Regulatory Enforcement and Sanctions Bill [HL]

I cannot guarantee that those criteria will be in final form by the time we get to Report. However, I guarantee to ask my officials to give as much current information as there is at that time to noble Lords, either through amendments to be moved on Report or by way of letter. In other words, we will keep the noble Lord and other Members of the Committee up to date. I cannot go further than that. The noble Lord will know that the Delegated Powers and Regulatory Reform Committee accepted the absence of a limit for variable monetary penalties imposed for either-way offences and invited the Government to make a case for having no limit in summary-only offences. We do not feel that it would be appropriate to require the Minister conferring the power on a regulator to impose discretionary requirements to cap the variable monetary penalties. To do so would restrict a regulator’s ability to tackle non-compliance effectively. The new sanctioning powers are designed to be flexible enough to cover a wide range of regulators. Regulators such as the Financial Services Authority already have the powers to impose unlimited financial penalties. When giving a regulator access to variable monetary penalties, the Minister will need to design the regime to ensure that such penalties are flexible and, of course—this is one of the crucial points behind Macrory—able to capture the financial benefit to the business arising from the non-compliance in order to ensure, frankly, that compliant businesses have a level playing field with those that have not been compliant. This was a key recommendation not only of Macrory but of Hampton before him. It may be difficult for a Minister to cap variable monetary penalties as he may not be able to predict the combination of aggravating factors and the level of financial benefit gained from the business’s non-compliance. One example of a high-level penalty was the FSA’s finding on Citigroup Global Markets Limited in June 2005. Citigroup was fined nearly £14 million for failing to conduct its business with due skill, care and diligence and for failing to control its business effectively when it executed a trading strategy on European government bond markets in August 2004. The financial penalty was composed of two elements: first, a relinquishment of the profits earned from the bond trading of nearly £10 million; and, secondly, an additional penalty of £4 million. If any cap on variable monetary penalties is applied, regulators may not be able to tackle in full some instances of non-compliance. It is worth noting that Professor Macrory specifically ruled out a cap based on a business’s turnover, arguing that such an upper limit would place undue legal complexity on the system and could encourage regulators to set VMPs at inappropriately high levels. That is not to say that they will not be capped in practice. In making an order under Part 3 of the Bill, the Minister may consider that such a cap is necessary. However, we do not think that should be an obligation on the Minister in every case. In the absence of a cap, the regulator will still be required by Clause 61 to publish guidance setting out the matters that it is likely to take into account when setting the level of VMPs so that there will be transparency in the process. The business will be able to make objections and representations about the level of penalty after the notice of intent is issued and will be able to appeal against the penalty. The noble Lord’s amendment makes a point in relation to summary offences. Not many summary offences will lead to a variable monetary penalty because, by their nature, they will be either-way offences or able to be tried only on indictment. The limit for summary offences in the magistrates’ court is £5,000 per offence, so there may be a point in limiting summary-only VMPs to £5,000. We have not reached a firm conclusion on that. I am grateful to the noble Lord for raising this issue. I hope that he will allow us to go away and consider that part of the amendment.