Company Law Reform Bill [HL]

My Lords, the Financial Reporting Review Panel—we touched on this previously—may disclose information obtained under its compulsory powers only in a limited range of circumstances. It may make disclosures to the bodies listed in subsection (3) and for the purposes listed in subsection (4), and, in circumstances specified in subsections (5) and (6), to public bodies outside the UK. Similarly, if a body listed in subsection (3) wishes to disclose information which it has received from the panel, it can do so only to one of the other bodies listed or for the purposes listed in subsection (4). The effect of Amendment No. 274, which would delete Clause 444(3), would be that the Financial Reporting Review Panel would not have a stand-alone power to disclose information to the bodies listed in Clause 444(3). Those bodies could obtain information from the panel only if it was for a purpose specified in subsection (4). We oppose the amendment. It is impractical to foresee every legitimate purpose for which the panel might want to pass on information that it has obtained and provide an exhaustive list in primary legislation. The bodies specified in subsection (3) might be given functions in future in respect of which disclosure would be appropriate. Does the noble Baroness intend that these functions should be added piecemeal to subsection (4) as they were introduced? Subsection (4) was not designed to capture all the functions in respect of which the panel might wish to transfer information. It instead acts as a narrower, secondary gateway to restrict the onward transmission of information passed by the panel to one of the specified bodies in subsection (3). Perhaps I can give some specific examples of information which the panel would be precluded from passing on under this amendment. The Financial Services Authority has a power under the Enterprise Act 2002 to apply to the courts to stop traders infringing a wide range of consumer protection legislation. Under the Unfair Terms in Consumer Contracts Regulations, it can prevent the unfair use of a contract term which was drawn up for a general use in a financial services contract. It can take action against persons responsible for breaching specified contracts under the Financial Services (Distance Marketing) Regulations 2004. If the proposed amendment were to be approved, the panel would be precluded from disclosing relevant information to the FSA that could help it discharge any of those responsibilities, because not one of these functions is included in the permitted purposes that are specified in subsection (4). As these examples show, it is desirable to retain the flexibility of the current gateway arrangements because there could be many such legitimate reasons for the panel to disclose information to any of the bodies in subsection (3) that would fall outside the specified purposes in subsection (4). In light particularly of the recent extension of the panel’s remit to make a proactive selection of accounts for review, such a restriction would be inappropriate and unhelpful as it could prevent a joined-up approach to the regulation of financial information and audit and accountancy in the UK. Both the panel and the bodies listed in subsection (3) are public bodies that are accountable for the exercise of their functions. We would not want to narrow these already restrictive gateways in ways that could hamper them in sharing information in the public interest. In responding to Amendments Nos. 452 to 454, I would like to be clear about the matters that the disclosure provisions in relation to the Takeover Panel in Part 22 were designed to facilitate and the constraints on them. Clauses 630 and 631 serve to implement Article 4.3 of the takeovers directive. The directive expressly states that confidential information held by takeover supervisory authorities may be disclosed by such authorities only in accordance with provisions set out in the law. Otherwise, if the provisions of Part 22 do not allow the panel to disclose the information, it cannot disclose the information. Amendment No. 452 would therefore stop the panel disclosing information to facilitate the carrying-out of its functions unless an alternative and express disclosure gateway existed. We have two important practical circumstances in mind when considering the disclosure avenue available to the panel under Clause 630(3)(a). They are appeals against panel decisions and applications by the panel to court to enforce its rulings. Following implementation of the takeovers directive, there will be a takeover appeal board, which will be separate and distinct from the panel. The appeal board will consider appeals against panel decisions. To do so, it will need to be put in possession of the necessary information by the panel. Equally, the panel is given a new power under the Bill to apply to court for enforcement of its rulings. To facilitate consideration of such applications, the panel will need to supply the court with relevant information. In neither case would disclosure be possible without the provisions in Clause 630(3)(a). These are very real, practical, regulatory matters. That is why the provision should remain. Amendment No. 453 would appear to lead to the result that the panel’s power to disclose information for the purpose of facilitating the carrying-out of its functions would apply only in respect of the persons listed in Part 1 of Schedule 2. This is a very limited list and it does not reflect the range of persons to whom the panel will need to disclose the information in the exercise of its functions. We assume that the intent behind the amendment, as with Amendment No. 454, is to examine the distinction that we make between disclosures to specified persons under Part 1 of Schedule 2 and specified purposes under Part 2 of that schedule. In legal terms, the distinction is simple. The panel need not consider the purpose for which it discloses information in deciding to disclose to the small number of specified persons listed in Part 1 of the schedule. This should remain the case for very good regulatory reasons. The panel needs to work extremely closely with other regulators such as the Department for Trade and Industry and the Financial Services Authority. It would be extremely difficult to devise an exhaustive list of all the regulatory functions with which such bodies are involved for inclusion in Part 2 of the schedule. It is simpler and more straightforward for the panel to be able to disclose to such bodies without having to analyse on each occasion the purpose for which such disclosure is being made. Accordingly, in the absence of evidence of problems with the operation of gateways in equivalent legislation, we would not wish to impose additional burdens on the panel or restraints on its ability to share information with the specified persons, each of whom has a key interest in ensuring proper regulation and enforcement in the market place. I am not therefore able to support any of the amendments.