Compensation Bill [HL]

: I am grateful to the noble Lord for raising an important issue that I will consider very carefully. We agree that the regulator’s rules need to include appropriate safeguards such as the requirement to hold the money in a separate account. It is our intention that the regulator’s rules should place a clear requirement on authorised persons to have adequate accounting arrangements in place, including appropriate arrangements for the holding of clients’ money. Persons seeking authorisation will need to demonstrate to the regulator that they can comply with the rules. This might take the form of evidence to show that a separate client account had been opened. We will be looking at these issues in great detail. Non-compliance with the rules could result in disciplinary action and, in extreme cases, cancelling authorisation. The measure fits into the general principles that we have for the regulatory regime. I am negotiating only where the measure is placed. We know of no cases where unscrupulous claims management companies have taken clients’ moneys, but the rules will cover such a situation. We are confident that the enforcement provisions are stringent enough to ensure that appropriate action can be taken where authorised persons do not comply. The noble Lord asked me whether I would hold discussions with the Law Society and the FSA about the appropriate rules. I will, indeed, do so for exactly the reasons that the noble Lord gave in setting out the detail of the current arrangements with the FSA. We are also considering the matter in relation to the development of the legal services reform draft Bill which we hope to introduce later in the Session, which is covered in the White Paper published in October 2005, as it is obviously of great relevance to that Bill. I am grateful to the noble Lord for his comments and concur entirely with what he seeks to achieve. As I said, we shall demonstrate precisely how we intend to address the matter. We shall probably do so through the regulator’s rules, but I shall discuss that with Members of the Committee before Report.