McFadzean, L.

Beloff, L.

Macleod of Borve, B.

Belstead, L.

Mancroft, L.

Bessborough, E.

Margadale, L.

Bethell, L.

Marshall of Leeds, L.

Boardman, L.

Maude of Stratford-upon-

Boyd-Carpenter, L.

Avon, L.

Brabazon of Tara, L.

Merrivale, L.

Bridgeman, V.

Milverton, L.

Brougham and Vaux, L.

Monk Bretton, L.

Butterworth, L.

Mottistone, L.

Caithness, E.

Mountevans, L.

Campbell of Croy, L.

Mowbray and Stourton, L.

Carnegv of Lour, B.

Munster, E.

Carnock, L.

Murton of Lindisfarne, L.

Colville of Culross, V.

Napier and Ettrick, L.

Colwyn, L.

Northesk, E.

Constantine of Stanmore, L.

O'Brien of Lothbury, L.

Cottesloe, L.

Onslow, E.

Craigavon, V.

Orr-Ewing, L.

Craigmyle, L.

Plummer of St Marylebone,

Cullen of Ashbourne, L.

L.

Davidson, V.

Rankeillour, L.

Denham, L. [Teller.]

Renwick, L.

Drumalbyn, L.

Rodney, L.

Elles, B.

Romney, E.

Elliot of Harwood, B.

St. Davids, V.

Elliott of Morpeth, L.

Sanderson of Bowden, L.

Elton, L.

Sempill, Ly.

Faithfull, B.

Shannon, E.

Fraser of Kilmorack, L.

Sharples, B.

Glanusk, L.

Stodart of Leaston, L.

Glenarthur, L.

Sudeley, L.

Gray of Contin, L.

Swinfen, L.

Grcenway, L.

Swinton, E. [Teller.]

Gridley, L.

Terrington, L.

Hailsham of Saint

Tranmire, L.

Marylebone, L.

Trefgarne, L.

Hanson, L.

Trumpington, B.

Harmar-Nicholls, L.

Tryon, L.

Henley, L.

Vaux of Harrowden, L.

Hives, L.

Vickers, B.

Holderness, L.

Vinson, L.

Hooper, B.

Vivian, L.

Hylton-Foster, B.

Whitelaw, V.

Kimball, L.

Wise, L.

Kinloss, Ly.

Wynford, L.

Lane-Fox, B.

Young, B.

Lauderdale, E.

Resolved in the negative, and amendment disagreed to accordingly.
7 p.m.
Lord Brabazon of Tara: My Lords, in moving that the House do now resume, I suggest that we do not return to further consideration in Committee on this Bill until eight o'clock. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Apple and Pear Development Council Order 1986
Lord Belstead: My Lords, I beg to move that the draft Apple and Pear Development Council Order 1986, which was laid before the House on 26th June, be approved.
This order is presented in accordance with the requirements of the Industrial Organisation and Development Act 1947. The effect of the order will be to replace, with amendments, the Apple and Pear Development Council Order 1980. I should like to explain briefly why it has been necessary to make a replacement for the 1980 order rather than simply amend it again, and then go on to describe the three main changes which this order will bring about, if your Lordships agree to it.
The reason for replacing the 1980 order rather than amending it is that the 1980 order, and the amendment order made later the same year, were both faulty. Your Lordships may recall that at Report stage of the Agriculture Bill the Government tabled a new clause which has the effect of validating the two faulty orders retrospectively. The noble Lord, Lord John-Mackie, was kind enough to agree that the amendment was in a good cause. Since the fault with the two orders was rather an obscure one, and since I explained it at some little length to the House on that occasion, I do not propose to go into it again unless your Lordships wish me to do so. Suffice it to say that we felt it desirable also to bring forward this replacement order to put matters on a proper legal footing for the future.
Three main changes are proposed in this draft order. First, it is proposed to raise the maximum rate of levy that may be charged from £40 per hectare to the £65 specified in Article 9(l)(a). I emphasise that this is the maximum; it is not the current levy, which in fact stands at £33 per hectare. The increase in the maximum rate of levy is being sought in order to allow the council the possibility of raising its levy above £40 in the future.
The council has, in fact, sought the approval of my right honourable friend the Minister to raise the levy for this coming year from £33 to £45, subject to this order being passed. There is good reason for an increase of this size. The council has decided that it, like other sectors of horticulture, should contribute to the funding of R & D projects, and £ 10 of the proposed increase is for this purpose. The remaining £2 is to cover increased costs over the two years since the levy was last increased. My right honourable friend is consulting the National Farmers' Union about the council's proposal for next year's levy. The National Farmers' Union was consulted on this proposal to
622
raise the maximum possible rate of levy and said that it would prefer to see the maximum levy increased to £60, rather than the £80 proposed by the council. The NFU has since indicated that this proposed increase to £65 per hectare is acceptable. We, in turn, feel that £65 is sufficient to give a ceiling to allow the council to enhance its activities in the way that it envisages over the next few years. That is the first main proposal in the order.
The second proposed change in this order concerns the definition of "the industry" in Article 2. This is a somewhat technical change, but the purpose is to make clear that growers who process some or all of their apples or pears on their own premises into fruit juice, for example, and do not therefore sell them as apples and pears, are nevertheless liable for levy on their whole growing hectarage.
The third proposed change concerns the increases in the levels of penalties in Article 12 and the fee chargeable to those who wish to examine the Register of Growers under Article 6. The penalties in question, which are set out in Article 12(1), 12(2) and 12(5), were set at the level of £50 by the 1966 order and have not been increased since. These increases to £400 are necessary therefore to update the fines to today's values and restore their deterrent effect. I should perhaps mention that we have removed from Article 12(5) the possibility of imprisonment of growers for knowingly making false returns.
The charge for examining the register is to be increased from 10 pence to,
"a fee not exceeding one pound".
I should make clear that the Register of Growers contains only names and addresses of growers and not any other personal or business information about them. I also assure your Lordships that the council is properly registered with the Data Protection Registrar as required by the Data Protection Act 1984.
Finally, I should say that the changes proposed in this order have been the subject of full consultations with the council and other interested parties. Consultation is of course generally undertaken, but in this case it is actually a requirement of the 1947 Act. The changes proposed are, I believe, acceptable to the interested parties.
During its nearly 20 years of existence, the Apple and Pear Development Council has served the industry well. We know from the poll of growers carried out during the review of the council in 1984 that the majority of growers accept that the council has an important role to play and they recognise the contribution that it has made up to now. With the advent of industry funding of R & D and Food from Britain the council's role is certainly not likely to diminish, and it is important that it should have sufficient scope to raise its income in order to fulfil these new responsibilities. This will enable the industry to face the future with greater confidence and to meet the increasing competition likely to come both from without and within our shores. I therefore have pleasure in commending this draft order to the House. I beg to move.
Moved, That the draft order laid before the House on 26th June be approved. [26th Report from the Joint Committee.]—(Lord Belstead.)
Lord John-Mackie: My Lords, we are obliged to the Minister for putting this order before us and explaining, as he did a week or two ago, the necessity for change because of some faults. He is right in saying that it is better to bring in a completely new order rather than to amend the old order. Have there been any recriminations or claims because of this fault? It would be interesting to know whether there has been anything of that nature.
A week or two ago we passed the Horticultural Development Council Order under the Industrial Organisation and Development Act. Why do we need two bodies to deal with horticulture and apples and pears? Why apples and pears alone? Why not plums and greengages? The present Government are keen to do away with quangos, and so on. Here is an opportunity to amalgamate two, which would probably save a lot of money, premises, and so on. Perhaps the Minister will comment on that.
How much money does the maximum figure raise? How much money is required each year? Did I hear the Minister say that the council had to have a change in the amount passed by the ministry before it could be applied, or can it go right up to the maximum of £65 without asking permission? I though the Minister said that it could.
Those are the points that interest me in regard to this order. However, the noble Lord may remember that during the discussion on the last order I raised the rather tricky point that people with a conscience would not join organisations. It is not that they are unwilling to pay the levy or the charges, but that they do not want to become members of an organisation. Does the same situation arise here, and has the Minister been able to do anything about those people who have approached us in this respect?
In the meantime, as the Minister said, the NFU is perfectly happy with this order, and we also give it our blessing. I shall be interested to hear what the Minister has to say on the small points I have raised.
Lord Belstead: My Lords, I am glad to say that I do not think there have been any recriminations as a result of the invalidity of the previous orders and the necessity to replace them.
The noble Lord, Lord John-Mackie, asked an interesting question as to why the Horticultural Development Council is being set up while at the same time we continue with an Apple and Pear Development Council. The answer is that the Government turned to the horticultural sector and asked whether it was prepared to raise money for research and development, and we felt from the informal consultations that took place that it would be well worth going out to a poll of growers. We then had to have regard to the organisations which already exist. The noble Lord will remember that the apple and pear growers have their own Apple and Pear Development Council, and the mushroom growers have their own association. They also wish to raise their own money for research and development. With regard to the rest of horticulture, we polled the growers who agreed that a Horticultural Development Council should be formed. Therefore, if the order is agreed to, the members of the Apple and Pear Development Council
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will be doing the same as the members of the Horticultural Development Council.
What the Apple and Pear Development Council intend to raise for research and development by way of an additional levy will work out at about the same per grower as the levy being raised from those within the scope of the Horticultural Development Council.
The noble Lord asked me whether the order's main effect, which allows the levy to be raised to a maximum of £65, means that the Horticultural Development Council could raise the levy to £65 without coming back to Parliament. The answer to that is yes. It will be the maximum allowable. As I said, we and the industry know that the council intends asking for only £12 more. Added to £33 that means that it will be looking for a £45 levy next year, if the order is agreed to.
The noble Lord asked two further questions. I am rather ashamed to say that I cannot tell him the total amount that is raised by the order. If I may, I shall write to him on that point. He mentioned the Exclusive Brethren. It happens that the Ministry is not aware that any members of that sect happen to be apple or pear growers. The point, which the noble Lord is right in remembering, is still a matter of consideration and I hope discussion which will lead to a conclusion in the near future. I shall get in touch with the noble Lord about that point when I have something to report to him.
On Question, Motion agreed to.

Road Races (Northern Ireland) Order 1986
7.12 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell)The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell) rose to move, That the draft order laid before the House on 10th June be approved.
The noble Lord said: My Lords, this order is designed to bring up to date the provisions of the law in Northern Ireland relating to motor racing on public roads.
Lord Kilbracken: Hear, hear!
Lord Lyell: My Lords, if the noble Lord has a little patience, he will discover that one form of driving on his side of the border does not equate with our side of the border. He will be able to take part in the debate.
Although the existing road races order dates only from 1977, it is in fact a consolidation of an Act of 1950 and two related amendments, and so the order represents the first in-depth review of the legislation in 36 years.
The central feature of the road races legislation is the making of an order (commonly called a road closing order) by the Department of the Environment. The effect of this is to close specified roads to ordinary traffic for the duration of the race period, and also to suspend during that period the application of certain road traffic law provisions relating to both drivers and vehicles. Road traffic law in the past 36 years has

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become more complex and wide-ranging and this is reflected in the expanded range of enactments which can be disapplied. The opportunity is also being taken to strengthen the powers of the police and promoters to control spectators and to increase penalties for various offences.
I now turn to the detailed provisions of the order. Article 3 deals with the making of road closing orders which, so far as concerns motor-cars and motorcycles, are limited to 10 in each year. There is no numerical limit placed on orders for hill climbs and kart races— I spell it with a "K" as in Kit Kat; your Lordships will find the definition of those vehicles in the order—because such events usually involve short courses, last only a short time and often form part of a local festival. No group or person, from whom comment was sought on the draft order before us tonight, suggested that an increase in the number of road closing orders was desirable, and so no change is proposed. While for other events such as hill climbs and kart races, no limit is placed on the number of road closing orders which may be made each year, the Department of the Environment, in conjunction with the RUC, exercises strict control over their number and location. Article 3 also provides that road closing orders cover such matters as spectator safety by providing for proper marshalling of crowds, the proper conduct of races and adequate insurance arrangements.
Article 4 deals with the control of traffic going to and from races by giving the chief constable power to issue directions to deal with any perceived traffic congestion problem. Article 5 reflects the growing complexity of road traffic law by substantially extending the range of provisions with which competitors and vehicles are not required to comply. The items now covered include construction and use and lighting regulations and the possession of a driving licence. Article 6 deals with the enforcement of the provisions of road closing orders and also empowers the police and race marshals to deal with abandoned vehicles and stray aninals which might interfere with the running of a race.
Article 7 relates to the department's expenses while Article 8 is concerned with the application of the provisions of the order to events held on the Dundrod Circuit which is the home of the Ulster Grand Prix motorcycle race. The Dundrod Circuit differs from others in Northern Ireland in that it is the only one which is specifically described in legislation and is also the only circuit where a road closing order may provide for the imposition of a charge on vehicles and spectators entering the race area on the day of the race. Proceeds of this sale are passed by the promoters to Lisburn Borough Council as successors to the former Antrim County Council which originally provided the circuit as a tourist development scheme, and are used by the borough council to provide course facilities.
The order is unique in United Kingdom terms but not in the British Isles because racing on closed public roads also takes place on the Isle of Man. Indeed, this order reflects changes made by the Tynwald in the Road Races Act 1982. The continuance of road racing for which this order makes provision will ensure that
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Northern Ireland will remain in the forefront of motor sport. I beg to move.
Moved, That the draft order laid before the House on 10th June be approved.—(Lord Lyell.)
Lord Prys-Davies: My Lords, the draft order was laid on 10th June, but we were advised within a week or so that the Hybrid Instruments Committee of your Lordships' House had declared the draft order to be hybrid because it affected the interests of Lisburn borough council. Any person affected was invited by public notice to petition against the draft order to this House not later than 26th June. Will the Minister confirm that no petition has been received?
The Minister has explained to the House that the order represents the first in-depth review of legislation affecting motor racing on closed public roads. He has reminded the House that, apart from the Isle of Man experience, within the United Kingdom the legislation is unique to Northern Ireland. In those circumstances, ordinarily we should have looked to the Northern Ireland Assembly for guidance on the adequacy of the in-depth review, on the consultation procedure, on the merits of the order in general and on its individual articles. Of course the Assembly is no longer in existence. But, had it been, I am conscious that on past form it would almost certainly have produced some improvements to the order. I believe that it is our duty from these Benches to touch upon matters which we think that it might have raised with the department. I have four points and no more.
First, a motor race on a public road can be a source of annoyance and a nuisance to the occupiers of houses adjoining the specified road. Are the residents who could be adversely affected by an order made by the department notified of the application by the promoter for a road to be closed? Are they given an opportunity to object? There is no reference whatsoever in the order to the rights of an objector. Should not the order give an objector at least the right to be heard?
My second point relates to the matters which have to be included in the order to be made by the department authorising the use of the road for motor racing. It is mandatory that the promoter effects an insurance policy against certain risks; that is pretty obvious. It is mandatory that the public right of way over the road is suspended; that is also pretty obvious. And it is mandatory that traffic regulation provisions are included. But it is not mandatory that the order to be made by the department should contain provisions relating specifically to the safety of spectators. The Minister referred to safety, but there is nothing in the order which places a mandatory duty on the department to include a provision relating to safety. Motor racing on a public highway, even if it is closed by the authority of the law, is still hazardous. Should not safety requirements have a high priority and be named among the mandatory permissions? In the absence of a mandatory requirement, does the department have power to insist on what is to be done in the interests of safety?
My third question relates to the offence which is committed by the keeper of an animal found without

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lawful authority on a specified road. That is an absolute offence, carrying a Level 3 fine; that is, a fine of up to £400, which is a not insubstantial figure. What is interesting about that offence is that it is not confined to the keeper of cattle but relates to the keepers of all animals. Thus it means that the keeper of a cat, a dog or poultry which strays on the road is guilty of an offence without proof of intent or of negligence. Ordinarily in English law the keeper of a cat or dog is not responsible if it trespasses. By their nature cats and dogs trespass. I therefore ask the Minister whether the offence has not been too widely drawn.
My final question relates to the powers of a race marshal. Under Article 6(3) a constable or a marshal may remove persons who, if I may paraphrase, are interfering with the conduct of a motor race and also any animal or vehicle found on the road. One has to read Article 6(5) before one realises that the marshal is not exempt from liability in a civil court unless at the time he was acting on the authority of a constable. I am not so sure that it is right in principle to draw a distinction in those circumstances between a policeman and a marshal. But, assuming that the distinction is valid, the wording of the article should have made it clearer that the marshal does not enjoy the status and the privileges of the constable unless he is acting under the authority of the constable.
Those are the four questions that I put to the Minister. Although I am sure that the order will add to the sum of human happiness in Northern Ireland, I believe that it is right and proper that we should delay its passage for at least five minutes to enable me to raise those reservations and the Minister to reply thereto.
Lord Hampton: My Lords, I thank the Minister for introducing the order, and I listened to the noble Lord, Lord Prys-Davies, with interest. It is good for a change to deal with a question largely concerned with the enjoyment of life for the people of the Province and not with divisive matters.
Whole stretches of road will be taken out of normal use for part of or the whole of a day at a time. I should like to ask the Minister just two questions. First, are there many objections by those who consider themselves inconvenienced? The noble Lord, Lord Prys-Davies, referred to the matter of complaints. Secondly, is there any basis for complaint by one section of the community as opposed to the other? There seems no reason, despite what the noble Lord, Lord Prys-Davies, said, for us to do other than support the order, and we wish it well.
Lord Lyell: My Lords, I am sure that the whole House will be grateful for the close attention to detail of both noble Lords. I was particularly grateful to the noble Lord, Lord Prys-Davies, for saying that he proposed to delay the implementation of this order, which deals with speeds considerably higher than those which he or I are able to achieve on the roads, for no more than five minutes. I pay tribute to the noble Lord; the questions that he raised had also crossed my mind and they are the questions that I should have asked had I been asking for detailed guidance on this
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unique aspect of life in Northern Ireland. I am afraid that I have not visited the Isle of Man, but I know that they have motor races, I think of a rallying type, the Manx Grand Prix and the TT races.
With regard to the noble Lord's first query, I can give him the assurance that no petition was presented to the hybrid instruments committee. He said that this was the first chance since 1950 that we had had to consider in depth motor racing in Northern Ireland. Both motor cars and motor cycles have been improved with scientific developments—perhaps not in the risks involved, but improvements have been made over 36 years in speed and cornering power and other such technical matters, so it is right to take advantage of the gap in your Lordships' programme to consider this legislation.
The noble Lord surmised whether the Northern Ireland Assembly would have thought differently on the issues considered in the order. In my conversations with members of the Assembly they were very much in favour of the 10 events to which I have referred. I was not too sure quite what they felt about kart races and hill climbs, but, as the noble Lord, Lord Hampton, said, we are dealing with the enjoyment of people in the Province and of many visitors.
The noble Lord, Lord Prys-Davies, referred to nuisance, noise and other inconvenience to members of the public. I am advised—and I have seen this for myself on the Dundrod circuit, specifically mentioned in the order—that every resident on the course (this applies to all courses covered, and, although I could go through all the courses, I shall mention only Portrush and Dundrod) is visited by an official of the promoting club and advised of the use of the road at that time. The noble Lord, Lord Hampton, will accept that these courses tend to go through towns. Earlier this year. I observed the North-West 200 proceeding through what seemed to be a main thoroughfare in Portrush. The course at Dundrod comprises what we would call A-class or B-class roads, and is very much a rural circuit with cottages, houses and groups of houses at the roadside.
I am given to understand that almost all the circuits have been in existence for many years. I recall that there were car races at Dundrod in 1955. That was, I think, the last year in which sports racing cars went round Dundrod. I am given to understand that the circuits have been used for the purposes we are discussing in the order for many years. I understand that every resident is well aware of the proposed use of the road, and I also understand that residents have the chance to make objections to the promoting clubs, but to our knowledge there are no major objections. If, however, I find that there are major objections to any race or to any of the road closing orders, I can perhaps write to the noble Lord; but I would stress that we are not aware of any objection. I know certainly of the care that is taken by stewards and members of each individual club going round and speaking to every individual resident on the course.
The noble Lord raised the question of insurance. This, too, concerns me. The noble Lord will find, if he consults page 3 of the order—
Lord Prys-Davies: My Lords, I raised the question of safety, not insurance. Insurance is adequately covered by the mandatory provisions, but not safety as such.
Lords Lyell: My Lords. I would refer the noble Lord to Article 3(7)(a). I do not have a definition of exactly what safety would entail. I understand, however, that what the noble Lord and myself would regard as safety is covered by the scrutineering and technical committee at each individual event. There are two events when roads are closed for four-wheeled motor cars—the Ulster Rally and the Circuit of Ireland. There are also eight motorcycle events for which roads are closed. All these events. I understand, are run by recognised clubs. They take place, I understand, under the RAC and the relevent motorcycle authorities, which take care of technical questions concerned with the machines and, indeed, take care of the riders. So far as I am aware, the courses are checked every single year by the stewards and by the technical committee. I am not too sure as to what would be the thoughts of the RUC and the department on relevant safety. However. I said in my opening remarks that the department and the RUC were in close contact on this aspect. But if I have omitted any aspect of safety, I shall certainly write to the noble Lord.
The noble Lord also mentioned animals, and drew attention to cattle. I have already referred to the fact that I observed the North-West 200, when I saw a dog escape on to the road. A large-sized dog being on the course caused a certain amount of disturbance. However, the dog was resident in one of the houses at the side of the course, and the marshals and those who lived in the house managed to entice the dog back to where it should have been. I should, however, like to bring your Lordships back to the opening answer to the noble Lord's first question. Every single resident on the course is indeed aware of what is happening on the road adjacent to the houses. They are aware, I believe, of the need to restrain dogs. I am not sure what would be the effect on motor cars, and certainly on motor-cycles, if poultry were to stray on to the road, but I am aware that dogs can be a dreadful risk.
Another question asked by the noble Lord related to marshalling. The hazards of motor racing and motorcycle racing are accepted. In the road closing order, the department specifies that certain marshal-ling arrangements must be complied with and that certain areas must be closed off so that spectators cannot use them. This is particularly relevant at the Dundrod circuit, mentioned in the order. The noble Lord asked about the marshals and the constables seeking to clear various obstacles from the course. I am given to understand that when I refer to vehicles this could be a motorcycle or car that might have crashed, or broken down. I understand that the marshals will normally take the first action but that the constables will also work with the marshals in seeking to keep back members of the public. As for animals, I understand, similarly, that the marshals will not only take action to remove obstacles but will warn riders and participants in the road race. Most of the technical action will be taken by the marshals. However, should the question of lawful authority be involved, the RUC
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has powers, I belive, to use its lawful authority if necessary.
The noble Lord, Lord Hampton, asked about those who could raise objections. I believe I have given the best answer I am aware of. which is that every single resident is visited. So far as we are aware, no particular grievance has been felt in respect of any of the ten occasions in any one year when roads are closed. I hope that I have covered all the queries. If not. I can perhaps glance through the Official Report and write to the noble Lord, Lord Prys-Davies, or the noble Lord, Lord Hampton.
On Question, Motion agreed to.

Criminal Justice (Northern Ireland) Order 1986
7.39 p.m.
Lord Lyell Lord Lyell rose to move. That the draft order laid before the House on 24th June be approved.
The noble Lord said: My Lords, this order will introduce a miscellaneous batch of measures in the field of criminal justice and criminal law which, in the following ways, will either strengthen or clarify the existing law in Northern Ireland or bring it into line with some recent changes in England and Wales. Articles 3 and 4 together with Schedules 1 and 3 of the order alter the method of trial for some offences which, at the moment, may only be tried on indictment by the Crown Court. Related changes have already been made in England and Wales whereby the method of trial for corresponding offences was altered so that they may, in certain circumstances, be tried summarily by a magistrates' court and so relieve the Crown Court of some of the less serious cases.
If we glance at Article 5, we find that this will principally remedy a defect in the present law by ensuring that neither a suspended young ofrenders centre order nor a committal order for non-payment of a fine causes a training school order to be ineffective.
Article 6 makes some changes, in line with England and Wales, to the law which requires a convicted person to compensate his victim, enabling compensation orders to be made instead of, as against in addition to, any other penalty and also gives priority to the payment of compensation over any fine that may also be imposed.
Article 7 provides for custodial remands of up to 28 days' duration. This article simply increases from the existing maximum of 14 days to a new maximum of 28 days the period for which a person may be remanded in custody where—and I stress this—both the accused and prosecution consent to an extended remand period.
Articles 8 and 9 make minor technical changes. Article 8 clarifies that a prisoner may be removed to a hospital for medical investigation or observation as well as for medical or surgical treatment. Article 9 makes a minor, consequential repeal to the Health and Safety at Work (Northern Ireland) Order 1978 arising from the provisions of the Forgery and Counterfeiting Act 1981.
Article 10 contains one of the order's more important provisions. We hope that in Article 10 we shall be able to offer the prospect of a quicker and more effective remedy to injured parties in Northern Ireland who have been deprived of the use and the possession of residential premises by other persons. In normal speech these other persons are sometimes referred to as "squatters". Article 10 re-enacts with certain amendments the present Northern Ireland law (which has been in force since 1946) obviously not with the intention of exacerbating or contributing to the problem of homelessness—which we hope it will not do—but with the aim of generally strengthening the law so that the existing court process is speeded up and a more deterrent maximum penalty is available to the courts in appropriate circumstances.
Article 11, if coupled with Schedule 4, provides for amendments to certain provisions of the Northern Ireland food and drugs legislation to bring the law relating to penalties, the method of trial and time limits for prosecutions generally into line with that which now applies in England and Wales.
If I may briefly run over Article 12, this contains the customary restrictions applicable to the operation of new legislation. Article 13 makes consequential amendments to the Northern Ireland legislation arising from this order and from earlier legislation.
I indicated when I began my remarks a few moments ago, and I hope it has been illustrated by my brief journey through the provisions of this order, that it deals with a miscellany of items, any one of which may be regarded as being useful in its own right to the administration of criminal justice and criminal law in Northern Ireland. It is in that spirit that I commend the order to your Lordships this evening. I beg to move.
Moved, That the draft order laid before the House on 24th June be approved.—(Lord Lyell.)
Lord Prys-Davies: My Lords, unlike the road races order many of the articles of this order bring the criminal law of Northern Ireland into line with the provisions of the criminal law of England and Wales. I note, however, that it has taken almost nine years to the day to assimilate some of the provisions of the criminal law of England and Wales. One wonders whether such a delay is justifiable.
However, in general we welcome the order which contains, as the Minister has said, a number of miscellaneous provisions in the criminal law field. We welcome in particular the amendments which were made following consultations with interested parties to the original proposal for an order published in July last year. I must say, in fairness, that the department has listened to the objections and reservations expressed during the consultative procedure. This we very much welcome.
I shall be grateful if the Minister will convey to his honourable friend Mr. Nicholas Scott, the Parliamentary Under-Secretary of State, our appreciation of his letter of 13th June, explaining the amendments which had been made to the original draft order. We welcome the redistribution of business between the Crown Court and magistrates' court. This
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should lead to a reduction of the number of cases coming before the Crown Court.
Again, the amendments to the compensation orders for any personal injury, loss or damage suffered or sustained by victims of crime are entirely to be welcomed. The compensation order is a worthwhile remedy for the victims of violence because it can be applied so quickly and so cheaply. We therefore welcome the amendments which are proposed in Article 6.
The important article, Article 10, deals with wrongful taking possession of premises. It does so by creating a new criminal offence. That is why it is so important. As the Minister has explained, we are dealing here with the old problem of squatting. Concern has been expressed that squatting has by this order been made a criminal offence. Nevertheless, we give the order our support. We would have been in much greater difficulty with this article had the original draft order not been amended to remove the retrospective application of the new offence from cases where the original entry had taken place before the operative date of the order.
Article 10 is not in substitution for civil remedy, but it should provide quick and simple machinery for repossessing a property from a squatter. We note that the word "premises" in the article is defined to mean a,
"building … designed or adapted for residential purposes",
and,
"any land adjacent to such a building".
The order is not therefore confined to a residential building. Perhaps the Minister will confirm that the offence is committed not merely when a person occupies a piece of land such as a garden used in conjunction with a residential building, but also when he occupies a field which happens to adjoin residential premises. Perhaps the Minister can clarify that point.
Concern has been expressed about Article 7 which allows a magistrates' court to remand an accused person in custody for 28 days with his consent. We can see what lies behind the article. It will lead to a saving of time of the court and the time of police and prison officers. However, there is anxiety that the extension of the remand period to 28 days could lead to a casual attitude to the needs of justice. Ideally, we would want to be assured that in practice the 28 days' extension will always be based on the genuine consent of the person held in custody; but I do not believe that this assurance can validly be given in the real world.
Article 13, which is the last article in the order—and I am not sure whether the Minister touched on this article—corrects a number of minor or textual errors in the Magistrates' Courts (Northern Ireland) Order 1981, and the Fines and Penalties (Northern Ireland) Order 1984. We are told that they are textual or minor errors. But one is left with this uneasy thought. Would these errors have occurred if these two orders had been subject to a clause by clause, line by line, almost word by word scrutiny which is given to Bills relating to England, Wales and Scotland? Maybe the textual correction in the last article of the order is a timely reminder of the inadequacy of Orders in Council. So, notwithstanding that worrying thought, we on these Benches give the order our blessing.
Lord Hampton: My Lords, I thank the noble Lord, Lord Lyell. for introducing this second order. I think we are all agreed that the order should not now, as it originally did, make squatting an offence retrospectively. At the same time, there certainly should be means of repossessing residential premises that have been wrongly occupied. I believe that the situation in the province will be brought into line with practice in England and Wales, and that that is sensible, so far as it is practicable.
I should like to ask the Minister just one question. My honourable friend Mr. Meadowcroft asked in the debate on this order in the other place whether the time spent on remand would be reduced. The reply from the Government (at col. 418 of the Official Report of 10th July) was that,
"the Lord Chancellor has sought both the appointment of extra judges in the High Court and in the county court in Northern Ireland, and the appointment of a substantial extra number of Queens Counsel in Northern Ireland to alleviate trial delays.'".
We on these Benches have strongly expressed the view that the delays are much too long. The noble and learned Lord the Lord Chancellor has been said to be seeking extra appointments—and I believe there has been comment on this in the press—but has his search met with success? With that query, we support this order.
Lord Lyell: My Lords, once again we are very grateful for the scrutiny of this order by the noble Lord, Lord Prys-Davies. I shall pass on his kind words to my honourable friend the Member for Chelsea, whose name and picture your Lordships may have seen recently in the newspapers. He has beaten the record of service of the noble Lord's honourable friend, and. indeed, my honourable friend is well into his fifth year, and very close to his sixth year, of service in the Province.
Lord Graham of Edmonton: Great stuff!
Lord Lyell: My Lords, there is hope for all of us,
possibly even for myself. I hope that I shall be given the time and the opportunity to continue this service. But certainly I shall pass on the kind words of the noble Lord, Lord Prys-Davies.
The noble Lord made a considerable case over Article 10 and what I referred to as squatting. He asked me whether, in the definition, the land would include a field beside a house. I am advised that only land which is adjacent to a building—and is used in connection with the building—would be covered by the definition in Article 10(8). Fields adjacent to a house and not used in connection with the building would not be covered. I would not want to get into an argument as to whether land for cattle grazing—and I am a farmer—would be used in connection with the building. Perhaps an owner's ponies grazing would have a close connection with the house. We had better not go too far down that path this evening. If I find any further details, I shall certainly be in touch with the noble Lord again.
The noble Lord was worried about the retrospective aspect of Article 10. I am given to understand that
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Article 10 will not be retrospective, and that any matter under the order before us tonight will have to occur after it comes into effect. So if there are any matters that are dragging on, they will continue under the old legislation and Article 10 will only bite after this order comes into effect.
The noble Lord also raised the question of a delay of nine years in the order before us this evening. We agree with the noble Lord that a lengthy delay is regrettable, but we want to stress that we had to find a suitable vehicle for this miscellany of legal provisions, and there certainly is not always a straightforward means of correcting these little lucanae in the law in Northern Ireland. I accept the noble Lord's observations on Article 13, and the errors which were not noticed until now.
The noble Lord raised one more question about genuine consent. He hoped that consent under Article 7 would indeed be genuine. I hope the noble Lord will accept that any attempt at pressure from the prosecution to increase the period on remand from 14 to 28 days would be apparent in the open court, and we consider that any member of the judiciary would be a in a position to assess whether the defendant was subject to undue pressure, or whether it had a bearing on his agreement to extend the period of remand. We believe that this would be a suitable safeguard.
But I am advised that this would not happen very often and that only 9.5 or 10 per cent. of the remand cases have been increased from seven days to 14 days. So a fairly small proportion of the cases on remand are covered by this article, and as I stressed it requires the consent of both the prosecution and the defence. I hope that this explanation will assure the noble Lord that undue pressure would not be brought to bear upon the accused person.
I was very grateful for the welcome of the noble Lord, Lord Hampton, to this order. He asked one question about additional judges. I understand that since 1980 there have been two additional High Court judges and three additional county court judges appointed to strengthen the judiciary. I shall study what the noble Lord said and see how it ties up with what my honourable friend said to the noble Lord's honourable friend in another place. If I have missed anything 1 shall write to the noble Lord. I hope that I have given your Lordships a fair run through these two orders. I am very grateful for the attention that has been paid to them, and I take the noble Lord's point that some of these errors might not have occurred had these orders been fought line by line with the intensity with which my compatriots, the Scots, fight out their legislation.
On Question, Motion agreed to.
Viscount Long: My Lords, I beg to move that the House do now adjourn during pleasure until eight o'clock.
Moved accordingly, and, on Question. Motion agreed to.
[The Sitting was suspended from 7.59 to 8 p.m.]

Financial Services Bill
House again in Committee on Clause 96.
[Amendment No. 243B not moved.]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 244:
Page 76, line 7, leave out ("subsection (5)") and insert ("subsections (5) and (5A)".).
The noble Lord said: I beg to move Amendment No. 244.1 spoke to this amendment with Amendment No. 111.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 245:
Page 76, line 10, after ("1") insert ("and paragraphs 4 and 4A of Schedule 13").
The noble Lord said: I beg to move Amendment No. 245.1 spoke to this amendment with Amendment No. 79.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 246:
Page 76, line 16, at end insert—
("(f) section (Communication by auditor with supervisory authorities) (2) above;").
The noble Lord said: I beg to move Amendment No. 246.I spoke to this amendment with Amendment No. 239.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 247:
Page 76, line 16, at end insert—
("(5A) This section does not apply to the making or revocation of a recognition order in respect of an overseas investment exchange or overseas clearing house or the making of an application to the court under section 12 above in respect of any such exchange or clearing house.").
The noble Lord said: I beg to move Amendment No. 247 which I spoke to with Amendment No. 111.
On Question, amendment agreed to.
[Amendment No. 247A not moved.]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 248:
Page 76, line 19 after ("6") insert ("or [Power to petition for winding up orders]").
The noble Lord said: I beg to move Amendment No. 248.I spoke to this amendment with Amendment No. 184.
On Question, amendment agreed to,
[Amendment No. 248A not moved.]
Clause 96, as amended, agreed to.
Schedule 5 [Qualifications of designated agency]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 249:
Page 159, line 11 at end insert (and including representatives of employees of authorised bodies").
The noble Lord said: My noble friend Lord Graham of Edmonton spoke to a similarly worded amendment when he moved Amendment No. 222. At that time he was referring to the financial services tribunal whose functions are principally legal functions. We come now to a much more important matter; namely, the membership of the designated authority—the SIB as it is named elsewhere in the Bill.
According to this schedule the SIB is to have representatives of those with business experience in financial services and also representatives of users of financial services. In my view there is a gaping hole in that membership provision. I totally agree that there should be representatives with business experience as well as users with experience. One part of the financial services industry which patently ought to be represented on the designated agency is the employees of the authorised bodies as well as the management of those bodies This is in no way a radical or startling departure The principle of tripartite representation is recognised in everything from the National Economic Development Council to the Manpower Services Commission and in virtually every European institution where the trade unions or other representatives of employees are represented as of right on such bodies.
There can be no conceivable threat to the designated agency in having representatives of this kind. Indeed, the expertise and the knowledge on the ground that they would bring to the membership of the designated agencies would be very great As I have said, there can be no conceivable disadvantages There could be very great advantages if the Government were to accept this modest amendment to the provisions for the membership of the designated agency.
Perhaps I may also refer to Amendment No. 250. I should like to say on behalf of those who sit on these Benches that we support the proposal of the noble Viscount Lord Chandos, and the noble Lord, Lord Ezra The proposal is defined in a negative way It does not say that there shall be representatives of consumers, it says that at least one-third of the body shall not be persons with business experience in the financial industries—in other words, they should be representative of the world outside We think that that is a useful provision which is in no way in conflict with the proposal which we make in Amendment No. 249. I beg to move.
Lord Ezra: I should like to speak to Amendment No 250. Although paragraph 3(b) indicates that "other persons" should be members of the governing bod\ of the designated agency, we feel that it should be defined in some way We have had this before in connection with the SROs We feel that there is a need, as emerged in that discussion, for some definition of the approximate proportion of those who should be members of the governing body who can be regarded as not being part of the activities of the City. Therefore, we should like to recommend that this degree of definition should be included in the schedule.
Lord Taylor of Gryfe: On behalf of my noble friend Lord Chandos, I should like to lend my support to Amendment No. 250. It is becoming increasingly apparent not only in business organisations but also in the City that there is a role for non-professionals being involved in these intricate and complex arrangements. The Stock Exchange has recognised that in the appointment of outsiders, if I may so call them, to the Stock Exchange Council. Even the council of Lloyd's has similarly recognised the contribution which can be made by the outsiders rather than the professionals. It is important that that should be quantified. That should not be overlooked. Therefore, a third might be the appropriate figure and give the appropriate balance in this organisation, and I have pleasure in supporting the proposed amendment.
Lord Lucas of Chilworth: I am grateful to those noble Lords who have agreed to, and spoken to, Amendments 249 and 250. However, I regret to say that I am going to ask the Committee to resist these amendments, however attractive they may seem. Indeed, we have had this matter before us on another occasion, although in perhaps a different sense.
Both the amendments impose some constraint on the way in which the board of a designated agency is composed. The noble Lord, Lord McIntosh, seeks to ensure that representatives of the employees of authorised persons are included on the governing body. If I pause on the word "representatives" it is not a quibble over the noble Lord's drafting as I quite realise that what he is talking about is a substantive point.
But may I take this opportunity to record that all those on the governing body of an agency will be appointed in a personal capacity and not because they represent some group interest. The board of a designated agency must comprise people of the highest calibre, capable of commanding the respect of both the City and the general public. They will have to take a much wider view of their responsibilities than if they were representatives answerable to some particular faction.
I am happy to have been able to put that point on the record, but I stress that I am not quibbling with the terms of the amendment proposed. May I put it to the noble Lord that the board has to be chosen so that it contains the best people to take on the very serious task which the board of a designated agency is to be expected to perform? Certainly this does not preclude the inclusion of employees. I am not for one moment suggesting that the schedule as drafted is intended to do that. That right person would make a valuable contribution to the work of the governing body. But I do not think it right to restrict the search for the right person by putting artificial constraints on how the governing body is to be composed. I would make exactly the same response if urged to provide for the inclusion of a member of any particular City group on the governing body. I am not making any special point about employees.
For these reasons I say to the noble Lord, Lord Taylor of Gryfe, that I would rather not set out in statute the proportion of the governing body of an
638
agency which comprises non-practitioners. I suggest that this might lead to situations where the composition of the board had to be determined by the need to achieve a set proportion, perhaps at the expense of excluding someone who could make a particularly worthwhile contribution, simply because he had, perhaps in the past, experience of investment business We also need to keep in mind the desirability of not haungtoo large and unwieldy a board To have to add a fixed percentage of non-practitioners could push the numbers up too high. A balance has to be struck so as to obtain the most effective board overall. The right composition for this purpose will very from time to time.
My honourable friend the Under-Secretary of State for Consumer and Corporate Affairs said during Standing Committee in another place that he expected a significant proportion of the members of the board to be independent I suggest to the Committee that that statement indicates the Government's thinking and avoids the potential difficulties which a statutory percentage could create.
That is something of repetition of what I said on the last occasion when we discussed what I suppose one might call proportionate representation. It is for the reasons that I have outlined that I would urge the noble Lord, Lord McIntosh, and the noble Lord, Lord Ezra, to withdraw their two amendments.
8.15 p.m.
Lord Graham of Edmonton: I am disappointed at the response of the Minister He is consistent. He makes the same case as he did on an earlier amendment that I moved seeking to establish that employees are in a special category. Besides having the interests of the business at heart, if they do not know as much as those who are pre-eminent in the industry at least they understand what it is all about, and they also have their livelihood at stake.
The Minister said that what they will be looking for are people of the highest calibre and who are respected. That would certainly fit most of the people I have in mind, who would at least be considered to be good representatives of those who are employed in the industry What the Minister said was that one wanted to avoid people being placed on a governing body representing a section The people I have in mind would not be representatives of, delegates of, reporting back to, talking orders or instructions from, a trade union. They would simply be seen to be people with a special experience, having actually sold the investment or sold the insurance It is not someone who is recognised as knowing finance, but perhaps knowing a little about that part of the business.
I do not envisage, if the Minister was sympathetic to this, or if it was placed in the Bill, that employees or trade unions would say, "We have got two places on the governing body" or, "one place, and that is ours". Not all all. I certainly recognise the well-established custom that when the Secretary of State appoints people they are his appointees in their personal capacity. I accept that. I am not arguing that employees ought to say, "We are entitled to so many places'.

639
Does the Minister not recognise in 1986, when we look increasingly upon improving industrial relations, with management buy-outs and with employees on the board, that the status and respect of employees has been elevated over the past 30 or 40 years by governments on both sides? In fact it has been done by the industrial situation.
What my noble friends say here is that there is a case for making sure that at the end of the day, when we look around and see who is on the governing body, we do not have to say, "What a pity. There is no one there who has actually sold insurance. There is no one there who has actually been at the sharp end." They may well know how to manage a business, make money, buy and sell, bob about the City doing all sorts of things, and that is needed, but what we say is also needed is the experience and the long and life-time commitment not just to the industry but to the employees. I am disappionted at the response of the Minister.
Lord Lucas of Chilworth: May I respond to the noble Lord. Lord Graham of Edmonton? He makes his points succinctly, and I should like to recognise here in the Committee that his voice is always worth listening to. I do not want to get involved in a discussion of the status of an employed person in the year 1986, or any other year for that matter, except that it has changed and all for the good, and I am happy about that, as he is. I am glad that he finds my argument consistent, because the argument has to be consistent.
The point I would make to him is that whichever way you look at it. if somebody is representative of some other body, some group, that is how it will be seen, and damage and danger I can see. What I would suggest, however, is that as the Bill is drafted no employee would be precluded from being a member. Employees can be included in the definition of,
"persons with experience of investment business".
and quite rightly so. If they then meet the other criteria which the Secretary of State wishes to consider all well and good. The noble Lord. Lord Graham of Edmonton, must not go away with the thought that the schedule precludes employees, because it does not do so. They can come in in their own right as people with experience of investment business. I feel that if one went any further than that one would be in danger of setting up sectional interests, which is the last thing that any of us wants.
Lord McIntosh of Haringey: The Minister chose to make his reply to my introduction of the amendment principally in terms of a criticism of the word "representatives". That was not his response to my noble friend Lord Graham. I recognise that fact, but if he wishes to maintain the position that this is not a quibble (I believe it is really a quibble) then he should have suggested some way in which the Government could have given ground on the substantive point rather than by criticising the wording of the amendment on the matter of the "representativeness". I remind the Minister that a representative is not a
640
delegate. A representative need not report back at every stage to his appointing body He need not be in am way constrained from playing a full part in the deliberations of the designated agency.
Employees' organisations, trade unions, staff associations or whatever they may be, have had a collective role in seeing that there is one or more persons on the board of the designated agency who will represent their interests. Those interests, as my noble friend Lord Graham has said, are not only important in their own right but they would be represented by people who really know the business at the sharp end, as he said They would really understand the nature of the business from being involved in it on a day-to-day basis rather than being involved as ultimate managers or representatives—because that is what they would be—of the large interests in the City.
I am disappointed that the Minister should have chosen to respond in that way I am disappointed that he did not think there was a valid point here with the valid examples I gave of tripartite authorities or tripartite boards with representatives of trade unions, representatives of management, representatives of government, and none the worse for that He has left it open to us to consider the wording again to overcome the difficulty that he raised, and we may do that at a later stage. However, in the meantime, I beg leave to withdraw the amendment.
Lord Taylor of Gryfe: Before the noble Lord sits down, may I add, if the Minister is to consider this again (if the noble Lord would press him so to do), that it is not uncommon in City institutions, such as the Court of the Bank of England, normally to have a trade union representative He does not attend as a representative. He is there as a member of the court and accepts the full responsibility in the same way as someone suggested in the amendment might act on the SIB. recognising his full responsibility as a member of the SIB and not directly as the voice of the trade unions involved I take the Minister's point that it would be quite wrong to have someone recognised as a representative of the workers He is there because of his experience, but it is important Such a representative is included in nationalised industries from time to time, and there is similar recognition.
I make one other point and that is that one of the largest forces in investment, the pension funds, belong to the employees, on which many employees sit as trustees. It is imporant that there should be employee representation as visualised in some rewording of the amendment because these people have to understand and in a sense are practitioners of the art of investment. There is a great case to be made for recognising the special place of employees in the SIB of the SROs.
Lord McIntosh of Haringey: I am most grateful to the noble Lord. Lord Taylor He has put a number of weighty additional arguments in favour of the general case that is being made in Amendments Nos. 249 and 250 However, since I had already indicated my willingness to withdraw the amendment, and since

641
there is a path open to us to put forward the same idea in different words at Report stage, it would be wrong of me to seek to divide the Committee on this amendment. But if the noble Lord feels like dividing the Committee on Amendment No. 250I am sure that my noble friends would support him. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 250 not moved]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 251.
Page 159, line 35, leave out from ("any") to end of line 41 and insert ("other body or person who is able and willing to perform them").
The noble Lord said: I spoke to this amendment with Amendment No. 72.
On Question, amendment agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 252:
Page 160, line 2, at end insert ("and the arrangements shall not be deemed to satisfy the requirements of this paragraph unless an ombudsman scheme is established.").
The noble Lord said: We come here again to the complex issue of complaints procedures. I should be the first to recognise that both Schedule 2 and Schedule 5 make provision for complaints procedures. The SROs and the SIB both provide for the investigation and, if possible, the resolution of complaints by users of financial services. But the problem with these investigations, rather like internal inquiries in the police or in many other spheres of life, is that however conscientiously they may be pursued and however honourably the people concerned may carry out the investigation, nevertheless justice has to be seen to be done as well as being done.
The users of financial services need the opportunity ultimately to appeal to an independent body if the internal investigations have not satisfactorily resolved the complaint. That principle has been recognised on many occasions over the past 20 or 30 years with ombudsmen schemes being set up for public administration generally for local authorities, and independent complaints authorities being set up for many aspects of the public service. If anybody should say that this is not the public service because formerly the SIB was a company limited by guarantee, I would only reply that if it were a company limited by guarantee like any other company limited by guarantee there would be no need for a Bill with well over 200 clauses, as this will be, to regulate from the public point of view the activities of that designated agency.
This has to be a probing amendment because I recognise at once that the term "ombudsman" has not been defined in this Bill and would probably have to be in a further schedule if the amendment were to stand adequately by itself and be a sufficient addition to the Bill. The principle of having a final port of call or final place where complaints can be raised which will be
642
known to all users of financial services, whatever aspect of financial services they may be concerned with, and which advertises its availability, as does the Advertising Standards Authority and many other independent authorities, is so important that I believe that it ought to be aired now. I hope the Minister will find it possible to respond to it other than in terms of criticism of the detailed wording of the amendment. I hope he will be able to address his mind and the mind of the Government to the substantive issue behind it.
Beyond the provision of an ombudsman there ought, in the end, to be the possibility of appeal to the courts. It is important, in any of these matters and in any consideration we give to complaints of misbehaviour in financial or other matters, that appeals should be reduced to an absolute minimum. It is important that as many as possible of the issues arising between the providers and the users of financial services should be dealt with immediately, on the spot, without any pomposity or delay or unnecessary legalism. However, behind that there must be a recognised and well known and single point of appeal for users of financial services who have not been satisfied by the investigation of their complaint. In the light of the many examples of successful ombudsmen—and I challenge the Minister to give a single example of a case where an ombudsman has been appointed and has not actually performed a useful service, or where that service has been withdrawn—I beg to move.
8.30 p.m.
Lord Ezra: Together with the amendment which the noble Lord, Lord McIntosh of Haringey. has mentioned goes the succeeding amendment which has very similar wording and I would therefore like to say that I fully agree with the arguments which he puts forward. I seem to recall that in a recent publication the SIB made it clear that it was their intention to appoint an ombudsman to look at complaints. If that is their intention and if we want to ensure that that intention, which is presently indicated quite voluntarily by the SIB, shall be enshrined in the legislation as it ought to be, I can see no possible objection from the Government side in so doing. This should make it absolutely clear that there is a desire to ensure that all complaints shall be dealt with fairly and independently. There should be no conflict of interest between what we should like to see in this Committee and what the SIB are apparently prepared to do. I therefore hope that on this occasion, at any rate, the noble Lord the Minister will see his way to agreeing to the amendment.
Lord Taylor of Gryfe: On behalf of my noble friend Lord Chandos may I add my voice to the persuasive remarks made by the noble Lord, Lord McIntosh of Haringey, and the noble Lord, Lord Ezra. We must ask ourselves what is the purpose of the Bill. The purpose is that the City may be properly organised and that small investors shall be protected in making use of financial services. I know that it is the Government's objective to extend share ownership. British Telecom is one example of this, and I believe that the TSB is now endeavouring to attract over 1 million

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shareholders to its public issue in September. I hope it will succeed.
I am in favour of wider share ownership. However, it must be recognised that if this is successful, share ownership will be distributed among many people who have no experience whatsover and who are totally unsophisticated in the area of making use of financial services. To them, going to the courts in order to protect their rights as provided within this Bill will not be an attractive proposition. The Committee is making heavy weather of this Bill; it is very complex and complicated. Goodness knows how the average small investor will understand his rights in the statute. It is important, therefore, that there should be a recognised body to which the small investor can go and say, "Look, I think I have had a bad deal. I am not sure how to pursue it within the Financial Services Act, but there should be an ombudsman as there is in the health service, local authorities and other areas to whom I can make a simple presentation of my case". It can then be decided whether that case should be taken to the courts. I suggest that that would satisfy many small shareholders who will be making use for the first time in their lives of the available financial services. The noble Lord, Lord McIntosh, has said that whether or not this is the appropriate amendment at this stage, perhaps the Minister could be encouraged, with some nudging from the SIB itself and from Sir Kenneth Berrill, to put this in the statute to protect the small investor. I beg to support.
Lord Lucas of Chilworth: May I again thank the three noble Lords for putting their views so succinctly. I start by agreeing that the provision of adequate arrangements for handling complaints about the conduct of investment business is a vital safeguard for investors, and especially for small investors, in pursuing claims against investment businesses.
Perhaps I may say to the noble Lord, Lord Taylor of Gryfe, that one of the principal safeguards for the small and less sophisticated investor is the basic step discussed at the outset of this Bill, which is the requirement that anybody giving investment advice or dealing in investments has to be an authorised person. I think we must accept that that will give a very large measure of comfort to a less sophisticated investor.
Now we must look at what I hope will be very exceptional cases where all has not gone right. There already exists in Schedule 5 a requirement that a designated agency must have effective arrangements for the handling of complaints. That is why there is a comparable requirement in Schedule 2 which will have to be satisfied by an applicant SRO if it is to be recognised. There are similar requirements for professional bodies and investment exchanges. In addition, Members of the Committee will have noticed that Clause 45(2)(j) provides that conduct of business rules may make provision for arrangements for the settlement of disputes. This provision would enable an ombudsman scheme to be set up. So the Bill already includes important provisions on the subject.
The noble Lord, Lord Ezra, was right when he reminded the Committee that last December the Securities and Investments Board issued a document
644
which set out its proposals for the regulation of investment business if powers were transferred to it under the Bill. That document, in paragraphs 1.39 to 1.45, announced SIB's intention to create an ombudsman who could grant an enforceable award to a person complaining against an investment business authorised by the board. SROs will themselves have to demonstrate that they have procedures for settling disputes which provide at least equivalent protection for investors and that their enforcement of compliance with their rules on the settling of disputes is adequate. I expect to see many SROs setting up comparable ombudsman schemes. The Committee will know that the Stock Exchange have recently announced, on their own account and on their own initiative, the establishment of an ombudsman scheme. Indeed, I understand also that the banks have done similarly. The advantage of an agency setting up their own scheme is that an ombudsman will have to have expertise only in the area of investment business covered by that regulatory organisation; he or she will not have to cover every single aspect of financial services. So I agree with the noble Lord, Lord McIntosh—a final port of call!
I believe that the idea of an independent ombudsman is being increasingly seen by the financial services sector as a sensible provision which can help investors. But there are other ways of dealing with complaints which could be equally satisfactory. There could be an arbitration scheme or some form of special arrangement for considering small claims without recourse to the courts. There are two possibilities. I do not think that the Bill should rule out these alternatives. The necessary safeguards and the powers are already in the Bill. The Secretary of State cannot transfer powers to an agency unless he is satisfied that it has an effective arrangement for the handling of complaints.
In looking at an agency's proposals, the Secretary of State will be particularly concerned to see that there are ways in which the small investor can get his complaint properly considered without great expense or great inconvenience. If the proposals do not include an ombudsman scheme, the Secretary of State will want to see that this objective is achieved in some other way. But it is for the organisation to determine that way and to prove its own case.
There is a final point. Both your Lordships' House and Members in another place will have an opportunity of considering whether the complaint arrangements proposed, which I have been discussing, are satisfactory when we come to debate the order for the transfer of functions. We believe that there are sufficient safeguards in the Bill. They allow for greater flexibility without imposing a direct solution which may not be totally and absolutely good for every single and individual SRO. I believe that there is a sufficiency in the Bill to take care of the points which the noble Lords, Lord McIntosh, Lord Ezra and Lord Taylor of Gryfe have put before the Committee. With that, I would seriously invite the noble Lords to withdraw their amendments.
Lord Grimond: Before the mover decides what to do about this, may I ask one question of the noble Lord

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the Minister? First of all, I am puzzled (because he seems wholly to approve of the amendment) as to why he objects to having it written into the Bill. It appears to be his hope and belief that ombudsmen will be appointed. If so, I do not see why he objects to having ii in the Bill.
But the question I really want to ask is this. Where in the Bill it says that the agency must have effective arrangements for the investigation of complaints, I take that to mean that they must have internal arrangements within the agency. That clearly seems to me to be what those words mean. The whole point of an ombudsman is that he is not internal. He stands outside, whether it is the health service, local government or parliamentary procedure. The ordinary Member of another place (and I have been one) has arrangements for examining the complaints of his constituents. But the ombudsman is outside Parliament, he is outside the health service, he is outside local government, and in this case he will be outside, as I understand it, the organisations dealt with in this Bill.
I wonder whether the Minister would like to say whether or not he agrees with that, because, if so, it seems to me that an ombudsman fulfils a different role, and it may well be that, on second thoughts, the Minister may find it rather peculiar, after his extremely persuasive arguments in favour of ombudsmen, to find himself unable to accept the proposition that it should be in the Bill.
8.45 p.m.
Lord Lucas of Chilworth: I am grateful to the noble Lord, Lord Grimond, for giving me a further opportunity. I hope, to be persuasive. Because I had been extolling, as it were, the virtues of an ombudsman system, he asked me why I would not put it in the Bill. The reason is quite simply this. While I think that the system is very good, it may not be appropriate in all cases; and it would be quite wrong to impose upon an SRO or any other regulatory organisation a system, an ombudsman, which does not totally meet their requirements. I accept from the noble Lord that an ombudsman is external from the organisation, but so also can be an arbitrator. Equally, we find in the Bill that an agency can devolve its responsibilities for monitoring the effectiveness of its rules to another body if that body is suitable, willing and able; and, equally, they may find it better to devolve the responsibility of complaints settlement to another body.
As the Bill is written, they can choose a number of areas in which to investigate this, and to draw into their rules an effective scheme. That scheme will have to be approved by the Secretary of State, and, as I have said, that scheme can be debated by both Houses of Parliament. If there are any deficiencies that can be identified, that will be the time to put them right. But it would be quite wrong at this stage, when SROs particularly are in the formative stages, to impose upon them a single area of complaint investigation and satisfaction. I do not believe that that will be the right way for SROs to proceed.
Viscount Colville of Culross: May I support my noble friend for a moment on this? I think it is a very important point The problem about ombudsmen —and in one of the amendments that is before the Committee we have a suggestion that an ombudsman should investigate and make reports, including recommendations, on complaints—is that that is just the trouble at the moment about the ombudsman system They do make reports after investigating complaints, and they make recommendations but then nobody ever does anything about it. Very often they do not do anything about it because they can afford to get away with it. I prefer on this my noble friend's argument about Clause 45(2)(j), which speaks of "arrangements for the settlement of disputes". That is what ombudsmen cannot do. If there are rules which are required for the settlement of disputes, then we will have gone further than recommendations.
Lord McIntosh of Haringey: It must be said that that was a series of exceptionally unsatisfactory replies from the Government In the first place, it is true that the SIB in its document indicates that it proposes to set up an ombudsman scheme, but I note from paragraph 143 that subscription to the scheme would be voluntary; that the board does not intend to make this a requirement. That must be unsatisfactory because, therefore, it need not be compehensive and will certainly not provide public and universal assurance that justice will be done to those using financial services.
In the second place—and I move from criticism to praise of the SIB—they propose to set up then own ombudsman system and they recognise that it will be both wasteful of resouces and potentially confusing for investors if each SRO provided its own ombudsman or other form of arbitration scheme to deal with complaints. The Minister has gone back on that and is proposing to the Committee, as it seems to me that there should be a series of potentially confusing ombudsmen, wasteful of resources, set up by each of the SROs. In that sense, the Minister's proposals do not go as far as the SIB.
But the most fundamental point, surely, is the independence of the ombudsman of a body which is making regulations and seeking to control the application of those regulations, whether it be an individual SRO or the SIB itself. That is paramount. The public must know that there is an independent body set up by statute on the face of the Bill when it becomes an Act, to which they can appeal against any injustice they may feel has been done. Of course, it is right, as the noble Viscount, Lord Colville, says, that as many problems as possible should be settled before that stage is reached. But that is in no way in conflict with the institution of the ombudsman, which has an honourable history over many years in our public life, our business life and our administrative life. To seek to reject this amendment, which is the only way of making an ombudsman system really effective, because it is independent, seems to us a very retrograde step. I would ask the Committee to take a view on this matter.
8.51 p.m.
On Question, Whether the said amendment (No. 252) shall be agreed to?
Their Lordships divided: Contents, 23; Not-Contents, 64.

DIVISION NO.3

CONTENTS

Airedale, L.

Morton of Shuna, L.

Carmichael of Kelvingrove, L.

Nicol, B.

Cledwyn of Penrhos, L.

Pitt of Hampstead, L.

David, B. [Teller.]

Seear, B.

Ezra, L. [Teller.]

Stoddart of Swindon, L.

Fitt, L.

Taylor of Blackburn, L.

Graham of Edmonton, L.

Taylor of Gryfe, L.

Grey, E.

Underhill, L.

Grimond, L.

Wells-Pestell, L.

Hatch of Lusby, L.

White, B.

Kirkhill, L.

Williams of Elvel, L.

McIntosh of Haringey, L.

NOT-CONTENTS

Ampthill, L.

Layton, L.

Auckland, L.

Long, V.

Belhaven and Stenton, L.

Lothian, M.

Beloff, L.

Lucas of Chilworth, L.

Belstead, L.

Lyell, L.

Boardman, L.

Margadale, L.

Boston, L.

Marshall of Leeds, L.

Brabazon of Tara, L.

Milverton, L.

Brentford, V.

Monk Bretton, L.

Bridgeman, V.

Mottistone, L.

Brougham and Vaux, L.

Mountevans, L.

Caithness, E.

Munster, E.

Campbell of Croy, L.

Murton of Lindisfarne, L.

Carnegy of Lour, B.

Norfolk, D.

Carnock, L.

Northesk, E.

Colville of Culross, V.

Polwarth, L.

Craigmyle, L.

Rankeillour, L.

Cullen of Ashbourne, L.

Rodney, L.

Davidson, V.

Romney, E.

Denham, L. [Teller.]

Sanderson of Bowden, L.

Elliot of Harwood, B.

Stodart of Leaston, L.

Elliott of Morpeth, L.

Swinfen, L.

Elton, L.

Swinton, E. [Teller.]

Faithfull, B.

Terrington, L.

Ferrers, E.

Thomas of Swynnerton, L.

Ferrier, L.

Trumpington, B.

Glenarthur, L.

Tryon, L.

Granville of Eye, L.

Vaux of Harrowden, L.

Harmar-Nicholls, L.

Vickers, B.

Hives, L.

Wise, L.

Hooper, B.

Wynford, L.

Lawrence, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
9 p.m.
[Amendment No. 253 not moved.]
Schedule 5, as amended, agreed to.
Schedule 6 [Principles applicable to designated agency's rules and regulations]:
[Amendment No. 254 not moved.]
The Deputy Chairman of Committees (Lord Wells-Pestell): Amendment No. 254A: Lord Williams of Elvel.
Lord Hacking: If I may have leave of the Committee, I am sorry I was not present when Amendment No. 254 was called, but I should like to ask leave of the Committee to speak on that amendment.
Lord Lucas of Chilworth: It is not for me to read the rule book. I am not quite sure whether, in the absence of the Leader of the House or the Deputy Leader, I am the person to rule on the Committee's procedure. Seeing the noble Lord, Lord Cledwyn of Penrhos, I wonder whether with his great experience he can help me; but I should have thought that, as the Lord Chairman of Committees had called the amendment and it was not moved and we had already moved on to the next amendment, the Committee would be right if it denied the noble Lord, Lord Hacking, what he is asking for. But it is very much, as I think the noble Lord will agree, for the Committee. That is how I would read the rule book.
Lord Cledwyn of Penrhos: I am much obliged to the noble Lord. I see no reason under the rules of the Committee why the noble Lord, Lord Hacking, should not speak.
Earl Ferrers: If Amendment No. 254A has been called surely it is not right that we should go back to an amendment which has already been passed. I am sure that the Committee will sympathise with the noble Lord, Lord Hacking, but if we have moved on to a subsequent amendment it would be wrong to go back.
Lord Cledwyn of Penrhos: I was not entirely aware that the noble Lord had called Amendment No. 254 A—
Noble Lords: He had.
Lord Cledwyn of Penrhos: If indeed he had called Amendment No. 254A that would make it difficult for the noble Lord, Lord Hacking, although personally I should like to have heard the noble Lord, Lord Hacking, speak.
Lord Hacking: I said I was in the Committee's hands about it. Unfortunately the annunciator did not announce the result of the previous Division in time for me to get here and there was a time pause between the two. The Committee can take a strict view about this and I shall not offend the will of the Committee. But it seems rather unreasonable when we are dealing with a matter of seconds when I was actually walking into the Chamber. I did not feel that it was right to shout as I came in to the Chamber and I paid respect to the Committee by waiting until I got to my seat before I drew attention the matter. During the few seconds between my entering the Chamber and moving to my seat the Lord Chairman called Amendment No. 254A.
I am in the Committee's hands. If the Committee thinks it is terribly important that I should be excluded from addressing the Committee on Amendment No. 254 then I shall not. I am in the Committee's hands. I have support from several noble Lords but apparently other noble Lords behind the noble Lord the Minister are taking a contrary view.
Lord Williams of Elvel: Perhaps I may suggest as a compromise to the Committee that the noble Lord, Lord Hacking, moves his amendment again on Report.
Viscount Colville of Culross: The noble Lord, Lord Hacking, can move his amendment on Report; he can move it on Third Reading; and he can move the substance of it on the Question, That the schedule shall be the sixth schedule to the Bill.
Lord Hacking: I think I get the feeling of the Committee. Perhaps the Committee now wishes to press on to the excitement of Amendment No. 254A.
[Amendments Nos. 254A and 254B not moved.]
On Question, Whether Schedule 6 shall be the sixth schedule to the Bill?
Lord Hacking: Now I shall take up the invitation of the noble Viscount, Lord Colville. I wish to draw attention to a problem here in the hope that the Government will give it some consideration. Schedule 6 to the Bill sets out the principles of the conduct of business rules which are to be drawn up by the SIB.
Paragraph 3 of Schedule 6 sets out the principles upon which the rules of conduct are to be drawn up by the SIB. There is a difficulty and it is a difficulty which affects fund management firms. Paragraph 3 of Schedule 6 lays down two stipulations. It says:
"The conduct of business rules must make proper provision for requiring an authorised person"—
first, and I am using the numerate—
"to subordinate his own interests to those of his clients and to act fairly between his clients".
The second proposition does not require further attention but the first does. To,
"subordinate his own interests to those of his clients",
for the fund management firm offers real difficulties. Indeed it has a serious consequence when that fund managment firm is in regular receipt of offers of sub-underwritings, vendor placings and so forth. It would probably be required to ensure that its clients take up the whole of the attractive offers (so that the firm would have no chance to participate), leaving the firm to take up the whole or the greater part of the less attractive offers or risk ceasing to receive such offers. Membership of "sub-underwriting clubs" involves being prepared to take the rough with the smooth and it is therefore the current practice for firms to retain a proportion of the more attractive offers for their own account to cushion the impact of the greater proportion of the less attractive offers which they are obliged to take for their own account in order to remain members of the club.
That is the difficulty and that system of managing their business in a perfectly proper way would collapse
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on the strict application of paragraph 3.I am sorry that I could not move this as an amendment, but those are my observations.
Lord Lucas of Chilworth: I am grateful to the noble Lord for giving us the benefit of his observations. I understand that it is in fact the Law Society which inspired the thought which has been transmitted to the Committee this evening. It put great faith in the effect achieved by the inclusion of the phrase "due precedence" in the wording.
Perhaps I may draw the Committee's attention to the phrase which is already included in paragraph 3—namely, that the principle already requires the relevant conduct of business rules to make "proper provision" for the matters which follow. This phrase is retained in the schedule, even if one were considering the amendment of the noble Lord, Lord Hacking. Even without the amendment which the noble Lord had on the Marshalled List, the paragraph enables the designated agency to fit its rules to the business circumstances in which they will be applied. Hence, those rules can govern business conduct in ways that secure standards of investor protection which can be reasonably regarded as appropriate in the circumstances in which they will apply. In some circumstances this can mean that no requirements are made, while in others the full weight of the principle can be applied.
I should like to assure the noble Lord that the principle as now drafted in paragraph 3 of Schedule 6 does provide the rule makers with all the flexibility that they need. I hope that the noble Lord will feel a little comforted and that the Committee will accept Schedule 6, so that we may move on.
Schedule 6 agreed to.
Clause 97 [Resumption of transferred functions]:
[Amendments Nos. 254C to 254E not moved]
Clause 97 agreed to.
Clause 98 agreed to.
Schedule 7 [Designated agencies: status and exercise of transferred functions]:
[Amendments No. 254F and 254G not moved]
Schedule 7 agreed to.
Clauses 99 and 100 agreed to.
Clause 101 [Recognised self-regulating organisations, investment exchanges and clearing houses]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 254H:
Page 80, line 20, at end insert—
("() In making such a recognition order the Secretary of State shall issue an accompanying statement which defines the nature of competition about which he is satisfied.")
The noble Lord said: We have now come to Chapter XII of the Bill and to Clause 101, which defines the examination of rules and practices of the recognised self-regulating organisations, investment exchanges and clearing houses. Here we see what has become, in Bills that the Government have brought before noble Lords previously, a familiar pattern. That is, where competition law as it at present stands is invoked in support of matters that I can only describe as being those with which the Bill cannot otherwise deal.
We have seen that in the Airports Bill, in the Gas Bill, and in other Bills. When in doubt, the Government say that competition law can deal with the matter. Thus, the Director General of Fair Trading and the Monopolies and Mergers Commission will deal with matters so that they may be swept under the carpet. The reason why I am moving this amendment, which is a probing amendment similar to Amendment No. 256A to Clause 103, to which I shall also speak, is that I want a definition of what exactly the Government mean by competition in this particular Bill.
I understand conceptually what is meant by competition, but are we here dealing with competition between different agencies, between different self-regulating organisations, or between different members of different self-regulating organisations or clearing houses? I find it difficult to understand, other than the general thesis that competition is, in the words of 1066 And All That, a good thing. I find it difficult to determine what exactly is the Government's definition of competition. I shall be most grateful if the Minister will help me out. I beg to move.
Lord Brabazon of Tara: I had a fairly long speech to make in order to persuade the Committee why it should not accept the amendment, or both amendments. At the same time, I intended to draw the attention of the Committee to the Government amendments that we shall reach in a minute or two, and which will achieve a better result than the amendments that the noble Lord, Lord Williams, has just moved. As it is, the noble Lord has merely invited me to define competition as it applies to the Bill, and that I shall attempt to do. I am certain that I shall think of other things after I have sat down that I should have better added.
Regarding anti-competitive practices within the field of activity concerned, I can only think of returning to the example of the Stock Exchange rule book which, as the noble Lord will remember, was to be subject to a restrictive practices inquiry following
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the passing of the Restrictive Trade Practices Act from which it was exempted. That was one of the factors that led on to the introduction of the present Bill. It was concerned with matters such as minimum commissions—indeed, that was probably one of the principal aspects.
There are matters which might appear to be uncompetitive in an organisation such as the Stock Exchange, but there must be a balance between what is uncompetitive and what is in the interests of protecting the investor. I can think of a couple of examples that could possibly be described as being uncompetitive but which would be in the interests of the general public. One would be a minimum capital requirement for member firms to have. Another one, for instance, would be the passing of examinations by members and operators. Both those could be described as anti-competitive but, I think noble Lords would agree, would be generally in the interests of the public at large. That is the sort of competition which we are talking about in this part of the Bill. I hope that the noble Lord will be slightly clearer with those examples.
Lord Williams of Elvel: I am most grateful to the noble Lord, but I am rather less clear than when I started, I am afraid. The noble Lord has mentioned two things which, in his view, are clearly uncompetitive, but which, he says, are in the nature of investor protection and therefore should be accepted by the Committee as being uncompetitive but nevertheless should be in mitigation of the general rule that there should be a pursuance of competition.
The question I have to repeat to the noble Lord is, what exactly is meant? When the Secretary of State defines all these things, will he issue an accompanying statement defining the nature of the competition? He may well mention that noble Lord's points about people passing examinations, minimum commissions and all the rest of it, but we are entitled to know what we are talking about in terms of competition and I do not think that we have got much further from the noble Lord's response, if I may say so with the greatest respect to him. I hope that, if I keep on talking, there may be some guidance from another quarter which will assist him in telling me what exactly is meant by competition in this particular instance.
Lord Brabazon of Tara: The noble Lord will not get himself far if he does go on talking. I think I have given a description of what sort of competitive aspects will be taken into account in operating this part of the Bill. I suggest that this is as far as I can go at the moment.
Lord Williams of Elvel: I am sorry. Maybe my amendment was poorly phrased. Perhaps I ought to have written to the Minister or done it in some other way. At present I cannot understand what competition means in the context of Clause 101 and Clause 103. If the noble Lord has any further views on what competition means—the definition of the word competition and the context of competition—I should

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be grateful if he would reply to me by letter. As I understand it, it does not mean Section 84 of the Fair Trading Act. It means something quite different, and I should be most grateful if the noble Lord would undertake to write me a letter about it.
Lord Brabazon of Tara: I certainly will if it adds anything to what I have already said.
Lord Williams of Elvel: I hope it will.
Lord Brabazon of Tara: We shall have to wait and see.
Lord Williams of Elvel: On the promise of a letter of slightly unspecified dimension and unspecified content, I beg leave to withdraw the amendment, with the right to bring it back at Report stage should I not be satisfied by the letter.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 255:
Page 81, line 9, at end insert—
("() Subsection (3)(c) above does not apply to an overseas investment exchange or overseas clearing house.").
On Question, amendment agreed to.
Clause 101, as amended, agreed to.
Clause 102 [Modification of s. 101 where recognition function is transferred]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 256:
Page 81, line 37, after ("39") insert ("(5) or (6)").
The noble Lord said: I beg to move Amendment No. 256 and, at the same time, to speak to Amendments Nos. 257 and 257ZE. These are really technical amendments. The first two are consequential on changes introduced in another place by including more specific cross references in Clauses 102(3) and 104(3). They restore the original intention of the clauses; namely that the Secretary of State and Director General of Fair Trading should receive notice of changes in the rules of guidance, or arrangements of recognised investment exchanges and recognised clearing houses.
The other amendment, No. 257ZE, is designed to give flexibility. When considering the effects of guidance, it is right that the Secretary of State and Director General should be able to assume that the guidance is complied with. There may be occasions, however, when that assumption is unrealistic. We do not, therefore, wish them to be obliged to make such an assumption. I beg to move.
On Question, amendment agreed to.
Clause 102, as amended, agreed to.
[Amendment No. 256A not moved.]
Clause 103 agreed to.
Clause 104 [Reports by Director General of Fair Trading]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 257:
Page 83, line 28, after ("39") insert ("(5) or (6)")
The noble Lord said: I spoke to this amendment with Amendment No. 256. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 257ZA:
Page 83, line 31, leave out ("subsection (4)") and insert ("subsections (4) and (4A)").
The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 257ZB and 257 ZC. These amendments are aimed at improving the operation of Clause 104. The revised subsection (4) and the new subsection (4A) replace the existing requirement that the Director General of Fair Trading should report on each change in the rules, guidance, arrangements or regulations of the designated agency or of a recognised self-regulating organisation, investment exchange or clearing house. Instead he will be expected to keep such matters under review alongside the rules and so on, and if he considers that a significant anti-competitive effect has arisen, or is likely to arise, he is then under a duty to make a report. This will reduce the administrative burden on the director and allow him to concentrate on the cumulative effect of the changes in a rule book, reporting when there is something to report. The scope of his powers and duties is largely unaffected.
The revised subsection (6) clears up a possible ambiguity in the current drafting. It was not intended that the powers in question would be exercised by the Secretary of State unless he had received a report from the director. That is now made clear.
Finally, the new subsection (7) fulfils an undertaking given in another place by allowing the director, where he wishes, to publish a report made under this clause. With that explanation I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 257ZB and 257ZC.
Page 83, line 33, leave out subsection (4) and insert—
("(4) The Director shall keep under review—

(a) the rules, guidance, arrangements and regulations mentioned in section 101(2) and 103(2) above, and

(b) the matters specified in the notices of which copies are sent to him under subsection (3) above;

and if at any time he is of the opinion that any such rules, guidance, arrangements, regulations or matters, or any such rules, guidance, arrangements or regulations taken together with any such matters, have, or are intended or likely to have, to any significant extent the effect mentioned in subsection (2) above, he shall make a report to the Secretary of State stating his opinion and what that effect is or is likely to be.

(4A) The Director may report to the Secretary of State his opinion that any such matter as is mentioned in subsection (4)(b) above does not in his opinion have, and is not intended or likely to have, to any significant extent the effect mentioned in subsection (2) above.")
Page 84, line 5, leave out subsection (6) and insert—
("(6) The Secretary of State shall not exercise his powers under section 101(3), 102(4) or 103(3) above except after receiving and considering a report from the Director under subsection (4) or (5) above.
(7) The Director may, if he thinks fit, publish any report made by him under this section but shall exclude from a published report, so far as practicable, any matter which relates to the affairs of a particular person (other than the self-regulating organisation, investment exchange, clearing house or designated agency concerned) the publication of which would or might in his opinion seriously and prejudicially affect the interests of that person.")
On Question, amendments agreed to.
On Question, Whether Clause 104, as amended, shall stand part of the Bill?
Lord Williams of Elvel: It is a great pleasure to have further conversations with the noble Lord, Lord Brabazon of Tara, on a subject on which we have had conversations on previous Bills. It is the question of the staffing of the Office of Fair Trading.
In successive Bills the Government have loaded all sorts of tasks on the Office of Fair Trading and, indeed, the Monopolies and Mergers Commission. This Bill, and specifically the clause we are now discussing, lays an extra burden on the director general and his office. I have to confess that the director general is an old personal friend of mine and it would not surprise the Committee to know that from time to time I have lunch with the director general. It would not suprise the Committee to learn that from time to time during these lunches, apart from discussing the general state of the country and the weather, we discuss the Office of Fair Trading and whether it has the ability to cope with all the tasks laid before it.
I am bound to report the Committee, without breaching any confidences the director general and myself may exchange during the course of those luncheon engagements, that I am extremely worried that the director general will not have the resources at his disposal to discharge the responsibilities laid upon him in previous Bills that have come before this House, let alone the very complex tasks that the director general is required to perform under this Bill. I note, again from outside sources—and I am not breaching any confidences; nor do I wish to do so—that when it comes to the staffing of Oftel or Ofgas there seem to be open purse strings, but when we come to the staffing of the Office of Fair Trading unfortunately the purse strings seem to be rather tighter. I must ask the noble Lord whether he is prepared to give us an absolutely categorical assurance that the resources of the Office of Fair Trading will be increased to discharge the responsibilities which the Bill lays upon it, not only in numbers but also in expertise. Up to now, apart from its foray into the Stock Exchange and its various practices, it has not got itself very much involved in the question of the diverse financial services with which the Bill is dealing.
I feel very strongly that if the Government are imposing burdens on a public body, they have a duty to ensure that it is properly equipped to discharge those functions and to carry those burdens. I do not believe—and I say this in all frankness to the Committee—that the Office of Fair Trading is so equipped at the moment, and, if it is not, it will discharge its functions under the Bill badly. I think that that would be wrong in practice and would impede the functioning of the Bill when it becomes enacted.
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I therefore ask the noble Lord, Lord Brabazon, in all seriousness—and I have asked him on previous occasions, the last one being, I think, consideration of the Building Societies Bill, or it may have been the Gas Bill or the Airports Bill. I cannot remember which one it was; I ask the same question on every Bill that becomes before us—whether the Office of Fair Trading will be properly staffed to allow it to perform its functions under the Bill.
Lord Brabazon of Tara: I am not a party to the luncheons which take place between the noble Lord and the Director General of Fair Trading, but the director has been consulted and the provisions which we are discussing have his full support. The internal staffing of the Office of Fair Trading is a matter for the director, and we have the fullest confidence in the staff to carry out their functions. We shall listen carefully to any representations that he makes to us, if indeed he feels that he has to make any.
Lord Williams of Elvel: I am sorry to disagree with the noble Lord, but the staffing of the Office of Fair Trading is not the responsibility of the director. He has made repeated requests to his sponsoring department, if I may put it like that, to have futher increments, without betraying any confidences. I do not believe that he is allowed to go out and recruit staff, which would be the case if the staffing of his office were his responsibility. I am sure the noble Lord means what he says in good faith, but I must ask him again whether the Government are prepared to see that the office is properly staffed both in numbers and in expertise to discharge those functions.
Lord Brabazon of Tara: I have little to add to what I said. We have discussed this with the director and we have his full support. We shall listen carefully to any representations that he makes to us for extra staff, if indeed he does so. I am afraid that I can go no further than that at the moment.
Clause 104, as amended, agreed to.
Clauses 105 to 108 agreed to.
9.30 p.m.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 257ZD:
After Clause 108, insert the following new clause:
"Modification of Restrictive Trade Practices Act 1976 in relation to recognised professional bodies.
Recognised professional bodies

(1) This section applies to—

(a) any agreement for the constitution of a recognized professional body, including any term deemed to be contained in it by virtue of section 16(3) of the Restrictive Trade Practices Act 1976; and

(b) any other agreement—

(i) the parties to which consist of or include such a body, a person certified by such a body or a member of such a body, and

(ii) to which that Act applies by virtue of any term the inclusion of which in the agreement is required or contemplated by rules or guidance of that body relating to the carrying on of investment business by persons certified by it.

(2) If it appears to the Secretary of State that the restrictions in an agreement to which this section applies—

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(a) do not have, and are not intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition; or

(b) if all or any of them have, or are intended or likely to have, that effect, that the effect is not greater than is necessary for the protection of investors,

he may give a direction to the Director requiring him not to make an application to the Restrictive Practices Court under Part I of the said Act of 1976 in respect of the agreement.

(3) If it appears to the Secretary of State that one or more (but not all) of the restrictions in an agreement to which this section applies—

(a) do not have, and are not intended or likely to have, to any significant extent the effect mentioned in subsection 2) above; or

(b) if they have, or are intended or likely to have, that effect, that the effect is not greater than is necessary for he protection of investors,

he may make a declaration to that effect and give notice of it to the Director and the Restrictive Practices Court.

(4) The Restrictive Practices Court shall not in any proceedings begun by an application made after notice has been given to it of a declaration under this section make any finding or exercise any power under Part 1 of the said Act of 1976 in relation to a restriction in respect of which the declaration has effect.

(5) The Director shall not make any application to the Restrictive Practices Court under Part I of the said Act of 1976 in respect of an agreement to which this section applies unless—

(a) he has notified the Secretary of State of his intention to do so; and

(b) the Secretary of State has either notified him that he does not intend to give a direction or make a declaration under this section or has given him notice of a declaration in respect of it;

and where the Director proposes to make any such application he shall furnish the Secretary of State with particulars of the agreement and the restrictions by virtue of which the said Act of 1976 applies to it and such other information as he considers will assist the Secretary of State in deciding whether to exercise his powers under this section or as the Secretary of State may request.

(6) The Secretary of State may—

(a) revoke a direction or declaration this section;

(b) vary any such declaration; or

(c) give a direction or make a declaration notwithstanding a previous notification to the Director that he did not intend to give a direction or make a declaration,

if he is satisfied that there has been a material change of circumstances such that the grounds for the direction or declara-tion have ceased to exist, that there are grounds for a different declaration or that there are grounds for giving a direction or making a declaration, as the case may be.

(7) The Secretary of State shall give notice to the Director of the revocation of a direction and to the Director and the Restrictive Practices Court of the revocation or variation of a declaration; and no such variation shall have effect so as to restrict the powers of the Court in any proceedings begun by an application already by the Director.

(8) A direction or declaration under this section shall cease to have effect if the agreement in question ceases to be one to which this section applies.

(9) This section applies to information provisions as it applies to restrictions.")

The noble Lord said: I wish at the same time to speak to Amendment No. 257ZF.
Clauses 101 to 109 are designed to replace the provisions of the Fair Trading Act, the Restrictive Trade Practices Act and the Competition Act with competition provisions especially designed to deal with matters covered by the new regulatory regime.
So far as recognised self-regulating organisations are concerned, their primary function will be to regulate investment business so that the application of the new
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competition arrangements presents little difficulty. With recognised professional bodies, however, the position is less clear-cut. The primary purpose of those bodies will not be to regulate investment business. In some cases they are likely to regulate investment business by means of existing rules applying to the practice of the profession generally. The special competition regime provided under the Bill will not be appropriate to deal with such general rules. A rule may, for instance, have an anti-competitive effect which could be justified in terms of investor protection in so far as it applies to investment business but not as it applies to other aspects of the profession.
Moreover, existing competition law already has special provisions dealing with the mainstream professions regulated by some of the main prospective recognised professional bodies, and it would be wrong to disturb that position. On the other hand, it would obviously be undesirable if, for instance, the rules or guidance of a recognised professional body were to be struck down on the basis that they were anti-competitive when in a similar case involving a recognised self-regulating organisation the Secretary of State had allowed a similar rule or guidance on the grounds that it was necessary for the protection of investors.
The new clause therefore provides a special safeguard in any case where agreements arising from the rules or guidance of a recognised professional body are subject to registration under the Restrictive Trade Practices Act. I have made available to noble Lords a note which explains the effect of the new clause in detail. I do not propose to detain the Committee by repeating the content of the note.
In summary, the clause provides a mechanism whereby the Secretary of State can decide that although such agreements, or terms in such agreements, have a significantly anti-competitive effect, that effect is no greater than is necessary for the protection of investors. If he does so decide, those agreements or terms will not have to be examined by the restrictive practices court. The test will be the same as the test that will be applied to the rules and guidance of recognised self-regulating organisations. The effect will be to put the rules and practices of a recognised professional body on broadly the same footing as those of recognised self-regulating organisations to the extent that they are concerned with investment business, while leaving unchanged the existing provisions of competition law as they apply to the great bulk of the body's activities.
I apologise that this is such an enormous new clause for noble Lords to grasp, but with that explanation I beg to move.
Lord Williams of Elvel: I have to say what I have said on many previous occasions, that we shall have to look at this clause and return to it on Report should we feel that there is something objectionable. 1 used to know the Restrictive Trade Practices Act 1976 almost off by heart. I am afraid that my knowledge has slightly withered on the vine. I shall look at it again and return to the matter on Report.
On Question, amendment agreed to.
Clause 109 [Supplementary provisions]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 257ZE:
Page 88, line 2, leave out ("it shall be assumed") and insert ("the Secretary of State and the Director may assume").
The noble Lord said: I spoke to this amendment with Amendment No. 256. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 257ZF:
Page 88, line 5, leave out ("Nothing in this Chapter") and insert ("No provision of this Chapter except section (Modification of Restrictive Trade Practices Act 1976 in relation to professional bodies)").
The noble Lord said: I spoke to this amendment with Amendment No. 257ZD. I beg to move.
On Question, amendment agreed to.
On Question, Whether Clause 109, as amended, shall stand part of the Bill?
Lord Williams of Elvel: May I ask the noble Lord whether all the matters in Chapter XI of the Bill will be subject to the current review of competition policy at present being conducted by Dr. Leisner?
Lord Lucas of Chilworth: I wonder whether the noble Lord will allow me to answer. If I heard him correctly, he asked whether the matters contained in this chapter have already been referred to the committee of inquiry—
Lord Williams of Elvel: No.
Lord Lucas of Chilworth: Will the noble Lord be good enough to repeat the question for me?
Lord Williams of Elvel: I shall repeat my question in the hope that guidance will arrive by carrier pigeon. Will the matters referred to in Chapter XI of the Bill be the subject of the current review of competition policy conducted by Dr. Leisner?
Lord Lucas of Chilworth: The answer is, "No".
Clause 109, as amended, agreed to.
Clause 110 agreed to.
Schedule 8 [Regulated insurance companies]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 257A:
Page 166, line 24, at end insert ("provided that the conduct of the regulated insurance company is in all respects consistent with the rules specified under the Act for other managers of investments.")
The noble Lord said: In moving this amendment it may be for the convenience of the Committee if I speak also to Amendment No. 260, although I do not see why I should, as Amendment No. 260 is a Government amendment. Nevertheless, they cover more or less the same points. What we are getting at here—it was raised in earlier discussion—is that insurance companies which are exempt under the provisions of the Bill but which are nevertheless
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regulated under different legislation should have rules of conduct that are similar to those that will be imposed by this Bill when enacted on competing institutions in the investment management market, that is, the management of funds I know that this has been the object of correspondence between the capital markets committee and the Department of Trade and Industry and certain Ministers I move the amendment in order to elicit from the Minister what exactly is the present position. I beg to move.
Lord Marshall of Leeds: I declare an interest as chairman of an insurance company I oppose the amendment of the noble Lord It would be unrealistic to require the conduct of regulated insurance companies which, as beneficial owners, hold the assets of the long-term insurance funds to meet their liabilities towards policy holders, to be in all respects consistent with the rules for other investment managers dealing as principals or agents for investors who, unlike policyholders, remain the beneficial owners of the assets.
It would also be wrong, I feel, to impose requirements of consistency with rules yet to be settled I feel that any additional protection for life insurance policyholders vis-à-vis the management of long-term business funds should, as now, be a matter for the Department of Trade and Industry under the Insurance Companies Act. That view, if I may say so, is shared by the Association of British Insurers. For those reasons I oppose the amendment.
Lord Williams of Elvel: I am grateful to the noble Lord, Lord Marshall of Leeds, for his clear explanation of where the insurance companies stand This leads me to press my amendment. Those of us who have long-term life insurance contracts are also perhaps investors in unit trusts. We may have occupational pensions and all sorts of other things where we have long-term assets. I simply do not grasp the argument that the noble Lord, Lord Marshall, has put forward that, in some way, insurance companies, managing investments on behalf of beneficiaries, as do other institutions and all people who manage funds, should be subject to different rules. If, under another Act, the rules are similar to those which will be imposed on collective investment schemes or investment business under the Bill, I am perfectly happy. I should, however, like that assurance because I do not believe that insurance companies and particularly life insurance companies are at all a special case.
Lord Lucas of Chilworth: The noble Lord, Lord Williams, in moving his amendment and speaking to Amendment No. 260, began by saying that he really wanted to get an update on the position, since when my noble friend Lord Marshall of Leeds has intervened to give his views as to why the amendment of the noble Lord, Lord Williams, should be opposed Because this is an important matter, I propose to deal with both Amendment No. 257A and the new clause, Amendment No. 260 We have before us two proposed solutions to a common problem, because that is what it is. Before I go into the differences between those approaches, I think I should for a moment stress the extent of the common grounds between us.

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We accept that the underlying economic reality is that life insurance companies manage the investment of money given to them initially by their policyholders. This is how most of the companies hold themselves out when they seek to sell their policies. We accept that the general principle in this Bill is that this activity of investment management should be regulated. Moreover, we accept that everyone doing the same thing should be subject to broadly the same regulations, so as to preserve a properly competitive and level playing field. So we agree that this activity of insurance companies should be regulated. The question then is: how? This is where we differ.
However, I should like to make it quite clear on a fundamental point that we are not simply applying the Bill to insurance companies in this area. Rather, we are extending it, both legally and beneficially. It is a basic principle of the Bill that it largely does not cover what people do with their own money. We are therefore moving into somewhat uncharted waters, and it is because of this that we have had to construct, so to speak, a rather special ship.
The noble Lord, Lord Williams, wishes to take the simple, and I agree superficially appealing, route. He wishes simply to apply the Bill's rules to that activity, though whether the rules concerned be those of the designated agency or of a self-regulating organisation, he leaves unclear. I wish that such a simple route were in fact available. I fear, however, that it is not; and there are three fundamental reasons for it not being available.
First, rules designed to benefit individual clients of investment managers are simply not appropriate for direct application to the essentially different relationship between a policyholder and an insurance company. Secondly, the investment management activity of an insurance company is central to the regulation of its solvency. The regulation of that is by my department, the Department of Trade and Industry, under European Community directives. Thirdly, the simple approach which has been put to us creates, quite unnecessarily, a third regulator of insurance companies—that is, apart from the regulators of solvency and marketing. This is a very important point; and it is important that we get it on the record because the Committee may wish to give it further consideration. So, even at the risk of wearying the Committee, let me expand on these matters.
As regards the point that the policyholder with an insurance company stands in a different relationship to the company from the client of an investment manager, the traditional life assurance company endowment policy is a complex investment which has, moreover, an important quality, quite apart from the necessary element of life insurance protection, and that sets it apart from other investments. Many investments have the ability to give the investor a spread of investment over different sectors and in different companies. A unit trust can do this. But an endowment policy has a further averaging quality. It is able to average up to a point the performance of investments over time. For example, if the stock market is high when a policy matures, not all those gains may be reflected in the maturity value. Equally, when the market is low the policyholder may do rather
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better than the performance of the underlying investments.
Reversionary bonuses, once declared, must always be paid whatever the state of the market and that is when a policy matures. To achieve this what happens, in effect, is that some policyholders cross-subsidise others and the actuaries of the companies have to make difficult judgments as to the issues of equity as between different policyholders. Rules made on investment management under the Bill will require fair treatment as between clients. Those rules cannot be applied directly to the individual policyholder in insurance companies. There is simply no pile of assets that can be said to be for the benefit of one, or a particular, policyholder. The proper application of that principle for insurance companies is fairness as between the various funds of the company, and it must take proper account of actuarial principles. I would not seek to make too much of this point. Special rules could be devised, but they would not be the same rules. There is no simple set of rules lying ready and waiting to cover the area. There would have to be a very careful tailoring of the rules to the special circumstances of policyholders in insurance companies. Therefore even if rules under the Bill are to be applied, our objective of a level playing field becomes a little more difficult to attain. There cannot be the same rules for all the players if some of them are playing a very similar but subtly different game.
This brings me to the second point. The investment management activities of an insurance company go to the heart of the regulation of the solvency of that company. The cardinal principle of insurance supervision is that there should be in place arrangements for securing that so far as possible insurance companies meet their liability. These arrangements exist under the Insurance Companies Act 1982, and regulations are made under that. Those regulations are administered by my department. The Act itself must take full account of the governing European Community directives on this subject. The regulation of solvency necessarily involves many of the factors that are important for good investment mangement. The managers, the directors, the controllers of the company must be fit and proper. Investments must be suitably spread into certain permitted types of assets, if they are to count for solvency purposes. Returns must be made to my department covering the liabilities of insurance companies and the assets set aside to cover them. I think it is generally accepted that this system works well—a fact which has been underlined recently by the experience concernng the problems of the United Kingdom Provident Institution.
The regulation of investment management necessarily goes into these areas. We cannot simply apply the rules made under the Bill. We would have to ensure their consistency. We would have to invoke far more often than we anticipate for marketing matters the complicated procedures of Schedule 8 to the Bill. Powers of intervention under the Bill would continually be fettered by solvency considerations. The degree of overlap with existing legislation is simply too great for good law and good administration.
I come to my final point as to why we do not think it prudent simply to apply the Bill to these matters. I

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have said that life insurance companies are regulated by my department. Under the Bill they will also be regulated by the designated agency or a self-regulating organisation for the marketing of their policies. This has created a system of dual supervision. We think that this is both acceptable and unavoidable. It is acceptable because the area of overlap between the regulation of marketing and of solvency is relatively small, and unavoidable because we think it is important that the marketing of all pre-packaged investments, insurance and unit trusts is dealt with in one place. Simply to apply the rules on investment management creates a system of triple supervision because it must bring in the designated agency or a self-regulating organisation in the area of investment management. Common sense suggests to us that it must be sensible to avoid this where we can. In this case I suggest to noble Lords that we can do this by adopting the course set out in Amendment No. 260.
Perhaps I may now turn to Amendment No. 260. This inserts a new section into the Insurance Companies Act. It is proposed that this new section becomes a properly integrated part of the system of supervision under the Insurance Companies Act, attracting all the provisions concerning monitoring and powers of intervention under that Act. It deals substantively with the single most important principle of investment management: that of dealing fairly as between different clients. It provides that companies must have arrangements to secure that they do not act unfairly as between their different funds. The requirement is deliberately flexible. Different companies may offer it in different ways, and we do not want to lose in this piece of statutory regulation the type of flexibility that we are all hoping to see in the new self-regulatory arrangements. It also contains more than what at first glance may strike the eye. For example, the reports that companies will be asked to make of these arrangements will be subject to audit, and that will ensure that the arrangements are backed by adequate record-keeping.
It has been suggested that in asking the question as to whether a company has arrangements that comply with the new clause, my department should ask whether the relevant rules made under the Bill have been complied with. I rather suspect that that may be one of the motivations behind the amendment tabled by the noble Lord opposite. I cannot give an assurance in precisely those terms for the reasons that I have already explained. The rules may not be appropriate, and their application may conflict with the supervision of solvency. I am particularly cautious because at this stage we do not know precisely what those rules will be.
I am of course sympathetic to the concern. I share the desire of the noble Lord opposite to construct a system that so far as possible creates this level playing field. I hope that the noble Lord, Lord Williams, will be satisfied with an assurance in a slightly different form, but one which I hope he will recognise goes as far as we can reasonably go.
In operating our monitoring arrangements under the proposed new clause, but more generally under the Insurance Companies Act, my department will want to be satisfied that the companies have in place
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arrangements for carrying on this aspect of their business—the investment of their funds—which meet commonly held standards of good practice. The rules which are developed and applied by the designated agency and the SROs to the slightly different area of investment of clients' funds will equally be seeking to apply similar standards of good practice. My department will expect insurance companies to pay regard to these rules and to consider their applicability to their own operations, bearing in mind the differences which exist and which I have described.
In addition, my department, in exercising its very wide responsibilities under the Insurance Companies Act, will want to keep in mind the rules and the standards which the SIB and the SROs are applying. I hope that the noble Lord, Lord Williams, will accept this assurance and with it the new clause. I anticipate that he may very well want to give some consideration not only to the clause but to the very long explanation which I have given. In that expectation I shall invite the noble Lord to withdraw his own amendment and to accept the Government's.
Lord Graham of Edmonton: For those who, like myself, are not completely untutored in these matters but who certainly do not have anything like the level of experience or expertise of other Members of the Committee, it is quite clear that we have reached the extraordinary position, after going through the long process of this Bill and the long consultation period prior to legislation appearing in another place or here, of being able to consider that there are ways in which the face of the Bill can be altered sensibly and reasonably. For example, when I listened to what my noble friend Lord Williams said was the genesis of his desire, he certainly had my support and I believe the Minister said that he had his support, too. My noble friend said he wanted the ensure that financial institutions—in this instance insurance companies, but there is a later amendment relating to friendly societies—are in effect able to operate in such a way that the security and safeguards they provide for those whose interests they protect are no less than for those who do not have special provisions. For instance, from what the Minister said and from the documents that I have read, I am satisfied that, under the Insurance Companies Act, it is possible for legislation—and that means, of course, the Department of Trade and Industry—to ensure that all that the Bill sets out to achieve in that narrow field of insurance companies is capable of being achieved by (I shall not say a proper) a rigorous and fair application of existing legislation.
What I believe will happen between now and Report stage is that those outside the Chamber, and certainly my noble friend, will want to examine whether there are any loopholes. We know from experience what has been the raison d'être of this Bill. We need to be satisfied that in, shall we say, three months' time we have in place a new piece of legislation in which there are not anomalies. The Minister used the simile of a level playing field where everyone involved has the same start, the same restrictions, and the same ability to make the same progress. I shall want carefully to read what the Minister has said so that we can consider what needs to be done on Report.
May I deal with a couple of aspects of the amendment in the name of the Minister? I shall be

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grateful if, in the spirit in which we are dealing with these matters, it simply forms part of the record to be taken into account in the recess.
I support the principle that a company's life assurance fund, and any other insurance funds it may have, must not suffer unfairly from transactions involving the company's assets. So far as this is provided under the Government's new clause and Section 31 of the insurance Act, I welcome what it says as a safeguard for policyholders. However, as it stands, the amendment also extends the same protection to the other assets of the company, such as those held in its shareholders' fund. This does not seem either necessary or desirable to me.
Let me explain why to the Minister. Surely the main criterion to apply to insurance legislation is the interest of the policyholders. I would not be happy with a provision which could prevent an insurance company from exercising flexibility or positive discrimination in favour of its policyholders. I ask the Minister to consider whether the amendment, as drafted, might have this unfortunate effect. For example, is it the intention to preclude an insurer from transferring assets from its shareholders' fund to one of its insurance funds at below the market value, or even from passing interest on its shareholders' fund to other funds? In my view these could be unwanted side effects.
I hope that after considering the matter the noble Lord will find a way of eliminating these side effects while retaining the safeguards which the amendment provides. Even with the best of intentions with the new clause as an amendment to Section 31 of the Insurance Companies Act, it is still possible for those who know more about these things than I do to draw to my attention some side effects of which the Minister and his colleagues may not have thought, but which need to be taken into account if we are to get this right at a later stage.
Lord Marshall of Leeds: It appears that in discussing Amendment No. 257A moved by the noble Lord, Lord Williams of Elvel, we have somehow slid into a discussion of the forthcoming Amendment No. 260 of my noble friend the Minister. If that is the case, I wonder whether, by leave, I may say a few words now about Amendment No. 260, and then I shall not say anything at the appropriate time when the amendment is called.
I would say again, in supporting Amendment No. 260, that it permits me to say a few words in answer to some of the arguments enunciated by the noble Lord, Lord Williams of Elvel, in speaking to Amendment No. 257A. The assets of long-term insurance funds, I repeat, are the property of the insurance company, held by the insurance company to meet its liabilities towards policyholders. They do not belong to the policyholders themselves, and no claim can be made by any policyholder to any specific investment or investments of the company. In this case insurance companies deal in investments on their own account, which is an excluded activity under Schedule 1 to the Bill.
During the debates in another place it was suggested that the Bill be amended to make the management of
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these funds subject to the same conduct of business rules as the management of assets which are the property of the investors. The long-term business funds of insurance companies are already, as I said before, subject to detailed regulation b\ the Department of Trade and Industry under the Insurance Companies Act. I feel that any additional protection for life insurance policyholders vis-à-vis the management of those funds should be a matter for the Department of Trade and Industry. The life officers would accept an obligation under that Act to operate a monitoring system to ensure a fair and justifiable allocation of assets between funds held for the benefit of different groups of policyholders. I think the Government's amendment seeks to achieve this. Its intention therefore is to be commended, and it is welcomed by the Association of British Insurers.
Lord Williams of Elvel: I am most grateful to my noble friend Lord Graham of Edmonton and to the noble Lord, Lord Marshall of Leeds, for their contributions to the debate. Indeed, I am grateful to the noble Lord, Lord Lucas, for the very extensive response he made both to my amendment and in explanation of the new clause. As he rightly divined, I shall need to read what he said rather carefully. and to consult. As I listened to his brief I started off by believing half of it, and by the end I believed two-thirds. Perhaps if I read it carefully I may believe the whole lot. I shall have to see, but we may come back on Report. In the meantime, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
10 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 258:
Page 166, line 26, at end insert—
("() The rules under section (Financial resources rules) of this Act shall not apply to an insurance company which is an authorised person by virtue of section 30 of this Act. ").
The noble Lord said: I spoke to this with amendment No. 134. I beg to move.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No 259:
Page 168, line 5, at end insert—
("() The powers conferred by section [Power to pennon for winding up orders] of this Act shall not be exercisable in relation to a regulated insurance company.").
The noble Lord said: I spoke to this with Amendment No. 184. I beg to move.
On Question, amendment agreed to.
Schedule 8, as amended, agreed to.
Clauses 111 to 115 agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 260:
After Clause 115, insert, the following new clause.
"Arrangements to avoid unfairness between separate insurance funds etc.
(1) After section 31 of the Insurance Companies Act 1892 there shall be inserted—
"Arrangements to avoid unfairness between separate insurance funds etc.
31 A.—(1) An insurance company to which this Part of this Act applies which carries on long term business in the United Kingdom shall secure that adequate arrangements are in force for securing that transactions affecting assets of the company (other than transactions outside its control) do not operate unfairly between the section 28 fund or funds and the other assets of the company or, in a case where the company has more than one identified fund, between those funds.
(2) In this section—
"the section 28 fund or funds" means the assets representing the fund or funds maintained by the company under section 28(1)(b) above; and
"identified fund", in relation to a company, means assets representing the company's receipts from a particular part of its long term business which can be identified as such by virtue of accounting or other records maintained by the company.".
(2) In section 71(7) of that Act (which lists the provisions of that Act default in complying with which is not an offence) after the words "section 16" there shall be inserted the word "31 A".")
The noble Lord said: I beg to move this amendment, on which I have just addressed the Committee.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 261:
After Clause 15, insert the following new clause:
("Regulations in respect of linked long term policies.
In section 78(2) of the Insurance Companies Act 1982 (regulations in respect of linked long term policies) after paragraph (a) there shall be inserted—
"(aa) restricting the proportion of those benefits which may be determined by reference to property of a specified description or a specified index;".").
The noble Lord said: This is a new clause and represents a quite modest amendment to the system of regulation for linked life assurance. At present, although my department may lay down the types of property to which the benefits under such policies may be linked, we cannot provide that only a certain proportion of the funds should be linked in a particular way. Since powers of this kind have been taken for units trusts under Clause 73 of the Bill, and since the White Paper contained a commitment to making as far as possible parity between the permitted investments of unit trusts and the permitted links for life assurance policies, we have decided it would be useful to make this addition to our regulation-making powers under the Insurance Companies Act.
It is far too early to say what any possible regulations made under this power may contain, but it is possible that we may be able to use the new flexibility to enable companies to invest a small proportion of the fund in riskier assets; for example, traded options. This will add a welcome element of flexibility. Since this power remains a part of the Insurance Companies Act, the powers will not be transferred to a designated agency, and the regulations will be made by my department. There will, as usual, be full consultations with those involved. I beg to move.
Lord Marshall of Leeds: Perhaps I may speak on this amendment moved by my noble friend the Minister by saying that Section 78 of the Insurance Companies Act 1982 provides for regulations to be made governing inter alia the choice and valuation of assets and indices to which benefits under unit-linked life assurance policies may be linked. The relevant
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regulations are found in regulation 72 and Schedule 13 as amended of the Insurance Companies Regulations 1981. Unlike the rules governing authorised unit trust investments, the Act makes no provision for permitted assets to be subject to any quantitative limits, that is, at present benefits under a policy may be wholly linked to, for instance, equities or property. The effect of this is that certain types of asset in which unit trusts may invest, such as traders options, have not been permitted as assets suitable for linking to life assurance policies because it would not have been judged in the investors' interests to take out a policy whose entire benefits were linked to them.
The Government's amendment would enable regulations to be made governing the extent to which benefits under linked policies may be linked to a particular asset or index, and to the extent that this will enable the types of permitted asset for linked life policies to be extended it is very acceptable and, if I may say so, acceptable to the Association of British Insurers—and again I declare my interest.
However I would welcome assurances on two points First, the new powers to impose restrictions should not be applied to the current list of assets to which policies may be linked, which was drawn up under the existing legislation and which has worked well for very many years. Secondly, authorised unit trusts and life companies have different characteristics. Life companies are more likely to have regular contractual inflows than authorised unit trusts and larger capital and reserves than the capital of unit trust management companies. They also have to comply with statutory solvency margin requirements. These factors enable life offices to absorb repurchases of units when, through lack of liquidity, the underlying asset cannot be realised As an example, in the case of property funds no life office has had to exercise the right to impose a six-month moratorium on redemptions despite the substantial cash outflows which have occurred on occasions over the past few years Therefore, I feel the question of quantitative limits for the investments of authorised unit trusts and for linked life assurance should be considered separately, and I very much hope that my noble friend the Minister will be able to deal with those two small matters when he replies.
Lord McIntosh of Haringey: My noble friend Lord Williams on a recent amendment found himself moving towards the Government position as he listened to the argument and read the amendment. I find myself in the opposite position. When I read the amendment itself and the notes on the new clause I felt it was relatively harmless, but I confess that I am concerned with the idea that the same degree of flexibility should be given to insurance companies with respect to long-term policies as is being given to unit trusts. Those who put money with insurance companies in long-term policies are not the same as those who invest in unit trusts. Those who invest in unit trusts are very conscious not only that they are investing but also that they are investing in a particular kind of unit trust which may have different objectives as between income and growth and almost certainly will have explicit policies about the kind of investments that will be made. Those who put money

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into long-term insurance policies are usually much less conscious of the nature of the investments being made on their behalf. What they want is of course high yield or high profits, if it is that type of a policy; but, above all, they want security and they do not see themselves as being positive investors in the way that those who take part in unit trusts are.
I appreciate that the degree to which long-term insurance policies and unit trusts become similar is a matter still for regulation. It is not set out in the new clause before us and therefore I do not think that there is any possibility of firmly resisting the amendment, but I would like some recognition from the Government that there is a distinction in the minds of those putting money into these different forms of funds and that the interests of those who wish security rather than taking a positive part in investment will be protected.
Lord Lucas of Chilworth: With the Committee's approval, I should like to respond. I think that the crucial thing to regulate here is the solvency of the insurance company concerned, and of course that is undertaken by my department under the Insurance Companies Act. Thus some aspects of the regulation of these two products must necessarily be different.
But we have acted through this Bill to make strides towards having a common regime for the marketing of all products. The proposals that have been put forward by the Marketing of Investments Board Organising Committee on disclosure of commissions, on economic information about products such as surrender values, cold-calling and cooling-off, and so on apply equally to unit trusts as to unit-linked insurance policies. It is when the investor buys the product that the crucial decisions are taken.
We are concerned with unit-linked insurance policies and not those policies with or without profits. Unit-linked policies are marketed as specific investment vehicles so that they are very much likened to unit trusts, and both of those will naturally have policyholder protection. My noble friend Lord Marshall of Leeds asked for two specific assurances. I think it would be wrong for me to give such assurances at this stage. The White Paper contained a commitment creating parity so far as possible between the permitted investments for unit trusts and the permitted links for linked trusts.
We shall be having full consultations with all those who are involved before any new regulations are made. I would want to consider very carefully what the noble Lord, Lord McIntosh, had to say before I went any further this evening. I would, however, ask the Committee to accept the amendment which I have moved, and if in the course of our considerations there may be necessary changes, so be it; we shall have to deal with that at a later stage.
On Question, amendment agreed to.
Clause 116 [Insurance brokers]:
10.15 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 262:
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Page 93 , line 32, leave out subsection (1).
The noble Lord said In moving Amendment No. 262, I should like to speak also to Amendments Nos. 263, 264, 265 and 402. As the Billl stands, Clause 116 restricts the scope of the Insurance Brokers' Registration Council so that in future it would deal only with broking in relation to non-investment mainly general insurance This is to prevent unnecessary duplication with the regulation of the broking of investment insurance under the Bill.
During the discussion of the Bill in the other place, attention was drawn to the fact that this would have the effect of preventing those who broke only life insurance from registering with the council and calling themselves insurance brokers We accept that this is undesirable, and the present set of amendments are designed to remedy the situation.
The existing scope of the Insurance Brokers (Registration) Act will be maintained but the council will have to accept that, subject only to an experience qualification, those who are authorised under the Bill have an automatic right to registration. Equally the council will take into account in its disciplinary proceedings adverse disciplinary decisions made under the Bill's procedures The registration council accept these new arrangements.
At the same time we have taken the opportunity to bring the provisions on professional indemnity insurance in the Insurance Brokers (Registration) Act into line with the provisions in the Bill. The present Insurance Brokers (Registration) Act 1977 says that the council,
"shall make regulations concerning professional indemnity insurance".
This lack of flexibility has caused problems in recent years because of the lack of suitable insurance and we are therefore moving to a rather more flexible approach I beg to move.
Lord McIntosh of Haringey: I have to preface any remarks by saying, as my noble friends have on previous new clauses, that these are extremely complex matters It is difficult for us, with our resources, fully to comprehend them when they are first presented and, despite the lucid explanation we have had from the noble Lord, for which I am grateful, we have to reserve our position for a later stage.
May I tentatively ask one or two questions of the noble Lord9 It seems to make sense that certain kinds of insurance broker should not inadvertently be excluded from the provisions of the 1977 Act Does the Bill, as amended by these amendments, actually require that independent intermediaries dealing with life and non-life business should become registered as insurance brokers under the 1977 Act? It seems to us that that is a desirable outcome even if there may be defects in the rigidity of the 1977 Act as it stands. It is possible for sharks to get into the insurance business by evading the provisions of the registration Acts and putting themselves forward as registered brokers when in fact they are not.
The only exemption ought surely to be those who are representatives of insurance companies or brokers They are the only ones who should be exempted from the registration conditions I should be grateful for any

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reassurance that the Minister can give me on the continued and, indeed, enhanced authority of the regulatory body for insurance brokers.
Lord Lucas of Chilworth: Because of the complex-ity, because it does overlap into the area of authorisation and SROs, I should prefer to give a considered reply to the noble Lord. Perhaps I may write to him on that point.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 263, 264 and 265:
Page 93, line 37, leave out ("that Act") and insert ("the Insurance Brokers (Registration) Act 1977")
Page 93, line 40, at end insert ("; and an individual shall be treated as satisfying the requirements of section 3(2)(a) of that Act (applicant for registration to satisfy Council as to his character and suitability) if he is an authorised person or a member of a partner-ship or unincorporated association which is an authorised person.")
Page 94, line 4, leave out subsection (4) and insert—
("(4) In section 12(1) and (2) of that Act (which requires the Council to make professional indemnity rules) for the words "The Council shall" there shall be substituted the words "The Council may".
(4A) In section 15 of that Act (erasure from register and list for unprofessional conduct etc.) after subsection (2) there shall be inserted—
"(2A) The Disciplinary Committee may, if they think fit, direct that the name of a registered insurance broker or enrolled body corporate shall be erased from the register or list if it appears to the Committee that any responsible person has concluded that the broker (or a related person) or the body corporate has contravened or failed to comply with—

(a) any provision of the Financial Services Act 1986 or any rule or regulation made under it to which he or it is (or was at the time of the contravention or failure) subject in carrying on business as an insurance broker in respect of such contracts as are mentioned in paragraph 10 of Schedule 1 to that Act; or

(b) any rule of any recognised self-regulating organisation or recognised professional body (within the meaning of that Act), to which he is (or was at that time) subject as aforesaid.

(2B) In subsection (2A) above—

(a) "responsible person" means a person responsible under the Financial Services Act 1986 or under the rules of any recognised self-regulating organisation or recognized professional body (within the meaning of that Act) for determining whether any contravention of any provision of that Act or rules or regulations made under it or any rules of that organisation or body has occurred; and

(b) "related person" means a partnership or unincorporated association of which the broker in question is (or was at the time of the failure or contravention in question) a member or a body corporate of which he is (or was at that time) a director." ").

On Question, amendments agreed to.
Clause 116, as amended, agreed to.
Clauses 117 and 118 agreed to.
Schedule 9 [Friendly societies]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 265A:
Page 171, line 41, at end insert ("Any such rates shall contain a provision that all members of the self-regulating organisation shall adopt rules of conduct in managing their funds which are at least equivalent to other bodies authorised to manage investments as defined in Part 11 of Schedule 1 of this Act.")
The noble Lord said: The words of this amendment are as on the Marshalled List except for one misprint. For "any such rates" read "any such rules". I hope that noble Lords opposite were not thinking that I was going to venture into the question of interest rates or local authority finance. I am confining myself for the moment to friendly societies.
This amendment seeks to do what we were trying to do for insurance companies—to make sure that the field was at least level, to use the word of the noble Lord the Minister; and not only that the field was level but that we were all playing the same game on the level field. I hope he will feel that this is an appropriate amendment for friendly societies, not necessarily in the words as drafted but in the spirit that is intended. I beg to move.
Lord Graham of Edmonton: Perhaps I may say a few words. I believe that we are all as one throughout the Committee in wanting to ensure the maximum peace of mind and security for everyone concerned. Clause 22 presages Schedule 9 and deals with the affairs of friendly societies. I have already declared an interest, which I repeat, on behalf of the Ancient Order of Foresters. The Minister will recall that when we dealt with Clause 22 he was kind enough twice to spell out precisely what Clause 22 means in relation to what are called centralised societies, as opposed to those with branches. I want the Minister to bear in mind (when I hope accepting the spirit of this amendment and coming back to us perhaps with an acceptable form of words) the complications that can occur for a friendly society where in effect its branches are virtually separate organisations within the major organisation.
Can the Minister also say whether the Trustee Investments Act as well as the Friendly Societies Act are prima facie adequate to take into account the desires of my noble friends who want to ensure parity in the management of investments funds?
Lord Lucas of Chilworth: I only wish that I could respond as briefly as the noble Lord, Lord Williams, spoke in moving his amendment and the noble Lord, Lord Graham, in speaking to it. I fear that I cannot because, before I get to the detail of the amendment, I should say something in general about friendly societies and their position in this Bill. That I hope will set in place the background against which, at the end, I shall ask the noble Lord, Lord Williams, to withdraw his amendment.
The friendly societies movement has an old and proud tradition. While I should not want in any way to detract from its present role I think it is fair to say that the time has now passed when it was the main provider of basic social security. Yet the movement continues to play a useful and remarkably diverse role. Part of that role is in long-term insurance business and its role is recognised as such by the special treatment that registered friendly societies receive under the Insurance Companies Act, which has fed through into the special treatment they receive under the present Bill. The business and internal affairs of friendly societies are governed by specific legislation. It is to be found in the various friendly societies Acts. They stretch back over many years but are now consolidated in the Act of 1974. That set up a regime for the

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supervision of registered friendly societies, which is in turn administered in Great Britain by the Chief Registrar of Friendly Societies and in Northern Ireland by the Northern Irish Registrar of Friendly Societies.
The regime provides for the registration of societies, sets out their powers, makes substantial provision for their internal organisation, provides for supervision by way of actuarial valuations and returns, and allows the chief registrar to intervene in the affairs of societies and, in some cases, to arbitrate between members and a society. I emphasise that, because it points to an important difference between membes of friendly societies and policyholders in insurance companies—or clients of any other kind of investment manager authorised under this Bill. Reflecting their origins in providing a rudimentary system of social security for their members, friendly societies are fundamentally mutual self-help organisations. As such, the affairs of a friendly society are run by its members. They elect a committee of management and trustees to hold the assets. Those assets must be invested in compliance with the Trustees Investment Act, and the trustees are subject to all the normal duties of trustees. We are therefore dealing with mutual and democratic organisations. We must be very careful before immediately applying to their internal affairs rules that are designed for a quite different relationship.
Having described that background, I turn to the question of investment management. The first question we must ask ourselves is whether the same problems arise for friendly societies. The most fundamental problem is of course the conflict of interests that arises for a person who is both dealing on his own account and managing the investments of other people. I need hardly remind the Committee of how fundamental is that conflict. I seem to recall that it was the main subject of the speech of the noble Lord, Lord Williams, on his amendment to Clause 3, which he thought was sufficiently important to divide the Committee.
If we consider friendly societies, that most fundamental problem which has so exercised the interests of the noble Lord, Lord Williams, does not exist at all. A friendly society's funds are only the funds of members of the society. There is no analogue of shareholders' funds, and therefore the fundamental conflict of interest to which the most important of the rules on investment management must apply simply does not exist. Do we really want to apply rules to a situation where the most fundamental problem for which they are designed does not and cannot exist?
I turn now to the second type of conflict of interest, which is that which arises as between the different clients of an investment manager. The Bill requires the investment manager to act fairly between them. Returning to the case of the friendly society, a member or group of members of a friendly society has a different mode of redress if it is felt that he or they are being treated unfairly as compared with other members of the society. Their redress is through their democratic control of that organisation. The client of an investment manager does not, apart from the Bill, have that form of redress. The policyholder of an insurance company does not, generally speaking, have

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that form of redress. It is the shareholders who control the insurance company, not the policyholders.
I turn next to the Trustees Investment Act, which the noble Lord, Lord Graham, mentioned. Obviously, their needs will have to be taken into account, as I have shown in what I have already said. The split between orders and branches is but one of the special features of friendly societies that lead me to resist the amendment of the noble Lord, which, if I may be allowed to say so, I feel is also something of a sledgehammer to crack a nut. If I go a little further, it is perhaps a nut that the friendly societies movement has its own way of dealing with—of reaching the kernel. That is because most friendly societies are small and, in any event, operate only one fund. Unfairness, I suggest, cannot arise in these circumstances. The sums invested are relatively small.
I think we have seriously to ask ourselves whether we want to place a further statutory burden on this movement just for the sake of a rather theoretical consistency. I do suggest that we have done enough by covering the marketing of friendly society policies, where, of course, the principles of member democracy cannot be invoked to protect the interests of a person who, before he or she takes out a policy, is not yet a member of the friendly society concerned.
Lastly, I do wonder where, outside the Committee, there is any such demand for a move such as is proposed by the amendment. It certainly has not been represented to us in our discussions. That is rather a long explanation. I did say at the outset that I was going to hope the noble Lord would feel, with that explanation, able to withdraw his amendment, which I now ask him to do.
10.30 p.m.
Lord Williams of Elvel: I am most grateful to the noble Lord for his long explanation of friendly societies, their history, their social objectives and their responsibilities for social security. Contrary to his submission on security companies, I started off by believing everything he said, but gradually stopped believing. Whereas before I had increased my belief, 1 now have suspended belief.
When he says that I am using a sledgehammer to crack a nut, the admission is that the nut is there. I believe I shall have to look very carefully at what the noble Lord says, and come back to this, if necessary, on Report. I am afriad I do not believe all he says. I do not believe that his views on the subject are entirely consistent with what I have heard elsewhere. I withdraw the amendment, but I will come back on report.
Amendment, by leave, withdrawn.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 266:
Page 176, line 41, after ("sections") insert ("41(7) ").
The noble Lord said: In moving Amendment No 266 I shall speak also to Amendments Nos. 267 to 272, excluding Amendment No. 266A. Perhaps I should say that these amendments make necessary consequential changes for friendly societies. They introduce no new element of principle. They are consequential upon that group of amendments

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beginning with Amendment No. 114 that I moved earlier in our proceedings. My Lords, I beg to move this amendment.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 266A:
Page 176, line 42, after ("150(l)(m)") insert ("(Directions restricting disclosure of information overseas)").
The noble Lord said: In moving Amendment No. 266A, I do appreciate that this does have relevance to Amendment No. 350A, which we shall be debating tomorrow. The amendment that I am speaking to now makes provision for certain information obtained by recognised self-regulating organisations for friendly societies. The provisions correspond to those applying for certain information obtained by recognised self-regulating organisations in the Government's new clause, Amendment No. 350A, which we shall be discussing in due course.
In essence, this is a paving amendment to the amendment that I have referred to. This was tabled on Tuesday of this week and was in the second Marshalled List. It relates to powers to prevent people disclosing information overseas. I beg to move.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 267 to 272:
Page 176, line 42, leave out ("and paragraph 3(3) of Schedule 5 to this Act").
Page 180, line 35, at end insert ("or the appointed representative of such a society").
Page 180, line 39, after ("society") insert ("or such a representa-tive").
Page 181, line 10, after ("society") insert ("or an appointed representative of a member society which is subject to the rules of a recognised self-regulating organisation for friendly societies in carrying on the investment business in respect of which it has accepted responsibility for his activities").
Page 181, line 13, after ("society") insert ("or appointed representative").
Page 181, line 13, leave out ("it is a member society") and insert ("the society or. as the case may be, the society which is the representative's principal is a member society").
The noble Lord said: I have spoken to Amendment No. 267, and with the agreement of the Committee I move Amendments Nos. 267 to 272 en bloc. I beg to move.
On Question, amendments agreed to. Schedule 9, as amended, agreed to.
Clause 119 [Official listing]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 273:
Page 95, line 34, leave out ("3").
The noble Lord said: With the leave of the Committee, I shall speak also to Amendment No. 274. These amendments are rather technical but their effect is to put beyond doubt that in accordance with the directives on the official Stock Exchange listing, Part IV does not apply to instruments issued by a member state or its local authorities. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 274:
Page 96, line 1, leave out ("3 shall have effect as if it applied only to instruments") and insert ("2 shall have effect as if it included any instrument falling within paragraph 3").
On Question, amendment agreed to.
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 275:
Page 96, line 8, leave out the words ("paragraph 6 of").
The noble Lord said: This amendment gives a power so that if the markets change and the rules of the directives from the Common Market change one will not need amending legislation. The amendment gives power to the Secretary of State to order that the clause shall apply to investments in Schedule 1 instead of only falling within paragraph 6 of Schedule 1. It gives the Secretary of State the power to do so in appropriate circumstances. I beg to move.
Lord Brabazon of Tara: As the noble Lord explained, the amendment is aimed at greatly extending the potential scope of a modest provision which is designed to do no more than retain our flexibility to exercise our option under Article 2 of the EC admission directive to apply the directive to open-ended collective investment undertakings. At present we have exercised that option the other way because UK unit trusts have not normally sought admission to listing; but it is prudent to retain the possibility to change.
Extending Part IV to any investment covered by Schedule 1 would unnecessarily extend the scope of the statutory regime created by Part IV. Whether such investments should be admitted to official listing, and on what terms, is a matter for the Stock Exchange to decide, not the Government. I therefore cannot agree to accept the amendment.
Lord Morton of Shuna: With the greatest respect to the noble Lord, he seems to have completely misunderstood the purpose of the amendment. The purpose is not to extend the effect but to give the Secretary of State the power to do so if he thought it advisable; and therefore avoid the necessity of amending legislation. The Secretary of State "may by order" means that he may do so in suitable circumstances. It does not mean that he has to do so.
Lord Brabazon of Tara: I am sorry if I have misunderstood the noble Lord's interpretation of his amendment. I have given our interpretation of what the effect of it would be. I stand by what I said. I shall look into what he said to see whether such a provision may be necessary, but I cannot give any commitment.
Lord Morton of Shuna: I shall accept that hesitant reply. On the understanding that I may return to the matter at a later stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 119, as amended, shall stand part of the Bill?
Lord Morton of Shuna: I wish to raise the question of the construction of Part IV of the Bill. It appears to

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me to be far too complicated. It sets out in the Bill matters which are unnecessary either because they are already in the Companies Act 1985. of which the Bill is repealing Part III. or they are in statutory instruments or can be made by statutory instrument and it would be much better if that power remained like that.
The Stock Exchange Listing Regulations adopt the EC directives. When the directives may change at any time, I can see little purpose in doing what appears to have been done in Clause 123(1). That is one attempt to paraphrase Article 4 of the Council directive of 17th March 1980, but Amendment No. 277, which we shall come to, would produce a different paraphrase. The article in the directive is already law and the European Court will enforce that. I cannot for the life of me see why we have to have a different interpretation.
The drafting of this part of the Bill makes life far too complicated, when it could have been made much more simple and straightforward by leaving the listing of securities to regulation, instead of trying to put everything into the Bill.
Lord Brabazon of Tara: The noble Lord suggests that this part of the Bill will cause unnecessary disruption and that we should continue to rely on the Stock Exchange Listing Regulations to implement the EC listing directives in this country. The listing directives had to be implemented within a tight timetable, which meant that we had to use Section 2(2) of the European Communities Act and proceed by secondary legislation. That imposed limitations on what could be done, and it was not possible to deal satisfactorily with certain matters; for example, the Stock Exchange Listing Rules (the "Yellow Book") are in many ways stricter than the minimum standards contained in the directives. The directives allow much stricter requirements to be imposed, but the European Communities Act did not allow the Stock Exchange to be empowered to impose additional legal requirements going beyond the directives, which could throw doubt on the validity of the Yellow Book.
I appreciate that there is room for legal experts to differ on this question, and I should certainly not presume to assert that the proposition that the regulations provide a secure foundation for the Yellow Book is untenable. But, equally, it cannot be said that there is no doubt and that a structure built on those foundations would not benefit from stronger underpinning. I believe that it is important to take the opportunity presented by the Bill to resolve the uncertainties that exist and to put beyond challenge the power of the Stock Exchange as the competent authority to make rules to impose the additional requirements which the directives allow.
As the Committee will know, the Government have tabled a number of amendments to Part IV of the Bill to meet the concerns that have been expressed by the Stock Exchange and others. We have listened to arguments and have been prepared to be reasonable and flexible about the drafting of these provisions. I hope that these amendments will at any rate allay the concerns of the Stock Exchange.

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I must stress that Part IV of the Bill is neither change for change's sake nor a radical revision of the present law, but it will remove damaging and undesirable uncertainties. Those are the reasons why we have had to go through this fairly carefully and why we brought Part IV into the Bill.
Clause 119, as amended, agreed to.
Clause 120 agreed to.
10.45 p.m.
Clause 121 [Admission to list]:
Lord Hacking Lord Hacking moved Amendment No. 275A:
Page 97, line 18, leave out subsection (1).
The noble Lord said: I ask for the Committee's sympathy. It is enormously difficult to deal with yet another complicated measure about which the Stock Exchange is extremely concerned so late in the evening and to give it the fair and detailed consideration that it deserves. I shall therefore shorten my words, but I cannot shorten them to a couple of sentences.
The amendment, as does Clause 121, concerns the listing regulations. Part IV of the Bill deals with the admission of securities to official listing, as the Committee knows. Its contents are in part derived from three EC directives known as the listing directive, the listing particulars directive and the interim reports directive. Those directives have already been implemented by the Stock Exchange Listing Regulations 1984. The purpose of Part IV is to replace those regulations. That was the point made by the noble Lord from the benches opposite. In doing so it has changed the legal basis of implementation.
Under the regulations, the directives were made directly part of the laws of the United Kingdom. Under the Bill, the application of the directives is more indirect. The competent authority is given power to make listing rules subject to certain limitations. The Bill makes no reference to the directives, nor to most of their numerous detailed provisions. Instead. Clause 160 gives the Secretary of State power to direct the competent authority to comply with the directives if it appears to him that its rules fail to do so.
As a result, instead of the directives being directly binding on the competent authority as well as the issuers, it is left to the competent authority to draw up and administer its own rules without direct reference to the directives. That is undesirable. As I said just now, it is a matter that causes considerable concern to the Stock Exchange. Indeed, at the early hour of 8.30 a.m. today, at the request of the chairman of the Stock Exchange, Mr. Michael Howard the Under-Secretary for Corporate and Consumer Affairs held a meeting. That meeting was attended by the chairman and other representatives of the Stock Exchange.
The chairman of the Stock Exchange was anxious that the Government should take careful note and have a record of the points urged upon Mr. Howard during the course of that meeting. The chairman of the Stock Exchange made four points in a letter which was sent later today. I believe that they are important points and with the Committee's leave I shall read them to the Committee. The first point that the Chairman of the Stock Exchange made is:

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"In the light of the structure which has been adopted in Part IV, we think that it is unnecessary to single out Article 3"—
of the Commission directive—
"in the way that Clause 121(1) does. The Directive can satisfactorily be implemented through the medium of clause 160".
The second point is:
"As we explained to you. Clause 121(1) goes far beyond the Directive in that, as drafted, it applies not only to the minimum requirements of the Directive but also to the 'additional requirements'. The latter represent the bulk of the Yellow Book"—
that is Admissions of Securities to Listing to which the Minister referred.
"To do what Clause 121(1) has done in relation to the additional requirements can in no way be regarded as being required by the Directive".
The third point is:
"We fear that the main practical effect of Clause 121(1) will be to provide an opportunity for those people who wish to interfere in the grant of listing for some collateral reason of their own. The obvious examples are contested takeovers and privatisations. We accept that one of the aims of the Directive is to see that competent authorities in Member States do not grant listings where the conditions of the Directive have not been fulfilled. We think that this aim will be met by the combination of the Yellow Book, the way in which the Stock Exchange administers its rules, and, if it should ever become necessary, the residuary power in Clause 160. We do not think that aim is met in any sensible manner by inviting litigation in the sort of case 1 have described".
The fourth point is this:
"As regards that litigation, although we understand your concern about the Secretary of State becoming involved, we do not think that it is justification for the practical problems to which Clause 121(1) will give rise. We think that circumstances are unlikely to arise in which an applicant will succeed in an application made against the Secretary of State under Clause 160 in the context of the grant of listing. In addition, as we explained, by leaving things to Clause 160 the risk is reduced because the applicant would only-have the minimum conditions of the Directive on which to base his case, rather than the additional requirements as well".
Those are the detailed points made only today in a letter sent by the chairman of the Stock Exchange to the colleague of the noble Lord the Minister who sits in this House. I would ask the Committee and the Government, difficult as it is to give detailed consideration to complex matters late at night, to view the concern, expressed clearly by the Stock Exchange, especially the four points that I have just read, as worthy of consideration. I would ask the Minister, at the very least, not over long nights but over the many days that will divide consideration of the matter in Committee and the Report stage in October, to give full consideration to it and to enter into whatever discussions are considered necessary by the Government and the Stock Exchange to resolve it. If it is sufficiently important for the chairman himself to ask for an interview, I believe that it is sufficiently important to warrant further consideration being given to it. I beg to move.
Lord Morton of Shuna: It appears that the chairman of the Stock Exchange, to the surprise of others as well as myself, takes much the same view as I endeavoured to put in relation to the whole of this part of the Bill. I support strongly the suggestion that this part should be taken away and thought out again. I support the amendment.
Lord Brabazon of Tara: The noble Lord, Lord Hacking, moved the amendment as if it was

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something that had been raised for the first time this morning by the chairman of the Stock Exchange. I hate to disillusion him. Almost exactly the same amendment was moved in Committee in another place.
Lord Hacking: No. I did not indicate that this was a new discovery by the Stock Exchange. I thought that I had said that this was a matter that had concerned the Stock Exchange for some time. It is currently so concerning it that the chairman of the Stock Exchange requested and indeed was granted a meeting this morning by the Minister.
Lord Brabazon of Tara: We have obviously listened to representations made to us, especially by such eminent people. In answer to the noble Lord's amendment, may I first say that the Government had no wish to make official listing a statutory matter. But, as was feared at the time when the European Community directives, which Part IV seeks to implement, were being negotiated, and as the subsequent jurisprudence of the European Court of Justice has confirmed, Community law requires directives of this kind to be turned into binding national provisions. Mere administrative action will not do. There is scope for debate on exactly how far one has to go in certain areas. On a number of points the Government have sought to accommodate the wishes of the Stock Exchange to the limit of what Community law can possibly be interpreted as allowing. We were happy to do that, and we certainly do not want to do anything that could adversely affect the pre-eminence of the United Kingdom as a financial centre. But the fundamental proposition that the directives have to be given a legal basis in the United Kingdom is, I believe, accepted. That being so, one has to carry the logic through, and if one tries to avoid it in one area, the only effect will be transfer the strain elsewhere.
Under the directives, the basic obligation is clear:
"Member states"
—that is the UK—
"shall ensure that securities may not be admitted to official listing on any stock exchange… unless the conditions laid down by this Directive are satisfied".
That is what we have to achieve. The question is about the method of achieving it. If we do not reflect it in the Bill, we will have to achieve it in some other way. The noble Lord has suggested that it could be achieved through Clause 160, which provides the Secretary of State with a power to give directions to the competent authority to enable the UK to comply with its Community or other international obligations.
I am not saying that that power is not wide enough to give a direction that the Stock Exchange should not admit particular securities to listing, where to do so would put us in breach of the directives; it is, but it would not be satisfactory, legally or in policy terms, to rely on it. As I said a moment or two ago, if one accepts the basic proposition, one has to carry the logic through or else one feels the strain elsewhere.
In the first place—and this is the legal objection—the power in Clause 160 is discretionary. We would therefore not be giving the binding effect that Community law requires. The purpose of the

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directives is to give investors an assurance that listed securities will meet a given standard. Listing is not just a matter between the issuer and the competent authority. This objective would be lost if the competent authority were able to grant listing when the standards were not met.
It has been suggested that the point I have just made applies only to the minimum standards laid down by the directives. I am afraid that I cannot agree; and I have, of course, taken legal advice on this point. The directives allow member states to impose additional or more stringent conditions on admission to listing. The UK is not bound to impose such conditions. But if it does, through listing rules, the directives require these to apply generally, and permit derogations from them only on a consistent basis. The implication is clear; namely, that if a member state chooses to adopt higher standards, investors are entitled to rely on those standards. It follows that they must be treated in the same way as the minimum requirements.
The second objection is one of policy. Under the Bill as drafted, the Stock Exchange is, under the law, responsible for the decision as to whether or not securities are admitted. The power in Clause 160 is there, but where, as here, the Bill lays down what is to be done, Ministers can properly refer any complainant to the Stock Exchange, or, if they are dissatisfied with the Stock Exchange's decision, to the court. But if this basic obligation were not in the Bill, Ministers would have to consider any complaint. They would be put in the position of having to second-guess the Stock Exchange. That is not a position in which Ministers wish to find themselves, nor, I would suggest, one in which the Stock Exchange would wish Ministers to be. Even then, one would not avoid recourse to the courts, since a complainant who did not receive satisfaction from the Minister, or someone else who was aggrieved by what the Minister had done, could apply to the court in just the same way as against the decision of the Stock Exchange.
It boils down to there being a clear obligation. We accepted it, and it must be right that investors should be able to rely on the standard it lays down. We have got to implement it somehow. I submit that it is far better to do it in a straight forward way than to risk Ministers being dragged in to achieve what has to be achieved anyway.
It is suggested that this provision will provide a ready opportunity to people to upset a contested takeover bid on a technicality. I do not myself believe that that result is likely. After all, the words of the directives which this provision reflects have been law under the Stock Exchange (Listing) Regulations, approved by your Lordships' House in 1984, for nearly two years and nothing has happened. Anybody who wanted to challenge the decision of the Stock Exchange to admit particular securities would have to go to court, and would have to have the leave of the court to do so, for which they would require to show that they had sufficient standing and at least a prima facie case. To bring the Minister in as well would simply increase the chances of problems arising.
To sum up, therefore, I do not believe that this amendment would achieve the result put forward. We

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have a Community obligation to implement and I am satisfied, after taking advice, that the Bill does what is necessary, and no more than is necessary, to comply with our obligations. This is a new subject which we have obviously looked into extremely carefully. The noble Lord has now heard my reasons why we cannot accept the amendment and I trust that he will feel able to withdraw it.
11 p.m.
Lord Hacking: It is certainly my intention to withdraw the amendment. I have no doubt at all that the Government have given a lot of consideration to this. However, the people in the market are concerned about it. If that concern evidences itself in it being treated as a matter of worry to such high authority within the market as the chairman of the Stock Exchange, it cannot be a matter that is trivial or unrealistic. For that reason, while I am willing to withdraw my amendment, I hope that the Minister will turn aside from the pages of his brief and try to give this further consideration. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 275B not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 276:
Page 98. line 5. leave out subsection (4).
The noble Lord said: I beg to move Amendment No. 276. This amendment deals with a rather narrow and technical point relating to certificates representing shares. The meaning of this expression in the listing directives is not completely clear, and on reflection it seems preferable for the Bill to leave the competent authority discretion to deal with such cases as may arise in the listing rules in a manner consistent with the directives. I beg to move.
On Question, amendment agreed to. Clause 121, as amended, agreed to. Clause 122 agreed to.
Clause 123 [General duty of disclosure in listing particulars]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 277:
Page 98, line 38, leave out ("with respect to") and insert ("as investors and their professional advisers would reasonably require, and reasonably expect to find there, for the purpose of making an informed assessment of—").
The noble Lord said: I beg to move Amendment No. 277. With the leave of the Committee. I shall speak to Amendments Nos. 278, 281 and 282, and 316, 317 and 318. These amendments are in response to representations we have received that the general duty of disclosure in Clause 123 is more onerous than is required by the listing directives. I hope it will be convenient to consider at the same time the similar amendments to the parallel clause, Clause 135. in Part V. My honourable friend the Parliamentary Under-secretary of State for Corporate and Consumer Affairs promised in another place to look again at the wording of these clauses, and these amendments, which

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incorporate several features of amendments moved in another place, are the result.
Our aim is to translate the requirements of the directive correctly, without creating uncertainty or unnecessary burdens for issuers. I believe that the amendments are a significant improvement, and I am grateful to those who commented on the clauses. I beg to move.
Lord Morton of Shuna: This clause remains as a potential benefit for lawyers—to which no doubt I should not object. However, the directive uses the word "necessary". One can think that the word "require" or "expect" in certain circumstances would be the same as necessary. Where does "reasonable" come in? Does that mean that there may be unreason-able requirements? Who will decide reasonableness? Why can the clause not say,
"insert ('as investors and their professional advisers would require and expect to find there' ".
Why does "reasonableness" add anything other than a muddle to something which should be clear, and is clear in the directive?
Lord Brabazon of Tara: I must admit that I should have thought the sense of the amendment was fairly clear and was what we were aiming to achieve. I would hesitate to argue with the noble Lord as a lawyer about the meaning of the word "reasonableness". I had understood that it was reasonably acceptable in legal jargon. However, I shall certainly take note of what the noble Lord said, and if there is any improvement which could be made—without any commitment whatsoever—I shall have a look at it.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 278:
Page 99, leave out lines 2 to 5.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 279:
Page 99, line 8, leave out ("the preparation of").
The noble Lord said: I beg to move Amendment No. 279, and I should like to speak to Amendments Nos. 290, 292, 293, 294, 296, 297, 298, 299, 300, 301, 302, 327, 328, 329, 331, 332, 333. 334, 335 and 408. I apologise if this seems a somewhat indigestible chunk of amendments but they all deal with the question of liability. Questions of who is to be liable and to what extent are bound up inextricably with the defences available, and so I think it makes sense to consider all these amendments and the new clauses together, both the Part IV and the Part V ones.
The liability provisions have, quite understandably, attracted considerable attention, and an extensive revision of the clauses in question inspired by the Stock Exchange and Law Society, was tabled in the other place. In responding to that, my honourable friend the Parliamentary Under-Secretary of State undertook to see to what extent he could meet the concerns expressed. These amendments are the result of that consideration, and I hope your Lordships will
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agree that they go a very considerable way towards meeting those concerns.
In particular, they provide new defences corresponding to those in the prospectus provisions of the Companies Act and clarify who is to be regarded as responsible for listing particulars and prospectuses by providing a list, instead of relying on the concept of persons responsible for the preparation of offer documents.
I do not intend to delay your Lordships with a detailed analysis of the new clauses. These are explained in the notes which have been provided, although I am of course happy to do my best to answer any queries any noble Lord may have.
But perhaps I may draw attention to some salient features. Additional defences are provided where an issuer relies on statements made by an expert or where it would be legally or otherwise improper for a person to disclose particular information in listing particulars or a prospectus. This could arise, for example, if a director straddled a Chinese wall in one of the new financial conglomerates. He will not be liable under Parts IV or V for omitting to disclose on one side of the fence what he learnt on the other. There is also a procedure in the second new clause on 'persons responsible' for the competent authority or an approved recognised investment exchange to certify that a director should not be liable, for example if he faces a conflict of interest. Perhaps I may just add in parenthesis that I shall be explaining the concept of an approved recognised investment exchange when we come to discuss the relevant amendments to Part V.
A defence is also provided if a person acquires securities in the knowledge that an offer document was misleading. It seems unreasonable that a person who buys with knowledge that a document is misleading should be compensated if he later suffers loss as a result of the true facts becoming known.
These amendments meet a good 90 per cent. of the points put to us and are a good indication of our willingness to listen. I therefore commend them to the Committee.
Lord Morton of Shuna: I am in the same position as I was regarding earlier clauses, and as my noble friend Lord Williams was on earlier clauses. We have not had time to digest these amendments which appear as if they have been recently plucked up from a field and given to us. They may be ready, but we do not know. Subject to the right to come back to the matter at Report stage, I shall say nothing further.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 280 to 282:
Page 99, line 17, leave out ("and").
Page 99, line 21, leave out from ("consult") to end of line 24 and insert (": and)
(d) to any information available to investors or their professional advisers by virtue of requirements imposed under section 127 below or by virtue of requirements imposed by a recognised investment exchange for the purpose of complying with paragraph 2(2)(b) of Schedule 3 to this Act.")
Page 99, line 25, leave out subsection (4).
The noble Lord said: I spoke to Amendments Nos. 280 and 282 with Amendment No. 277. Therefore,

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with the leave of the Committee, I beg to move Amendments Nos. 280 to 282.
On Question, amendments agreed to.
Clause 123, as amended, agreed to.
Clause 124 [Supplementary listing particulars]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 283:
Page 99, line 35, at end insert ('": or").
The noble Lord said: I beg to move Amendment No. 283 and at the same time speak to Amendments 284 to 288. and 320 to 326. These amendments concern Clause 124, which deals with supplementary listing particulars, and Clause 136, the corresponding provision in Part V on supplementary prospectuses. It may be convenient to discuss them together. They are a result of undertakings given in another place to reconsider the clauses and should meet the concerns that were expressed about them. In particular, it is made clear that a new matter will trigger the need for a supplement only if it affects the assessment of the securities.
The amendments to Clause 124 lay the duty to publish a supplement on the issuer of the securities once he is aware of a significant change or new matter. If any other person responsible for listing particulars learns of a significant change or new matter, he is under a duty to inform the issuer. In response to concerns expressed by the Stock Exchange, the provisions dealing with corrections are removed from this clause.
The amendments to Clause 136 are similar, with the duty to publish a supplementary prospectus laid on the person who delivered the prospectus for registration. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 284 to 288:
Page 99, line 36, after ("a") insert ("'significant").
Page 99, line 38, leave out from ("prepared") to end of line 41.
Page 99, line 42, leave out ("appropriate person") and insert ("issuer of the securities").
Page 100, line 2, leave out from ("matter") to end of line 3.
Page 100, line 4, leave out subsection (2) and insert—
("() In subsection (1) above '"significant" means significant for the purpose of making an informed assessment of the matters mentioned in section 123(1) above.
() Where the issuer of the securities is not aware of the change or new matter in question he shall not be under any duty to comply with that subsection unless he is notified of it by a person responsible for the listing particulars: but it shall be the duty of any person responsible for those particulars who is aware of such a matter to give notice of it to the issuer.")
The noble Lord said: With the leave of the Committee, I beg to move Amendments Nos. 284 to 288. I have just spoken to them.
On Question, amendments agreed to.
Clause 124, as amended, agreed to.
Clause 125 [Exemptions from disclosure]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 289:
Page 100, line 24, leave out ("international securities (as defined in section 45(6) above):") and insert ("securities which fall within paragraph 2 of Schedule 1 to this Act as modified by section 119(3)(b) above and are").
The noble Lord said: I beg to move Amendment No. 289. This amendment fulfils another undertaking given by my honourable friend in another place. The clause at present allows the competent authority to derogate from the disclosure requirements when international debt securities traded in by experts arc offered. There seems no reason to differentiate between foreign and domestic issues in this respect. The amendment allows similar flexibility for the latter. As we have made clear in many parts of the Bill, we have no desire to drive business from London by imposing unduly exacting requirements. I beg to move.
On Question, amendment agreed to.
Lord Hacking Lord Hacking moved Amendment No. 289A:
Page 100, line 34, leave out ("decision") and insert ("assessment").
The noble Lord said: This is a simple amendment. It is another amendment that falls under the disclosure provisions, and the question here is whether the person who is considering the acquisition of securities is exercising an informed "decision", which is the word at present in the Bill, or an informed "assessment", which is the word I am asking the Government to accept.
When the Government were dealing with Amendment No. 277, that the Committee agreed should be placed in the Bill, they chose the words "informed assessment". Therefore not only do I suggest that "assessment" is the right word and "decision" the wrong word, but I even have the support of the Government in Amendment No. 277. I beg to move.
Lord Brabazon of Tara: I am delighted to say that I shall be able to respond to the noble Lord, Lord Hacking, considerably more briefly that I did on the previous amendment. I compliment him on the sharpness of his eye, and note that his amendment restores the word used in Article 7 of the relevant directive, and I can readily accept it.
On Question, amendment agreed to.
11.15 p.m.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No 290:
Page 100, line 38, leave out ('"the preparation of").
The noble Lord said: I spoke to this amendment with Amendment No. 279. I beg to move.
On Question, amendment agreed to.
Clause 125, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No 291:

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After Clause 125, insert the following new clause:
("Registration of listing particulars.

.—(1) On or before the date on which listing particulars or supplementary listing particulars are published as required by listing rules a copy of the particulars shall be delivered for registration to the registrar of companies and a statement that a copy has been delivered to him shall be included in the particulars.

(2) In subsection (1) above "the registrar of companies" means—

(a) if the securities in question are or are to be issued by a company incorporated in Great Britain, the registrar of companies in England and Wales or the registrar of companies in Scotland according to whether the company's registered office is in England and Wales or in Scotland:

(b) if the securities in question are or are to be issued by a company incorporated in Northern Ireland, the registrar of companies for Northern Ireland:

(c) in any other case, any of those registrars.

(3) If any particulars are published without a copy of them having been delivered as required by this section the issuer of the securities in question and any person who is knowingly a party to the publication shall be guilty of an offence and liable—

(a) on conviction on indictment, to a fine:

(b) on summary conviction, to a fine not exceeding the statutory maximum.").

The noble Lord said: This is a new clause which fulfils another undertaking given by my honourable friend in another place. I should like to draw the attention of the noble Lord, Lord Morton of Shuna, to this, because I think he will note with approval that under subsection (2)(c) overseas companies are free to choose which registrar to use and may deliver listing particulars where it is most convenient for it to do so. My noble friend will be moving a parallel amendment to Part V in due course. I beg to move.
Lord Morton of Shuna: I accept that invitation. I certainly welcome the amendment so far as it goes, but whether it goes far enough I do not know. I should like the opportunity of further study, but there are other rules such as the rules about charges and various other things where particulars have to be registered with specific registrars. It would be unfortunate if someone had to go from one registrar to another just at the choice of a particular company or issuer. This may need looking at again.
On Question, amendment agreed to.
Clause 126 [Compensation for false or misleading particulars]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 292 to 294:
Page 101, line 1, after ("(1)") insert ("Subject to section (Exemption from liability to pay compensation) below.")
Page 101, line 1, leave out ("the preparation of).
Page 101, line 4, after ("loss") insert ("in respect of them").
The noble Lord said: These amendments were spoken to with Amendment No. 279. I beg to move these three amendments.
On Question, amendments agreed to.
Lord Hacking Lord Hacking moved Amendment No. 294A:
Page 101, line 7, leave out from (" above ") to the end of line 8.
The noble Lord said: With the Committee's leave, I shall also address the Committee on Amendment No. 295, which is a Government amendment, and No.
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295A, which is my amendment. These concern Clause 126, which sets out the basis upon which compensation can be awarded against persons responsible for the preparation of any supplementary listing particulars when those particulars include an untrue or misleading statement or when there has been some omission from them in any matter required by Clauses 123 and 124.
Under current requirements of the listing regulations of the Stock Exchange parties are required—that is to say, those persons responsible for the preparation of any listing particulars—to make what is called a positive negative. That means that in the case of litigation, for example, it is the responsibility of those persons to state positively that there is no material litigation which affects the issue of that security.
My first submission is that by removing the last few words from Clause 126(1) a clear proposition is made which does not need any further assistance from any subsection. Nonetheless, it is clear that the Government consider that there should be a subsection setting out in more detail the circumstances in which Clause 126(1) should bite. The suggested subsection is set out in both Amendment No. 295, in the name of the noble Lord the Minister, and also Amendment No. 295A, which is in my name.
Without going into detail or being insulting to the Government late at night, I should like to say to the Committee that the Government's draft is ambiguous. Without puffing myself up I may say that I believe that my amendment avoids the ambiguity and sets out in greater detail what the Government are anxious to introduce into the Bill with this subsection. I have been greatly assisted in the preparation of this amendment by persons outside the Committee, and particularly by the Law Society, and I wish to put that on record.
My first submission to this Committee is that it adopts Amendment No. 294A, which is the simplest amendment of the three. If the Committee is against that proposition but with the Government in agreeing that another subsection is needed, may I suggest, without sounding impertinent, that the Committee should choose Amendment No. 295A? I beg to move.
Lord Brabazon of Tara: I sympathise with the notion that the issuers should not be liable for trivial omission of material required by listing or prospectus rules, but the Bill as we propose to amend it already contains various devices to prevent this. First, the requirement that the purchaser should have suffered loss imports a materiality test and should preclude claims based on technical breaches. Secondly, the noble Lord's own amendment, Amendment No. 295A, which I am bound to say we prefer to our own amendment, Amendment No. 295 (which I shall not be moving) allows insurers to omit irrelevant information about incurring liability in certain circumstances. Thirdly, it is also necessary to consider the defences, which I shall be moving amendments to later to augment further. We have thus moved a considerable way to recognise issuers' difficulties. To remove liability for breaches of the rules goes too far, in my opinion, and could prejudice investor protection. Apart from the general principle that investors should have the same redress for losses caused by breaches of

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listing rules as for losses caused by breaches of the general duty, it seems an unreasonable additional burden to require investors to prove a breach of a generally expressed duty where there is a clear contravention of a specific rule. This may be much harder since not every significant breach of a specific rule will be a clear violation of the general duty. What that explanation I hope that the noble Lord will see fit not to press his Amendment No. 294A and will move Amendment No. 295A, which we shall be pleased to accept.
Lord Hacking: The willingness of the Government to accept an amendment of mine which is some five or six lines long is quite a triumph, although the Government have always been willing to be helpful. I therefore cannot resist the invitation of the noble Lord to withdraw my Amendment No. 294A. However, before I withdraw it, I should like to draw to the Committee's attention and to put on record the fact that both my amendment and the Government's amendment are fine for the existing Stock Exchange listing regulations, but they are not fine for any future listing regulations that may be drafted in a different matter, and they are not fine for the listing regulations (under Part VI) of other exchanges that may be permitted to join into the market. Therefore, while the amendment serves the present circumstances, or the present listing arrangements of the Stock Exchange, it may not serve either future regulations of the Stock Exchange or the listing regulations of other exchanges. However, having drawn that caveat to the attention of the Committee, I am more than happy to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendment No. 295 not moved.]
Lord Hacking Lord Hacking moved Amendment No. 295A:
Page 101, line 7, leave out from ("above") to end of line 8 and insert—
("() Where listing rules require listing particulars to include information as to any particular matter on the basis that the particulars must include a statement either as to that matter or, if such is the case, that there is no such matter, the omission from the particulars of the information shall be treated for the purposes of subsection (1) above as a statement that there is no such matter.")
The noble Lord said: I have already addressed the Committee on this amendment. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 296 to 300:
Page 101, line 9, after ("(2)") insert ("Subject to section (Exemption from liability to pay compensation) below,").
Page 101, line 11, after ("loss") insert ("in respect of them").
Page 101, leave out lines 13 to 45.
Page 102, line 10, leave out ("the preparation of").
Page 102, line 11, leave out ("their preparation") and insert ("them").
The noble Lord said: I spoke to Amendments Nos. 296 to 300 with Amendment No. 279, With the leave of the Committee, I beg to move the amendments.
On Question, amendments agreed to.
Clause 126, as amended, agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 301:
After Clause 126, insert the following new clause:—
("Exemption from liability to pay compensation.

.—(1) A person shall not incur any liability under section 126(1) above for any loss in respect of securities caused by any such statement or omission as is there mentioned if he satisfies the court that at the time when the particulars were submitted to the competent authority he reasonably believed, having made such enquiries (if any) as were reasonable, that the statement was true and not misleaing or that the matter whose omission caused the loss was properly omitted and—

(a) that he continued in that belief until the time when the securities were acquired; or

(b) that they were acquired before it was reasonably practicable for steps to be taken to bring a correction to the attention of persons likely to acquire the securities in question; or

(c) that he continued in that belief until after the commencement of dealings in the securities following their admission to the Official List and that the securities were acquired after such a lapse of time that he ought in the circumstances to be reasonably excused.

(2) A person shall not incur any liability under section 126(1) above for any loss in respect of securities caused by a statement purporting to be made by or on the authority of another person as an expert which is, and is stated to be, included in the particulars with that other person's consent if he satisfies the court that at the time when the particulars were submitted to the competent authority he had reasonable grounds for believing the other person to be competent to make or authorise the statement and to have consented to its inclusion in the form and context in which it was included and—

(a) that he continued to have such grounds until the time when the securities were acquired; or

(b) that they were acquired before it was reasonably practicable to bring the fact that the expert was not competent or had not consented to the attention of persons likely to acquire the securities in question.

(3) Without prejudice to subsections (1) and (2) above, a person shall not incur any liability under section 126(1) above for any loss in respect of any securities caused by any such statement or omission as is there mentioned if he satisfies the court that reasonable steps were taken before the time when the securities were acquired to bring a correction to the attention of persons likely to acquire the securities in question or, where the statement was such as is mentioned in subsection (2) above, to bring to their attention the fact that the expert was not competent or had not consented.

(4) A person shall not incur any liability under section 126(1) above for any loss resulting from a statement made by an official person or contained in a public official document which is included in the particulars if he satisfies the court that the statement is accurately and fairly reproduced.

(5) A person shall not incur any liability under section 126(1) above if he satisfies the court that the person suffering the loss acquired the securities in question with knowledge that the statement was false or misleading or, as the case may be, of the omitted matter.

(6) A person (other than the issuer of the securities or, where the issuer is a body corporate, a director of that body) shall not incur any liability under section 126(1) above if he satisfies the court that it was unlawful or otherwise improper for him to disclose any information the non-disclosure of which resulted in the statement causing the loss being false or misleading or in the omission that caused the loss.

(7) A person shall not incur any liability under section 126(2) above if he satisfies the court that he reasonably believed that the change or new matter in question was not such as to call for supplementary listing particulars.

(8) In this section "expert" includes any engineer, valuer, accountant or other person whose profession, qualifications or experience give authority to a statement made by him; and references to the acquisition of securities include references to contracting to acquire them or an interest in them.").

The noble Lord said: I spoke to this amendment also with Amendment No. 279. I beg to move.
On Question, amendment agreed to.
Lord Hacking Lord Hacking moved Amendment No. 301 A:
Paragraph (a) of subsection (2), leave out ("to have such grounds") and insert ("in that belief").
The noble Lord said: With the leave of the Committee, when addressing the Committee on this amendment, I should like to address the Committee also on every amendment which stands in my name on that page of the Marshalled List—that is, from Amendment No. 301A to Amendment No. 301J inclusive. I am also going to ask the indulgence and assistance of the Committee in taking an even shorter course. All these amendments are directed to amend the new clause that has now been inserted in the Bill pursuant to the Committee accepting Amendment No. 301, which has just been moved by the noble Lord and accepted by the Committee.
I could therefore give details concerning each of these amendments and why I would urge that the Government's amendment would be improved if each and every one of my amendments was now incorporated into it. I have received considerable assistance—and I should like to make mention of this again—from the Law Society's Company Law Committee, which has provided detailed reasons in support of each of the amendments. They have also provided those details to those who advise the Ministers in Commmittee. Therefore, not only have I in my possession the detailed reasons for each of these amendments but the noble Lord the Minister also has them in his possession as well. Other Members of your Lordships' Committee may at this stage be deprived of these detailed arguments and, if any noble Lords would like to know more of the detailed arguments by my writing a letter and giving them the details, I shall be more than happy to do so.
I am therefore proposing not to present any detailed arguments on the majority of my amendments on the basis that if your Lordships find it acceptable then all who would like to have further information can be supplied that information either by me or by the Law Society. I feel confident in taking this course because the Minister has been kind enough to intimate that the Government are prepared to give consideration, and in some cases to give consideration to the point of agreeing in principle, to several of these amendments. The Minister has kindly intimated that the Government are prepared to give further consideration to my Amendments Nos. 301A and 301B, but not to No. 301C, which incidentally is misplaced and should not be in its present position on the Marshalled List. Perhaps your Lordships could, either mentally or otherwise, strike it from the Marshalled List.
To go further down the list, the Government have been kind enough to intimate that they would give further consideration to Amendments Nos. 301H, 301HH and 301J, which has the further accolade of being agreed in principle by the Government. There are a number of cross-references which perhaps I might draw to the Committee's attention concerning those amendments. Amendment No. 301A also applies to my Amendment No. 334B; No. 301G also applies to No. 334F; Nos. 301H, 301HH and 301J are also applicable to Nos. 334G, 334H and 334J. I hope that will be helpful to your Lordships when reading the Official Report.
We are now left with Amendments Nos. 301D, 301E, 301F and 301G. The first three are considered together, and in respect of those amendments the Minister was not able to give the favourable indication that he was able to give in the case of the other ones. For that reason, I should like to put a little more of the detailed argument.
Amendment No. 301, as your Lordships will be aware, concerns defences for persons responsible for listing particulars. It explains the circumstances where they are not liable under Clause 126—for example, liable to pay compensation in respect of a breach of the general duty of disclosure. Subsection (3) states that a person will not be liable if reasonable steps were taken before the securities were acquired to bring the correction of an error or omission in the particulars to the attention of likely investors.
This defence may not be entirely satisfactory to a director or similar person responsible. If the director becomes aware of an error or omission, the proper course is for him to draw it to the attention of the issuer of the securities or of the merchant bank or broker handling the issue. The issuer, bank or broker would then arrange for the proper publicity to be given to the error or omission. If, however, the director duly reported the error or omission and the issuer, bank or broker, for their own reasons, decided not to publicise the point, the director may find that he had no defence as reasonable steps would not have been taken to bring the correction to the attention of investors. It could well be that the director had been reassured that reasonable steps would be taken. He could be prejudiced, not only by complete failure to take such steps but also by any delay in taking them. However, it would not be reasonable to expect the director immediately and unilaterally to publicise the error or omission himself. He should normally at least first ascertain that no other action is likely to be taken.
The purpose of the suggested Amendments Nos. 301D, 301E and 301F is to ensure that, for the purposes of the defence, account is taken only of what it was reasonable for the director in question to have done. He should not be prejudiced by the inaction of others if it was not reasonable for him to take further steps. The suggested amendments would not impose any greater burden on a director than the wording of No. 301. Thus, if some other person had publicised the error or omission it would not be reasonable to require him to do so also. Those are the reasons why I am advancing Amendments Nos. 301D, 301E and 301F.
Amendment No. 301G goes to a different problem. Without this amendment, subsection (6) does not reflect paragraph 2.27 of the explanatory statement on the amendments to Parts IV and V of the Bill, which the Department of Trade issued on 18th July 1986. If the clause were to impose on directors an obligation to disclose information which they held subject to a duty of confidentiality owed to other persons, the effect of the clause would be to discourage persons having outside interests becoming directors of a company. This would be contrary to the policy of encouraging non-executive directors and would be contrary to the interests of investors.
It would not be appropriate for a director with undisclosable information to rely on the power of the

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competent authority to exclude him from the "persons responsible" under subsection (4) of Amendment No. 302 on the grounds of a conflict of interests. The competent authority might not exercise its discretion to exclude him as it might nonetheless be appropriate for the director to be responsible generally—his protection might be needed only in respect of one piece of information.
There is a good deal of detail there; but those are the reasons why I have moved these amendments. Although the noble Lord the Minister was not earlier able to say that he was prepared to give them consideration, having heard that detail, I hope that if he was able to follow it through, he will now take a different view of these amendments. I beg to move.
Lord Brabazon of Tara: I am grateful to the noble Lord, Lord Hacking, for speaking to these amendments and for alerting the department that the amendments were to be moved, thus enabling us to come up with some response to them at very short notice. I shall deal with them as quickly as I possibly can.
With regard to Amendment No. 301 A, with which Amendment No. 334 was taken, we shall look at this and see whether it has anything that we can improve. I cannot accept any of the amendments outright. With regard to Amendment No. 301B, which the noble Lord explained, we are grateful to him for raising this point. We have a minor reservation about how the reference to the person continuing in that belief should be worded, but I should like to take a look at this and if necessary talk to the noble Lord about it before Report stage. Amendment No. 301C, the noble Lord quite rightly said, should not be there.
I now turn to Amendments Nos. 301D, 301E and 301F; with these the noble Lord also spoke to Amendments Nos. 334C, 334D and 334E. We cannot accept these amendments. The apparent purpose of the amendments is to relieve issuers and others responsible for listing particulars of liability for untrue or misleading statements after they take such steps as it is reasonable for them to take. However, as drafted, it would deny them the defence if someone else took the steps, which is the effect of the use of the passive. This would narrow this defence, which I doubt is what is intended.
The clause already covers the points raised. If a director took such steps as were reasonable for him, such as bringing the matters to the attention of the board and obtaining its agreement to issue a correction, he would not be liable even if the board did not do what it had agreed. For those reasons we cannot accept those amendments.
I turn to Amendment No. 301G with which the noble Lord also spoke to Amendment No. 334F. In this case I am not unsympathetic to the dilemma of a director or an issuer who possesses information which is relevant to an offer but who is under an obligation of some sort not to disclose it or who feels that it would be inappropriate for him to do so. However, I am unable to accept the noble Lord's amendments. Subsection (6) of the new clause on exemptions deliberately excludes directors of issuers, leaving them
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to be dealt with under the certification procedure in the clause on persons responsible. It may be helpful if I explain the thinking behind this distinction.
I should first point out that both subsection (6) and the certification procedures are new departures in defences and have no counterpart in the Companies Act. However, we have accepted the representations made to us that the Companies Act regime needs to be changed to reflect developments in financial services, notably financial conglomerates. Subsection (6) provides what may be called a Chinese wall defence. However, the arguments that apply to a multifunctional financial conglomerate do not apply-to the issuer. The conglomerate will be subject to the disciplines of SRO rules, with civil liability for breaches, and is the midwife to the offer, not the parent. The issuer and its director fill that key role, as is recognised in the persons responsible clause.
The competent authority or an approved exchange are in a good position to assess the directors' claims to being relieved of the responsibility, as they have overall charge of admission of the securities to trading and of the contents requirements governing the offer documents. As there is a general presumption that directors of issuers are liable, it is desirable that any exceptions should be sorted out in advance, so that investors have clear information on who is responsible if they should suffer a loss due to misleading statement or omission.
Certification should only be necessary in a small number of cases where, for example, a person is on the board of both predator and target in a contested takeover. I remain of the view that there is a distinction between the directors of the issuer and others who may be responsible; but it is appropriate for the authority or exchange to be involved in reversing the fundamental assumption that the director of the issuer should normally be liable and that certification procedure is sufficiently flexible. For those reasons, I cannot accept that particular amendment.
I turn to Amendments Nos. 301H, 301HH and 301J, and I believe that the noble Lord spoke also to the equivalent amendments to Part V of the Bill. Again, I cannot accept the amendments outright as drafted, but I accept the noble Lord's proposition that defence in subsections (5) and (6) should extend to a failure to produce a supplement as well as to untrue or misleading statements in the original document on the supplement. I should very much like to be in contact with the noble Lord before Report stage. I hope that we shall between us be able to devise something appropriate. With those rather long explanations, I hope that the noble Lord is willing to withdraw all his amendments.
Lord Hacking: Indeed I am; and I am just about to withdraw Amendment No. 301 A, which is the first that I was addressing. It will be best if I do not make any counter argument. There are one or two points that I should care to make, but I shall leave them until another day. I am very grateful to the Minister for being willing to consider favourably so many of my amendments. I should simply like to leave on the record the comments I made on the four amendments that he did not feel able to treat so favourably as the

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others. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 301B to 301J not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 302:
Insert the following new clause:
(" Persons responsible for particulars.

.—(1) For the purposes of this Part of this Act the persons responsible for listing particulars and supplementary listing particulars are—

(a) the issuer of the securities to which the particulars relate;

(b) Where the issuer is a body corporate, each person who is a director of that body at the time when the particulars are submitted to the competent authority;

(c) where the issuer is a body corporate, each person who has authorised himself to be named, and is named, in the particulars as a director or as having agreed to become a director of that body either immediately or at a future time;

(d) each person who accepts, and is stated in the particulars as accepting responsibility for, or for any part of the particulars;

(e) each person not falling within any of the foregoing paragraphs who has authorised the contents of, or any part of, the particulars.

(2) Where a person has accepted responsibility for, or authorised, only part of the contents of any particulars he is responsible under subsection (1) (d) or (e) above for only that part.

(3) Where the particulars relate to securities which are to be issued in connection with an offer by the issuer for securities issued by another person then, if—

(a) that other person; and

(b) where that other person is a body corporate, each person who is a director of that body at the time when the particulars are submitted to the competent authority and each other person who has authorised himself to be named, and is named, in the particulars as a director of that body,

is responsible by virtue of paragraph (d) of subsection (1) above for any part of the particulars relating to that other person or the securities to which the offer relates, no person shall be responsible for that part under paragraph (a), (b) or (c) of that subsection but without prejudice to his being responsible under paragraph (d) or (e)

(4) Paragraph (b) of subsection (1) above does not apply in the case of an issuer of international securities of a class specified by listing rules for the purposes of section 125(l)(c) above; and that paragraph (b) of subsection (3) above do not apply in the case of any director certified by the competent authority as a person to whom that paragraph should not apply by reason of his having an interest, or of any other circumstances, making it inappropriate for him to be responsible by virtue of that paragraph.

(5) Where any listing particulars or supplementary listing particulars contain a statement purporting to be made by an expert, that expert shall be responsible for the statement included in the particulars if he has agreed to its inclusion in the form and context in which it is included.

(6) In subsection (4) above "international securities" means any investment falling within paragraph 2 of Schedule 1 to this Act as modified by section 119(3) (b) above which is of a kind likely to be dealt in by bodies incorporated in or persons resident in a country or territory outside the United Kingdom, is denominated in a currency other than sterling or is otherwise connected with such a country or territory.

(7) In subsection (5) above "expert" has the same meaning as in section (Exemption from liability to pay compensation) above.

(8) Except as provided by subsection (5) above nothing in this section shall be construed as making a person responsible for any particulars by reason of giving advice as to their contents in a professional capacity.")

The noble Lord said: I spoke to this amendment with Amendment No. 279. I beg to move.
11.45 p.m.
Lord Hacking Lord Hacking moved, as an amendment to Amendment No. 302, Amendment No. 302A:
Line 2 of subsection (1), leave out ("and") and insert ("or")
The noble Lord said: I can take an entirely short course with the following amendments because the Minister has been kind enough to intimate that he accepts some of them. He has intimated to me that he is minded to accept Amendments Nos. 302A and 302H. I hope that he has not changed his mind meanwhile; he is entitled to do so, but I hope that he has not. So unless any noble Lords wish me to give the reasons why I have tabled those amendments, I shall be only too happy for my part to acknowledge the willingness of the Government to accept my two amendments.
Incidentally, I shall not be moving Amendment No. 302G. As to the others, the Minister has kindly intimated that he will give further consideration to each and every one of them. Concerning Amendment No. 302F, the Minister has been kind enough to give an indication that he will give that amendment also favourable consideration, in that he agrees in principle with my amendment, although I think he wishes to reserve his position on the drafting of it. I offer, to any Member of the Committee who wishes to know, the reasons why I have tabled those amendments, and indeed the reasons why the Minister has been willing to give them further consideration, and, in the case of two or them, to accept them. I should be more than happy to arrange that further information be put before noble Lords, either through myself or through the kindness of the Law Society.
I think I should put on record that Amendment No. 302B is linked to Amendment No. 335A, and Amendments Nos. 302C, 302D and 302E should all be considered together. They are linked to Amendments Nos. 335B and 335C. Amendment No. 302F is linked to Amendment No. 335D, and Amendment No. 302H, which the Minister has intimated earlier outside this Committee that he is willing to accept, is linked to Amendment No. 335F. That is all I desire to say upon any of those amendments. I beg to move Amendment No. 302A, which stands in my name.
Lord Brabazon of Tara: Yes, I agree with the noble Lord, Lord Hacking, and I am grateful to him for having brought these matters forward. We would certainly accept Amendment No. 302A and, when we come to it, Amendment No. 302H, and I have indicated to him that we are willing to look in detail at all the other amendments that he has moved.
On Question, amendment agreed to.
[Amendments Nos. 302B to 302G not moved.]
The Deputy Chairman of Committees (Lord Strabolgi): I should inform the Committee that there is a printing error in Amendment No. 302H. After the words "paid up" in the last line there should be inserted the word "or".
Lord Hacking: Perhaps a manuscript amendment could be included in order to correct theprinting error,

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because I do wish to move Amendment No. 302H. I do not know how a manuscript amendment can be effected, but I believe it can be.
Lord Brabazon of Tara: I think that if the Lord Chairman called the amendment with the error put right, that would be how the Committee was considering it, and therefore we could accept it as it is.
Lord Hacking Lord Hacking moved Amendment No. 302H:
At the end of subsection (4) insert—
(" () Where by virtue of this section the issuer of any shares pays or is liable to pay compensation under section 126 above for loss suffered in respect of shares for which a person has subscribed no account shall be taken of that liability or payment in determining any question as to the amount paid on subscription for those shares or as to the amount paid up or deemed to be paid up on them.")
On Question, amendment agreed to.
Clause 127 agreed to.
Clause 128 [Advertisements etc. in connection with listing applications]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 303 to 309.
Page 102, line 32, leave out from ("no") to ("unless") in line 35 and insert ("advertisement or other information of a kind specified by listing rules shall be published in the United Kingdom").
Page 102, line 36, after ("or") insert ("other").
Page 102, line 43, at end insert—
(" () An authorised person who contravenes this section shall be treated as having contravened rules made under Chapter V of Part I of this Act or. in the case of a person who is an authorized person by virtue of his membership of a recognised self-regulating organisation or certification by a recognised professional body, the rules of that organisation or body.")
Page 103, line 1, after ("person") insert (", other than an authorised person.").
Page 103, line 17, leave out ("a document") and insert ("information").
Page 103, line 19, leave out ("the preparation of, or of") and insert (". or for").
Page 103, line 22, leave out ("document if the document") and insert ("information if that information").
The noble Lord said: These amendments result from the sympathetic consideration promised in the other place for the Stock Exchange's concern that Clause 128, as drafted, would result in its being unnecessarily swamped with documents to examine.
The amendments are an attempt to devise a sensible, pragmatic solution to the problems arising from a rather ill-defined obligation imposed by the listing particulars directive. Essentially, we propose that the Stock Exchange should specify in its listing rules the documents it considers it ought to see before publication and that breaches by authorised persons should be treated as civil, rather than criminal, matters. With that explanation, I beg to move these amendments en bloc.
On Question, amendments agreed to.
Clause 128, as amended, agreed to.
Clauses 129 to 131 agreed to.
Clause 132 [Preliminary]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 310:
Page 106, line 6 at end insert—
("() In this Part of this Act "the registrar of companies", in relation to any securities, means—

(a) if the securities are or are to be issued by a company incorporated in Great Britain, the registrar of companies in England and Wales or the registrar of companies in Scotland according to whether the company's registered office is in England and Wales or in Scotland;

(b) if the securities are or are to be issued by a company incorporated in Northern Ireland, the registrar of companies for Northern Ireland;

(c) in any other case, any of those registrars.

() In this Part of this Act "approved exchange", in relation to dealings in any securities, means a recognised investment exchange approved by the Secretary of State for the purposes of this Part of this Act either generally or in relation to such dealings, and the Secretary of State shall give notice in such manner as he thinks appropriate of the exchanges which are for the time being approved.")
The noble Lord said: In moving this amendment I propose at the same time to speak to Amendments Nos. 311 to 315, 319, 336 to 339,341 to 344, 370and 405.
These amendments fulfil an undertaking given in the other place in regard to statutory recognition for the rules of recognised investment exchanges. As anticipated by my honourable and learned friend, this has proved to require rather more than the single line amendment proposed in the other place and has involved quite a radical re-shaping of Part V. This is necessary in order to allow for the fact that, in gaining admission to a recognised exchange, the issuer is entering into a system of continuous disclosure. There is no such requirement, beyond the normal Companies Act reporting requirements, where shares are not traded on a recognised exchange and information is largely limited to the single snapshot view of the prospectus rather than the moving picture of continuous disclosure. The amendments take account of this difference; for example, by allowing offerers to be relieved of the need to produce a prospectus in certain circumstances where an earlier document, augmented by continuous disclosure, provides sufficient information.
The amendments introduce a sub-species of recognised investment exchange—approved recognised investment exchanges, to which I will refer by the astrological acronym of ARIEs. ARIEs may substitute their own prospectus rules for those of the Secretary of State, and, as I have said, may relieve offerors of the need for a prospectus in certain cases.
The view that the rules of a recognised exchange should have equal validity with statutory prospectus requirements is not a new concept. Under Section 76 of the Companies Act 1985, a provision which goes back to 1947, the Stock Exchange is permitted to grant certificates of exemption from the prospectus contents requirements of that Act. The amendments build on this precedent and give additional flexibility. If an exchange's rules require offerors to provide information which is at least equivalent to that required by the rules of the Secretary of State, it seems entirely appropriate to enable the exchange's rules to apply instead. This avoids issuers having to bear the unnecessary burden of complying with two different sets of requirements. The condition that the disclosure rules be at least equivalent will ensure that investors receive no less information, and will probably receive more. For example, the Stock Exchange's rules for the

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unlisted securities market go considerably beyond the current Companies Act disclosure requirements.
This principle is extended also to overseas prospectus law. The Secretary of State will be empowered to make an order that issuers from an overseas country need only comply with their domestic law if this appears to the Secretary of State to provide UK investors with at least equivalent protection as Parts IV or V. Securities are becoming increasingly internationalised, and multi-national offers are expected to become more common. The flexibility to recognise foreign law will help the UK attract overseas issuers without prejudicing investor protection. I commend these amendments to the Committee. I beg to move.
On Question, amendment agreed to.
Clause 132, as amended, agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 311:
After Clause 132, insert the following new clause:
("Offers of securities on admission to approved exchange.

.—(1) Subject to subsection (2) and section (Exceptions) below, no person shall issue or cause to be issued in the United Kingdom an advertisement offering any securities on the occasion of their admission to dealings on an approved exchange or on terms that they will be issued if admitted to such dealings unless—

(a) a document (in this Part of this Act referred to as a "prospectus") containing information about the securities has been submitted to and approved by the exchange and delivered for registration to the registrar of companies: or

(b) the advertisement is such that no agreement can be entered into in pursuance of it until such a prospectus has been submitted, approved and delivered as aforesaid.

(2) Subsection (1) above does not apply if a prospectus relating to the securities has been delivered for registration under this Part of this Act in the previous twelve months and the approved exchange certifies that it is satisfied that persons likely to consider acquiring the securities will have sufficient information to enable them to decide whether to do so from that prospectus and any information published in connection with the admission of the securities.").

The noble Lord said: I spoke to this with Amendment No. 310. I beg to move.
Lord Hacking Lord Hacking moved, as an amendment to Amendment No. 311, Amendment No. 311A:
Line 6 of subsection (2), after ("securities") insert ("or their professional advisers").
The noble Lord said: Again I am attempting to take the blessed role of improving government amendments. Amendments Nos. 311A and 311B are directed to improving Amendment No. 311, which I anticipate will shortly receive the assent of the Committee. Amendment No. 311A concerns Part V of the Bill which deals with offers of unlisted securities, in contrast to Part IV, which deals with the admission of securities to listing.
In considering what information is required under Part IV for listing particulars, account may be taken of the information which the professional advisers of investors are likely to have. This amendment enables account to be taken (for purposes of Part V as well) of information available to professional advisers. That is the reason for moving Amendment No. 311A.
If I may, I shall also address the Committee on Amendment No. 311B, and in doing so I may also pass comment on Amendment No. 326A.
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Amendment No. 311 governs the information which must be mentioned in an advertisement issued when securities are admitted to dealings on an exchange (otherwise than to the official list of the Stock Exchange). It allows account to be taken of certain information already available to investors in earlier prospectuses. If the issuer already has securities dealt in on that exchange, it will, however, have been required to provide information to the exchange to satisfy its "continuing obligations" following the earlier admission to dealing. This obligation to provide continuing information has to be imposed by the exchange under paragraph 2(2)(b) of Schedule 3. No reference is made in Amendment No. 311 to such information. The suggested amendment provides that account may be taken of such information when assessing what needs to be made available to investors. I beg to move Amendment No. 311A.
Lord Brabazon of Tara: I must advise the Committee to reject these amendments. I would stress that as far as the first and second amendments are concerned, I do so purely on practical grounds and not from any objections of principle. Indeed, I can readily subscribe to the thinking behind them. My case is simply that they are not necessary to achieve the desired result. So far as concerns Amendment No. 326A, I considered carefully whether there should be power for an approved exchange to derogate from the general duty. I have to say that I am not satisfied that a case has been made out.
It is true that there is an equivalent in Clause 125 but it is there because it appears in the relevant directive. There is no equivalent in the present text of the draft directive, which is currently being negotiated, covering much the same ground as Part V. That makes it immensely important not to restrict our room for manoeuvre, as the amendments inevitably would. If such a provision were to appear in the final text, it would be possible to amend the Act by regulations under the European Communities Act to permit it.
The proposed directive is a recent revival, much modified by the Commission, of a proposal originally put forward in 1981, upon which your Lordships' scrutiny committee held hearings and published a report. Major differences between the member states caused negotiations to be suspended for some two years. The Council secretariat will shortly be issuing a text embodying the outcome of discussions under the Dutch presidency on the modified proposals. As soon as this is to hand, the department will furnish those concerned with copies and invite their comments in the normal way. For those reasons, I am afraid that I cannot accept the amendments.
12 midnight
Lord Hacking: I have heard the Minister's reply. I ask the leave of the Minister and the Committee to give further consideration to that reply. On that basis, I beg leave to withdraw the amendment.
Amendment to the amendment, by leave, withdrawn.
[Amendment No. 311B not moved.]
On Question, Amendment No. 311 agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 312:
After Clause 132, insert the following new clause:
(" Oilier offers of securities.

.—(1) Subject to subsection (5) and (6) and section (Exceptions) below, no person shall issue or cause to be issued in the United Kingdom an advertisement offering any securities which is a primary or secondary offer within the meaning of this section unless—

(a) he has delivered for registration to the registrar of companies a prospectus relating to the securities and expressed to be in respect of the offer; or

(b) the advertisement is such that no agreement can be entered into in pursuance of it until such a prospectus has been delivered by him as aforesaid.

(2) For the purposes of this section a primary offer is an advertisement issued otherwise than as mentioned in section [Offer of securities on admission to approved exchange) (1) above inviting persons to enter into an agreement for or with a view to subscribing (whether or not in cash) for or underwriting the securities to which it relates or containing information calculated to lead directly or indirectly to their doing so.

(3) For the purposes of this section a secondary offer is any- other advertisement issued otherwise than as mentioned in section (Offer of securities on admission to approved exchange) (1) above inviting persons to enter into an agreement for or with a view to acquiring the securities to which it relates or containing information calculated to lead directly or indirectly to their doing so. being an advertisement issued or caused to be issued by—

(a) a person who has acquired the securities directly or indirectly from the issuer with a view to issuing such an advertisement in respect of them; or

(b) a person who is a controller of the issuer or has been such a controller in the previous twelve months and who is acting with the consent or participation of the issuer in issuing the advertisement.

(4) For the purposes of subsection (3)(a) above it shall be presumed in the absence of evidence to the contrary that a person has acquired securities with a view to issuing an advertisement offering the securities if he issues or causes it to be issued—

(a) within six months after the issue of the securities; or

(b) before the consideration due from him for their acquisition is received by the person from whom he acquired them.

(5) Subsection (1) above does not apply to a secondary offer if such a prospectus as is mentioned in that subsection has been delivered in accordance with that subsection in respect of an offer of the same securities made in the previous six months by a person making a primary offer or a previous secondary offer.

(6) Subsection (1) above does not apply to an advertisement issued in such circumstances as may be specified by an order made by the Secretary of State for the purpose of exempting from that subsection—

(a) advertisements appearing to him to have a private character, whether by reason of a connection between the person issuing them and those to whom they are addressed or otherwise:

(b) advertisements appearing to him to deal with investments only incidentally; or

(c) advertisements issued to persons appearing to him to be sufficiently expert to understand any risks involved.

(7) An order under subsection (6) above may require any person who by virtue of the order is authorised to issue an advertisement to comply with such requirements as are specified in the order.

(8) An order under subsection (6) above shall be subject to annulment in pursuance of a resolution in either House of Parliament.")

The noble Lord said: I spoke to this amendment with Amendment No. 310. I beg to move.
Lord Hacking Lord Hacking moved, as an amendment to Amendment No. 312, Amendment No. 312A:
Line 3 of subsection (3)(a), after ("view") insert ("(on the part of both that person and the issuer)").
The noble Lord said: Subsection (3) defines a "secondary offer" where the offer involves securities which have not been admitted for dealings on any exchange. A prospectus is required where there is a primary offer (where securities are issued direct to the public) or a secondary offer, as I have just explained to the Committee. No prospectus is required in the case of other offers.
A secondary offer includes an advertisement offering securities if that advertisement was issued by a person who acquired the securities directly or indirectly from the issuer with a view to issuing the advertisement. It is not clear what involvement the issuer must have for an advertisement to be a secondary offer. If a person buys shares, for example, from certain aged shareholders of a family company with a view to offering them to the public, it would appear that the offer could be a secondary offer even if the company and its directors were not involved in or even aware of the offer or the original acquisition of shares.
Such operations could be adequately covered by the conduct of business rules applicable to authorised persons. It seems unnecessary to require a prospectus when making the offer. A prospectus should be required only if the company as well as the offerer intended, when the offeror acquired the securities, that the acquisition was with a view to the offeror issuing the advertisement. The amendment that I have tabled seeks to achieve that objective. I beg to move.
Lord Brabazon of Tara: I have strong reservations about this amendment. It would open a considerable loophole in Part V. A prospectus would be required only for a secondary offer if the issuers as well as the intermediary intended that the securities would be on-sold.
Part V is based on the concept that a prospectus should be required when securities which have not been admitted to listing on an approved exchange are offered for the first time by the issuer or by someone else who acquired them for that purpose. I am not convinced that in the latter case the intentions of the issuer affect the justification for acquiring a prospectus for the benefit of potential investors who need the information to decide whether to acquire the securities.
In many such cases, the issuer will have little or no interest in what the intermediary does with the securities. Where there is a chain of intermediaries, the issuer can have a little knowledge of or influence over what is to happen to them, and yet from the public's point of view the outcome looks the same. With a public offer of new securities it should be incumbent upon the offeror to produce a prospectus.
We have already moved a considerable way towards meeting the views of those who argued that Part V went too wide by restricting it to the secondary offers defined in subsection (3). I do not think that it would be in investors' interests to go any further. I must therefore ask the Committee not to accept the amendment.
Lord Hacking: I have said my piece. Nothing will be gained in the Committee at this hour of the night by repeating the argument or taking up other points made

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by the Minister. The provision is worthy of further consideration. There is plenty of time before Report. I hope that advantage will be taken during the weeks ahead to give this amendment further consideration. Having made that comment, I beg leave to withdraw the amendment.
Amendment to the amendment, by leave, withdrawn.
On Question, Amendment No. 312 agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 313:
After Clause 132, insert the following new clause:
(" Exceptions.

(1) Sections (Offers of securities on admission to approved exchange) and (Other offers of securities) above do not apply to any advertisement offering securities if the offer is conditional on their admission to listing in accordance with Part IV of this Actor the securities have been listed in accordance with that Part in the previous twelve months.

(2) Neither of those sections applies if other securities issued by the same person (whether or not securities of the same class as those to which the offer relates) are already dealt in on an approved exchange and the exchange certifies that persons likely to consider acquiring the securities to which the offer relates will have sufficient information to enable them to decide whether to do so having regard to the steps that have been taken to comply in respect of those other securities with the requirements imposed by the exchange for the purpose of complying with paragraph 2(2)(b) of Schedule 3 to this Act, to the nature of the securities to which the offer relates and to the circumstances of their issue.

(3) If it appears to the Secretary of State that the law of a country or territory outside the United Kingdom provides investors in the United Kingdom with protection at least equivalent to that provided by Part IV of this Act or this Part of this Act in respect of securities dealt in on an exchange or exchanges in that country or territory he may by order specify circumstances in which those sections are not to apply to advertisements offering those securities.

(4) An order under subsection (3) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.").

The noble Lord said: I spoke to this amendment with Amendment No. 310. I beg to move.
On Question, amendment agreed to.
Clause 133 [Registration and publication of prospectus]:
On Question, Whether Clause 133 shall stand part of the Bill?
Lord Brabazon of Tara: Clause 133 has been made redundant by Amendments Nos. 310 to 313 to which the Committee has agreed.
On Question, clause negatived.
Clause 134 [Form and content of prospectus]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 134:
Page 107, line 4, at end insert—
(" (3) If it appears to the Secretary of State that an approved exchange has rules in respect of prospectuses relating to securities dealt in on the exchange which provide investors with information at least equivalent to that required by rules under this section he may direct that any such prospectus shall be subject to the rules of the exchange instead of the rules made under this section.").
The noble Lord said: I spoke to Amendment No. 134 with Amendment No. 310. I beg to move.
On Question, amendment agreed to.
Clause 134, as amended, agreed to.
Clause 135 [General duty of disclosure in prospectus]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 315 to 318:
Page 107, line 6, leave out (" made under ") and insert (" applying to it by virtue of").
Page 107, line 7, leave out (" with respect to ") and insert (" as investors and their professional advisers would reasonably require, and reasonably expect to find there, for the purpose of making an informed assessment of— "). Page 107, leave out lines 12 to 15. Page 107, line 16, leave out subsection (2) and insert—
(" () The information to be included by virtue of this section shall be such information as is mentioned in subsection (1) above which is within the knowledge of any person responsible for the prospectus or which it would be reasonable for him to obtain by making enquiries.
() In determining what information is required to be included in a prospectus by virtue of this section regard shall be had—

(a) to the nature of the securities and of the issuer of the securities;

(b) to the nature of the persons likely to consder their acquisition;

(c) to the fact that certain matters may reasonably be expected to be within the knowledge of professional advisers of any kind which those persons may reasonably be expected to consult; and

(d) to any information available to investors or their professional advisers by virtue of requirements imposed by a recognised investment exchange for the purpose of complying with paragraph 2(2)(b) of Schedule 3 to this Act.").

The noble Lord said: I have spoken to all the amendments to Clause 135, Amendment No. 315 with amendment No. 310 and the remainder with Amendment No. 277. I beg to move.
On Question, amendments agreed to.
Clause 135, as amended, agreed to.
Clause 136 [Supplementary prospectus]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 319 to 326:
Page 107, line 27. leave out ("under") and insert ("applying to it by virtue of).
Page 107, line 28, at end insert ("; or").
Page 107, line 29, after ("a") insert ("significant").
Page 107, line 31, leave out from ("prepared") to end of line 35.
Page 107, line 36, leave out from first ("the") to end of line 37 and insert ("person who delivered the prospectus for registration to the registrar of companies shall deliver to him for registration").
Page 107, line 39, leave out (", as the case may be, correcting that mistake").
Page 107, line 40, leave out subsection (2) and insert—
("() In subsection (1) "significant" means significant for the purpose of making an informed assessment of the matters mentioned in section 135(1) above.
() Where the person who delivered the prospectus for registration is not aware of the change or new matter in question he shall not be under any duty to comply with that subsection unless he is notified of it by a person responsible for the prospectus

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but any person responsible for the prospectus who is aware of such a matter shall be under a duty to give him notice of it.").
Page 108, line 8, leave out subsection (4).
The noble Lord said: I spoke to Amendment No. 319 with Amendment No. 310. The remaining amendments I spoke to with Amendment No. 283. With the leave of the Committee, I should like to move the amendments en bloc.
On Question, amendments agreed to.
Clause 136, as amended, agreed to.
Lord Hacking Lord Hacking had given notice of his intention to move Amendment No. 326A:
After Clause 136, insert the following new clause:
("Saving for omissions from prospectus.

.—(1) An approved exchange may authorise the omission from a prospectus or a supplementary prospectus of any information the inclusion of which would otherwise be required by section 135 above—

(a) on the ground that its disclosure would be contrary to the public interest:

(b) subject to subsection (2) below, on the ground that its disclosure would be seriously detrimental to the issuer of the securities; or

(c) in the case of international securities (as defined in section 45(6) above) of any class specified by rules of the approved exchange, on the ground that its disclosure is unnecessary for persons of the kind who may be expected normally to buy or deal in the securities.

(2) No authority shall be granted under subsection (1)(b) above in respect of, and no such authority shall be regarded as extending to, information the non-disclosure of which would be likely to mislead a person considering the acquisition of the securities as to any facts the knowledge of which it is essential for him to have in order to make an informed assessment.

(3) The Secretary of State or the Treasury may issue a certificate to the effect that the disclosure of any information (including information that would otherwise have to be included in a prospectus for which they are themselves responsible) would be contrary to the public interest and the approved exchange shall be entitled to act on any such certificate in exercising its powers under subsection (1)(a) above".).

The noble Lord said: I have already addressed the Committee on this amendment when discussing Amendments Nos. 311A and 311B. I withdrew those amendments. In the circumstances, therefore, it is not my intention, at this stage, to move this amendment.
[Amendment No. 326A not moved.]
Clause 137 [Compensation for false or misleading prospectus]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 327 to 329:
Page 108, line 13, after ("(1)") insert ("Subject to section (Exemption from liability to pay compensation) below,").
Page 108, line 13, leave out ("the preparation of").
Page 108, line 16, at end insert ("in respect of them").
The noble Lord said: I spoke to Amendments Nos. 327, 328 and 329 with Amendment No. 279. I beg to move the three amendments together.
On Question, amendments agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 330:
Page 108, leave out line 19, and insert ("section 135 or 136 above.
() Where rules applicable to a prospectus by virtue of section 134 above require it to include information as to any particular matters or, if there are no such matters, a statement to that effect, the omission from the prospectus of the information shall be treated for the purposes of subsection (1) above as a statement that there are no such matters.").
The noble Lord said: I spoke to this amendment with Amendment No. 295. I think I implied at that stage to the noble Lord, Lord Hacking, who is now to move a manuscript amendment to Amendment No. 330, that I would be prepared to accept his manuscript amendment to my own Amendment No. 330. I beg to move.
Lord Hacking Lord Hacking moved, as a manuscript amendment to Amendment No. 330:
Leave out from ("particular") to the end and insert ("matter on the basis that the prospectus must include a statement either as to that matter or, if such is the case, that there is no such matter, the omission from the prospectus of the information shall be treated for the purposes of subsection (1) above as a statement that there is no such matter.").
The noble Lord said: The new subsection is in the form of a manuscript amendment. I have given notice of that manuscript amendment to some noble Lords—not very long notice, I am afraid—and have distributed copies of it. It deals with the problem of prospectuses. My amendment attempts to deal with exactly the same area as the Government's amendment, and the Government have been kind enough to accept my amendment, which answers the problem slightly better than theirs does. I think I should, therefore, read out the amendment so that there is a full record of it. My manuscript amendment to Amendment No. 330 reads as follows:
Leave out from ("particular") to the end and insert ("matter on the basis that the prospectus must include a statement either as to that matter or, if such is the case, that there is no such matter, the omission from the prospectus of the information shall be treated for the purposes of subsection (1) above as a statement that there is no such matter.").
That is my manuscript amendment. I beg to move.
On Question, amendment to the amendment agreed to.
The Deputy Chairman (Lord Airedale): I have to point out that there is a printing correction to be made to Amendment No. 330 as it appears on the Marshalled List. In the first line, the word "by" should be deleted.
On Question, Amendment No. 330, as amended, agreed to.
Lord Hacking Lord Hacking had given notice of his intention to move Amendment No. 330A:
Page 108, leave out line 19 and insert ("section 135 or 136 above").
The noble Lord said: I do not want to delay the Committee at this late hour. My amendment has the word "by" removed and begins correctly. Having said that, we have now agreed Amendment No. 330 with the word "by" removed, so my Amendment No. 330A is redundant.
[Amendment No. 330A not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 331:
Page 108, line 20, after ("(2)") insert ("Subject to section (Exemption from liability to pay compensation) below,").
The noble Lord said: I have spoken to Amendment No. 331 with Amendment No. 279, as I have to Amendments Nos. 332, 333, and 334.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 332 and 333:
Page 108, line 22, after ("loss") insert ("in respect of them").
Page 108, line 24, leave out subsection (3) and insert—
("() This section does not affect any liability which any person may incur apart from this section.
() References in this section to the acquisition by any person of securities include references to his contracting to acquire them or an interest in them.").
On Question, amendments agreed to.
Clause 137, as amended, agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 334:
After Clause 137, insert the following new clause:
(" Exemption from liability to pay compensation.

.—(1) A person shall not incur any liability under section 137(1) above for any loss in respect of securities caused by any such statement or omission as is there mentioned if he satisfies the court that at the time when the prospectus or supplementary prospectus was delivered for registration he reasonably believed, having made such enquiries (if any) as were reasonable, that the statement was true and not misleading or that the matter whose omission caused the loss was properly omitted and—

(a) that he continued in that belief until the time when the securities were acquired; or

(b) that they were acquired before it was reasonably practicable for steps to be taken to bring a correction to the attention of persons likely to acquire the securities in question; or

(c) that the securities were acquired after such a lapse of time that he ought in the circumstances to be reasonably excused;

but paragraph (c) above does not apply where the securities are dealt in on an approved exchange unless he satisfies the court that he continued in that belief until after the commencement of dealings in the securities on that exchange.

(2) A person shall not incur any liability under section 137(1) above for any loss in respect of securities caused by a statement purporting to be made by or on the authority of another person as an expert which is, and is stated to be, included in the prospectus or supplementary prospectus with that other person's consent if he satisfies the court that at the time when the prospectus or supplementary prospectus was delivered for registration he had reasonable grounds for believing that other person to be competent to make or authorise the statement and to have consented to its inclusion in the form and context in which it was included and—

(a) that he continued to have such grounds until the time when the securities were acquired; or

(b) that they were acquired before it was reasonably practicable to bring the fact that the expert was not competent or had not consented to the attention of persons likely to acquire the securities in question.

(3) Without prejudice to subsections (1) and (2) above, a person shall not incur any liability under section 137(1) above for any loss in respect of any securities caused by any such statement or omission as is there mentioned if he satisfies the court that reasonable steps were taken before the time when the securities were acquired to bring a correction to the attention of persons likely to acquire the securities in question or. where the statement was such as is mentioned in subsection (2) above, to bring to their attention the fact that the expert was not competent or had not consented.

(4) A person shall not incur any liability under section 137(1) above for any loss resulting from a statement made by an official person or contained in a public official document which is included in the prospectus or supplementary prospectus if he satisfies the court that the statement is accurately and fairly reproduced.

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(5) A person shall not incur any liability under section 137(1) above if he satisfies the court that the person suffering the loss acquired the securities in question with knowledge that the statement was false or misleading or, as the case may be, of the omitted matter.

(6) A person (other than the issuer of the securities or, where the issuer is a body corporate, a director of that body) shall not incur any liability under section 137(1) above if he satisfies the court that it was unlawful or otherwise improper for him to disclose any information the non-disclosure of which resulted in the statement causing the loss being false or misleading or in the omission that caused the loss.

(7) A person shall not incur any liability under section 137(2) above if he satisfies the court that he reasonably believed that the change of new matter in question was not such as to call for a supplementary prospectus.

(8) In this section "expert" includes any engineer, valuer, accountant or other person whose profession, qualifications or experience give authority to a statement made by him; and references to the acquisition of securities includes references to contracting to acquire them or an interest in them.").

Lord Hacking Lord Hacking had given notice of his intention to move, as an amendment to Amendment No. 334, Amendment No. 334A:
At the end of subsection (1), insert, ("in respect of which the prospectus or supplementary prospectus was published").
The noble Lord said: I am caught by surprise. I thought my work was done. I think that I have already dealt with this at an earlier stage. In any event I shall not be moving the amendment.
[Amendments Nos. 334A to 334J not moved.]
On Question, Amendment No. 334 agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 335:
After Clause 137, insert the following new clause:
(" Persons responsible for prospectus.

(1) For the purposes of this Part of this Act the persons responsible for a prospectus or supplementary prospectus are—

(a) the issuer of the securities to which the prospectus or supplementary prospectus relates;

(b) where the issuer is a body corporate, each person who is a director of that body at the time when the prospectus or supplementary prospectus is delivered for registration;

(c) where the issuer is a body corporate, each person who has authorised himself to be named, and is named, in the prospectus or supplementary prospectus as a director or as having agreed to become a director of that body either immediately or at a future time;

(d) each person who accepts, and is stated in the prospectus or supplementary prospectus as accepting, responsibility for, or for any part of the prospectus or supplementary prospectus;

(e) each person not falling within any of the foregoing paragraphs who has authorised the contents, of, or of any part of, the prospectus or supplementary prospectus.

(2) A person is not responsible under subsection (l)(a),(b) or (c) above unless he has made or authorised the offer in relation to which the prospectus or supplementary prospectus was delivered for registration.

(3) Where a person has accepted responsibility for, or authorised, only part of the contents of any prospectus or supplementary prospectus he is responsible under subsection (1)(d) or (e) above for only that part.

(4) Where a prospectus or supplementary prospectus relates to securities which are to be issued in connection with an offer by the issuer for securities issued by another person, then if—

(a) that other person: and

(b) where that other person is a body corporate, each person who is a director of that body at the time when the prospectus or supplementary prospectus is delivered for registration and each other person who has authorised himself to be named, and is named, in the prospectus or supplementary prospectus as a director of that body,

709
is responsible by virtue of paragraph (d) of subsection (1) above for any part of the prospectus or supplementary prospectus relating to that other person or the securities to which the offer relates, no person shall be responsible for that part under paragraph (a), (b) or (c) of that subsection but without prejudice to his being responsible under paragraph (d) or (e)

(5) Paragraph (b) of subsection (1) and paragraph (b) of subsection (4) above do not apply in the case of any director if the prospectus or supplementary prospectus is subject to the rules of an approved exchange by virtue of section 134(3) above and he is certified by the exchange as a person to whom that paragraph should not apply by reason of his having an interest, or of any other circumstances, making it inappropriate for him to be responsible by virtue of that paragraph.

(6) Where any prospectus or supplementary prospectus contains a statement purporting to be made by an expert, that expert shall be responsible for the statement included in the prospectus or supplementary prospectus if he has agreed to its inclusion in the form and context in which it is included.

(7) In subsection (6) above "expert" has the same meaning as in section (Exemption from liability to pay compensation) above.

(8) Except as provided by subsection (6) above nothing in this section shall be construed as making a person responsible for any prospectus or supplementary prospectus by reason only of giving advice as to its contents in a professional capacity.").

The noble Lord said: I have spoken to this with Amendment No. 279. I beg to move.
[Amendments Nos. 335A to 335E not moved.]
Lord Hacking Lord Hacking moved, as an amendment to Amendment No. 335, Amendment No. 335F:
At end insert—
(" () Where by virtue of this section the issuer of any shares pays or is liable to pay compensation under section 137 above for loss suffered in respect of shares for which a person has subscribed no account shall be taken of that liability or payment in determining any question as to the amount paid on subscription for those shares or as to the amount paid up or deemed to be paid up on them.").
The noble Lord said: I move this amendment. I think that the Minister has intimated a willingness to accept this amendment. On that basis, unless noble Lords wish me to give the detail of it, I shall not do so.
On Question, amendment to the amendment agreed to.
On Question, Amendment No. 335, as amended, agreed to.
Clause 138 agreed to.
Clause 139 [Advertisements by private companies and old public companies]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 336:
Page 109, line 3, at end insert—
("(1 A) Subsection (1) above shall not apply to an advertisement issued in such circumstances as may be specified by an order made by the Secretary of State for the purpose of exempting from that subsection such advertisements as are mentioned in section (Other offers of securities) (6)(a), (b) or (c) above.
(1B) An order under subsection (1A) above may require any person who by virtue of the order is authorised to issue an advertisement to comply with such requirements as are specified in the order.
(1C) An order under subsection (1 A) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
The noble Lord said: 1 spoke to this amendment with Amendment No. 310. I beg to move.
On Question, amendment agreed to.
Clause 139, as amended, agreed to.
On Question, Whether Clause 140 shall stand part of the Bill?
Lord Brabazon of Tara: The need for Clause 140 disappeared with the Committee's acceptance of the group of amendments which were dealt with when I moved Amendment No. 310. I therefore oppose the Question, That Clause 140 shall stand part of the Bill.
On Question, Clause 140 negatived.
Clause 141 [Contraventions]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 338 to 344:
Page 109, line 32, leave out ("133") and insert ("Offers of securities on admission to approved exchange) or (Other offers of securities)").
Page 109, line 35, leave out ("140") and insert ("Other offers of securities) (6) or 139").
Page 110, line 4, after ("or") insert ("certification by a").
Page 110, line 11, leave out ("133") and insert ("Offers of securities on admission to approved exchange) or (Other offers of securities)").
Page 110, line 12, leave out ("140") and insert ("Other offers of securities) (6) or 139").
Page 110, line 18, at end insert—
(" () A person who in the ordinary course of a business other than investment business publishes an advertisement to the order of another person shall not be guilty of an offence under subsection (3) above in respect of a contravention of section (Offers of securities on admission to approved exchange) or (Other offers of securities) above if he proves that the matters contained in the advertisement were not (wholly or in part) selected or devised by him or by a person under his direction or control and that he believed on reasonable grounds after due enquiry that neither of those sections applied to the advertisement or that one of those sections had been complied with in respect of the advertisement.").
Page 110, line 21, leave out ("133") and insert ("Offers of securities on admission to approved exchange) or (Other offers of securities)").
The noble Lord said: I spoke to Amendment No. 338 when we dealt with Amendment No. 310, and I also spoke to Amendment No. 339 and Amendments Nos. 341 to 344. I spoke to Amendment No. 340 with Amendment No. 79. I beg to move Amendments Nos. 338 to 344.
On Question, amendments agreed to.
Clause 141, as amended, agreed to.
Lord Brabazon of Tara: I think that we have reached a suitable moment to resume the House. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
House adjourned at twenty-four minutes past midnight.

  NORTHERN IRELAND: ARREST STATISTICS
  NORTHERN IRELAND: ARREST STATISTICS
  HAND-HELD MOBILE RADIO AND TELEPHONES: ACCIDENTS
  HAND-HELD MOBILE RADIO AND TELEPHONES: ACCIDENTS
  MR. PETER WRIGHT: MEMOIRS
  MR. PETER WRIGHT: MEMOIRS
  NEWSPAPER AND PUBLISHING INJUNCTIONS
  NEWSPAPER AND PUBLISHING INJUNCTIONS
  HACKNEY: INQUIRY
  HACKNEY: INQUIRY
  MR. DAVID LEWIS-PRICE
  MR. DAVID LEWIS-PRICE
  SALMON DRIFT NETTING: IMPLEMENTATION OF RESTRICTIONS
  SALMON DRIFT NETTING: IMPLEMENTATION OF RESTRICTIONS