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

My Lords, I am most grateful for the contributions that have been made to the debate. Both these sets of regulations have been made after comprehensive consultation and careful consideration. The noble Baroness is correct—this is the last opportunity in this parliamentary Session that she and I will have to discuss statutory instruments. She feared that she may be feeling demob happy, but I feel upcoming withdrawal symptoms at no longer being challenged, as the noble Baroness always does so effectively. She always exhibits her absolute commitment to read every line and subsection of any statutory instrument or piece of legislation that I find myself proposing to the House or Grand Committee. She sets a standard for all to aspire to in the thoroughness with which she does her work on issues which are often very complex and probably quite tedious. However, they are important in the circumstances in which they are activated. The noble Baroness and the noble Lord, Lord Oakeshott of Seagrove Bay, asked how often these powers have been exercised under FSMA. Section 313 was inserted into FSMA to reflect a requirement arising from the EU’s Markets in Financial Instruments Directive—otherwise known as MiFID. The powers under Section 313A have not yet been used by the FSA to suspend trading of a financial instrument. The powers under subsections (4) to (5) of Section 313C to suspend or remove a financial instrument from trading where that instrument has been suspended or removed from trading in another EEA state are used frequently by the FSA. Under subsections (4) to (5) of Section 313C the FSA is simply acting on notice from other EEA competent authorities. The FSA has other ways in which it can suspend trading under FSMA. For example, it has the power to suspend the listing of a financial instrument under Section 77 of FSMA, as it did when it suspended Northern Rock and Bradford & Bingley shares in 2008. However, these other various powers are dependent on breaches of listing, prospectus transparency or disclosure rules and apply only to suspension from listing or trading on a regulated market. They do not enable the FSA to suspend trading across the whole market, and trading in the OTC or over-the-counter market can continue. Suspending trading across the whole market may be necessary to protect consumers—for example, if the issuer is in severe financial difficulty—or to maintain market integrity if trading has become disorderly. MiFID gives the FSA the power to suspend trading on OTC markets, and therefore it is essential to ensure that the FSA is able to carry out its duties effectively. Let me be clear: there have been actual occasions during the crisis that have required a trading suspension, when the FSA was able only to suspend listing. Suspending OTC trading would not have been practical, as the FSA would have had to serve written notices on the many individual firms trading on the OTC. Why is that important if the FSA has never used the powers? The FSA is of the view that it is very important to address that defect in the current UK regime—in particular, in the post-MiFID context, where considerable trading now takes place outside the rules of exchanges and multilateral trading facilities. If the FSA can demand a suspension across that entire market quickly, that will give it a more effective tool to manage volatility and market stability concerns. It will also greatly enhance the FSA's ability to protect investors' interests, because investment firms and banks will not be able to trade in financial instruments where trading has been suspended for regulatory reasons. The Takeover Panel has also expressed concerns about the FSA's inability to halt trading in the OTC markets. The Takeover Panel relies on the FSA to halt trading in the event of problems during merger and acquisition activity. In its view, halting OTC trading is essential to that. The noble Baroness asked whether the cost/benefit justifies the Part 18 regulations. We are of course required under EU law to ensure that the FSA can exercise the power to suspend shares from trading, so we do not have a choice whether we want to take that power. The discount rate used is apparently in accordance with HM Treasury guidance. I will have to do the maths myself and find out whether the noble Baroness is correct. I look forward to getting a briefing from my officials and will of course share the outcome with both the noble Baroness and the noble Lord, Lord Oakeshott. The noble Lord, Lord Oakeshott, asked why there was an 18-month delay in issuing the liability consultation. I am advised—and this makes great sense from my experience in the Treasury—that the Treasury has had to prioritise work during the banking crisis. The Treasury is a very lean machine in that respect; it does not carry excess capacity. Clearly, the banking crisis has had to take up a lot of capacity which the Treasury would otherwise have been able to use to focus on other issues. The noble Baroness also asked whether we will consider the issue of ranking with the Insolvency Service. I can commit that we will do that in due course. I hope in writing to the noble Baroness and the noble Lord to give a little more information or colour to what "in due course" might mean. I can also confirm to the noble Baroness that we will review the proposals within three years and consider the extraterritoriality issue that was raised. As I said, in order to ensure that the FSA has effective tools to deliver its objectives of market confidence and consumer protection, it is clear that we need to give it the option to give notice of its decisions by using the RIS services. The Part 18A regulations achieve that aim. The Financial Services and Markets Act 2000 (Liability of Issuers) Regulations 2010 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 regard these as important steps forward, and for my own part I have been happy to devote a few hours to this matter, as I am sure have the noble Baroness and the noble Lord. My own hourly charge rate is rather lower than that of a KPMG partner and certainly a lot lower than that of a former Secretary of State or anyone who offers themselves rather as a taxi offers itself to the public for financial gain.