Financial Services and Markets Bill (Third sitting)

Debate between Stephen Hammond and Emma Hardy

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[Peter Grant]

If it became clear to the Treasury or the relevant regulator that crowdfunders were using funds for illicit purposes, rather than for genuinely good causes, I would expect the Treasury and the relevant regulator to step in. My amendment is designed to put primary legislation in place to allow the regulators to step in, and to allow the Treasury to take action, if it becomes clear that there is a problem, regardless of whether that is through crowdfunding or any other method of raising finance. The important part of the amendment is about finances being raised as a way of raising capital. The amendment does not in any way imply that it would cover, for example, crowdfunding for a good cause or to raise funds for someone who has had a serious accident. That would not be covered by the wording of the amendment.

I can understand the concerns, and I am quite happy if someone can come up with better wording—possibly in an amendment to a different piece of legislation—that achieves the aim of the amendment, but I am utterly convinced that there is a serious weakness in our current regulation. As currently worded, neither this Bill nor the Economic Crime and Corporate Transparency Bill will close down that loophole sufficiently.

At Blackmore Bond, the abuse that was taking place was stopped after it was too late. At Safe Hands Funeral Plans, the abuse that was taking place was stopped after it was too late and people had lost their money. The selling of mini-bonds to the general public, which is what Blackmore Bond was up to, is now outlawed, so action has been taken on that specific kind of abuse. Funeral plans are now regulated, so action has been taken on that specific kind of abuse. I do not want the regulator or the Treasury having always to see where the next specific company disguise is going to be, however; I want them to have the power to regulate based on how businesses take money from the general public.

With those comments, I look forward to hearing the Minister’s response. If he is not minded to accept the amendment, I hope that we can get an assurance that the intention behind it will be addressed at a later stage.

[Emma Hardy]

I have a general question on the clause and the designated activities regime. In the consultation response document produced by the Treasury—“Financial Services Future Regulatory Framework Review: Proposals for Reform. Response to Consultation” to be precise—some consultation respondents were concerned about what activities would physically be regulated, what constraints were to be placed on the powers of the Treasury and what the consequences for failing to comply with the regulator’s rules would be. I have not yet seen their concerns answered by the Minister. Will he address that?

[Stephen Hammond]

It is a great pleasure to serve under your chairmanship, Dame Maria. Will the Minister clarify quickly proposed new section 71S? The power in subsections (3) to (7) is an exceptional power, rather than a regular power.

Financial Services and Markets Bill (Second sitting)

Debate between Stephen Hammond and Emma Hardy

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Stephen Hammond]

Q I think it has been explicit all the way through that there is a hierarchy of objectives. Would you agree that the Bill should ensure that there is a clear set of metrics and there is transparency for showing how that objective is being met or is not being met?

Martin Taylor: If that can be done, I would certainly welcome it. One of the difficulties that the Financial Policy Committee has always had is that if your job is maintaining financial stability, it is not always very easy to see if you are succeeding. One can see that recently, for example, the Monetary Policy Committee has not been meeting its inflation objective. That is an objective in hard numbers, and for the FPC and for other regulatory bodies it is harder.

[Emma Hardy]

Q Thank you, Martin, for your candour. What risk could the intervention pose to financial stability and to the UK’s reputation and global competitiveness if left as it is?

Martin Taylor: I do not want to exaggerate. I said this was a corruption of the system and corruptions work slowly, so it does not make us into Argentina or Turkey overnight but that is the direction of travel, if I can put it that way. Independent regulation is not an aesthetic choice; it is a practical one. I think the transparency of the regulatory process in London—the need for the regulators to explain themselves and especially the scrutiny by Parliament—is one of the cornerstones, along with the legal system and various other things we are familiar with, of London’s attraction as a financial centre. The UK’s reputation needs a bit of tender loving care at the moment, I would say, and bringing in unnecessary measures that risk damaging it seems to me unintelligible.

Financial Services and Markets Bill (First sitting)

Debate between Stephen Hammond and Emma Hardy

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Stephen Hammond]

Q And those would be transparent?

Sheldon Mills: Of course, absolutely. We will be transparent on that.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Q Good morning. Sheldon, I read a speech of yours before about financial inclusion; I know it is something you care about. On the Treasury Committee, we have had a conversation similar to the one we are about to have. You probably know what I am going to ask you.

The Government have opted so far to not have a “have regard” for financial inclusion in the Bill. Do you believe that such a “have regard” for the FCA would ensure financial inclusion as a greater priority for the regulator? What else could be done with the Bill to ensure that financial inclusion is given a greater prominence?

Sheldon Mills: I hope we won’t have the same conversation as before. We have done some more work on financial inclusion following our conversations. Our position is still the same: we do not think we need a “have regard” on inclusion. We don’t think that that would add to our ability to act within our remit in line with our objectives. We have our consumer protection power and we have put in place our new consumer duty, which asks firms to meet a higher standard. We feel that we have sufficient powers to fix any problems that we feel we need to solve.

As we discussed last time, the regulator’s role is to support firms and the market to deliver to as many consumers as possible, including those who are vulnerable or might be excluded. However, we do not do that alone; we do that with partners such as Government, local authorities, charities and others. In relation to that, we are taking a proactive role and arranging a financial inclusion policy sprint in the autumn, working with Fair4All Finance and others. We will bring as many actors as possible into that space, using our innovation labs to work through the types of innovative activity we can put the financial services industry to in terms of tackling financial inclusion.

At the moment, we do not think we need a “have regard” given our current remit and the powers we have.

--- Later in debate ---

[Emma Hardy]

Is there anything you want to add, Karen?

Karen Northey: No, I think I covered it earlier.

[Stephen Hammond]

Q May I refer to my themes of transparency, accountability and proportionality? Charlotte, in your written evidence you say that the Bill should be amended to achieve the correct balance between customer protection and proportional regulation, and that the opportunity for improved accountability is falling short. I rather detect from your evidence that you agree with what Emma Reynolds said about the regulators marking their own homework. Will you comment on that? Karen, in your written evidence you talk about an evolutionary rather than a revolutionary approach to regulation. Could you explain what you mean by that?

Charlotte Clark: That language is really important. How do we get things like transparency and challenge into the system? I am not sure that writing it into legislation necessarily leads directly to it, but there is something about getting the right mechanisms, the right debate and the right challenge between Parliament and the regulators, without undermining their independence. This is such a big change. I do not think any of us could be completely certain that we have got it right, but it is about making sure that we have got the right balance and the right mechanisms to hold people to account.