Financial Services Bill

Baroness Penn Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

Moved by

[Baroness Penn]

14A: After Clause 36, insert the following new Clause—
“Retention of personal data under the Market Abuse Regulation
In Article 28 of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (data protection), omit “Personal data is to be retained for a maximum period of five years.””Member’s explanatory statement
This amendment removes the prohibition, under the Market Abuse Regulation, on retaining personal data for more than five years.

[Baroness Penn (Con)]

My Lords, Amendment 14A makes a minor change to the market abuse regulation to ensure that the Financial Conduct Authority is able to continue to effectively identify, investigate and prosecute complex cases of market abuse.

The market abuse regulation, commonly known as MAR, aims to increase market integrity and investor protection, which enhances the attractiveness of the UK market for investors. It contains prohibitions on insider dealing, unlawful disclosure of inside information and market manipulation, and provisions to enable the FCA to identify, investigate and take action against such market abuse.

Article 28 of MAR provides that personal data collected for the purposes of MAR is to be retained for a maximum period of five years. The market abuse regulation was introduced as an EU regulation in 2014 and so forms part of retained EU law in the UK following our withdrawal. Article 28 applied from July 2016 and so, without this amendment, from July 2021 the FCA would be obliged to begin deleting five year-old personal data collected under the regulation.

This requirement in MAR is inconsistent with other references to data protection in EU financial services regulation and the approach to personal data retention in data protection regulation, particularly the general data protection regulation, or GDPR. An obligation to delete personal data after five years would cause problems for the FCA when carrying out its market monitoring and enforcement duties.

The FCA needs to retain personal data for longer than five years for three reasons: first, to investigate complex market abuse such as that carried out by organised criminal groups, which can typically occur over a prolonged period of time; secondly, to prosecute those complex cases—prosecutions will draw on evidence from longer than five years ago; and, finally, to enable the FCA to discharge its disclosure duties in prosecution cases by providing relevant information to the defendants that may support their case.

In some cases, the obligation to delete personal data after five years could obstruct the FCA and prevent it carrying out investigations and commencing prosecutions. This is of particular concern when it comes to preventing, investigating and prosecuting complex market abuse undertaken by organised crime groups, which can often take place over five years. For example, in a well-publicised recent case a conviction of insider dealing was confirmed on appeal in December 2020, resulting in custodial sentences and £3.9 million in confiscation. During the 2020 appellate proceedings, the FCA had to disclose information from 2013. The conviction may not have been secured if the FCA had been forced to delete the personal data relating to the case.

The Government therefore consider that it is appropriate to remove the requirement in MAR to delete personal data after five years. If it is removed, the FCA will be required to adopt a GDPR-compliant retention policy for data collected under MAR, consistent with its treatment of personal data collected for other regulatory, compliance and operational purposes. This will enable the FCA to keep personal data so long as it is necessary for the enforcement of MAR, including identifying, investigating and then prosecuting these cases of complex market abuse.

I recognise that this amendment has been tabled at a late stage of the Bill, and it would have been preferable to include it earlier. After such a large body of EU legislation was transferred to the UK statute book at the end of the transition period, the Government have been working closely with the FCA to identify any issues. This issue was identified as one that requires urgent attention to ensure the FCA is able to effectively pursue its investigations into potentially criminal conduct.

I know that the importance of investigation and addressing potential market abuse was raised by many noble Lords during debates in Grand Committee. I therefore ask that noble Lords support this amendment to ensure that the FCA is not prevented from using personal data that would support it in identifying, investigating and prosecuting cases of market abuse. I beg to move.

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[Lord Eatwell (Lab)]

My Lords, this seems to be an entirely sensible modification of an overly restrictive time limit on prosecutions for market abuse, and the Minister has certainly made a strong case.

I have one question associated with the Government’s note that accompanied the amendment. The Government stated that they had not found any clear rationale for the five-year limit applying in EU law and could see no reason for maintaining it in UK law. They said they understood that it had also been raised as an issue by EU regulators and they were considering a change to their law. Given that the EU is also considering a change, why have the UK Government not co-ordinated the change in our law with theirs? Is it not the Government’s “go it alone” approach that has been so damaging in the quest for equivalence? Could the Minister outline how the Government’s current stance on this change fits with the Memoranda of Understanding on trade in financial services with the EU?

[Baroness Penn (Con)]

My Lords, I thank noble Lords for their remarks in support of the amendment. As I have said, I recognise that the amendment has been tabled at a late stage of the Bill and that it would have been preferable to have included it earlier. However, as it seems the House agrees it is important that the FCA is able to effectively pursue its investigations into potentially criminal conduct, it is right that we make this minor change to ensure that it can continue to effectively identify, investigate and prosecute complex cases of market abuse. I reassure the noble Baroness, Lady Kramer, that this will not be seen as an opportunity by the FCA to take its foot off the pedal in such cases, but where it is undertaking this work it is essential that it is able to continue if the case spans a period of longer than five years.

To the question asked by the noble Lord, Lord Eatwell, the Government are committed to co-operation with the EU but it is now responsible for its own law and is aware of this issue and we are responsible for ours. As I set out in my opening remarks, without action now in this Bill the time limit would come to bite in July this year, and there is therefore an urgency with which we need to act. While we will continue to co-operate with the EU, it is right that we take this opportunity to address what we view as an unnecessary restriction on the retention of data.

Amendment 14A agreed.

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[Lord Sharkey (LD) [V]]

My Lords, Amendments 21 and 37B are in my name and those of the noble Lord, Lord Stevenson of Balmacara, and my noble friend Lady Kramer, and I am very grateful for their support. I declare an interest as co-chair of the APPG on Mortgage Prisoners. The plight of these mortgage prisoners was discussed extensively—

[Baroness Penn (Con)]

My Lords, due to the technical issues that the noble Lord, Lord Sharkey, is having, I suggest that we adjourn for five minutes until a convenient moment after 8.28 pm.

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The mortgage prisoner report of last month—[Connection lost.]

[Baroness Penn (Con)]

My Lords, once more we will need a brief adjournment due to technical issues. I beg to move that we adjourn until 8.30 pm. Or do we have the noble Lord?

[Lord Sharkey (LD) [V]]

Yes.

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[Baroness Penn (Con)]

Ignore me. Please go on, Lord Sharkey.

[Lord Sharkey (LD) [V]]

Thank you. I think I was talking about Amendment 21 being prescriptive; it sets out exactly what must be done and by whom.

It has two sections. The first reduces the currently usurious SVR paid by mortgage prisoners by capping it at two percentage points above the bank rate. This is what, in the end, Martin Lewis thought was necessary. He said:

“Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I’m very happy the All-Party Parliamentary Group on mortgage prisoners is pushing it.”


He also said:

“This would provide immediate emergency relief to those most at risk of financial ruin … No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”


This is all necessary, but not sufficient. SVRs are not the normal basis for mortgages, as I have already mentioned. What is needed is access to fixed-rate mortgages, as provided by normal active lenders to 90% of mortgagees. The second part of Amendment 21 sets out how that is to be done.

This is, of course, all very prescriptive, and we understand the Government’s reluctance to write such details into the Bill. That is why we have also tabled Amendment 37B. This amendment takes a simpler and non-prescriptive approach. It places the obligation to fix the problem squarely on those who caused it—the Treasury. It is explicitly fuelled by the overwhelming and undeniable moral responsibility that the Treasury has for the terrible situation in which mortgage prisoners have long found themselves. The amendment sets out what must be achieved to relieve mortgage prisoners, by whom and by when, but it does not say how. It leaves that entirely for the Government to work out.

Amendments 21 and 37B give the Government a clear choice. Amendment 21 prescribes a detailed method of solution; Amendment 37B says what the Government must achieve but leaves the mechanism to them. The Government caused the mortgage prisoner problem, which has caused and continues to cause much suffering to many families. I hope that the Government will recognise their moral responsibility and adopt Amendment 21 or Amendment 37B.

This has all gone on much too long, and it has caused, and continues to cause, far too much misery and desperation. If the Minister is not able to adopt either amendment, or give equivalent assurances, I will test the opinion of the House. I beg to move Amendment 21.