Clause 15

Financial Services Bill – in a Public Bill Committee at 12:30 pm on 15th December 2009.

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Removal of restriction on imposing a penalty and cancelling authorisation

Question proposed, That the clause stand part of the Bill.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West 12:45 pm, 15th December 2009

I have a simple question. “Cancelling” is used in relation to authorisation in the clause heading— page 19, line 36—but “withdrawing” is used in the body of the clause, on line 39. What is the difference between withdrawing and cancelling?

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I suggest that my hon. Friend the Member for Chichester move closer to the Front Bench—oh, he has gone. That would have brought him closer to the hot air that has been generated by the debate.

I expect that the Minister will deal with this matter during the stand part debate. The clause removes part of section 206 of FSMA. Therefore, if the clause passes into law, when someone loses authorisation—whether it is cancelled or whatever term is used—and loses the right to earn a living from the business, they will also face a financial penalty. That was not the case under FSMA, so what has changed in the Government’s thinking since the passing of that Act? If someone is deprived of the right to earn a living, it is much harder for them to pay a fine, unless they have accrued profits in the interim. Will the Minister clarify the Government’s position?

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

The clause removes section 206(2) of part XIV of FSMA, which prevents the FSA from both imposing a fine on a firm and withdrawing its authorisation in relation to the same misconduct. I am sure that hon. Members will agree that if a firm gains a financial advantage from misconduct, the FSA should be able to fine it. The best answer I have for the hon. Member for Fareham is that when given a choice between withdrawing a firm’s authorisation, to remove the firm from the industry, and fining the firm, the FSA often chooses the former. That is the right choice because consumers need to be protected. It means, however, that a firm can retain any financial gains that it has made as a result of misconduct. It is not right that a firm should not have to suffer a fine when the misconduct warrants it, and it is therefore right to give the FSA the option to use both sanctions when it feels it is appropriate to do so.

On the difference between cancelling and withdrawing, which my hon. Friend the Member for Wolverhampton, South-West pointed out, I am advised that cancelling applies to permissions. Once all permissions were cancelled  —removed—the FSA would have to withdraw the firm’s authorisation. I hope that that is clear to my hon. Friend, or as clear to him as it is to me.

Again, I want to make the basic point that the FSA will use the powers proportionately. It will seek to take actions only in cases where they are justified. It is important, however, that the FSA has that power, so it can use it when appropriate. It simply is not right that a firm whose authorisation could be withdrawn because it was guilty of misconduct could be allowed to keep the proceeds of financial gain that it had wrongly made. The clause will remove that possibility. Therefore, I urge that it stand part of the Bill.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.