Financial Services and Markets Bill [HL]

Lord Holmes of Richmond Excerpts

Committee stage
Wednesday 24th June 2026 Grand Committee

Moved by

[Lord Holmes of Richmond]

47A: Schedule 2, page 72, line 11, at end insert—
“6A After section 1QA insert—“1QB The Payment Systems Panel(1) Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Payments System Panel”) to represent the interests of—(a) participants in regulated payment systems, and(b) those who use, or are likely to use, services provided by regulated payment systems.(2) The FCA must appoint one of the members of the Payments System Panel to be its chair.(3) The Treasury’s approval is required for the appointment or dismissal of the chair.(4) The FCA must appoint to the Payments System Panel such persons to represent interests and expertise relevant to the FCA’s payment systems objectives.””Member’s explanatory statement
Schedule 2, paragraph 6 removes the Payment System Regulator from the FCA’s statutory panel composition provisions and does not replace it with any payments-specific representation. This amendment and another in the name of Lord Holmes of Richmond seek to provide such representation.

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[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to open day two of Committee on the Financial Services and Markets Bill. As it is the first time I have spoken in Committee, I declare my interests as set out in the register around technology, as an adviser variously to the Crown Estate, Endava plc, Simmons & Simmons LLP, and as non-exec director of Avalanche BVI Inc and the Avalanche Foundation.

I had hoped to take part in day one of your Lordships’ deliberations on the Bill, but unfortunately there was a direct clash with the Sporting Events Bill in the Chamber. I was hoping to be able to perform some kind of Bill biathlon but, sadly, time clearly caught up with me and I found myself stuck on the track in there. However, it is a pleasure to open day two of the Bill. I will move Amendment 47A and speak to the other amendments in this group in my name. I give more than a nod to the other amendments in this group and I thank my noble friend Lady Neville-Rolfe for co-signing two of my amendments.

In essence, these amendments can be seen as a connected group. The intention set out in the Bill is clear that the PSR is no more and its functions are to move over to the FCA. That is a defensible and clear objective and it has been communicated. The difficulty is that it is not what the Bill currently achieves. In many ways, these amendments could be summed up by “Lost in Translation”, because key elements of the functions of the PSR, not least those critical elements around competition and innovation, have not come over and certainly have not been reproduced in the Bill to the same extent as they appear in their original statutory form. This is clearly a gap in the Bill that we have before us.

Amendment 47A suggests a payment systems panel. This goes to the second element of “Lost in Translation” in the Bill. Representation of those involved in and affected by payments has similarly disappeared and has not come across from the wording in the originating statute. This is critical, not only because it does not fulfil the Government’s stated intention with these parts of the Bill but because, when you think about it, so much in life involves a payment. Something is either started with a payment or ended with a payment and, if it is neither started nor ended with a payment, odds-on it is probably a payment in its own right. This needs to be put right in the Bill and I suggest that the payment system panel achieves that.

The remaining amendments in my name very much go to putting back those requirements and obligations, as set out in the originating statute, around competition and innovation. The Government have talked variously about the growth objective, not least the role that regulators have to play in it. Indeed, they summoned regulators to No. 11 for a regulators’ showdown— I am not sure what the collective noun for a group of regulators is, but it was certainly a gathering—focused solely on growth. Well, competition and innovation are critical to that growth objective.

I suggest that this suite of amendments fills the gap that is left in the existing draft of the Bill. I very much look forward to the Minister’s response and to the debate on this and the other amendments—those who have put them forward have all done so on similar and related issues. I beg to move.

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[Lord Stockwood (Lab)]

To come back on that, we have heard the criticism of the FCA loud and clear. The intention is for further debates to come back to what we believe is the current state of oversight and governance, and we are open to the conversations that the debates will lead to.

[Lord Holmes of Richmond (Con)]

I thank all noble Lords who have taken part in this important debate. One of the key themes that ran through it and the Minister’s response is the question of clarity, or the lack thereof. Certainly, as a consequence of these changes as currently drafted, there is less clarity on payment systems regulation and on how the competition and innovation requirements will be satisfied in a broader context. I fully support the comments of the noble Lord, Lord Vaux, on his amendments, and I will come to the important amendment of the noble Baroness, Lady Bowles.

I am disappointed that the Minister did not take the opportunity to offer a consultation about consultations. The reality is that the Minister could take this opportunity to bring clarity to increasing and varying levels of opacity and unnecessary levels of control in the hands of the regulator, where they currently exist. We have seen this in financial services in recent Bills that we have considered; it goes beyond financial services to this sense of leaving regulators with greater powers as a consequence of significant statutes passed, as opposed to Parliament debating and determining these decisions, which in no sense would tie the regulators’ hands. In fact, the amendment of the noble Baroness, Lady Bowles, would assist the regulators, because it would bring clarity on how to operate these consultations. There is a significant issue with consultations in financial services, and a significant issue with government consultations across the piece. It is not a party-political point; it has been the case for years. This is an opportunity to bring clarity to this and enable more firms, more individuals and more perspectives to be brought into what would then be better consultations and better outcomes as a result of that consultation process. I very much look forward to the noble Baroness, Lady Bowles, bringing her amendment back on Report. It is strong; it would not let too many cats out of too many bags—even though I stand with a Labrador at my feet—and I do not think that this will be the last we see of a number of these amendments. For now, I beg leave to withdraw my amendment.

Amendment 47A withdrawn.

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Moved by

[Lord Holmes of Richmond]

64A: Clause 14, page 16, line 35, at end insert—
“(1C) Regulations made under subsection (1A) may make provision in relation to— (a) the Financial Conduct Authority, in respect of its functions under the Financial Services and Markets Act 2000;(b) the Financial Conduct Authority, in respect of its functions relating to payment services or electronic money;(c) Ofcom;(d) the National Crime Agency;(e) the National Economic Crime Centre;(f) law enforcement agencies.”Member's explanatory statement
The amendment seeks to require more effective intelligence sharing between supervisory authorities.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to open on this group of amendments, which in many ways builds on the first group. This Bill is light on the use of technology and on the use of intelligence between the regulators which are spread across the financial services landscape. As my noble friend Lady Neville-Rolfe said in responding to the first group, in many ways the Bill feels as if it is written for a time which is already rapidly evaporating. There are new payment mechanisms and new financial instruments. In fact, there are new products which are already dominating key parts of the market.

It would seem to make sense to have provision for more intelligence-sharing across the regulators, and indeed the broader landscape. Modern technologies are deployed by both participants and bad actors in this arena. Thus, it would seem to make sense to have combined activity, connected action and shared intelligence among the regulators and, within that, to bring technologies such as AI and others to bear in achieving it. I look forward to the debate on this amendment and others in this group, and to the Minister’s response.

[Lord Hope of Craighead (CB)]

My Lords, I should like to speak to Amendments 64B and 69AA in this group, which are in my name. They direct attention to matters arising from the provisions in Clause 14 that are of great concern to the Law Society and the Law Society of Scotland. I apologise to the Minister for their late arrival; they are based on draft amendments that were not sent to me until Monday of this week. I am grateful to the Table Office for its help in drafting them at short notice.

The background to these amendments is as follows. The Law Society and the Law Society of Scotland are both regulatory authorities. Their current regulatory roles include responsibility for supervising compliance by solicitors, in their respective jurisdictions, with the UK’s anti-money laundering and counterterrorism financing frameworks. They are, therefore, supervisory authorities of the kind referred to in the amendment to Section 49 of the Sanctions and Anti-Money Laundering Act 2018, as set out in Clause 14(2).

However, the regulation of anti-money laundering and counterterrorism financing is only part of the responsibilities that these two societies exercise as regulators. Solicitors play an important role in tackling economic crime. The societies’ roles as AML supervisory bodies are a key component of their functions as regulators of the solicitor profession. This is a task that both societies take very seriously. I am told that the Law Society of Scotland employs a team of dedicated specialists with detailed, up-to-date knowledge of the trends in economic crime and the risks that are associated with the provision of legal services; I have no reason to think that the way in which the Law Society of England and Wales handles its responsibilities is any different.

The effect of the amendments proposed in Clause 14 would be to transfer, through regulations that we have not yet seen, the front-line AML supervision of the solicitor profession to the Financial Conduct Authority, as the single professional services regulator. The Law Society believes that this will amount to a seismic shake-up as to how law firms and their AML/CTF obligations are regulated, which risks sending shockwaves through the sector. It also says that adapting to this change has the potential to divert attention, resources and time from supporting clients and developing solicitors’ businesses, with effects that it would be quite hard to cope with.

The Law Society of Scotland strongly opposes this change. Its point is that it will lead to the duplication of systems of regulation. On the one hand, the society will continue to have its role as the profession’s regulator; on the other hand, there will be the FCA. Solicitor firms, large and small, will have to deal with them both in future, increasing the time spent and the cost of being regulated. This will bear heavily, especially on small firms in the remoter areas of Scotland, which often operate on very narrow margins. The population is thinly spread in these areas, as are the firms that exist to provide essential legal services there to the people who need them. Much will of course depend on how the FCA approaches its task, but anything that might lead to the disappearance of these firms due to the consequences would be very much to be regretted. That is what lies behind the Law Society of Scotland’s objection.

The Law Society of England and Wales, for its part, is concerned that, without a clear statement of their position by the Treasury and the FCA, Parliament is being asked to legislate for powers to enable the detail of the reforms to be enacted that remain unclear and which the sector has not yet seen.

My Amendment 64B focuses on the points that are of particular concern. I shall mention in relation to each one, as briefly as I can, the questions for which answers are sought from the Minister. Proposed new subsection (1C)(a) asks that the regulations be “proportionate and risk-based”. The question is whether the FCA intends to import its banking model into the process for all solicitors’ firms, small as well as large, or instead to take a risk-based approach. Should not the supervision in regard to this profession be tailored to the risks posed by the different sectors within it? Firms vary from the very small, with perhaps just one partner in a remote part of Scotland, to the very large international firms found in the City of London. How will the Government ensure that the small high street firms up and down the country are not disproportionately burdened by the system that they propose to operate?

Proposed new subsection (1C)(b) seeks appropriate protections for legal professional privilege and client confidentiality. Can the Minister confirm that nothing will be done under Clause 14 that will weaken legal professional privilege, which has a vital role in securing access to justice? The Solicitors Regulation Authority of the Law Society of England and Wales at present keeps all LPP material confidential. It may be used only for investigation and enforcement proceedings against the solicitor or the firm that it regulates. It may not be used in relation to proceedings that may be taken against its clients. Will the FCA follow the Law Society’s practice? Will it also accommodate the duty of confidentiality that underpins much legal work? Further, will it respect the obligations of the solicitor or the firm to the court?

Proposed new subsection (1D) seeks to avoid duplication. It is feared that the Treasury will introduce a broader system of regulation than the current regime, with the risk that this will duplicate the Solicitors Regulation Authority’s oversight, create unnecessary burdens and delay routine transactions. What practical mechanisms can be put in place to prevent solicitors from being subjected to overlapping requirements from both the FCA and the SRA?

Proposed new subsection (1E) calls for an impact assessment. How can the appropriateness of these powers be judged without seeing the underlying regime? Will the regulations be accompanied by assessments of their impact on those to be subjected to the system of supervision for which they provide? What estimate has been made of the compliance costs for these law firms? Will the powers be compatible with the way that legal services are regulated in Scotland, which has a different legal system from that in England and Wales?

My Amendment 69AA asks for a review of AML and CTF supervision within three years and a report that includes an assessment of each of the points to which I have drawn attention. I do not expect the Minister to answer my questions this evening. I have set them out because I hope that they may form the basis of some discussion, if the noble Lord is willing to meet me at some point before Report to go over these thoughts at greater leisure and in more detail.