Financial Services and Markets Act 2000 (Amendments to Part 18A etc.) Regulations 2010

My Lords, I shall speak also to the Financial Services and Markets Act 2000 (Liability of Issuers) Regulations 2010. I start by setting out the purpose of the first order. Section 313A of the Financial Services and Markets Act 2000 gives the FSA the power to suspend or remove financial instruments from trading where this is necessary to protect either investors or the orderly functioning of the financial markets. The Act requires the FSA to give written notice both to the issuer of the instrument concerned and to all those who trade in financial instruments, for example in those particular shares. This is a bureaucratic, burdensome and inefficient procedure, requiring the FSA to write to the increasing number of exchanges, trading platforms and firms that trade with each other over the counter. However, it is important that firms receive timely information of such an announcement, to ensure that immediate effect can be given to the suspension of trading. We propose to simplify the procedure for notifying firms of a trading suspension or of the removal of a financial instrument from trading. These regulations give the FSA the power to announce such a suspension or removal via a regulatory information service, as it already does with other regulatory announcements, and with which firms are very familiar. In practice, such announcements are rapidly disseminated by secondary information providers such as Bloomberg, Thomson Reuters and others. In the light of this, we are also clarifying the procedure that the FSA must follow to give effect to a suspension or removal from trading. For example, the regulations set out what decisions the FSA may make following a challenge to a suspension or removal from trading imposed on a class of institutions by either affected institutions or the issuer; when the FSA is required to give written notice of its decisions; and when the decisions must be published by means of an RIS. I make it clear that the FSA is not being given additional powers. The purpose of the regulations is to enable the FSA to use its existing powers more effectively. I ask noble Lords to note also that the coming into force date of this statutory instrument has been corrected from 6 April to 9 April, to take account of the Easter Recess. It is crucial that the FSA has effective tools to deliver its objectives of ensuring market confidence and consumer protection. This is what the changes to Part 18A of the FSMA provide. I hope that noble Lords will agree that this is an important change. I now move on to the second order: the Financial Services and Markets Act 2000 (Liability Of Issuers) Regulations 2010. The purpose of the regulations is to extend the current statutory regime for the liability of issuers for misstatements as set out in Section 90A of FSMA. These regulations are the culmination of an extensive period of review and consultation carried out initially by Professor Paul Davies QC, Cassel Professor of Commercial Law at the London School of Economics, and most recently by HM Treasury. Under the existing statutory regime, issuers of securities traded on regulated markets in the United Kingdom are liable for fraudulent misstatements made to the market in a limited class of publications. These regulations extend that regime to cover both issuers of any securities admitted to trading on a securities market in the UK, and issuers for which the UK is the issuer’s home state. Claims for misstatement may be brought not only by buyers of securities but also by sellers and holders of securities where they have acted in reliance on a fraudulent misstatement and suffered loss as a result. The regulations extend the regime to include not just announcements that are required to be made under the transparency directive, but all information published by means of a recognised information service, and information which has been announced by the issuer as being available by such means. While this brings a much greater number of announcements within the scope of the regime, we feel that there is likely to be little impact on the day-to-day checking process by issuers. Issuers and directors already face significant financial and reputational penalties for misstatements, and issuers are required to have robust disclosure assurance processes. The regulations also create liability for dishonest delay in publishing information in limited circumstances. The claimant must be able to demonstrate that they have suffered loss in respect of their securities as a result of delay by the issuer in publishing information and that a manager within the issuer acted dishonestly in delaying publication of that information. There will naturally be situations where disclosure of information is delayed for good reason, for example to check facts before publication. This will not be dishonest behaviour by the issuer and will not give rise to a claim. The regulations provide that an issuer will not be subject to any form of liability other than liability under the statutory regime or certain specific forms of liability which are listed in the regulations. These include contractual liability and civil liability arising from a person having assumed responsibility to a particular person for a particular purpose for the accuracy or completeness of the information concerned. The latter preserves the existing liability under the common law for negligent misstatement, as decided in Caparo v Dickman and subsequent cases. I should like to make clear that responsibility statements in reports and accounts which companies are required to produce would not, in and of themselves, be regarded as constituting a representation to a particular person for a particular purpose for the accuracy or completeness of the information concerned. In conclusion, these regulations are the culmination of an extensive period of review and consultation, and the proposals have gathered widespread support from affected parties throughout the process. They provide clarity as to the liability that issuers may have to pay in compensation to claimants who have suffered loss as a result of relying on misstatements, or dishonest omissions by the issuer. I therefore hope that noble Lords will agree to the important amendments to the statutory regime provided for by these regulations. I beg to move.