The intention behind amendment No. 448 is to reverse amendments made in another place. That is not something that the Government undertake lightly, but the amendments that were made to the clause would have a seriously detrimental effect on the operations of the Financial Reporting Review Panel.
The FRRP performs the vital role of investigating apparent breaches of Companies Act 1985 requirements on the annual accounts and reports of public and large private companies. It will continue to perform that role after the Bill is enacted. The amendments would have affected the onward disclosure of information obtained by the FRRP in the exercise of its compulsory powers under clause 443. The Bill as it now stands imposes additional requirements on the FRRP that we think are unworkable. Were the FRRP to pass on information to other bodies within the prescribed limits of clause 445, and should those bodies need to disclose that information onward to other bodies, the Bill as currently amended requires that the FRRP first authorises onward disclosure and secondly satisfies itself that onward disclosure is in the public interest.
I appreciate that the requirements introduced in another place were based on the requirements that currently apply to the Revenue and Customs, but they do not work in this context. The Revenue provisions only apply to disclosures that the Revenue makes itself, but in the context of the Bill, the restrictions would apply to further disclosures by bodies to whom the FRRP had made disclosures. However, the FRRP would not necessarily be in a position to made judgments about the merits of the onward disclosures, and it has expressed considerable anxiety about the new requirements.
For instance, is the FRRP the correct body to judge whether information that is quite properly passed to the Secretary of State should be further disclosed by the Secretary of State? It will be for the Secretary of State to judge whether that information can and should be further disclosed—indeed, the Secretary of State might be constrained from disclosing to the FRRP the reasons why onward disclosure is necessary. In those circumstances, how could the FRRP authorise disclosure and satisfy itself that disclosure was in the public interest? So far as disclosures by the FRRP are concerned, they must of course act properly and responsibly in ensuring that any disclosure is permitted, and they face criminal sanctions under clause 444 if they do not.
There are particular concerns about how the amendments would have affected the system of financial regulation. Responsibility for the enforcement of financial information is shared between the FSA—the securities regulator—and the FRRP. A key outcome of the considerations of the Government committee on audit and accountancy reports was the way in which the FSA and the FRRP work together to present a seamless approach to financial regulation in the UK. Provisions in the Companies (Audit, Investigations and Community Enterprise) Act 2004, including those on disclosure of information obtained by the FRRP, were included to reflect that approach. Clause 14(2) of that Act obliges the FRRP to monitor certain financial information, and to inform the FSA of its findings. That was considered essential in view of recent developments in the EU. Two standards regarding financial information have since been issued by the Committee of European Securities Regulator with which it is desirable that UK regulators comply.
The C(AICE) Act sets out the key responsibilities of the FSA and FRRP, which have been further developed through a public memorandum of understanding. The memorandum includes details of how the two bodies co-ordinate their work, and sets out the points at which the FRRP may refer specific company matters to the FSA. It must be asked whether the Bill as amended would require the FRRP to conduct a public interest test in respect of every piece of information that it contemplates disclosing to the FSA. If so, such a requirement would damage the co-ordinated and informed approach to financial regulation that we have developed in the UK.
If the UK could not demonstrate a high level of co-ordination and co-operation in its regulatory map, the alternative would be a more expensive and rules-driven approach which we do not consider suited to the UK culture of compliance. I do not believe that that was what was intended, and I therefore trust that hon. Members will support the proposal to revert to the position as it was when the Bill was originally introduced in another place.
Amendment No. 449, likewise, concerns clause 445. It honours an undertaking given by Lord Sainsbury in the House of Lords. As Baroness Noakes observed, the Bill contains inconsistencies between provisions concerning the FRRP so far as references to the Data Protection Act 1998 are concerned. Clause 648 in part 24 of the Bill provides expressly that nothing in that clause authorises the making of a disclosure in contravention of the Data Protection Act. That is in similar terms to section 449(11) of the Companies Act 1985. Amendment No. 449 would bring the provisions into line as we promised, and provides explicitly that nothing in the FRRP gateway provisions on disclosure of information that is obtained under its compulsory powers authorises the making of a disclosure in contravention of the Data Protection Act.
I am grateful for the Minister’s ample explanation of why the Government are proposing the amendments. The issues are clearly complex and we need to take great care with them. I think that I should therefore probably follow my own advice in that respect and scrutinise what the Minister has said in more depth. We might consider revisiting the point on Report if necessary.