HOUSE OF COMMONS
Fourth Standing Committee on Statutory Instruments, &c.
DRAFT FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) (No. 2) ORDER 1995
DRAFT PUBLIC OFFERS OF SECURITIES REGULATIONS 1995
Tuesday 13 June 1995
Members who wish to have copies of the Official Report of Proceedings in Standing Committees sent to them are requested to give notice to that effect at the Vote Office.
No proofs can be supplied. Corrigenda slips may be published with Bound Volume editions. Corrigenda that members suggest should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor's Room, House of Commons,
not later than
Saturday 17 June 1995
STRICT ADHERENCE TO THIS ARRANGEMENT WILL GREATLY FACILITATE THE PROMPT PUBLICATION OF THE BOUND VOLUMES OF PROCEEDINGS IN STANDING COMMITTEES
© Parliamentary copyright House of Commons 1995
Applications for reproductions should be made to HMSO
|HMSO publications are available from:|
|HMSO Publications Centre||HMSO Bookshops||The Parliamentary Bookshop|
|(Mail and telephone orders only)||49 High Holborn, London WCI V 6HB (counter service only)||12 Bridge Street, Parliament Square,|
|PO Box 276, London SW8 5DT||0171 873 0011 Fax 0171 831 1326||London SW1A 2JX|
|Telephone orders 0171 873 9090||68–69 Bull Street, Birmingham B4 6AD 0121 236 9696 Fax 0121 236 9699||Telephone orders 0171 219 3890|
|General enquiries 0171 873 0011||33 Wine Street, Bristol BS1 2BQ 0117 9264306 Fax 0117 9294515||General enquiries 0171 219 3890|
|(queueing system for both||9–21 Princess Street, Manchester M60 8AS 0161 834 7201 Fax 0161 8330634||Fax orders 0171 219 3866|
|numbers in operation)||16 Arthur Street, Belfast BTI 4GD 01232 238451 Fax 01232 235401|
|Fax orders 0171 873 8200||71 Lothian Road, Edinburgh EH3 9AZ 031 228 4181 Fax 0131 229 2734||HMSO's Accredited Agents|
|The HMSO Oriel Bookshop, The Friary, Cardiff CF1 4AA 01222 395548||(see Yellow Pages)|
|Fax 01222 384347||and through good booksellers|
|Printed in the United Kingdom by HMSO|
The Committee consisted of the following Members:
Chairman: Sir John Hunt
Bottomley, Mr. Peter (Eltham)
Bruce, Mr. Malcom (Gordon)
Butler, Mr Peter (Milton Keynes, North East)
Conway, Mr. Derek(Lord Commissioner to the Treasury)
Darling, Mr. Alistair (Edinburgh, Central)
Davies, Mr Quentin (Stamford and Spalding)
Emery, Sir Peter (Honiton)
Evans, Mr. Nigel (Ribble Valley)
Livingstone, Mr. Ken (Brent, East)
MacGregor, Mr John (Norfolk, South)
MacShane, Mr. Denis (Rotherham)
Nelson, Mr. Anthony(Minister of State, Treasury)
Pearson, Mr. Ian (Dudley, West)
Roberts, Sir Wyn (Conwy)
Rooney, Mr. Terry (Bradford, North)
Shepherd, Mr. Richard (Aldridge-Brownhills)
Simpson, Mr Alan (Nottingham, South)
Touhig, Mr. Don (Islwyn)
Mr T. W. P. Healey (Committee Clerk)2 3 Fourth Standing Committee on Statutory Instruments, &c. Tuesday 13 June 1995
[SIR JOHN HUNT in the Chair]
The Minister of State, Treasury (Mr. Anthony Nelson): I beg to move, That the Committee has considered the draft Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995.
The Chairman: With this it will be convenient to consider the draft Public Offers of Securities Regulations 1995.
Mr. Nelson: These somewhat technical consolidation measures will not rise to the standard of the intellectual and debating skills arrayed in the Committee this morning. Nevertheless, it may assist the Committee if I briefly explain their import. The two statutory instruments simplify and modernise the law governing the issue of investment advertisements. The package offers a number of benefits: it makes clear what information must be disclosed in a prospectus; removes some types of offer from prospectus law altogether; and makes it easier and cheaper for United Kingdom issuers to offer securities or gain admission to official listing on stock exchanges in other member states. It will achieve those benefits by strengthening investor protection by modernising and clarifying the existing law and ensuring that the United Kingdom has a body of coherent and comprehensible legislation governing public offers of securities. It will also assist by deregulating through removing certain types of offer from the requirements of prospectus law and by enabling United Kingdom issuers of securities to take advantage of the mutual recognition provisions of the prospectus and listing particulars directives.
Mr. Alistair Darling (Edinburgh, Central): Will the Minister briefly outline those matters that are being deregulated?
Mr. Nelson: Yes, there are a number of specific changes which include, for example, lower requirements where an issue is made to a limited number of people—say, fewer than 50. There will be exemptions with regard to advertisements which, unless the changes were to take 4 place, would require a second process of authorisation and validation even though they had already achieved that to subscribe to the requirements of the prospectus. Without the changes there would be imposed on issuers and offerors additional costs which would be superfluous and, in many cases, would double-count the costs already incurred in producing a prospectus to comply with the law and listing particulars and prospectus directives. Those are a couple of examples. Admittedly they are minor ones but for individual offerors and issuers such costs are not insignificant because the costs of producing prospectuses and obtaining legal and financial advice can be considerable. The changes will limit those costs where it would be unreasonable to ask for them to be paid again. In those small ways the changes will be deregulatory. We believe that the regulations have the support of United Kingdom industry, the city and the stock markets as they have been subject to extensive rounds of consultation. I commend them to the Committee.
Mr. Darling: We do not oppose the instruments but one or two things might usefully be said. I agree with the Minister that we have a distinguished gathering on the Committee. I see that there is an ex-Cabinet Minister who, after days of glory, is now forced to do his turn. We have a former Minister, two aspiring Ministers—I am not sure about one of them—and a Eurosceptic who is camped on the extremes of the Committee, at the far end. As the Minister said, the instruments have been the subject of fairly widespread consultation and, as I understand it, not many people are concerned about them. I fully agree with the point that was made in the explanatory note on the draft Public Offers of Securities Regulations 1995, which says: "A prospectus must contain the information necessary for investors to make an informed assessment of the issuer's position and prospectus". The irony of the Government's advocating that only a week after the fuss over the sell-off of Powergen and National Power and the suggestion that not all the information was made public has not escaped us. I agree that that should be the aim; the only question is whether the two statutory instruments make it more likely that investors can make an informed assessment about what is on offer. I, like other members of the Committee, read the documents but had considerable difficulty understanding them. We have made this complaint many times not only on Standing Committees considering statutory instruments but during the recent passage of the Finance Bill. There is increasingly a tendency to produce rules and regulations that are virtually incomprehensible. I know that the measures implement numerous European Community directives—indeed, so many that one almost becomes a Eurosceptic. But that is no excuse for not being able to draft readily understood regulations. 5 No doubt those who advise those in the City and elsewhere will have made it their business to understand them, but thought should be given to making all rules and regulations slightly more comprehensible. I appreciate that there is a thin line between making legislation legally watertight—always very difficult—and making it sufficiently comprehensible to enable people to conduct their business with ease. The Minister spoke of the desirability of deregulation. I agree that there is no point in bundling people up in unnecessary red tape. One of the best deregulatory measures that Parliament could adopt would be to pass legislation that people could understand without the need for solicitors or accountants to guide them through what is sometimes a tangled web. I realise that the statutory instruments are unamendable and that there is nothing that we can do about them: it would be extremely difficult to attempt to rewrite them in Committee. However, I hope that the Minister and his hon. Friends and all those involved in translating EC directives into law in this country will appreciate that these documents are not readily understood or easily readable. I cannot believe that it is beyond the wit of the authorities, and those responsible, to make them more easily understood. The two statutory instruments amend substantially the Companies Act 1985 and, to some extent, the Financial Services Act 1986. It is perfectly proper to amend through secondary legislation, but it does mean that the instruments are not subject to scrutiny, or capable of being amended if that proves necessary. I have no objection in principle to the measures, although in time some of the details may require further amendment. The Minister will say that that is a general rather than a specific point, but we must repeat general points because we face an increasing problem. Ever more legislation from Europe is coming before the House which it must then translate into secondary legislation. If that secondary legislation cannot be drafted in a way that is readily understood, the Government's stated aim of reducing regulation will be undone because we shall be producing incomprehensible legislation that will hardly make life easy for those who must interpret and abide by it. I hope that the Minister and his supporters will take that into account for the future. I am grateful to him for explaining the Government's position so succinctly.
Mr. Nelson: I shall respond briefly to the three points raised by the hon. Member for Edinburgh, Central (Mr. Darling). He sought assurances about the extent to which full disclosure will still be required in prospectuses issued under these statutory instruments, and implied some read-across with Genco 2. I make no complaint about his being somewhat mischievous about that, although I assure him readily that nothing in the measures requires lower standards of disclosure as a result of the procedures being followed. The requirements for full disclosure in prospectuses will remain after the instruments are enacted. Genco 2 was the subject of a clear statement by my right 6 hon. and learned Friend the Chancellor of the Exchequer and by my right hon. Friend the Financial Secretary to the Treasury. The hon. Gentleman is aware that the Treasury is looking into the issues raised by the letter from the chief executive of the stock exchange, and will respond to it. Three is no read-across from these provisions to that. The hon. Gentleman made a compelling point; he says that he finds the instruments incomprehensible. It should be the purpose of an explanatory note to assist the Committee and the House and it is ultimately for Ministers to try to explain in language that is as simple as possible provisions that are sometimes complex. However, he is right to make his point and I accept his strictures. The lesson that I should take away is that the explanatory note should be in simpler English. I have the benefit of considerable briefings from my officials and am able to delve into the reasons for the provisions. It is right that the Committee should take me to task if it is dissatisfied. I share the hon. Gentleman's view that all too often, with complex measures under secondary legislation coming before the House, we forget the virtues of simple English and the prime responsibility of Ministers to translate them into language that we and our constituents can understand.
Mr. Darling: I do not want to detain the Committee unnecessarily, but my point was that the explanatory note came dangerously close to simply repeating what was in the body of the instruments. Usually, explanatory notes are lucid and readily understood. Will the Minister reflect on the desirability of making available to members of the Committee some of the briefings that Ministers receive, because they do not usually contain confidential information? Often, they contain information which, in blunt terms, states what an instrument does.
Mr. Nelson: Of course I will try. The Government would always try to be as nelpful as possible in such circumstances. Although the instruments have been the subject of consultation, I acknowledge that not every Member of the House will have taken the opportunity to read the relevant papers. It is important that such things should be easily understood. We will endeavour to improve our performance in that regard. With regard to the point that the hon. Gentleman made about the instruments not being subject to amendment, the consultation process—there were three rounds of consultation over some years—enabled the interested parties fully to understand and to comment on them. Indeed, they had the opportunity to persuade the Government to bring forward amended proposals. If the house was dissatisfied at the behest of outsiders with the eventual package, it would be within its remit to vote it down. I hope that the Committee will accept my assurances that the instruments faithfully represent the concerns and views expressed by the consultees—people outside the House are broadly satisfied. In simple terms—perhaps this is what the explanatory note should state—the changes will ensure that our 7 prospectus law is brought into line with the European prospectus directive and try to ensure that certain changes with regard to unlisted securities are brought into place in time for the arrival of the new alternative investment market, the AIM, which starts next week. Perhaps two sentences to that effect should have been put up front, but I welcome the opportunity to state that to the Committee.
Question put and agreed to.
Resolved, That the Committee has considered the draft Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995.
Resolved, That the Committee has considered the draft Public offers of Securities Regulations 1995.
Committee rose at seventeen minutes to Eleven o'clock.
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Hunt, Sir John (Chairman)
Davies, Mr Quentin
Evans, Mr. Nigel
Roberts, Sir. Wyn
Shepherd, Mr. Richard