Regulatory Reform (Financial Services and Markets Act 2000) Order 2007

rose to move, That the Grand Committee do report to the House that it has considered the Regulatory Reform (Financial Services and Markets Act 2000) Order 2007. The noble Lord said: The Government believe that proportionate and risk-based regulation is key to encouraging an innovative and flourishing financial services sector in the UK. The role of the Financial Services Authority is important in this regard. The Government recognise that the FSA, and business, would benefit from the reduction or removal of certain burdens to support such a regulatory approach. As a result, we propose a number of amendments to the Financial Services and Markets Act 2000 that will also enable the FSA to operate more efficiently. The Treasury consulted extensively on the proposals—twice, in fact. Indeed, some of the proposals originate from a stakeholder consultation into the effectiveness of the Financial Services and Markets Act 2000 two years after its enactment. Those consulted on the draft order included key stakeholders within the FSA’s jurisdiction, as well as consumer bodies and trade associations. The first consultation exercises consulted on a broader range of proposals than contained in this order. Three measures proved somewhat controversial and were not pursued as a result of concerns expressed by stakeholders. That aside, there was broad support for the proposals put forward in the second consultation. There are a number of measures in the order but I shall try to run through them as briefly as possible. Article 3 would make it easier for partnerships to continue trading and remain authorised by the FSA following a change in membership. Such an amendment would benefit small businesses in particular. Article 4 would remove the requirement on the FSA to consult EEA regulators in certain, limited circumstances. The current arrangement over-implements various EC directives, and the proposed amendment would remove this element of gold-plating. The amendments outlined in Articles 5 to 8 would simplify a number of procedural requirements that the FSA is obliged to fulfil, even when an issuer himself seeks to discontinue or suspend the listing of a security. This includes the FSA giving reasons for its decision, and the right of the issuer to make representations and to refer the matter to the tribunal. Clearly, these procedures are entirely appropriate when the discontinuance or suspension has been initiated by the FSA and the issuer is resisting such action. However, when the discontinuance or suspension is initiated at the request of the issuer, these procedural requirements appear to serve no useful purpose. The reforms impose some new procedural burdens on the FSA in order to protect the rights and freedoms of the issuer in cases where the FSA decides not to grant a request to de-list or suspend the listing. These include a right for the issuer to apply to the Financial Services and Markets Tribunal if the FSA rejects its application. The additional burdens are judged by the Government to be proportionate and fairly balanced, and I emphasise that when the order was considered by the Committee in the other place, due agreement was given to this point. Article 9 would simplify the procedures that the FSA has to undergo when cancelling a sponsor’s permission. This will take effect only in cases when the cancellation is at the request of the sponsor. The amendment will deny access to the tribunal to those who make an application to cancel their permission to act as a sponsor. However, I emphasise that the cancellation will be by consent. As such, the Government do not consider that anyone will be prevented from exercising any rights or freedoms that he could reasonably expect to exercise. At present, the FSA is able only to waive or modify a certain number of its rules for people and firms it authorises. The amendments contained in Articles 10 to 12 would enable the FSA to waive or modify its rules for unauthorised persons as well if, for example, it believes the rules concerned are unduly burdensome. This amendment requires the FSA to satisfy itself on a number of issues before using this power. The final two amendments relate to the provision of FSA guidance. Article 13 would reduce some of the requirements placed on the FSA when consulting on its own guidance. Article 14 would enable the board to delegate the task of issuing guidance to a committee or sub-committee of the board. The Government believe that these measures, taken together, will enable the FSA to take a better targeted, more streamlined and risk-based approach to its work. Firms will benefit indirectly from this more flexible approach and directly through the changes in the scope of FSA waivers and modifications. The Delegated Powers and Regulatory Reform Committee has considered the proposals and regards them as making proper use of the powers under the Regulatory Reform Act 2001. I thank the members of the committee for their opinion and for their work in scrutinising the draft order. The Committee in the other place also considered that the proposals were within the vires of the 2001 Act and has given its assent to the order. As the order was unanimously approved in the other place, I have hopes in commending it to the Committee today. I beg to move. Moved, That the Grand Committee do report to the House that it has considered the Regulatory Reform (Financial Services and Markets Act 2000) Order 2007. 11th report from the Regulatory Reform Committee.—(Lord Davies of Oldham.)