HL Deb 16 May 1989 vol 507 cc1165-6WA
Lord Jenkin of Roding

asked Her Majesty's Government:

When they will announce their decisions on the responses to the Department of Trade and Industry consultation paper of 1st March 1989 on possible changes to the Financial Services Act 1986.

The Secretary of State for Trade and Industry (Lord Young of Graffham)

My right honourable friend the Chancellor of the Duchy of Lancaster announced on 3rd May in another place that amendments would be brought forward to achieve the following changes in the Financial Services Act. First, the Securities and Investments Board will have the ability to promulgate a set of general principles governing the conduct of investment business. A breach of such a principle will not give rise to civil liability under Section 62 of the Act but may give rise to disciplinary consequences or the exercise of SIB's powers of intervention. The self-regulating organisations will be required to adopt these same principles for similar purposes.

Secondly, the SIB will have the ability to require all the self-regulating organisations to adopt so many of the board's rules as are designated for this purpose by the board. Those rules will have the same status as any other rules; in particular, a breach may give rise to liability under section 62 in appropriate circumstances.

Thirdly, both the SIB and the self-regulating organisations will be able to supplement their rules with guidance as to the application of those rules in particular cases. A breach of that guidance would not of itself constitute breach of a rule, but could be used as evidence of such a breach.

It is also proposed to amend the test for recognition of a self-regulating organisation. In future it will be possible for the SIB to recognise such an organisation if it is satisfied, having regard to the principles, the rules and the guidance, that the organisation provides an adequate level of investor protection, having regard to the type of investor with which its members deal. The board will also be able to take account of the costs of compliance with an organisation's rules. The new recognition test will replace an existing one after a transitional period.

Finally, the Government also intend to introduce provisions to increase the scope for the board and the organisations to rely on other Financial services regulators, both in the United Kingdom and overseas.