Financial Services and Markets Bill
Lord McIntosh of Haringey (Deputy Chief Whip (House of Lords), HM Household; Labour)
And, by the way, it is what the noble Lord, Lord Saatchi, intends to vote against!
I turn to Amendment No. 231XA. Clause 141, which has nothing to do with Clauses 129 or 130, allows an authorised person to be sued for damages if a private person suffers loss as a result of the contravention of a rule. The effect of Amendment No. 231XA would be to prevent such actions for damages in respect of non-regulated activity rules.
As I explained in putting the case for the Government's amendments, we are proposing to remove the clause which confers the power to make non-regulated activity rules as such. That was the second point I made. In any event, we believe that the FSA's power to make rules relating to non-regulated activities is narrower than has often been supposed. We believe that under our new proposals it will be clear that the FSA will have a power to make rules only about non-regulated activities if it considers that it is necessary or expedient to do so in order to protect the consumers of regulated activities.
I believe that the same logic which results in the authority being given power to make rules in relation to non-regulated activities follows through to there being a right of action for breach of statutory duty in relation to contraventions of such rules. I keep looking towards the noble Earl, Lord Onslow, to make sure that he is still with me!
It is part of the necessary protection for consumers of regulated activities. The right of action for breach of statutory duty is of course only available to private persons. Perhaps I may give an example. Let us suppose that an authorised person who also carried on a non-regulated coin-dealing business were to operate an authorised collective investment scheme in which participants' money was pooled for the purposes of investing in coins. Operating any collective investment scheme is a regulated activity and it is perfectly lawful to operate such a scheme as long as the operator is authorised.
However, it is not inconceivable that some rules might need to be applied to the coin dealing business--purely as a minimum--in order to make sure that the funds contributed by participants in the collective investment scheme--that is, the consumers of the regulated activity--are protected.
A rule might be necessary to require an independent valuation of any purchase for the scheme made using investors' funds which the scheme operator makes for his coin dealing business in order to avoid any conflict of interest he might otherwise have and to ensure that the scheme participants' interests are protected. It may be arguable that the rule would touch on the running of the non-regulated coin dealing business. However, it is clear that if he contravenes such a rule, and the coins are sold to the scheme at what turns out to be a disadvantageous price, there could be damage to the interests of the scheme participants. Are we together on this?