I have a passing, but important, comment. Many hon. Members will be familiar with the concerns that have been voiced, especially during the global financial crisis, about the activities of hedgers or short sellers and the possible impact of such practices. I am not one to say that all short selling is inherently bad or inherently negative—there are circumstances in which good hedging practices can be sensible—but we have to have an eye to the report published by the FSA itself. When considering some of the circumstances of the global crisis, the FSA identified anxieties on the potential for market abuse, the disorderly arrangements and the deficiencies in transparency and settlement arrangements, which need to be addressed to ensure that reforms can be made.
The reform agenda is proceeding in a number of ways, although not particularly in clause 23. As I see it, clause 23 largely transposes the arrangements of the Financial Services and Markets Act 2000 to ensure that the new Financial Conduct Authority will be able to take forward certain rule-making powers.
My question on clause 23 addresses emergency rules on short selling. The Minister will, of course, be familiar with the fact that emergency rules were brought in in, I think, September 2008 to prohibit short selling of 32 major companies, including the UK’s major banks. Such emergency rules may typically last for three months, but they may be extended to six months. My slight anxiety is that, from time to time, as we have seen, there can be extended periods of volatility that go beyond six months. I want clarity on the Government’s view of the possibility of extending beyond six months certain emergency rules on restrictions on short selling. Will the Minister assure the Committee that the power to roll over such provisions beyond six months is available to the regulators? Does he think such provisions would need to be reviewed to be extended beyond six months? What would be the process for extending a provision, should the need arise?
The hon. Gentleman is right that, on the whole, the clause simply makes consequential amendments required by the Bill. The powers to make short-selling rules were of course taken in the Financial Services Act 2010, which was introduced by the previous Government. Subsection (2) deals with urgent cases, and one must be careful because it is right to have the power to roll over, but the power must be used carefully and sensibly and only when there is a genuine emergency, rather than as a way to introduce a general ban on short selling. Some would like that, but I am encouraged by the fact that the hon. Gentleman sees some benefits in short selling. I remember Ian Pearson, when he was Economic Secretary to the Treasury, making a passionate defence of short selling on the Floor of the House during the passage of the 2010 Act. There are some benefits, but we need to be careful that we use the roll-over powers only when there is a genuine emergency, so that a temporary measure does not become a permanent ban.