My Lords, in moving Amendment No. 121 on behalf of my noble friend I should like to speak also to Amendments Nos. 122, 125, 126, 129 and 130. All of these are government amendments which make minor but essential drafting changes. Amendments Nos. 121, 125, 126 and 129 insert the word "competent" before "authority". This amendment is necessary to ensure that it is absolutely clear that it is the competent authority, rather than the FSA, to which reference is being made. The Bill names the FSA as the competent authority and that will be correct so long as the authority continues to exercise these functions. However, if the functions were ever transferred the FSA would no longer be the competent authority and there is a danger that the Bill would not make sense.
The other amendments in this group, Amendments Nos. 122 and 130, concern the power to define the term "approved exchange". This power is currently contained in Clause 101. However, the definition is relevant only to Part V1 as it is modified by Schedule 9 to the Bill where the term "approved exchange" appears in paragraph 5. Amendment No. 130, therefore, deletes the power in Clause 101 and Amendment No. 122 inserts it in its proper place in Schedule 9. I beg to move.
moved Amendment No. 122:
Page 253, line 7, at end insert--
("( ) After paragraph 8 of that Schedule, insert--
"Meaning of "approved exchange"
9. "Approved exchange" has such meaning as may be prescribed." ").
On Question, amendment agreed to.
Clause 89 [Penalties for breach of listing rules]:
[Amendment No. 122A not moved.]
Clause 90 [Warning notices]:
moved Amendments Nos. 123 and 124:
Page 42, line 4, leave out ("impose a penalty on") and insert ("take action against").
Page 42, line 6, leave out subsections (2) and (3) and insert--
("(2) A warning notice about a proposal to impose a penalty must state the amount of the proposed penalty.
(3) A warning notice about a proposal to publish a statement must set out the terms of the proposed statement.
(4) If the competent authority decides to take action against a person under section 89, it must give him a decision notice.
(5) A decision notice about the imposition of a penalty must state the amount of the penalty.
(6) A decision notice about the publication of a statement must set out the terms of the statement.
(7) If the competent authority decides to take action against a person under section 89, he may refer the matter to the Tribunal.").
On Question, amendments agreed to.
Clause 91 [Statement of policy]:
moved Amendments Nos. 125 and 126:
Page 42, line 19, after first ("The") insert ("competent").
Page 42, line 37, after ("The") insert ("competent").
On Question, amendments agreed to.
Clause 93 [Notice for payment]:
moved Amendment No. 128:
After Clause 93, insert the following new clause--
.--(1) The Treasury may by order provide for--
(a) regulating provisions, and
(b) the practices of the competent authority in exercising its functions under this Part ("practices"), to be kept under review.
(2) Provision made as a result of subsection (1) must require the person responsible for keeping regulating provisions and practices under review to consider--
(a) whether any regulating provision or practice has a significant adverse effect on competition; or
(b) whether two or more regulating provisions or practices taken together have, or a particular combination of regulating provisions and practices has, such an effect.
(3) An order under this section may include provision corresponding to that made by any provision of Chapter III of Part X.
(4) Subsection (3) is not to be read as in any way restricting the power conferred by subsection (1).
(5) Subsections (6) to (8) apply for the purposes of provision made by or under this section.
(6) Regulating provisions or practices have a significant adverse effect on competition if--
(a) they have, or are intended or likely to have, that effect; or
(b) the effect that they have, or are intended or likely to have, is to require or encourage behaviour which has, or is intended or likely to have, a significantly adverse effect on competition.
(7) If regulating provisions or practices have, or are intended or likely to have, the effect of requiring or encouraging exploitation of the strength of a market position they are to be taken to have, or be intended or be likely to have, an adverse effect on competition.
(8) In determining whether any of the regulating provisions or practices have, or are intended or likely to have, a particular effect, it may be assumed that the persons to whom the provisions concerned are addressed will act in accordance with them.
(9) "Regulating provisions" means--
(a) listing rules,
(b) general guidance given by the competent authority in connection with its functions under this Part.").
My Lords, in moving government Amendment No. 128 I should like to speak also to Amendments Nos. 128A and 157A. We made clear in Committee in another place our intention to subject the competent authority to competition scrutiny in respect of its regulating provisions and practices. Currently, there is no such scrutiny under the Financial Services Act. Like the FSA more generally, the competent authority in going about its functions under the Bill can do things which have an impact on competition. Almost all regulation by definition involves restrictions which can affect competition in one way or another. We believe it right, therefore, that the special competition scrutiny regime should apply to the competent authority as well as the FSA and recognised bodies. The new clause, therefore, gives us the power to apply such a regime to the competent authority by order.
The reason for doing this by order is to allow flexibility to adapt the competition scrutiny regime should the power in Schedule 8 to the Bill ever be exercised to transfer the function to another body. For example, if we ever split the function between two bodies we might need to make changes to these provisions. We cannot foresee now whether we shall ever transfer the function and, if so, to what kind of body. However, given that we have such a power in the Bill, which was debated and agreed in Committee, we believe that it makes sense to introduce a provision for competition scrutiny arrangements. The Delegated Powers and Deregulation Committee has not raised any questions about our taking this power.
The new clause allows the Treasury to provide for the competition scrutiny of the competent authority's regulating provisions and practices. Subsection (3) provides that the order may include provision corresponding to that made by any provision of Chapter III of Part X. We intend to exercise this power to bring in the same arrangements for the competition scrutiny of the competent authority as the Bill has put in place for the Financial Services Authority.
The Director-General of Fair Trading will be placed under a duty to report on regulating provisions or practices of the competent authority which have a significantly adverse effect on competition. The Competition Commission will then, as in Part X, reach a conclusion on whether there is a significant adverse effect and, if so, whether it is justified. If the commission reports that any such effect is justified, in ordinary circumstances that will be the end of the matter. If, however, the commission reports that an adverse effect is not justified the Treasury will, in ordinary circumstances, have to direct the competent authority to make any necessary changes.
The only exceptions to what I have just said arise where the competent authority makes any necessary changes itself which obviate the need for Treasury action, or where the Treasury considers that the exceptional circumstances of the case lead it to a different conclusion from the commission. An example of this, which was outlined by my noble friend when we debated Chapter III of Part X, is where it is necessary to meet our international obligations. If the Treasury considers that there are exceptional circumstances which lead it to a different conclusion we intend to provide, as in Part X, that it must publish a statement of its reasons and lay a copy before Parliament. As has been indicated in previous debates, Treasury Ministers expect that this House or another place may wish to question them on their reasons for coming to a different conclusion.
I turn next to Amendments Nos. 128A and 157A tabled by noble Lords opposite. These amendments have the same effect, although the former in relation to the competition scrutiny regime for the competent authority and the latter in relation to the regime which covers the FSA more generally. The amendments would include within the scope of those items covered by the competition scrutiny regime matters which have a significantly adverse effect on competition between authorised persons and particular classes of authorised persons and the competitive position of the United Kingdom.
I am happy to reassure noble Lords that the first two elements of this definition--competition between authorised persons and between classes of authorised persons--are already included in the wide class of matters which have a significantly adverse effect on competition, but only in the case of the competition regime under Chapter III of Part X. Why? As noble Lords will appreciate, in the case of the new clause we are concerned with issuers, not authorised persons. The competitive position of the United Kingdom is also covered in so far as we are talking about things which the FSA does that damage competition. I fear that there may be some confusion as to how the Bill works, so perhaps I may take a brief step back. All regulation has an impact on competition. Regulation involves placing restrictions on those who can perform a regulated activity and the way that they perform it.
No one doubts that it is necessary, nor that too much can be counter-productive.
The Bill sets the FSA objectives and principles of good regulation, and subjects it to transparency and accountability arrangements which should lead it to strike the right balance between regulation and competition. However, if it does not, and it over-regulates so as to produce a significantly adverse effect on competition, then the competition authorities can step in and investigate and, ultimately, the FSA can be directed to change what it is doing.
However, if the FSA is regulating in accordance with its objectives and principles in a way that does not have a significantly adverse effect on competition, then what is there for the competition authorities to examine? There is, we certainly acknowledge, a separate issue concerning the competitive position of the UK, which noble Lords are attempting to introduce into the competition scrutiny regime. This separate issue is whether the regulatory framework set up by the Bill, including the objectives and principles, remains the right one in the light of developments in the UK and world financial markets. That is a legitimate question. But it is not one that is appropriate for the competition scrutiny regime.
As was made clear in our debate last week on Report, Ministers will keep the legislation under continual review. As part of that, of course, they will consider its impact on the UK's competitive position. Ministers will be responsible for their policies to Parliament in the usual way. If appropriate, Ministers could decide at some point to commission a review of the impact of the regulatory regime on competition and the competitive position of the UK. Whether the competition authorities would be the right bodies to carry out that particular task would of course be considered carefully if the issue arose.
In conclusion, let me try to reassure noble Lords that there is nothing missing in the competition scrutiny regime. It covers the right things, which are the effects of the FSA's regulatory provisions and practices on competition. Its job is not to review whether the FSA's objectives and principles are the right ones; and indeed the Bill does not give the Treasury powers to change those objectives and principles. These are things for Parliament to decide in the first instance, and for Ministers to keep under review thereafter.
In the light of this somewhat lengthy explanation, I hope that noble Lords will not move those amendments. I beg to move.
My Lords, perhaps I may resort to the rather tired device of addressing the Minister before he sits down. We would want to reflect on his extremely helpful statement. Having pursued at earlier stages of the Bill interest in ensuring that the international competitiveness of the United Kingdom should be maintained, what the noble Lord said was encouraging.
The noble Lord may be encouraged to know that, having heard what he said, I may not return to some of the earlier issues in the Bill.
My Lords, in moving the amendment, I thank the Minister for his remarks. I too have had the benefit of my noble and learned friend's views. Perhaps the wise course would be for me to wait until I have read Hansard, reflect on what the Minister has said, and consider whether or not it is right to reintroduce the amendment at Third Reading.
In those circumstances, I confine my comments to the new clause, after Clause 93, introduced by the Government. I have only a technical point to make. The amendment introduces the same competition scrutiny for the rules of the authority as a competent authority--in other words, in its role as a listing authority--as is imposed by Chapter III of Part X on the authority as regulator, although it does not go into the detail of who will be the person responsible for keeping the rules and practices under review.
In two places the amendment refers to "a significant adverse effect" rather than "significantly adverse effect". I am sure this is a mistake. The difference is that with the phrase "significantly adverse effect" the adversity must be significant. However, in the (if I may so say) incorrect phrase, "significant adverse effect", the effect must be significant.
It is plainly a drafting point, but one of significance. It is for that reason that I draw it to the attention of the Minister. I beg to move.
My Lords, Amendments Nos. 130A and 131A are probing amendments. Part VII deals with the control of business transfers involving transfers of insurance and deposit taking.
"No insurance business transfer scheme or banking business transfer scheme is to have effect unless an order has been made in relation to it under section 109(1)".
Such an order is an order for the court.
However, in Clauses 103(2) and 104(2), it is clear that an insurance business transfer scheme and a banking business transfer scheme can involve the transfer of only a part of the business. Is it intended that every business transfer involving the transfer of part of a business, no matter how small, must require the approval of the court before it becomes effective? In the case of the transfer of a very small business it may be possible to get consent to a scheme from all the policyholders and deposit holders involved. Is it still necessary to obtain court approval in such cases?
The clauses are beneficial, in that in the case of transfers of substantial businesses, it will not be necessary to obtain the consent of all policyholders and deposit holders. But should the provisions be compulsory in all cases? I beg to move.
My Lords, perhaps I may respond by speaking briefly to government Amendment No. 131 in this group. It addresses a minor technical point. In its current form, Clause 103 refers to a body incorporated "in any part of the United Kingdom". It is more usual to refer to a body incorporated "in the United Kingdom". The amendment tidies the drafting.
As regards Amendments Nos. 130A and 131A, Part VII of the Bill would enable a person carrying on deposit-taking or insurance business to transfer that business to another entity with the sanction of the court. This is broadly equivalent to the arrangements for long-term insurance companies under the Insurance Companies Act 1982. In the past, different arrangements applied in other cases. General insurance business transfers could be approved by the Secretary of State; now the Treasury. Banking transfers required a Private Bill procedure. We have therefore taken this opportunity to rationalise the arrangements so that similar procedures apply in all these cases.
To a degree, the transfers of business arrangements are facilitative. Without these provisions, it would nearly always be impossible for a bank or insurance company to transfer its business to another firm. But that is not the only purpose that these provision serve. Part of the reason for introducing them is to provide that a proper regulatory scrutiny may be applied to transfers of business. Perhaps I may illustrate the potential difficulty.
If a company wanted to transfer its business, it could do so in a way whereby insufficient assets were transferred to meet the liabilities of the business being transferred. That could happen, for example, where a company was taking over a failing firm and seeking to combine the businesses. That could have the effect of jeopardising the solvency of the firm to which the business is transferred and could thereby threaten the interests of the policyholders from both companies.
A transfer of business could also be used as a device for a company to restructure its group so as to place all the liabilities in one subsidiary while retaining the assets in another, from which they could be siphoned off, leaving the remainder of the group and the policyholders insolvent. The noble Lord, Lord Kingsland, seemed to believe that that was a shocking allegation. However, I can assure him that it happened on occasions at Lloyds. Those might be extreme cases, but they illustrate the kinds of risk that we need to guard against. Therefore, the provisions of this part are intended to ensure that any transfer proposals affecting insurance or deposit-taking business are subject to proper scrutiny.
They will be subject to certain conditions being met. The conditions will include proper independent analysis of the financial standing of the firms concerned to ensure that the customers of the firms are not exposed to undue risks. The provisions give the authority a proper role in scrutinising the scheme and advising the court of its likely effect, and give any person likely to be affected by the scheme the opportunity to make his views known to the court. It will then be for the court to decide whether the transfer may take place, and whether any conditions should be imposed.
The Treasury has heard arguments that certain types of transfer should be excluded. The noble Lord, Lord Kingsland, referred to minor transfers. Clearly, there will be a question where minor transfers are involved whether the transfer is of a business as opposed to a contract, asset or liability. That would need to be considered on a case-by-case basis. The position is no different from that under the Insurance Companies Act 1982. It has never caused any problems in practice during the past 18 years, although I realise that out of context my reply might seem vague.
There are difficulties even in excluding certain kinds of transfer. For example, if a life insurer were to offer a small cash incentive to its policyholders to agree to the transfer, most would probably accept without having any understanding of the significance of what they had signed up to. Another case might be where only a small part of the business was to be transferred. But that itself raises question as to the extent of the assets that need to be transferred to ensure that both parts of the business remain viable.
If there were a case for making exemptions, in our view it would need to be made by or under the Bill and certainly not, as Amendments Nos. 130A and 131A would have it, be a matter of discretion for the transferee and transferor firms.
However, we have concluded that it would be wrong to provide for exemptions of that kind over and above those set out in Clauses 103 and 104. The risks are too great. While it has been argued that in some cases court scrutiny is not necessary and would be burdensome, the Government believe that that can easily be tested under the procedure set out in Part VII. If a transfer is simple, raises no prudential concerns and has the support of the customers and creditors of the firms involved, there is no reason why the court process should be protracted.
However, I would like to draw attention to one point which has come to light in the past few days. That involves a possible exemption for transfers which are subject to approval procedures in overseas jurisdictions; for example, where two firms are incorporated in Australia and the merger or transfer of business would be approved in accordance with Australian law. That is something we are looking at and will come back to at Third Reading if necessary.
On the basis of what I have said, I urge the noble Lord, Lord Kingsland, not to press the amendments.
My Lords, of course I recognise that from time to time fraudulent practices take place. It is extremely important to do everything in our power to prevent that happening. On the other hand, the Bill, in the circumstances I described, could prove extremely onerous for those who want to enter into what seems to me to be a straightforward and simple transaction. It is a question of finding the right balance.
When I have the benefit of seeing the Minister's speech in print I shall look carefully at what he has said and shall reflect on whether to return to the issue on Third Reading. In the meantime, I beg leave to withdraw the amendment.
My Lords, the Minister will recall that in Committee this and a number of related amendments formed the basis of a long debate. As I said to the Minister earlier today, it is not my intention to repeat speeches I made in Committee to identical amendments I have tabled on Report. I simply wish to remind the Minister of the importance that we ascribe to the definition of "market abuse". I wonder whether he has had an opportunity since our last debate to reflect further on what was said and whether, in the light of that reflection, he has decided to make any changes to this part of the Bill. I beg to move.
My Lords, the noble Lord takes me slightly by surprise in that approach. I want to make a relatively brief intervention on this matter. I believe that the Minister will understand that my greater interest lies not so much in what is contained within Clause 115 as in a wish to explore at a later stage exactly what is the relationship between market abuse in terms of that clause and what the Financial Services Authority may determine is market abuse in terms of its code.
I believe that there are still some very real difficulties to be resolved before the Bill reaches the statute book. I must indicate to the Minister that, until they are resolved, I am, if one likes, neutral on the question as to whether or not it is desirable to introduce into the Bill the concept of the "regular user" of the market. The noble Lord, Lord Grabiner, made an extremely telling and worthwhile point in Committee. He said that if one examines the Bill properly and looks at what is contained within Clause 115(10), it is clear that one must have regard not only to a "regular user" but to a "reasonable" regular user of the market. That seems to me to be a concept trundled up on an omnibus from Clapham.
In some senses, it may be quite helpful to grasp what we are trying to establish as the test against which one examines conduct in the market. However, I am not quite sure about that because, before I come to a personal view on whether or not that is desirable, I need to know whether we properly understand what the FSA can do within its code in relation to inclusion of examples or indications of what is unacceptable market conduct.
I believe that the importance of the role of the Financial Services Authority can be described as follows. One reason that London has become pre-eminent in the world as a centre for financial services is because over the past 10 or 20 years it has been extraordinarily innovative. It may be that some of the innovation which those who practise financial services in the City would like to introduce is simply unacceptable and should not be allowed to continue. I have difficulty in grasping the idea of the "reasonable regular user" of the market when confronted with a novel, innovative approach to marketing or a financial product. I am concerned about trying to determine whether or not that is market abuse. That "reasonable regular user" of the market will simply have to shrug his shoulders and say, "I don't know whether that is the sort of conduct that I expect".
It seems to me that, in the circumstances of that type of innovation, one desirable feature of the FSA would be to place people in a position where they could stand back and examine exactly what is going on. In its code, the FSA could indicate, "We understand that that is innovative; that it is clever and new", and say, "Either that is completely unacceptable and you cannot do that any more without suffering the risk of being prosecuted or convicted for market abuse" or "Yes, that is acceptable, innovative and helpful to the international competitiveness of the City of London". The Minister will understand that that is something of a hobby-horse of mine.
However, I do not understand how one tests the desirability of such a change in the way that the market works if one holds only to the idea of a "regular user" of the market who in the past has never encountered such a product or marketing approach. I shall return to this issue when I come to Amendment No. 133BA.
Earlier today, the Minister indicated, in a slightly tart fashion, that something of our approach has been dilettante and irrational. I would indicate to the Minister at this stage that there seems to be a coherence in the approach that I take to what my noble friend advances, and in the queries I raise with my three amendments.
My Lords, I suspect that all of us can agree that Clause 115(1)(c) contains some of the most tortuous wording in the Bill. I think that is for a very good reason.
This subsection is seeking to strike a balance between, on the one hand, allowing action to be taken where there is market abuse but, on the other, not providing too tight a framework--a framework which might in people's minds stifle innovation and arrest an activity that would be perfectly legitimate. This is a balancing act. Like many balancing acts, it is slightly inelegant.
This amendment is the result of a process which any of your Lordships who have done much drafting will have been through when grappling with a complex problem. You start with a short statement which seeks to encapsulate it; you then realise that it might not quite work, so you add in a subordinate clause and another phrase. The Government have done a fair bit of that. The Opposition have said that it is now far too complicated and that we should have a much shorter, clearer definition. In the process, the use of the phrase "falls below" introduces a rather vaguer concept than that in the Bill. Everyone has been seeking clarity, but not always feeling that we have found it.
Of the two choices on offer, however, the Bill is certainly clearer to me, as a layman, than what is suggested by the Opposition. We would therefore prefer to leave the Bill as it stands.
My Lords, I am sorry that my noble friend Lord Eatwell has chosen to separate out his group, because I much prefer to be the pig in the middle. I can always argue that if people are attacking me from both sides, there must be something right about what I am doing--a feeble argument, I know, but good enough for your Lordships after dinner! "Don't annoy them", the Chief Whip is saying!
I am grateful to the noble Lord, Lord Kingsland, for the way in which he has spoken to this amendment and I am grateful to him for what may be seen to be terseness, although I think he has another word for it--"telegraphic", rather.
I say to the noble and learned Lord, Lord Fraser, that I may be tart on occasion, but I have never accused him of being dilettante. I have always taken his arguments extremely seriously.
The effect of Amendment Nos. 132 and 133 would be to delete the reasonable regular user from the test in Clause 115(1)(c) and make the relevant standard for determining whether the abuse had occurred that of the person doing the abuse. This is absolutely critical.
The amendments would change Clause 115(1)(c) so that behaviour which meets the other conditions in Clause 115 would amount to abuse only if it is behaviour--if I may do a Keeling schedule on the noble Lord's amendment--"which falls below the standard of behaviour reasonably expected of the person or persons concerned in his or their position in relation to the market".
If the regular user is deleted from Clause 115(1)(c), I am not clear as to who would then be deciding whether there had been a failure to observe expected standards. I am particularly puzzled, as the noble Lords have chosen to leave the regular user in subsection (2) of Clause 115.
The noble Lord, Lord Kingsland, said in Committee that the reason that he sought to remove the expression "the regular user" was that it imported a subjective element which he wished to exclude. I simply do not understand this. There is no subjective element in the test as it stands. It is an objective test.
The view of the reasonable regular user is the view which an impartial third party who regularly uses the market would take, on an objective and reasonable basis, of the question of whether a particular person's behaviour represented a failure to observe the standard of behaviour reasonably to be expected of someone in that position.
I thought that the noble Lord, Lord Grabiner, made that entirely clear in Committee. He said in relation to Clause 115(1)(c) that,
"[it] is drafted in entirely objective terms; it is not subjective at all. I emphasise the words in the first line which states:
'which is likely to be regarded by a regular user'.
That does not mean that the person who is, so to speak, being charged with market abuse on a particular occasion; it concerns 'a regular user'--the nominal person; the anthropomorphic version of the human being we are concerned with".--[Official Report, 21/3/2000; col. 215.]
Removing the "regular user" from this element of the definition of abuse would, at a stroke, remove much of the certainty which the new test builds in. Most market participants are "reasonable regular users" themselves and will know what is okay and what is not. That is the whole point of the test. It is the bad apples who do not observe expected standards--the standards that the markets rely on to work properly--who are the target of the new regime.
The second amendment, Amendment No. 133, does something quite strange. Currently Clause 115(1)(c) refers to the standard of behaviour reasonably expected of a person in the position of the abuser. That person is not the abuser himself, but a hypothetical person. For example, if the alleged abuser is a company, then the person in the position of the abuser for the purposes of this clause is a.n. other company director.
If the behaviour is something which fulfils the other elements of Clause 115--for example it involves a squeeze coming with Clause 115(2)--the question the reasonable regular user is addressing is whether there was a standard of behaviour reasonably expected of any person in the same position in relation to the market as the squeezer. He does not decide whether there is a standard of behaviour reasonably expected of a person in the position of the alleged abuser by looking at the personal characteristics of the alleged abuser. That would be absurd. One would reasonably expect a dishonest person, for example, to commit abuse.
However, that is precisely the effect of Amendment No. 133. I think it should be immediately clear that this would produce a bizarre result. Why should one expect any other standard of behaviour from an abuser than a very poor one? And if that is the case, how could the FSA take action against him? How would market protections be enhanced?
I must say that I am not sure that it would be possible to drive a more damaging coach and horses through the market abuse regime than would be done by these amendments.
The noble and learned Lord, Lord Fraser, referred in advance to the relationship between market abuse and the FSA's code. I understand that he intends to return to that with his later amendments so I shall restrict my remarks to saying that what constitutes market abuse will be determined by the provisions of Clause 115. At the heart of the test set out in the clause is the concept of the reasonable person who regularly uses the market concerned.
I believe that it is within the bounds of the concept of the reasonable man that he can take a view on the acceptability of innovative behaviour, to which the noble and learned Lord, Lord Fraser, was referring, as well as on the acceptability of well-rehearsed behaviour.
The code is not determinative of what market abuse is. However, where a person acts in accordance with the code, he will have a completely safe harbour. A person who acts in contravention of the code will not automatically be found to have engaged in market abuse. But the fact that he has acted in contravention of the code will clearly carry evidential weight. But we can return to that matter on the later amendment.
I return to Amendments Nos. 132 and 133. They would be extraordinarily damaging if they were to be agreed to and I urge noble Lords not to press them.
My Lords, on Second Reading and in Committee, my noble friend Lord Lipsey and I expressed considerable reservations about the regular user test that is the foundation stone of the definition of market abuse in Part VIII of the Bill.
Our reservations derive from two characteristics of the regular user test. First, as currently formulated, the use of the concept of the regular user to define market abuse seriously weakens current defences against market abuse by authorised persons. I provided examples at Second Reading. At no time has the Minister sought to refute those examples. I must presume that he accepts their validity.
Secondly, we believe that the regular user test provides no clear standard of acceptable behaviour by any market participant, authorised or not, since the regular user of the market, albeit a reasonable person, might, in the light of longstanding custom and practice in a given market, reasonably expect behaviour to occur, even if that behaviour was not in the interests of the operation of the market as a whole.
Noble Lords may remember that in earlier debates I illustrated the latter point by reference to an analogy drawn from the game of association football. Everyone knows that shirt-pulling has become endemic in modern professional football; and yet a regular user--that is, a reasonable professional footballer--would expect his colleagues to pull shirts, even though such behaviour is damaging to the game as a whole.
Noble Lords will be relieved to know that that is the last reference I shall make to that particular analogy, but I believe that it aptly covers the case. Most worrying of all, the point made that what is customary is what is expected by the reasonable person has not been answered by the Minister at any time. I hope that he will answer that point tonight. The point that I beg him to consider is, if in the financial services industry behaviour that abuses the market were typical of the participants in that market, why would the regular user, however honourable he might be, not reasonably expect that standard of behaviour from others? Indeed, it would be irrational to do otherwise.
I had not intended to refer to the remarks made in Committee by my noble friend Lord Grabiner, as he is not here this evening. However, since he has been quoted extensively by the Minister, I feel that I must take up his arguments. My noble friend's argument was essentially that a regular user, being a reasonable person, could reasonably expect participants in the market to behave in an honourable manner and not to abuse the market; that is, a reasonable person will be a person of high standards and would expect others, too, to have high standards. I must say that at the time when I listened to my noble friend's argument, I found it a little odd. Even if the regular user is a person of high standards himself, why should he reasonably expect others to share those standards?
I have consulted colleagues at the University of Cambridge who hold appointments in law in an attempt to discover whether that is an oddity and is one of those charming foibles of English law designed to confuse non-lawyers. The consensus among those dons I consulted was that my noble friend presented a good case, but not a decisive case.
That is the problem with the Government's position on the regular user test. They have an argument, but it is not a conclusive argument. It is quite possible that, as currently formulated, their position will fail in the courts. In that case, the entire market abuse section of the Bill would collapse. I cannot for the life of me understand why the Government are prepared to take such a risk with that section of the Bill and with the reputation of financial services regulation in this country.
In Committee, the Minister kindly offered to meet my noble friend Lord Lipsey and me in order to allay our fears about the characterisation of the market abuse regime in the Bill. I am grateful to the Minister and to his officials for giving up their time to that meeting. Sadly, the meeting had exactly the opposite effect from that for which we had both hoped. I am even more convinced that Part VIII is seriously flawed. That is because up until the time of the meeting I had believed that Clause 116 provided a defence against the damaging interpretation of the regular user test to which I have just referred. As noble Lords will be aware, Clause 116 requires the FSA to produce a code containing such provisions as the authority considers will give appropriate guidance to those determining whether behaviour amounts to market abuse.
That, I hoped and believed, provided the opportunity for the authority to set standards and even to raise standards. The noble and learned Lord, Lord Fraser of Carmyllie, pointed out in Committee that there is a certain ambiguity in Clause 116. He has made that argument again this evening. The authority is to produce a code, but it is to provide guidance about the views of the regular user. That is the core of the ambiguity.
Sadly, when I put this point to the Minister and his officials they declared that there was no ambiguity because what is meant by Clause 116 is that the FSA should simply codify the views of the regular user. It should not express its own views. The Government's intention is that, in constructing the code, the authority should simply mirror the views of the regular user. Indeed, the Minister made exactly that point in reply to the noble and learned Lord, Lord Fraser of Carmyllie, a few moments ago. That interpretation may be regarded as rather odd particularly in the light of Clause 116(2) but, never mind, the Government's view is that the regular user rules, and not the authority.
That brings us back to the basic definition in Clause 115. In his defence of the regular-user test, the noble Lord, Lord Grabiner, told us that the regular user is a hypothetical individual of decent moral standards. But even a hypothetical person must draw his or her views from actual experience of the market, from the environment in which he or she works.
So let us consider how the views of a reasonable person might interact with the environment in which he or she works. Let us take as an example of a reasonable person a barrister, perhaps even a QC. Let us suppose that our barrister is an expert in tax law. Is it not reasonable to expect that our QC will, when acting for taxpaying clients, seek to identify all measures to minimise their tax liability within the bounds of the criminal law on tax evasion? That is his job. That is what he would expect a reasonable person to do. Is that not exactly how a large number of very rich people manage to pay very little tax today? Is it not that minimisation of tax payments within the law exactly what a regular and reasonable person would expect, and yet is it not clear that it is that kind of tax avoidance by the wealthy that brings the operation of the whole tax system into disrepute? That point has been well recognised by the Chancellor of the Exchequer who is now trying to correct it.
My fear is that the market abuse regime, as defined in the Bill, will have the same outcome: that the boundary to the behaviour reasonably expected by a regular user of the market will be the boundary defined by the criminal law, so that the whole attempt in this Bill to define an entirely new regime to police market abuse other than by the criminal law will fail. Noble Lords will be well aware of the fact that the criminal law regime against market abuse has not performed very well and that that failure has damaged the reputation of the City of London.
The amendment in my name and that of my noble friend Lord Lipsey seeks to rescue the regular-user test by providing that the action reasonably expected by the regular user should be such as to be,
"in the interests of the market as a whole".
The importance of this qualification should be clear from my example of the tax QC. If tax avoidance, although within the criminal law, were against the interests of the fiscal regime as a whole, perhaps by bringing it into disrepute, then in the spirit of Amendment No. 133A, it would be shunned. By analogy, behaviour that is damaging to the market as a whole would be shunned by the reasonable regular user since it would amount to market abuse if this amendment were to be accepted.
I hope that my noble friend the Minister is minded to accept at least the spirit of this amendment. If, sadly, he is not, I ask him this: would he deem acceptable behaviour which meets the criteria of Clause 115(1)(c), as currently drafted, but which is not in the interests of the market as a whole? Would he deem that acceptable? The new market abuse regime is a vital part of this Bill and I fully support the Government's objectives in framing it. Acceptance of this amendment would secure the Government's goal beyond all reasonable doubt. Rejection of it would place the Government's goal at risk. I beg to move.
My Lords, this has been one of the livelier debates in the always lively proceedings on this Bill, featuring as it did at one stage in Committee a debate on whether this amendment would apply to financial markets the moral standards of the late Sir Stanley Matthews or of Diego Maradona.
This is the second cut by my noble friend Lord Eatwell and myself to try to improve the clause so as to make it clear that we want Sir Stanley Matthews financial markets. In our first attempt we suggested that there should be a reasonable and ethical user, but that did not meet the approval of the referee, so we are trying again with this amendment.
I cannot improve on the arguments set out so brilliantly by my noble friend. However, when we have discussed this matter with Ministers and their advisers, their general line has not been that we are aiming at the wrong point, but that the clause as drafted will broadly have the effect that we seek. If that is so, that is fine. The only point that I make is that it is not enough that it will have that effect, or that Ministers think it will have that effect, or even that if it came before a court that the court will consider that it will have that effect. It is terribly important that the regulator, who has to decide how, when and where to use the clause to cope with market abuse--to cope with Diego Maradona--believes that the clause will have that effect.
I do not easily understand why it is hard for the Government to accept this amendment if it is true that it is of nil effect. I believe that it would merely clarify the situation. But at least I ask that, in reply, the Minister gives the regulators the comfort that they require to make them confident that the clause indeed has the effect that he and the Government believe that it has and, therefore, that it can be effective in ensuring that Sir Stanley rules and not Mr Maradona.
My Lords, the practice of indolent judges who cannot be bothered to prepare their own judgments is to say, "I concur in the judgment previously delivered". There is little in what the noble Lord, Lord Eatwell, has said that would not lead me to conclude that I could offer up the same view.
His words seem to be exceptionally apposite. They penetrated with great clarity of analysis exactly the problem about the market abuse provision that is allowed for in the Bill. I hope that the noble Lord on the Front Bench will not find some contentment in the idea that, if he is criticised from behind and from this side of the House, in some bizarre fashion he must have achieved an acceptable balance. This is a situation that he ought to acknowledge and understand as one that he should take away and reflect on carefully.
I do not have the advantage of being president of Queens' College, Cambridge. I greatly admire the position of the noble Lord, Lord Eatwell, and the opportunity that he has to consult such distinguished legal academics as are to be found in Cambridge. I certainly hope he talked to Dr Ferran, who contributed in such a distinguished fashion to the Joint Committee.
I hope that the Government understand that nobody is trying to attack what is being done about market abuse. We are still intent, one way or another, on achieving a regime that will be beyond challenge once it is put in place. I still have a grave concern that the provisions that are to be found in Clauses 115 and 116 simply do not mesh together. The outcome will not be a reduction of the abuse of the market that there is in London, in particular, and in the UK generally; but it will simply provide a field day for lawyers to work their way through these two sets of provisions and find that, far from being an advantage to those who wish to stamp out abuse, it will exacerbate the situation.
If the Minister looks back to such problems as there have been in relation to insider dealing--I acknowledge that his government were not in office at the time--he will realise that the one thing that all sides of the House must seek to achieve is a regime that is settled; one that is direct; and one that brings to account those who abuse the market.
I have been intrigued by this amendment. For my purpose, had the amendment been put within Clause 116, which requires the FSA expressly to put together descriptions of behaviour that amounts to market abuse, acting in the interests of the market as a whole, that might have been another route to the same objective. I am not trying to draft on my feet. I hope that those on the Government Front Bench do not regard this set of opinions as the opportunity to say that there is such a degree of division that we cannot come to an acceptable and satisfactory arrangement. We have the same objectives. I hope that the Minister will appreciate, even at this relatively late hour, that this is not a destructive approach to this part of the Bill; we want to improve it.
I am not entirely sure that my Front Bench will always agree with me. But I am not averse to the idea, as my later amendments will indicate, that the FSA should have a role in that. The only point with which I disagree in the approach of the noble Lords, Lord Eatwell and Lord Lipsey, is that I have difficulty in believing that the reasonable, regular user of the market--that objective creature--will be sharp enough to pick up the sort of abuse that may be emerging. It is important to understand that, if people wish to engage in financial services in the City and they are not sure whether or not what they propose is acceptable, as I understand Clause 116 and other provisions, they will have the right to go to the FSA and say, "This is what we propose to do. Is it acceptable?". If the FSA says that it is acceptable, they have their safe harbour.
In those circumstances, the FSA is in a far better position than anyone else to know about, to listen to, and to determine upon innovations in the City and then come to a conclusion as to whether or not specific innovations are acceptable. It can be spelt out there and then if it is an abuse. It follows from that that those who then pursue that innovation will suffer the penalties that flow from it. Alternatively, if the FSA regards it as being acceptable behaviour and an innovation it wishes to see continued in the City, that will not be trammelled in any way.
I have difficulty in believing that simply relying on this reasonable, regular user of the market, will provide a complete solution. I could continue to speak on this matter for a long time. It is not difficult to envisage a circumstance--there are some distinguished court practitioners in your Lordships' Chamber tonight who can also do this--when those who are reasonable, regular users of the market give evidence in the best of faith to a tribunal or other body but come to completely different conclusions. In such circumstances, what possible conclusion could the tribunal draw? The only definite view one could reach is that no decision is more obviously amenable to judicial review than that.
My Lords, these debates have been conducted on a theoretical plane and my question on the amendment is really for those who tabled it. My question relates to the more practical work that the FSA has been doing in terms of the code. As noble Lords will be aware, the authority has already gone some way towards drawing up a draft code. The matter was put out to consultation and received feedback, which was all published. What emerged and what, I suspect, the draft code will become--noble Lords will correct me if I am wrong--is the equivalent of the rules of the game, to continue the football analogy.
It seems to me that there are already equivalent provisions within the code against shirt pulling. Indeed, there are provisions against the Maradona method of scoring goals. If rules are drawn up in consultation with practitioners--that is to say, the regular users--which command broad support not just in the market place but also among the other audiences, including Members of this place, who have a chance to study such documents, I believe that we shall then have, arguably, a series of rules that will avoid many of the theoretical concerns expressed by noble Lords.
The key final point is the fact that the FSA is the referee. Indeed, if the authority were a good referee at the moment, it would, like all good referees, be penalising people who were shirt pulling; and would, equally, be penalising the Maradona. I would welcome any comments from noble Lords opposite explaining why, in their view, this procedure and the drawing up of the code gives them such concern about the proper avoidance of the abuse that everyone is keen to stamp out.
My Lords, the amendment would provide that the reasonable regular user, when considering the behaviour engaged in by person X, would look at whether that person had failed to observe the standard of behaviour reasonably expected of a person who was,
"acting in the interests of the market as a whole".
I am grateful for one thing that has emerged from this debate; namely, that my noble friend has promised not to use football analogies any more. As he knows, I am out of my depth in that respect. My noble friend the Chief Whip tells me that shirt pulling in the penalty area would immediately attract a penalty kick against the person responsible. So perhaps the analogy is not perfect. But at least we can leave that and talk in properly theoretical and metaphysical terms.
It is a fact of life that people who engage in transactions in the market do not do so because it is in the interests of the market as a whole; they do so because it is in their own interests or in those of their clients. Therefore, if we were to insert the words,
"acting in the interests of the market as a whole", it would raise all sorts of questions about what acting in the best interests of the market meant in an individual case. Indeed, it would introduce a new standard into this area.
Let us suppose, for example, that the market is going through a volatile period. Would selling shares during that time be something that would represent acting in the interests of the market as a whole? Arguably, it might not be, but clearly we do not want to stop people selling shares during a volatile period. Perhaps another such example might help to illustrate the difficulties with this approach. I may, for example, be about to sell a large holding of shares. To minimise the impact on the market, and thus the price I can get, let us suppose that I decide to sell off those shares in small parcels. It is possible that my doing so might give a mistaken impression of supply and demand. There would be nothing wrong with what I was doing and clearly it would not fail to meet expected standards, but what if the provision were amended so that the regular user was considering my action against what he would expect from a person who is acting in,
"the interests of the market as a whole"?
If I am acting in the interests of the market, should I, or should I not, tell people that I am selling off a large number of shares? I am afraid that it is not clear that the phrase which this amendment would add to the Bill relates to what happens in financial markets even when people are not doing anything which by anyone's standards--those of the noble Lords, Lord Eatwell and Lord Lipsey, of the noble and learned Lord, Lord Fraser, or my own--is wrong in itself.
However, while people who engage in transactions in the market act in their own interest, that does not mean that anything they do in their own interest is, by definition, acceptable behaviour. Whether someone has committed market abuse or not depends on whether he has failed to observe expected standards. Of course markets depend upon those who use them having confidence in their fairness and efficiency. It follows, therefore, that the standard of behaviour which is reasonably to be expected of persons using such markets will be one which takes into account the need for the market as a whole to operate fairly and efficiently, which is in the interests of all users. That is implicit in the test for which Clause 115(1)(c) makes provision and it does not need to be further stated.
My noble friend drew an analogy with a tax lawyer. That analogy does not hold good because a reasonable person would expect a tax barrister to use the arguments most favourable to his client's case. That is his job as an advocate. The reasonable user test is based on an objective and disinterested view of what is appropriate behaviour.
I was asked about the role of the code and whether we should use the FSA to raise or set standards. The regime rests on the definitions in Clause 115. Clause 115(2) specifically picks out three elements of behaviour: insider trading; false or misleading impression of supply or demand for investments; and distortion of the market. In constructing the code, the FSA can set down its opinion of what constitutes market abuse, but, to be abuse, market behaviour has to fail to meet expected standards. The FSA should reflect those standards. It is not for the FSA to say what the expected standards are; otherwise we could get rid of all the definitions in Clause 115 and say that market abuse is what the FSA says it is. That is not what we are doing here.
The noble Lord, Lord Lipsey, mentioned a similar point. The statute book would be several times the length it is if unnecessary words were inserted in order to make things clear which in our view are already clear. I assure noble Lords that the effect of these provisions is not to allow the worst standard of conduct which might prevail to prevail but neither is it to allow the FSA to determine what is best for markets.
As I said, on the basis that the standard of behaviour which is reasonably to be expected of persons using such markets will be one which takes into account the need for the market as a whole to operate fairly and efficiently, which is in the interests of all users, I invite my noble friend not to press the amendment.
My Lords, I am grateful to the Minister for his reply. However, he will not be at all surprised to hear that I find it enormously disappointing. In fact, I find it distressing in the sense that he has reiterated the point--in a way he answered the point made by the noble Lord, Lord Newby--that the FSA cannot be, in the words of the noble Lord, Lord Newby, the referee. It cannot determine the rules. However, it is the regular user whom the Government believe to determine what the FSA can say. I find that position very worrying.
The noble Lord has pointed out the difficulties of the approach taken by myself and the noble Lord, Lord Lipsey. I have some sympathy with the strictures which he has brought to bear upon our formulation. However, I find his argument that the reasonable regular user and reasonable persons would expect the markets to be free and fair nai ve in the light of behaviour in financial and commodity markets around the world. That is not how markets work. I regret to say that we shall have to return to this matter at Third Reading if by that time the Government have not considered these matters further and taken the steps which will rescue this part of the Bill and allow them to achieve the goal they seek. I beg leave to withdraw the amendment.
My Lords, we have had such an interesting and important debate that it is something of an unnecessary interlude to interject this amendment. I cannot wait to get back to the next part of our debate, which I promise the Minister will be somewhat shorter than the first part.
The amendment seeks to ensure that the Treasury will consult with all relevant interests before prescribing the markets to which the clause applies. If the Minister's response is, "Of course", that will be more than sufficient for my purposes. I beg to move.
My Lords, I do not think that I can quite get away with saying, "Of course", and then sitting down.
As a general point, we did, of course, twice debate in Committee obligations for the Treasury to consult on proposals to make secondary legislation; we did so on 20th March and 30th March 2000. I shall not repeat the detailed explanations that I gave there, but the Treasury will act in accordance with the usual procedures for making secondary legislation. There is a presumption in favour of consultation, and noble Lords will be aware that the Treasury has already consulted on drafts of a number of draft statutory instruments to be made under this Bill.
Specifically on the power to make orders under Clause 115, the Treasury has consulted on the proposed regulations to be made under Clause 115(3). A draft of the order was published in June 1999 in a consultation document entitled Market abuse: prescribed markets. This proposed that the regime should cover the markets run by the six recognised investment exchanges and the investments traded on them.
I should point out that we consulted more widely than would strictly be required by the amendment. As the Treasury has already done what is required by the amendment--and, indeed, gone further--I hope that the noble and learned Lord will consider that I have said the equivalent of "Of course".
moved Amendment No. 133B:
Page 56, line 43, at end insert--
("( ) Behaviour does not amount to market abuse within subsection (2)(b) if the impression given is misleading only because of information which the individual whose behaviour it is does not know about it because it was withheld from him in conformity with control of information rules.").
My Lords, in moving Amendment No. 133B, I shall speak also to the other two amendments in the group, Amendments Nos. 133E and 133F.
So far as concerns Amendment No. 133B, the Minister in another place--I think it was the honourable lady Patricia Hewitt--said in Committee that it was important that the FSA rules should be a safe harbour because they would provide for stabilisation and for Chinese walls. I think that this observation is so crucial that it ought to be stated on the face of the Bill. If the Minister were to glance at government Amendments Nos. 202 to 206, he would see that it is so stated--or, rather, that the Government intend it to be so stated--in relation to the criminal offence of market manipulation. All the Government have to do is to follow the logic of that criminal offence into the offence of market abuse.
In this case, exemption should apply where a person makes a statement, promise or forecast without knowing that it is misleading, false or deceptive because the relevant information was withheld from him in compliance with the control of information rules. In addition, the company itself should be treated as not knowing or being reckless if the individual making the statement, promise or forecast was not aware of the relevant information and was not told to make it by someone who was.
"which is likely to be regarded by a regular user of that market who is aware of the behaviour as a failure on the part of the person or persons concerned to observe".
Amendment No. 133E inserts that concept in a separate part of the Bill. The Minister will recall that a similar approach was taken by the Opposition at the Committee stage.
Finally, Amendment No. 133F to Clause 119(2) is designed to bring in another ground on which the authority cannot impose a penalty. It seeks to reintroduce a situation where no penalty can be imposed if the accused did not realise that he could be misinterpreted in what he was saying or doing. The two conditions referred to in the amendment are the market abuse limbs, consisting of misleading or distorting the market. I beg to move.
My Lords, clearly we have not succeeded in communicating the extent to which we have introduced changes to the Bill to improve protections in this area on top of those made at earlier stages of the Bill's passage through Parliament.
First, Clause 119(8) now provides that behaviour does not amount to market abuse if it conforms with FSA rules which include a provision saying that behaviour does not amount to abuse. That was inserted to remove any uncertainty that compliance with specified rules--for example, those on control of information: "Chinese walls rules" as they are known--and compliance with price stabilisation rules will provide a safe harbour from a charge of market abuse.
Secondly, we improved the protections for those who take reasonable precautions and exercise due diligence to avoid engaging in market abuse, and for those who believe on reasonable grounds that their behaviour does not amount to market abuse. In addition to these safe harbours, the Government in another place provided that behaviour which complies with express provisions of the code of market conduct, which the FSA is required to produce under Clause 116, cannot amount to market abuse.
The amendments do not make any improvements to the safe harbours we have already introduced. Amendment No. 133B would provide that it is not market abuse if an individual gives a misleading impression as a result of not knowing about something because it was withheld from him in conformity with control of information rules. We shall shortly discuss these rules in the context of government Amendment No. 156.
This is a statement of the obvious. While FSA rules on control of information could cover this situation, it is clear that the person concerned would not be breaching expected standards, and indeed that he would have reasonable grounds for believing that his behaviour was not abuse.
There may be some misunderstanding in the area of control of information. The concern is not so much with the position of the individual, who is clearly protected, but his firm. Even if various parts of the firm do not have all the information as a result of Chinese walls, the firm considered as a whole clearly will have all the information. The danger is that if one person in a firm dealing with a client does not have information which another person in the firm knows about, there is a danger that the firm, taken as a whole, will have misled the client.
While we could specify this situation and others in the Bill--for example, behaviour in conformity with price stabilisation rules--we think that the better approach is to leave it to the FSA. The FSA has discretion to make control of information rules and price stabilisation rules. It will do so, and work is in hand. But the legal position is that it does not have to. So putting explicit safe harbours on the face of the Bill rather than leaving it to the FSA to decide when safe harbours should apply does not really change the position. In any event we want to provide flexibility here since there may also be other rules which the FSA would want to form a safe harbour from market abuse.
The FSA will, of course, have to consult on all of its rules. In doing so, it may identify the need for further protection or conclude that it does not want to give protection in all circumstances. The unscrupulous are very good at exploiting loopholes.
Amendments Nos. 133E and 133F concern the circumstances in which the FSA can impose a penalty for market abuse or issue a public statement. As I have said, this is an area where we made improvements in Committee.
I am rather surprised by Amendment No. 133F. In Committee, noble Lords opposite tabled an amendment which sought to restrict the protection for "belief", which was present in the previous version of Clause 115, to situations where someone believed "on reasonable grounds" that he had not engaged in market abuse.
We met the substance of this amendment when we included the protections that are found in Clause 119(2). But noble Lords now follow it up with an amendment which would provide a safe harbour for someone who had given a misleading impression or distorted the market if he did not "anticipate" that his behaviour would do this. Where have the "reasonable grounds" gone on which noble Lords were so keen in Committee? Are they now saying that it is all right if someone does not have reasonable grounds for his belief?
If I assert that I really did not anticipate that my behaviour would lead to regular users being given a misleading impression, should that be the end of it, even if I did not have reasonable grounds for that anticipation? If noble Lords are not seeking to remove the "reasonable grounds" element, then this amendment adds nothing to what is already in Clause 119(2). If the noble Lord, Lord Kingsland, is seeking to remove what he previously desired to include in the Bill, I must resist that as strongly as I welcomed the previous position.
Amendment No. 133E would introduce a change which would be at best unnecessary and at worst extremely damaging. It is unnecessary if by the amendment the noble Lord, Lord Kingsland, means that the behaviour satisfies the expected standards of behaviour which a reasonable regular user of the market would expect a person in the alleged abuser's position reasonably to observe. That is already provided for. But if the noble Lord means that behaviour which is widespread can never be market abuse, then it would be a terrible change to make. I am sure that that cannot be the noble Lord's position. There is a big difference between "accepted market practice" and "acceptable market practice".
Perhaps I may give an example. Let us suppose that insider dealing were rife on a market. Would that mean that, just because everyone is "at it", it should fall outside this regime? Clearly it should be capable of being caught. That is what the regime does by introducing the concept of the regular market user, a reasonable man who knows right from wrong, and by looking at the expected standards of the market from his perspective. We cannot accept these amendments.
My Lords, I thank the Minister for his response. In view of later government amendments, I was rather surprised to hear what the noble Lord said about Amendment No. 133B. However, I shall reflect on what he has said and, if necessary, reintroduce the amendment at Third Reading; likewise with respect to the noble Lord's remarks on Amendment No. 133E.
As regards Amendment No. 133F, here we have probably arrived at a point of deadlock. So, when we reach that amendment, I shall seek to test the opinion of the House. I beg leave to withdraw the amendment.
My Lords, I have tabled three amendments that seek to amend Clause 116. It may be surprising, in view of what I have hitherto argued, but essentially they seek to restrict what should be included within the code. Thus, if my amendments were accepted, the code would not allow for a specification or description of behaviour that in the opinion of the authority amounted to market abuse. All that the code would contain would be descriptions of behaviour that in the opinion of the authority did not amount to market abuse, or factors that in the opinion of the authority should be taken into account in determining what behaviour did not amount to market abuse.
It seems to me--it follows from what the Minister said--that in the context of market abuse, the code provides for nothing more than a safe harbour; that is, if the code says that something is not market abuse, it does not matter what a reasonable regular user of the market thinks about the conduct. Under Clause 118, if the code says that certain behaviour is not market abuse, that is the end of it. Therefore, one is wholly safe, provided that what one does is within the code.
What surprises me about the Government's approach is that I believe it to be equally appropriate that the code should contain descriptions of behaviour that in the opinion of the authority amount to market abuse. In previous debates, I have indicated a special context in which I believe that that is particularly applicable; namely, where, following informal consultation with the FSA, an approach to marketing or new financial products is brought to its attention and it decides whether it is acceptable or unacceptable. If the FSA decides that that is unacceptable to someone who works in that sector, that behaviour should be capable of amounting to market abuse. However, given the way in which this part of the Bill is constructed, the matter is not as clear cut as that. If one looks at Clause 118(2), one finds that,
"the code in force under section 116 at the time when particular behaviour occurs may be relied on so far as it indicates whether or not that behaviour should be taken to amount to market abuse".
Confronted with that provision, lawyers will believe that all their Sundays have come at a single moment. One must consider the view of the reasonable regular user of the market and, in some fashion, weigh that against what is provided for in the context of the code. The code is not to be definitive or overriding, but in some obscure way it is only to be "relied on". It is not unreasonable to envisage circumstances in which it is impossible to arrive at a clear, simple, unanimous view of what the reasonable regular user of the market would regard as acceptable. The problem is infinitely compounded if one must then look at what is in the code and decide whether one must rely on it.
My only concern in this matter, in the best interests of the financial services sector, is to achieve the greatest possible degree of certainty. I believe that, far from bringing about that desirable result, exactly the opposite is achieved because of the way that the provisions have been put together. I understand that already lawyers in the City have concluded that if the code says that something is market abuse, the arrangements will prove to be wholly unworkable. They boast about it. At an earlier stage the noble Lord asked that those people should be named. I have no intention of naming them; I shall not allow them a greater professional advantage than they might otherwise enjoy. But the Minister should understand that there are those who have already reflected on the provisions and concluded that they are unworkable. I want to ensure that they are workable.
I repeat the primary point. I am not so much concerned about those marketing arrangements which are already well established where the regular reasonable user can offer an opinion, but those where the situation is completely innovative, either in market technique or product. In those circumstances, the FSA will be in future in a far better position to come to a conclusion and say, "If you carry through such behaviour it is unacceptable". On the other hand, if it is acceptable, that is a safe harbour.
I want a framework of certainty and clarity; otherwise I am concerned that we shall achieve neither and the relationship between the two provisions will be such a muddle that it will be a happy market for lawyers but will do nothing to enhance the reputation of the United Kingdom financial services sector.
My Lords, I sympathise with the intentions underlying the amendments and with what the noble and learned Lord said about the need for certainty.
Clause 116 places a duty on the FSA to prepare and issue a code which will help people to get a better understanding of what behaviour is abusive and what is not. This is called the code of market conduct.
In many circumstances, it will be obvious when abuse has occurred. I have already given some examples. You do not need a code to tell you that buying or selling shares while in possession of inside information is likely to fall short of expected standards of behaviour unless there is a very good reason--for example, if circumstances forced the sale. Equally, you do not need a code to tell you that it is not market abuse if, say, a pension fund placing a big buy or sell order in the ordinary course of its business moves market prices. We have accepted that uncertainty exists at the margins. The purpose of the code is to provide greater certainty.
Perhaps I may give the analogy of the Highway Code. The Highway Code gives people a better idea of what it means to drive with or without due care and attention. What it does not do is provide a template on which a decision can be made on whether in an individual case a charge should be brought of driving without due care and attention, or whether there should or should not be a conviction in the courts on that charge. The Highway Code provides assistance but not a definitive answer in any individual case; and it is not intended to do so.
There has been plenty of consultation on the code. The FSA is engaged in an extensive consultation exercise on a draft code, Consultation Document 10. It is revising the code with the help of a practitioners group and a group of exchange and clearing house representatives.
Amendments to Clause 116 leave me a little puzzled. They would reduce the certainty which the code can provide to market participants as to whether or not their behaviour was likely to be abusive.
Amendment No. 133BA makes a drafting change which would cast doubt on what the code could contain. At present the code is not limited to specifying things described in subsection (2). So it would be possible for the code to set out the general background which might assist people in understanding the descriptions it contained, or contain descriptions of particular situations in which people should take extra care about what they do.
Under Amendment No. 133BA, it may still be possible for the code to do that. The power in subsection (2) remains permissive. But it would cast doubt on this in an unhelpful way.
Amendment No. 133BB deletes subsection (2)(a). I presume that the intention is that the code should not be able to specify descriptions of behaviour which amount to market abuse. I think that the effect would be to reduce the certainty people are looking for from the code. They would have to fall back solely on the provisions contained in Clause 115 in coming to a judgment about whether their behaviour was likely to be abusive. People would be less clear than they otherwise would be about whether the FSA would be likely to take action against them.
One of the main issues raised on the market abuse provisions during consultation and the Joint Committee scrutiny was the need for certainty. The effect of the amendment would be to reduce that. The third amendment, Amendment No. 133BC, would have the same effect, making people less clear as to when they might be likely to find themselves being proceeded against for market abuse.
Of course the code cannot set out all the situations in which behaviour does not amount to market abuse. That would be impossible. The result would be that by not saying whether certain behaviour was abusive, or whether certain factors might be relevant in deciding whether abuse had taken place, people would only have certainty where the FSA had said that something was not abuse.
That is not the way in which the code should be drafted in order to provide guidance. No one has suggested in consultation that it should be drafted in the way in which the noble and learned Lord proposes, and I hope that he will not press his amendment.
My Lords, I am a little surprised that the noble Lord has not grasped the technique I have deployed in the three amendments. It is the tried and tested one of looking at what I regard as an enfeebled set of provisions and suggesting their deletion--although I should wish to see them strengthened--in the hope that the Minister might be in a position to explain to me that I am wrong and that they are not as enfeebled and useless as I regard them to be.
I have said at least four times today that I believe that the FSA, particularly in regard to certain developments in the market, should be in a position to say, "That innovation is potentially abusive and we will set out in our code that if anyone pursues it he will suffer penalty". I am still completely at loss to understand why the Government are so resistant to that.
When the Minister, in a somewhat condescending fashion, referred me to the Highway Code, it did not seem to be an entirely apt comparison. If within that code the FSA says, "This behaviour is not market abuse. It matters not what any reasonable regular user of the market regards it as being", that is a total and complete safe haven for the individual who embarks on that behaviour.
That does not seem to me to be anything like an appropriate parallel with the Highway Code.
My Lords, I made it clear that that is the easy bit. It is the other side of the coin that is more difficult.
My Lords, the noble Lord is at long last right on this matter. That is the important point that we are seeking to make.
I believe that the relationship between the two clauses is important and I was therefore strongly minded to divide the House on the matter. However, I hope that my faith is not misplaced. While I did not entirely agree with the amendment moved by the noble Lords, Lord Eatwell and Lord Lipsey, they seemed to understand what is important about establishing a clear and unequivocal relationship between Clause 115 and the code in Clause 116. I am still at a loss to understand why the Government cannot bring forward their own amendments in order to put the matter beyond doubt.
I hope that between now and the next stage of the Bill the Minister will consult with those who are concerned about it. If he does not know that I am not alone in having these concerns, he ought to consult more widely. In the, I hope not vain, expectation that he will do just that, or that the noble Lords, Lord Eatwell and Lord Lipsey, may have greater powers of persuasion on the Minister, it is with considerable reluctance that I beg leave to withdraw my amendment.
My Lords, as the Minister will doubtless remember, this amendment and the others in this group were tabled in Committee. They seek to extract from the Government a reaction to the proposition that the imposition of a penalty by the FSA following an investigation is likely to be a contravention of the European Convention on Human Rights.
As I understand the jurisprudence of the court, a clear distinction is made between the investigative function and the function of adjudication and penalising. If the Minister follows through the logic of that jurisprudence, he will see the incompatibility of the authority either imposing or even recommending a penalty at the end of an investigation. It is in that context that these amendments have been tabled. I beg to move.
My Lords, this is a long list of opposition amendments with a number of government amendments in the middle. In the case of market abuse penalties, in principle there is no reason to insist that a penalty of this kind can be imposed only through the medium of the courts following an application to them by the FSA. The noble and learned Lord, Lord Donaldson, made that point when we discussed similar amendments in Committee. When there was a debate on whether the regime was criminal or non-criminal--and I am afraid that we have agreed to differ on that point--the noble and learned Lord said:
"I make it clear that I do not agree with the noble Lord, Lord Kingsland. Despite the fact that I believe this matter falls under criminal law, it does not follow that one ought to refer it to the courts".
The reason why the Bill provides for reference to the tribunal rather than application to the courts is that we consider that there are positive advantages for all concerned in that approach. The tribunal will deal solely with financial services cases. The Lord Chancellor will be able to appoint to it people with appropriate knowledge and experience. Over time, we can expect the tribunal to build up a considerable body of expertise in financial services, as other tribunals have done in other areas. As it will be concerned solely with referral from the FSA, the tribunal will also provide a quick and relatively inexpensive route for cases to be heard.
Although we would lose some of those comparative advantages by providing that market abuse penalties could be imposed only by the courts, I cannot see what we would gain. The Bill provides plenty of safeguards if a person wishes to contest the decision of the FSA to impose a penalty on him. The tribunal is a first-instance tribunal. It is able to look at all the facts and consider all the merits of a case. It is not inferior to the courts. It will be run as part of the court service; its members will be appointed by the Lord Chancellor; and it will ensure that people enjoy their right to a full and fair hearing under Article 6 of the European Convention on Human Rights, with which it will be fully compliant. Our amendments to this clause simply align the procedures through which the FSA must go if it proposes to impose a penalty or publish a statement about market abuse with the procedures applying more generally in the Bill.
Amendments Nos. 134 and 136 simply align the wording of Clauses 122 and 123 with that which applies elsewhere in the Bill in respect of penalties and statements. Amendments Nos. 135 and 137 delete subsection (3) of both clauses. This provision is necessary in order to avoid multiple notices and multiple rights of referral to the tribunal in respect of the same matter by the same person. The reason that those subsections are being deleted is because they are no longer needed following the introduction of Clause 388 in Committee. Clause 388(2) has the same effect as subsection (3) of Clauses 122 and 123. I commend the government amendments in this group to the House and urge the noble Lord not to press his amendments.
moved Amendment No. 134:
Page 60, line 23, leave out subsection (2) and insert--
("(2) A warning notice about a proposal to impose a penalty must state the amount of the proposed penalty.
(2A) A warning notice about a proposal to publish a statement must set out the terms of the proposed statement.").
moved Amendments Nos. 136 and 137:
Page 60, line 30, leave out subsection (2) and insert--
("(2) A decision notice about the imposition of a penalty must state the amount of the penalty.
(2A) A decision notice about the publication of a statement must set out the terms of the statement.").
Page 60, line 31, leave out subsection (3).
On Question, amendments agreed to.
Clause 124 [Notice for payment]:
moved Amendment No. 139:
Page 62, line 16, after ("by") insert ("or under").
My Lords, Clause 129 establishes the financial services and markets tribunal. Subsection (2) specifies that the tribunal should have the functions which are conferred on it by the Bill; that is to say, those which are set out on the face of the Bill. In a number of specific instances, such as in Clause 258, which deals with open-ended investment companies, the Bill does not directly confer jurisdiction on the tribunal, but contains a power to make secondary legislation conferring jurisdiction on the tribunal. Amendment No. 139 is a technical amendment intended to take account of that fact. I beg to move.
My Lords, I believe that I can move the amendment very shortly. If I get a bloody nose over it, I shall be more than content. My interest is not in any sense to restrict the writ of the Lord Chancellor. For reasons I have previously indicated, I should like to see the powers of the financial services and markets tribunal operate on a UK basis. That is what I understand is proposed. However, I want to ensure that the Lord Chancellor, when making rules for the tribunal, should consult the Lord President of the Court of Session as the senior judge in Scotland as well as the Council on Tribunals. I have a lurking suspicion that if there is not an expressed statutory obligation to do that, it is always implicit in the arrangements. If I am reassured on that matter, I shall readily withdraw the amendment. I beg to move.
My Lords, I wish to speak to Amendments Nos. 140A to 140E, which are grouped with Amendment No. 140ZA. These amendments relate to the composition of the financial services and markets tribunal. It is possible that when the Government first considered the qualifications for membership of the tribunal they concluded that it did not require to be made up of persons of very high standing in so far as their legal qualifications are concerned. Schedule 13 requires the members of the panel of chairmen to have at least seven years' standing as a qualified lawyer.
Today these qualifications seem inadequate given the importance now attached to the role of the tribunal. We believe that the tribunal justifies the presence of a High Court judge or a judge of the Court of Session to be its president and deputy president. We also believe that the seven-year qualification requirement for other members of the panel of chairmen should be increased to 10 years.
My Lords, the answer to the noble and learned Lord, Lord Fraser of Carmyllie, takes a page, but I do not need to say it. Yes, it is implicit. The reason why we have not included it is because there are other people to consult, such as the Lord Advocate, representing the Scottish Executive, the Law Societies of England and Wales, Northern Ireland and Scotland, the Bar Council and many others.
As regards the main opposition amendments, Amendment No. 140A required the Lord Chancellor to appoint judges of the High Court or Court of Session as the president and deputy president. The Bill provides that he must appoint the president and deputy president of the tribunal from the members of the panel of chairmen which he also appoints.
The current legal qualifications for these appointments under paragraphs 2(5) and 3(2) are sufficient for the proposed new tribunal and are fully in line with appointments for other tribunals. The president of the tribunal must have a 10-year legal qualification.
Of course we want the tribunal to have a high level of expertise and authority. The Lord Chancellor can make appointments at a higher level of seniority if there is a case for doing so. But we do not believe that the nature and volume of the workload of the tribunal warrants taking the unusual step of making such an appointment. The amendment would impose too much inflexibility on the appointment of the president. It would appear to prevent at a future date the appointment of, say, a retired High Court judge or even a more senior judge, should it be found that the workload justified such an appointment.
Amendments Nos. 140B to 140E require all members of the panel of chairmen to have a 10-year legal qualification as opposed to seven years. The provisions in the Bill for the panel of chairmen ensures that suitable people are appointed to the tribunal with the necessary qualification. We do not believe that it needs to be changed. It is the normal practice for other tribunals to appoint people with a seven-year qualification, such as the VAT and Duties Tribunal, employment tribunals and the transport tribunals.
If there is a case which raises legal issues of a particularly complex or ground-breaking nature, then the tribunal may appoint one or more experts to provide assistance. It can also bring in additional members of the panel of chairmen with the relevant expertise to the case in question. I hope that noble Lords will not press these amendments.
moved Amendment No. 141:
Page 267, line 13, at end insert--
("( ) for the suspension of decisions of the Authority which have taken effect;").
My Lords, in moving this amendment I would like to speak also to Amendments Nos. 142 to 149 inclusive. This is a central part of the Government's rationalisation of the procedural provisions to ensure fairness and consistency. The Government's amendments to Part IX, most of which were circulated in draft when we were in Committee, improve the way in which the decisions of the tribunal are given effect and put beyond doubt the tribunal's ability to consider all the relevant evidence.
Amendment No. 141 makes it clear that the tribunal rules made under Clause 129 may include provision for the tribunal to suspend the effect of decisions that come into effect before they have considered the matter. That reflects the need to allow for supervisory decisions which need to take effect while the matter is still open to review. It is only right that in these circumstances the tribunal should have discretion to grant relief from whatever requirement or restriction has been imposed.
Amendments Nos. 142 and 149 are drafting amendments, consequential on the drawing of the distinction between supervisory notices, warning and decision notices.
Amendment No. 143 is a drafting improvement. We are anxious to make it as clear as possible that the tribunal can consider any evidence, regardless of whether it was available to the FSA or not. That is the intended effect of the current wording, but we were concerned that it may seem ambiguous so decided to put the point beyond any doubt.
Amendment No. 144 concerns the manner in which the tribunal's decisions are given effect. As the Government explained in another place, the existing drafting left the tribunal with the responsibility for giving effect to its own decisions unless it decided to remit the matter back to the FSA.
The Tribunal should not be responsible for taking the necessary administrative action to give effect to its own decisions. We have been concerned that that may lead the tribunal to be a competent authority for the purposes of the European directives, which could embroil the tribunal in much unnecessary administration. So the responsibility for giving effect to the tribunal's decisions will rest with the FSA, which has all the relevant powers. Naturally the amendments ensure that the FSA will be bound to take whatever action the tribunal determines.
Amendment No. 145 takes us back to the issue of when a decision takes effect. As we made clear in Committee, it is not our intention that the FSA should be able to demand payment of penalties or restitution, or make public statements, during the period when the person concerned has a right to refer the matter to the tribunal.
Amendment No. 145 makes that clear. The FSA cannot give effect to a decision contained in a decision notice pending a reference to the tribunal, or appeal from the tribunal to the higher courts, or while a decision remains open to such a reference being made. Once the review process is complete, action will be given effect to by a final notice under Clause 385. The final notice must then give effect to the determination made by the tribunal or, if its decision is appealed, to the judgement of the higher courts.
Amendments Nos. 146 to 148 are consequential changes. I beg to move.
My Lords, these amendments are a series of amendments to Clause 130 and there is one to Schedule 13. The first amendment makes it clear that there can be a reference to the tribunal after a supervisory notice as well as after a decision notice, which is welcome. The second makes it clear that the tribunal can consider all evidence, even if it were available to the authority at the time of reaching a decision. The present version suggests that the tribunal can consider only evidence that was not available to the authority at the time. That is also welcome.
Subsection (4) is replaced by a series of provisions that provide for the tribunal to decide the appropriate action for the authority to take and then directs the authority to take it, which is sensible. If the reference relates to a supervisory notice, the tribunal cannot direct the authority to take action which would have required the giving of a decision notice. The two categories of offences, respectively covered by the two notices, are to be kept separate. That also seems appropriate.
Finally, the tribunal can also make recommendations as to the authority's rules or procedures. It cannot actually require changes, but presumably a recommendation would be enough.
The amendment to page 62, line 40 provides that the authority cannot take action pursuant to a decision notice during the period within which the matter to which the decision notice relates may be referred to the tribunal and, if the matter is referred to the tribunal, until the reference and any appeal is disposed of. In another place, during the Committee stage, and at every opportunity thereafter in another place and in your Lordships' House, we had been asking for this. We are very pleased to see it. I hope that the Minister will not mind me reminding him of the number of times that we have had to ask the Government to provide that.
The few final amendments merely tidy up the clause. I do not need to comment on them.
My Lords, I am grateful to the noble Lord for his support. On the matters on which he has been clearer than I have been in expounding the government amendments--I am sure there are many--I hope that his text can be used in Pepper v. Hart rather than mine.
moved Amendment No. 141A:
Page 268, line 19, at end insert--
("(3) At the commencement of any proceedings a party (other than the Authority) to those proceedings may elect either that the provisions of sub-paragraph (2) must apply, or instead of sub-paragraph (2), that the Tribunal has discretion to order one party to the proceedings to pay the whole or part of the costs or expenses incurred by the other party in connection with the proceedings.").
My Lords, I must say that if the Minister would make that Pepper v. Hart concession to all my speeches in your Lordships' House on this Bill, I would be most content and much obliged.
Under paragraph 13 of Schedule 13, the tribunal may award costs against a party to proceedings only if that party has acted "vexatiously, frivolously or unreasonably" or, in the case of the authority, if the decision of the authority was unreasonable. There will be cases where the authority acted reasonably, but where the tribunal finds in favour of the other party to the proceedings. In those cases, although the authority loses the proceedings, it will not have any responsibility for the costs incurred by the other party, which could be substantial.
We accept that any alternative proposal on costs should not favour one party over another. Amendment No. 141A seeks to achieve that balance by giving the non-authority party to the proceedings the choice, at the commencement of the proceedings, either to accept the present provision in paragraph 13, in which case he will not have to pay the authority's costs if he loses but does not receive from the authority any contribution towards his costs if he wins; or to opt for the proposed alternative, which will allow the tribunal to decide costs. We believe this to be a fairer structure which does not prejudice the position of the authority. I beg to move.
My Lords, the aim of Amendment No. 141A is to widen the circumstances under which the tribunal can award costs. The current drafting of the Bill allows the tribunal to award costs against either party if they have acted "vexatiously, frivolously or unreasonably". In addition, sub-paragraph (2) makes explicit the tribunal's power to award costs against the FSA where it considers that the FSA decision giving rise to the reference was unreasonable.
As I understand it, Amendment No. 141A would give the party other than the FSA the option at the start of the proceedings to elect either that the provisions of sub-paragraph (2) "must" apply--I do not understand whether that means any more than that it just applies--or that the tribunal should have the discretion to award costs against either party regardless of whether they have acted "vexatiously, frivolously or unreasonably". That seems to go against the thrust of the Joint Committee's recommendation.
The Joint Committee recommended that we restrict the discretion of the tribunal to award costs to those cases where the tribunal considered that one or other party had acted unreasonably, vexatiously or frivolously. The committee was, I believe, concerned that a broad power to award costs could act as a deterrent to people using the tribunal.
After considerable reflection and consultation with the Lord Chancellor's Department, we were persuaded that we had provided an unusually broad power for a tribunal of this nature and so it was narrowed in another place. We understand that the Opposition have introduced this new element of an option for the party other than the FSA in order to meet the concerns about the possible deterrent effect. However, we do not think that it is right or proper to apply this sort of provision to tribunal proceedings. We are unaware of any precedent for such a provision, and it seems inherently unfair for one party to any dispute to be able to determine the basis on which costs may--or must--be awarded.
These are fundamental questions. I hope that the noble Lord will not press his amendment
My Lords, the noble Lord will be relieved to hear that I do not intend to press the amendment, but I shall reflect on what he said. However, the proposition that just because something has not been done before, it ought not to be done now is one which I would have thought was alien to the culture of the Government. Perhaps the Minister will surprise me.
moved Amendments Nos. 142 to 149 en bloc:
Page 62, line 26, after ("notice") insert ("or supervisory notice").
Page 62, line 31, leave out from ("evidence") to end of line 32 and insert ("relating to the subject-matter of the reference, whether or not it was available to the Authority at the material time").
Page 62, line 33, leave out subsection (4) and insert--
("(4) On a reference the Tribunal must determine what (if any) is the appropriate action for the Authority to take in relation to the matter referred to it.
(4A) On determining a reference, the Tribunal must remit the matter to the Authority with such directions (if any) as the Tribunal considers appropriate for giving effect to its determination.
(4B) In determining a reference made as a result of a decision notice, the Tribunal may not direct the Authority to take action which the Authority would not, as a result of section 383(2), have had power to take when giving the decision notice.
(4C) In determining a reference made as a result of a supervisory notice, the Tribunal may not direct the Authority to take action which would have otherwise required the giving of a decision notice.
(4D) The Tribunal may, on determining a reference, make recommendations as to the Authority's regulating provisions or its procedures.").
Page 62, line 40, leave out from beginning to ("until") and insert ("The Authority must not take the action specified in a decision notice--
(a) during the period within which the matter to which the decision notice relates may be referred to the Tribunal; and
(b) if the matter is so referred,").
Page 62, line 41, leave out ("decision,") and insert ("determination,").
Page 63, line 1, leave out ("If a matter is remitted to the Authority,").
Page 63, line 2, leave out ("decision of") and insert ("determination of, and any direction given by,").
Page 63, line 5, at end insert--
("( ) "Supervisory notice" has the same meaning as in section 390.").
On Question, amendments agreed to.
My Lords, I beg to move that further consideration on Report be now adjourned.