Financial Services Bill

Lord Sassoon Excerpts

Monday 26th November 2012 Lords Chamber

Moved by

[Lord Sassoon]

80: Clause 23, page 87, line 28, at end insert—
“137DA Rules requiring participation in benchmark
(1) The power of the FCA to make general rules includes power to make rules requiring authorised persons to take specified steps in connection with the setting by a specified person of a specified benchmark.
(2) The rules may in particular—
(a) require authorised persons to whom the rules apply to provide information of a specified kind, or expressions of opinion as to specified matters, to persons determined in accordance with the rules;(b) make provision about the form in which and the time by which any information or expression of opinion is to be provided;(c) make provision by reference to any code or other document published by the person responsible for the setting of the benchmark or by any other person determined in accordance with the rules, as the code or other document has effect from time to time.(3) Rules making provision of the kind mentioned in subsection (2)(c) may provide that the code of practice or other document is to be capable of affecting obligations imposed by the rules only if specified requirements are met in relation to it.
(4) In this section—
“benchmark” has the meaning given in section 22(6);
“specified” means specified in or determined in accordance with the rules.”

--- Later in debate ---

Moved by

[Lord Sassoon]

81: Clause 23, page 92, line 10, after “in” insert “or specified under”

--- Later in debate ---

Moved by

[Lord Sassoon]

83ZA: Clause 23, page 95, line 29, leave out “must” and insert “may”

[The Commercial Secretary to the Treasury (Lord Sassoon)]

There was a lot of approval for those amendments but not so many people are staying to listen to the fascinating start of today’s discussion on the important issue of financial promotions. The regulation of financial promotions may seem relatively minor in importance and impact when compared with some of the other major and systemic issues covered by the Bill but, in fact, the appropriate regulation of financial promotions to ensure that they are clear, fair and not misleading is absolutely vital. It is a first and essential step on the road to preventing consumer detriment happening in the first place.

The fundamental shortcoming of the current financial promotions regime is that in most cases the FSA is not able to publish the fact that it has asked a firm to withdraw a misleading promotion. The Government are committed to ensuring both that the regulator can and does take action in relation to inappropriate promotions and that the regulator is seen to be taking such action. However, as I said when we last discussed this power on 8 October, there may be circumstances when it is not necessary or appropriate to publish the information about a direction. For example, where the firm is able to explain to the FCA why the promotion is not in fact misleading, there is little purpose in the FCA being required to say, “We thought there was a problem with this promotion and required the firm to withdraw it in the short term, but we discussed it with the firm and were persuaded that the promotion was in fact acceptable”. This does not necessarily help the FCA, the firm in question or consumers.

In our discussions on 8 October, the noble Baroness, Lady Hayter of Kentish Town, expressed her support for the new financial promotions power but cautioned:

“We would not want to see it diminished in any way”.—[Official Report, 8 October 2012; col. 880.]

I share her view, and would like to reassure her that changing “must” to “may” here does not in any way undermine, diminish or weaken the power for the FCA to step in and require promotions which the FCA considers may be inappropriate to be withdrawn. It simply gives the regulator some helpful discretion as to how it approaches disclosure. I can confirm that we do not expect this amendment to result in any change of policy in how the regulator exercises the power to direct firms to withdraw inappropriate promotions. I hope that my explanation of the Government’s thinking in this area has been helpful to the House. I beg to move.

--- Later in debate ---

[Lord Peston]

That is totally—going back into the history of economic thought—to misunderstand the most fundamental contribution that Adam Smith made to economics, which is that it is the consumer who matters and not the firm. The noble Lord and several other noble Lords on that side have spent a large part of the debate on this Bill deciding that the firm was what mattered. The fact is that the consumer is what matters, and the consumer needs to know that there was a problem in principle even though it turns out that there was not a problem in fact. I think the noble Lord is also arguing that one is not allowed to speak twice because we are on Report—I thought he was shaking his head when I got to my feet again—but I had not yet finished. However, I am finished now.

[Lord Sassoon]

It did go through my mind to ask my noble friend Lord Newby to assure me that we were back on Report—because we went back into Committee mode for a bit last week—so I am grateful to the noble Lord, Lord Peston, for confirming that we are indeed on Report.

As I said in our previous discussion on professional standards, and as the noble Baroness knows full well, the Joint Committee of the two Houses is working away on this—indeed, I think it is sitting again this afternoon; I am looking around to see who is here and who is not in their place—and it will come forward with its suggestion as to what would be the appropriate body for professional standards.

Sadly, although professional standards are enormously important and they absolutely need to be raised in the industry, that does not mean that we do not need the construct that we are talking about in this clause. However, I can confirm to the noble Baroness that I expect that the default will be to publish and that there will be only limited circumstances, of which I have described one—although I cannot think of many others—in which it would wish not to publish. Indeed, other provisions in the Bill require the FSA to have regard to the desirability in more general terms of publishing as a back-stop.

[Lord Barnett]

Initially, I understood the Minister to say that the policy is the same after this amendment as before. I find that difficult to understand—if that is what he said. We are back to this “must” and “may” again. Saying that the FCA may publish such information is very different from saying that it must publish it. How does the Minister explain the fact that it is now only “may” and it is no different in policy?

[Lord Sassoon]

My Lords, as we have discussed before—and perhaps we will come back to it in other amendments over the next couple of sessions—the mere fact of putting in the Bill a statement with a “may” in it actually carries much more than the common-sense connotation of “may”; it holds up a presumption that something is going to happen in this area. Here, we are merely allowing a small amount of room for what my noble friend explained as circumstances in which we would all agree it was patently absurd to give the full decision, if in fact it was based on a misunderstanding and the problem has gone away and we are just seeking to do a bit of tidying-up based on reflection on a discussion of this very point in October.

Amendment 83ZA agreed.

--- Later in debate ---

Moved by

[Lord Sassoon]

85: Clause 23, page 103, leave out lines 13 and 14