I beg to move, That this House doth agree with the Lords in the said amendment.

I am grateful to the Minister for that somewhat brief explanation of the new clause. I think that both sides of the House would concede that this is a considerable derogation from the principles laid down in the Data Protection Act, which was a major step in advancing civil liberties in Britain. Therefore, we are obliged to look rather carefully at any substantial exception of this type which is introduced so soon after the passage of the Data Protection Act.

With respect, the more relevant provision of the Data Protection Act is section 30. Section 28, as the hon. Member for Dagenham (Mr. Gould) has suggested, deals with exemptions from the Act in relation to prosecution, but section 30 specifically deals with the regulation of financial services and is, therefore, the most relevant section to this question. It follows from that that the principle of exemption under the Data Protection Act in relation to the regulation of financial services was recognised at the time that the Act was passed, so no new principle of any sort is involved in the amendment.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendment No. 350.

This amendment reflects the result of consultations on the Bill's provisions in relation to occupational pension schemes. The reference in the existing clause 159 to management "through" an authorised person has caused some uncertainty, and some have questioned the position of trustees of occupational pension schemes. The new clause clarifies the requirement to be authorised. A person, such as a trustee, who is responsible for the management of investments held for the purposes of an occupational pension scheme will not be required to be authorised if he delegates day-to-day management of those assets to an authorised, exempted or overseas person. This does not mean that he would have to distance himself entirely from the management of the assets. He would still be able to take what might be called strategic decisions, for example, about the proportion of the assets which should constitute investments of particular kinds, or the desired balance between growth and income and, indeed, his responsibilities as a trustee might require him to do so. Similarly, a trustee would not need to be authorised simply because the person managing the scheme's assets was required to consult him from time to time in particular circumstances, for example, where there was a takeover bid, where the manager had a conflict of interests, or where the transaction in question was particularly large. But a trustee would be required to be authorised if he regularly exercised discretion as to the sale or purchase of a particular investment.

I beg to move, That this House doth agree with the Lords in the said amendment.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendments Nos. 354 to 365, 371 to 373, and 376.

These are technical amendments to adapt the Bill to take account of the different company law provisions in Northern Ireland. Amendment No. 376 is also a technical amendment. An amendment was introduced earlier to provide a definition of the exempt interests of recognised market-makers which will not be notifiable under sections 198 to 210 of the Companies Act 1985, but the corresponding provision for Northern Ireland was omitted. This amendment makes good that omission.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendments Nos. 367 and 368.

These amendments are technical. The first closes a potential loophole which might have allowed assistance to be provided for purposes other than the acquisition of beneficial ownership of shares. The second modifies the definition of "connected company" in subsection (3). The third brings Northern Ireland company law into line with the Companies Act as amended by this clause.

I beg to move, That this House doth agree with the Lords in the said amendment.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendments Nos. 506 and 520. I must inform the House that amendment No. 382 involves privilege.

The new clause has been prepared in accordance with an undertaking given to a noble Lord on the Opposition Benches. It confers on the Secretary of State the function of publishing information and giving advice about the way in which the Bill operates and other specified matters. The functions will be transferable to the designated agency in the normal way.

This is an extremely helpful provision and I am grateful to my hon. and learned Friend the Minister for explaining how it came about. I had some misgivings when I heard that it arose from an undertaking given to a Member of the Opposition, but in view of the good relationship that we built up in Committee, it would be unfair to dwell on that point.

I endorse the comments that have been made about the value of the amendment, and I thank the Minister for introducing it. Perhaps, not surprisingly, the provenance of the new clause adds to its charm.

As consultation has been our watchword throughout the passage of this legislation, it would be churlish to do anything other than to respond in the most positive fashion to the invitation extended to me by my hon. Friend the Member for Stafford (Mr. Cash). I am delighted that his initation has been endorsed by the hon. Member for Dagenham (Mr. Gould), and I agree with what they have said.

I beg to move, That this House doth agree with the Lords in the said amendment.

I beg to move, That this House doth agree with the Lords in the said amendment.

Simple curiosity leads me to ask whether any attempt was made to consult the Spanish authorities about this.

I wanted to ask that question, too.

The answer is no.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to discuss Lords amendments Nos. 394 to 401, 405 to 409, 412, 414 to 419, and 421 to 426.

This rather large group of amendments contains several detailed amendments to the definition of investment business in schedule 1. They have all been made in response to concerns expressed about the wording of the schedule. Indeed, some of the amendments fulfil Government commitments made in the House when particular concerns were expressed.

What is the difference between shares in the share capital of a company and stock in a company, and shares and stock in the share capital of a company?

I am not sure that I can give a sufficiently authoritative exposition of that distinction immediately. As I am sure that my hon. Friend would not want any answer that was not entirely authoritative, I shall reply to him as soon as I am in a position to do so.

Why did the drafting on that point result in so much confusion? Is the same true of other provisions, in that the way in which they were worded has led to this large block of amendments?

In the Bill as originally drafted, we adopted definitions which we thought were appropriate, but we always recognised that it would be necessary to consult further—consultation preceded publication of the Bill—with those engaged in day-to-day dealings with these various instruments in the markets, who are in the best position to know exactly how the definitions formulated in the legislation should apply to their activities. The Bill is an excellent example of the way in which we are prepared to learn from those who have the knowledge that cannot possibly repose within the confines of Government, and to respond constructively to representations made so as to ensure that the definitions in the legislation correspond as effectively as possible with the realities of practices in the market place. That is why these amendments have been introduced, and I make no apology for them.

Nevertheless, my hon. Friend the Member for Brent, South (Mr. Pavitt) has made a serious and valuable point which is very much in line with some of the opening remarks made by hon. Members yesterday.

I am grateful to the hon. Gentleman for giving me another opportunity to expand on that point. It is not a question of people not having been brought in or encouraged to comment earlier. Extensive consultation took place with affected interests. As I shall demonstrate, it is not only the City which has come forward late with suggestions. Extensive consultations took place during the preparatory stages of the legislation, before publication of the Bill. The Bill was published last December, so there was every opportunity for affected interests to come forward. I am not in a position to say why, in many cases, they came forward later rather than earlier, but it was not for lack of any contact, invitation or encouragement on the part of the Department and its officials.

rose—

I remind the hon. Member for Dagenham (Mr. Gould) that he can make a further contribution only with the leave of the House. I hope that we are not to have a protracted debate about consultation methods or their absence.

I was hoping to intervene in the Minister's speech. However, I ask the leave of the House. I was interested in the Minister's concluding remarks. Does he accept that we are talking about a novel principle for legislation? Apparently one can add words to a Bill, however meaningless they may seem, provided that they do not actually do anything.

That is not quite what I said. I did not suggest that the words to be added to the Bill are meaningless. I said that the extent of the additional clarity which they provided was open to dispute and question. The words are certainly not meaningless. They are meaningful, but whether they are more meaningful than the original words is open to doubt. So as to be certain that we take full advantage of the Law Society's learning, I commend the amendments to the House.

The amendments emanate from the Law Society, of which I am a member. I was concerned to hear that the amendments were suggested so late in our proceedings. We received late amendments during the Committee stage and I had to raise the matter with the Law Society.

On a point of order, Mr. Deputy Speaker. I should be grateful for your advice. I have been in the House for a long time, but today I have been faced with a new situation. A total of 581 Lords amendments are before the House. You, Mr. Deputy Speaker, have just ruled that an hon. Member, having spoken on a group of amendments, must seek the leave of the House if he wishes to speak again. If an hon. Member has spoken about one amendment in a group of 10, is he precluded from speaking again on another amendment in the group? Do we have to deal in one intervention with all the amendments in the group or are we able, if we accept one amendment, to talk about another amendment in that group? After all, we might wish to divide the House on one of the other amendments. For me, your ruling is unprecedented.

I appreciate the difficulty of considering a large number of amendments. One of the purposes of Mr. Speaker's selection of amendments, putting like amendments in a group, is to enable us to debate them together. Having participated once in a debate on a group of amendments, an hon. Member can speak again only with the leave of the House.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take amendments Nos. 403 and 404.

These amendments are the result of very helpful advice that we have received from the commodity and futures exchanges and the banks which do business both on such exchanges and off-exchange.

"delivery is to be made at a future date".

I thank the Minister for that explanation of some important and useful changes to the schedule. They certainly help to make clear the new regime which is to apply to some important and relatively novel forms of trading.

With the leave of the House, Mr. Deputy Speaker, I shall respond to the question of the hon. Member for Dagenham (Mr. Gould). The hon. Gentleman's surmise of the import of the explanation which I gave in Committee and which he failed to recollect is correct.

I beg to move, That this House doth agree with the Lords in the said amendment.

I am grateful to the Minister for introducing the amendment. I am sure that it is a well intentioned attempt to deal with the problem which exercised my noble Friends in another place, but I am not necessarily convinced that "merits" has exactly the effect that the Minister claims. I concede, however, that these are difficult drafting matters and I can only join the hon. and learned Gentleman in hoping that he has managed to make the distinctions clear in the form of words chosen.

I have listened carefully to what my hon. and learned Friend the Minister has said about the way in which the definition has been narrowed. When I read the amendment I thought that there were two ways in which it had been narrowed. First, advice has to be given on the merits. Secondly, advice has to be given to persons in their capacity as investors. I may have missed the explanation, but I do not understand the consequences of bringing that phrase into the paragraph. Perhaps my hon. and learned Friend will provide some explanation.

With the leave of the House, Mr. Deputy Speaker, I shall respond to the intervention of my hon. Friend the Member for Beaconsfield (Mr. Smith). I suppose that if advice were given in a purely academic context as part of a seminar for academic purposes, where those receiving the advice were not investors or potential investors, that might be one example. It is not, however, the example that has been drawn to my attention on a piece of paper that has just been passed to me. That does not necessarily mean that it is not an apposite example.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take amendments Nos. 413 and 420. I have to inform the House that amendment No. 420 involves privilege.

This group of amendments makes important changes to the definition of investment business in schedule 1. Important though the changes are, however, they are changes only at the boundaries. They would not affect the position of mainstream investment business. Definitions are notoriously difficult, especially in a Bill of this sort, as are decisions about the precise boundaries of areas to be regulated. The House will recall that one of the major conclusions of the Gower report, on which much of the Bill is based, was that the definition of investment to which existing law applied was outdated and too narrow and that a much broader and more flexible definition was needed. Accordingly, the Bill as presented included wide definitions of investment and investment business, which in turn proved to be too wide in some respects.

Will my hon. and learned Friend explain how minorities would be protected under these provisions? A group may consist of subsidiary companies, all of which are not necessarily wholly owned. How will minority shareholders be protected from investment advice that is taken in the group?

I do not think that the issue of minorities arises in this context. We are concerned with a company which engages in activities in which it would normally engage as a principal. If an offer is made on behalf of a company to shareholders in another company for their shares, we are concerned with whether the company should be deprived of its exclusion from the Bill's provisions by virtue of the fact that it is acting on behalf of other companies in the group and not only as a principal. That is why I say that I do not think that the protection of minority shareholders arises in this context. Minority shareholders have the benefit of the protection that is afforded by the general provisions of company law.

The Minister's explanation of the measure shows that he has made a valiant attempt to meet the concerns of the CBI, the Association of Corporate Treasurers and others about the difficult definitional problems. I have no quarrel with what the Minister has sought to achieve. I share his hope that the provisions will secure that objective. The only observation I make is that, as in so many other of the difficult problems with which the drafters of the Bill have had to deal, we must realise that dividing lines drawn now and which look appropriate now could well be inappropriate in changing circumstances.

Can my hon. and learned Friend say whether new paragraph 17(1) (c) would remove any protection for the general public against being cascaded with misleading information about investment in unsound schemes, such as the construction of the Channel tunnel?

I hope that the Minister will forgive me for my ignorance in seeking an explanation of new paragraph 17(1)(b). I am more at home in talking about the National Health Service than I am in the stratosphere of high finance. I am sure that all hon. Members will understand my asking: how does a principal hold himself out to be engaged in either investment or speculation? What process must he go through if he is to conform to the strictures contained in the new paragraph? Since my days on the stock exchange floor there have been gigantic changes. For example, the position of a principal who is a jobber or a broker has altered recently.

My hon. Friend the Member for Southend, East (Mr. Taylor) will appreciate how severe the temptation is for me to be drawn into extensive discussion on the Channel tunnel project and how unwise it would be for me to succumb to that temptation. I content myself with the observation that the protections of clauses 51 and 52 will still be available, as I said in opening, and I think that that provides the answer to the general point that he raised.

I beg to move, That this House doth agree with the Lords in the said amendment.

I beg to move, That this House doth agree with the Lords in the said amendment.

I am glad to hear the Parliamentary Under-Secretary make that point. It will help considerably in cases in which, for example, bodies might otherwise be unreasonably and unfairly blackballed, because members of that organisation will have an opportunity to make representations. On the point about the cosy club, on which there are differences of opinion, only time will tell. It is possible for circumstances to arise in which somebody who is not regarded with the same favour in some circles as others would find himself excluded, perhaps unreasonably. In those circumstances, rather than having to go through the courts, he may be able to take advantage of this provision. Will the Parliamentary Under-Secretary confirm that that is what he has in mind?

Will the Parliamentary Under-Secretary enlighten us as to why this clause is permissive rather than mandatory?

I am happy to confirm that the effect of the clause as drafted will cover the point raised by my hon. Friend the Member for Stafford (Mr. Cash).

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take the amendent in the name of the hon. Member for Yeovil (Mr. Ashdown).

Lords amendment No. 437 is similar to the one concerning the composition of governing bodies of self-regulating organisations, which has already been agreed to. The schedule also provides that the members of the governing body of the designated agency must be drawn from persons having experience in investment business and other persons as described in the schedule. This amendment provides that the composition of the body overall must be sufficient to ensure a proper balance between the interests of those who carry on investment business and those of the public. That has always been our intention. The amendment makes it an express requirement.

I beg to move, as an amendment to the Lords amendment, at the end, add

'by ensuring that at least one third of the members of the body are independent non-practitioners'.

I, too, welcome the Lords amendment, as I welcomed the similar amendment concerning self-regulating organisations. I have some sympathy with the amendment moved by the hon. Member for Stockton (Mr. Wrigglesworth). However, the difficulty is that, whenever one specifies a particular number or proportion, there is a tendency to regard it as a maximum rather than a minimum. There are also possible grave difficulties in deciding into which category individuals fall. Although I strongly sympathise with the amendment, I realise that there may be objections to it.

I regard this as the most important amendment that we will consider today. I do not think that we should let this opportunity pass without probing the Minister and debating the criteria and qualifications of members of the SIB. This amendment is more important than the one that we passed earlier concerning the composition of SROs, for while each SRO will determine its own way and have a variable example in terms of the independent and lay membership, in this instance we are debating the principal supervisory body for the framework of regulation that we are establishing under the Bill.

That is not correct.

My hon. Friend is right. That power cannot be designated to the SIB. I brought into question the duty of the Governor of the Bank of England to act jointly with the Secretary of State in appointing the chairman and members of the SIB. I expressed reservations about what I regarded as the continued encroachment—I do not use that word too pejoratively —of the Bank of England outside its area of prudential control of the banking system into supervisory control of the investment markets. Historically, one understands, in the absence of any other body or responsibility, the need for the Governor to do so However, with the new body in place, and the legislation enacted, it should be the right of the Secretary of State alone. I do not say that he should not consult the Governor of the Bank of England, but it should be his right to appoint the chairman and, in consultation with him, to appoint the members of the SIB.

We might even see some Members of Parliament.

I do not rule out jobs for the boys. Perhaps we should discuss that openly. I can think of few people who would make better members of the SIB than many hon. Members on both sides of the House who have contributed to the debates. I can mention that with equanimity, because I know that none of us would stand a chance of being appointed, but such is life. There may be life after death after the next election for at least some Opposition Members. I would not want them to be excluded from such considerations.

The amendment and the amendment to it moved by the hon. Member for Stockton, South (Mr. Wrigglesworth) give us a useful opportunity to debate the important matter of the composition—the membership—of the designated agency, a subject that deserves some reflective consideration by the House. I welcome the fact that several hon. Members wish to speak in this important debate.

Order. I am trying to be as tolerant as I can in approaching the debate, but the hon. Gentleman is going too far beyond the terms of the amendment in discussing accountability. We are talking about the composition of the body.

I will certainly heed your warning, Mr. Deputy Speaker.

This is a very important provision. We ought to be extremely glad that the Government have brought forward, in the House of Lords, a provision that goes a considerable way towards ensuring that there is a proper balance between public interests on the one hand and the interests of the SIB on the other.

I suspect that the next occasion on which we shall have the opportunity to consider these matters will be early next year, when we shall have to consider the designation order for the SIB. One matter that we shall consider then will he the composition of the board.

Six.

Yes, three of each, so two further consumer members should be appointed. Mrs. Waterhouse has a difficult job because she is the sole representative of consumer interests. However, it was to protect the interests of the private investor that the Bill was first brought before the House.

Does my hon. Friend agree that the designation order will be subject to an affirmative resolution, so there will be a considerable incentive to ensure that the persons included on the list will be representative of the matters that we have discussed today? The order will have to be approved by both Houses of Parliament.

That is precisely what I said at the beginning of my speech. I said that the next occasion on which we will have the opportunity to consider these matters will be when we discuss the designation order, which is subject to affirmative resolution. We shall then also consider the composition of the board and whether the Government's proposals comply with the schedule.

With the leave of the House, Mr. Deputy Speaker, I wish first to deal with the amendment moved by the hon. Member for Stockton, South (Mr. Wrigglesworth), which I invite the House to reject, largely for the reasons given by the hon. Member for Dagenham (Mr. Gould) and by my hon. Friends. I do not think that the rigid formula which is the basis of the amendment would make it easier to arrive at the proper balance that the main amendment before the House would require.

With the leave of the House, I should like to comment on what has been said.

I beg to move, That this House doth agree with the Lords in the said amendment.

The use of mandatory language in the amendment is clearly the consequence of pressure put upon the Government in another place. For that reason, it may be appropriate at this stage to pay tribute to their Lordships in that they, like the Standing Committee, have done what they could—it has been a substantial element—to make the Bill a better piece of legislation. The amendment is part of that overall achievement.

Two points cause me some disquiet. The first is the general point that, while I understand the import of what my hon. and learned Friend the Minister said, I remain a little concerned that we may in some way be detracting from the prime responsibility of the SIB to undertake inquiries and investigations. We are setting up the SIB, as we are the SROs, with the clear duty to investigate cases of abuse and dereliction of duty by authorised persons.

"The agency must have effective arrangements for the investigation of complaints arising out of the conduct of investment business by authorised persons"—

"or against any recognised self-regulating organisation, professional body, investment exchange or clearing house."

"The arrangements must make provision for the investigation of complaints in respect of authorised persons to be carried out in appropriate cases independent of the agency and those persons."

The hon. Member for Dagenham (Mr. Gould) welcomed the mandatory nature of the amendment, which contrasts with the permissive nature of an earlier matter. However, it seems to me that this is not entirely mandatory, because the mandatory nature is purely that provision should be required to be made, and it depends on what may be an appropriate case. Who will be the judge of what is an appropriate case? Is the SIB to judge whether a case is appropriate for independent machinery or whether it will carry out the investigation itself? Will that responsibility fall on the Secretary of State? Can the complainant decide what is an appropriate case? The matter is not entirely clear, and I would be grateful if my hon. and learned Friend the Minister would clarify it.

I wish to associate myself with the remarks of my hon. Friend the Member for Chichester (Mr. Nelson) in his extremely interesting and useful intervention, which supported many of the points made in Committee. I should like to add a gloss to them.

"the investigation of complaints in respect of authorised persons to be carried out in appropriate cases independently of the agency."

"The agency must have effective arrangements for the investigation of complaints"

"authorised persons or against any recognised self-regulating organisation, professional body, investment exchange or clearing house."

I shall endeavour to deal with the various points raised in this interesting debate. The hon. Member for Dagenham (Mr. Gould) asked about the relationship between this provision and the fact that there is not a similar provision for SROs. The position is, indeed, as he suggested was likely to be the case, that the compulsory requirement for the agency to have an ombudsman system applicable to all authorised persons removes the need for the recognised body to be obliged to set up its own ombudsman system. It is free to do so, if it wishes, as one way of meeting the requirement to have effective arrangements for investigating complaints. The precise way in which the ombudsman scheme would work is a matter for the SIB. It would be for the board to work out the details in relation to the various points that the hon. Gentleman has made.

I am grateful to my hon. and learned Friend the Minister for what he has said. He made an important statement. He has said—it certainly does not say this in the legislation—that the SIB will have to have effective measures for investigating unauthorised persons. That is implicit in the amendment that has been passed. I suspect that the matter may have been overlooked as almost a consequential amendment to that amendment, but we should have added in the schedule the investigation of unauthorised as well as authorised persons. As the legislation stands, there is a duty on the SIB to have a mechanism only for investigating authorised persons. I hope that what my hon. and learned Friend has said will be taken note of by SIB.

I am not sure that my hon. Friend is correct in that. Clause 92 provides for effective mechanisms to be provided for the investigation of unauthorised persons. That is not dealt with in schedule 5. It is concerned with establishing an independent mechanism for the investigation of authorised persons. That does not detract from the other provisions. I think that clause 92 will provide my hon. Friend with the answer to his point.

I am glad to clarify the point. I asked who would be the arbiter.

I am much obliged to my hon. Friend. The answer is, of course, the SIB. It would be for it to decide what are the appropriate circumstances in which the independent mechanism is to operate, but the Secretary of State will look at the totality of the rules made by the SIB and at the provision made for that independent mechanism when it comes to the designation process.

I am grateful to my hon. and learned Friend for that explanation, but is it not a little extraordinary that there should be a mandatory obligation to set up this mechanism, although it then becomes entirely discretionary as to whether it is implemented?

That is not an entirely fair construction to make. When the matter was debated in the other place, it was accepted that it would not be desirable to require all complaints to be the subject of such independent investigation. There will be circumstances in which other, equally effective, arrangements can be made. I see no difficulty about leaving it to the SIB, subject to the requirement to satisfy the Secretary of State at the designation stage, to identify those circumstances in which independent investigation is likely to be particularly appropriate and desirable. I hope that I have answered my hon. Friend's point.

With this, it will be convenient to discuss Lords amendment No. 552.

I seek some clarification of amendment No. 552, which relates to delegation orders, and is part of the transitional provisions. As we are now dealing with the schedule on transitional provisions, can my hon. and learned Friend say when he thinks that the provisions will come into force, and give the timetable for implementing the Bill?

I am happy to respond to the second of my hon. Friend's points. When I have dealt with it, I may well be in a position to deal with his first point. However, the answer to the second point is that the hope and expectation is that the putative designated agency, the SIB, will be in a position to make its application for designation within a relatively short time, and that that application will be duly considered by the Secretary of State. It is hoped that he will be in a position to designate the agency in the early part of next year.

I beg to move, That this House doth agree with the Lords in the said amendment.

With this, it will be convenient to discuss Lords amendments Nos. 555 to 581.

I would have moved the amendment formally, but I seek your indulgence, Mr. Deputy Speaker, as I wish to associate myself with the remarks made by the hon. Member for Dagenham (Mr. Gould) in paying tribute to the part played in this legislative process by those in the other place and by Committee Members, many of whom are in the House today. I am particularly grateful to officials in the Department, who have borne the brunt of this heavy burden of legislation, and who have discharged their responsibilities in a way that goes far beyond the course of duty. I am enormously grateful to them for the assistance that they have given me throughout.