Clause 27 - Powers in relation to recognised investment exchanges and clearing houses

Financial Services Bill – in a Public Bill Committee at 3:15 pm on 8th March 2012.

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

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

The clause again raises some issues to which the Minister has referred. The clause is an example of unclear drafting of the Bill. I am sure it is not deliberate, because people write these things for  good reasons, using a particular form of words. My hon. Friend the Member for Nottingham East has already pointed out that the Bill is a cut-and-paste job, grabbing a bit from here and pasting it into there. That means that it is sometimes difficult for a lay person to read.

I will give an example of where the meaning is obfuscated. Clause 27(1) proposes an amendment after section 285, to insert 285A, which inserts three subsections of which subsection (3) is entitled, “In Schedule 17A”. It then goes on with three paragraphs (a), (b) and (c) with details around schedule 17A. Then section (2) says,

“After schedule 17 of FSMA 2000 insert schedule 17A set out in schedule 7 to this Act.”

When legislation is formulated in this way it can make things difficult. I would hope that we are able to ensure that legislation is accessible and understandable without having to go from one section or one schedule to another. I hope that the Minister will take that on board.

I have a couple of other brief points about clause 27. Will the Minister confirm that entities that offer both exchange services and central counterparty clearing services will be regulated by the Bank of England? I think he has referred to that, so I will not press that point too much. The other point is in relation to a series of memorandums of understanding that need to be set up under the clause. According to the explanatory notes, the Bank and the FCA are required to prepare and maintain a memorandum describing how they will work together in “exercising their functions”. That is a recurring theme throughout the Bill. There is a lot of emphasis being put on memorandums of understanding and we need to see how that is going to work.

Will the Minister report what progress has been made on the MOU between the Bank of England, the FCA and the PRA regarding the co-ordination of regulation for those dual-regulated entities to be established, and how and when—as FSMA schedule 17A requires—that will be published in the way appearing to them to be

“best calculated to bring them to the attention of the public”?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

On the hon. Lady’s first point, she is right. If she thinks this is difficult and challenging to put together, just wait until the Finance Bill comes. This year’s Finance Bill will amend a host of previous legislation and will be more mind-boggling than this, and she will enjoy getting to grips with it.

It is because we are putting together FSMA and this Bill that we have produced the consolidated Bill. That will enable people, when the Bill is enacted, to see a single version so they can find their way through it quite easily. The hon. Lady asked who is going to regulate central clearing services. Central counterparty clearing services will be regulated by the Bank of England. If it is a service that facilitates clearing it goes back to our previous debate.

On the MOUs, work is underway by the authorities, they will be published by regulators and they will be laid in Parliament.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury) 3:30 pm, 8th March 2012

Obviously, we need at least two MOUs. Are there likely to be any more?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

The MOUs that are required by statute are set out in the Bill. As we said earlier this afternoon, there may be occasion for other MOUs on a voluntary basis, such as the one between the Office of Fair Trading and the FCA that I expect to be produced.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.