Financial Services Bill

Like the hon. Member for North East Cambridgeshire (Stephen Barclay), I shall address areas in which we need to proof and improve the Bill before it goes to another place. I first want to express support for the hon. Member for Walthamstow (Stella Creasy) in respect of consumer credit protection. Not only lenders of consumer credit should be under the FCA, but debt collectors, brokers, retail services that sell insurance products and those offering debt management services. Similarly, I support the hon. Member for Rutherglen and Hamilton West (Tom Greatrex). Contrary to suggestions made earlier in the debate that the Bill is about putting Parliament back in charge, it is notable that inquiries and investigations under part 5 go to the Treasury. There is no reference whatever to Parliament in that measure, unlike in section 14 of the Financial Services and Markets Act 2000, which clearly states that any such report will be laid before Parliament. The Financial Secretary no doubt anticipated that I would mention credit unions in Northern Ireland, because their regulatory status will change in the wider context of the changes heralded by the Bill. He was good enough to receive a pick-up band of Northern Ireland MPs last week to discuss our outstanding concerns on the detail. I can assure him that we are pursuing those. We have not yet eliminated him from our inquiries, but we are making the necessary representations to the FSA and will make them to its successor, the FCA. I wanted to talk not just about the implications of the Bill in terms of the lessons of the banking collapse, but about other provisions. The launch of auto-enrolment means that millions more people will save for a pension through the capital markets, including many low-paid workers. In recent months, we have seen that pension savers' interests are not always put first by the industry. The spotlight has been turned on to excessive and untransparent charges, and conflicts of interests. The fund management industry's duties to savers are poorly understood and observed. The Law Commission has confirmed that when firms manage other people's money or give financial advice, they have strict fiduciary duties to act in their clients' interests—both individuals and institutions, such as pensions, that represent large numbers of underlying savers. That fact is, of course, not generally accepted or reflected within the industry. In addition, as we have heard, because those are common law duties, they do not form part of the FSA's regulatory approach. An explicit reference to fiduciary duty in the Bill would give the FSA a powerful tool to ensure that consumers' interests are protected. Examples of where consumers have suffered from those duties not being observed include unauthorised profits, and recent research shows that some fund managers made significant profits from lending out clients' shares with only two thirds of the income from those activities returned to the fund. Of course, under fiduciary duties, any such profit should go back to the underlying investor. Another example is in relation to the exercise of shareholder rights. Asset managers, acting on behalf of pension savers, should exercise their voting rights at major companies in the best interests of the savers, without regard to the interests of the firm, but we have anecdotal evidence of fund managers being told by superiors to wave through excessive executive pay to avoid upsetting potential clients. So the interests of the business are placed ahead of the savers whose money is at stake.