Financial Services and Markets Bill [HL]

Lord Carlile of Berriew Excerpts

2nd reading
Monday 8th June 2026 Lords Chamber

[Lord Carlile of Berriew (CB)]

My Lords, it is a privilege to speak in a debate with those who have such deep understanding of financial services and markets, including a Minister with transformational business experience, which we all respect. My own experience as a lawyer has been limited in this area largely to providing unwelcome and pessimistic advice in relation to large frauds, some of which have enriched the egregious fraudster to an extent that he—and it is usually a he—has gone on to lead a very successful financial life. This is not good for the reputation of the financial services industry.

In that context I remind your Lordships of something that my profession, the legal profession, does rather successfully and in an increasing amount as part of the informal part of financial regulation. That is the increase in private prosecutions which are used to bring fraudsters to justice. I remind your Lordships who are interested in this rather narrow subject of the successful prosecution in 2018 in what is called the Allseas case, in which the Director of Public Prosecutions at the time had twice refused to prosecute, but that private prosecution was successful.

To turn to the generality of this interesting Bill, I say that financial markets are living instruments, in the most literal meaning of that phrase. When we legislate, there is an imperative to provide flexibility to meet need, rather than waiting for reactive new legislation when something has to be done because it has gone wrong. This is a very important legislative opportunity, in which we have a duty to enact the new law with due anticipation of potential unpredictability—a difficult but important task.

Intrinsic to the Bill is the relationship between Parliament, regulators and the citizen. Over recent decades, we have witnessed a significant shift in the way that financial services are regulated. Increasingly, Parliament has established broad frameworks while regulators are entrusted with responsibility for detailed implementation. There are understandable reasons for this, and in this area, although I am rather against having regulations rather than a main Act provision, I think there is room for quite a lot of regulation so that that living instrument can survive, for technological innovation proceeds at extraordinary speed. Parliament can enable; the regulators are there to provide expertise and experience, which use the statutory foundation to enable proportionate reaction to whatever future challenges may arise.

I turn to three specifics. First, Clause 7 in Part 2 reforms the Financial Ombudsman Service. I support those changes in the round, but I urge the Government to give thought to enhancing them so that entities themselves have the ability to request a referral to the Financial Conduct Authority for advice on rule interpretation, rather than leaving it to the Financial Ombudsman Service on a case-by-case basis. Important principles can arise and it should not take so long to resolve them.

Secondly, I urge that additional attention be paid to authorised push payment fraud. This is a major and egregious fraud for consumers, costing about £450 million in losses annually, mostly to unsophisticated people. I hope that the Bill can be amended to strengthen safeguards to prevent that kind of fraud at source, specifically by requiring online marketplaces to apply know your customer checks to sellers and to have on-platform, traceable payment methods to defeat the cruelty of fraudsters.

Thirdly, there is the important issue of collective actions. Collective actions are funded by litigation funders, who are now part of financial services and recognised as such. I have played some part in collective actions and still do. Sometimes they may involve a dozen claimants; sometimes they involve 10,000 claimants. These are collective actions that give the opportunity for ordinary people to recover damages for frauds committed upon them—some by the financial sector, I am afraid—that they would not otherwise be able to recover from.

Litigation funding has been very damaged, inadvertently, by a Supreme Court case called the PACCAR case. Legislation was introduced in the previous Parliament, with the agreement of all three main parties, to push it through quickly, but the election came and that was not done. I and other noble Lords are happy to discuss with the Minister the PACCAR situation in the hope that it could be dealt with in this Bill, in which I believe it is in scope.

I return to more general matters. Parliament should never lose sight of the distinction between creating rights and administering those rights. The House must therefore carefully examine any provisions that may have the effect of transferring important questions of consumer protection from primary statute into a wood which we cannot see through for the trees. I illustrate this concern through the issue of consumer redress. One of the recurring themes in modern financial services regulation has been the recognition that consumers require effective mechanisms through which to enforce their rights. I have been waiting years to say this, but a right without an effective remedy qualifies as what the eminent jurist Hohfeld strikingly described as a no-right. The Bill should avoid no-rights.