The 4th sitting of the Grand Committee on the FSM Bill took place on 6 February. The Committee discussed:
- financial inclusion, both as a general principle and in terms of the reality of retail investors being excluded from many share offers as issuers seek to avoid regulatory burdens resulting in minimum investment levels being too high. So as well as generally having regard to financial inclusion it is proposed the regulators minimise barriers to wider share ownership. Baroness Bull suggested that the amendments plug the gap in the Consumer Duty, which she said fail to address the financial exclusion of those who are charged more or excluded because they are seen as higher risk or too expensive to serve, and a number of speakers noted that there are gaps in responsibility between regulators. Baroness Penn said that action is already being taken to reduce barriers for retail investors with prospectus regime reform, and with a review of secondary capital raising. On changing FCA’s objectives, she said that although she agreed with their intention, regulatory objectives should not be changed without consultation. Many Lords noted that it was not good enough for the Government just to keep reiterating that they were doing something – but ultimately, Clause 24 was agreed. Amendment 55 was withdrawn and amendments 56-66 not moved;
- an amendment from Baroness Bowles to introduce a prevention of fraud objective for FCA, to specify that, for these purposes “relevant markets” are not only regulated markets, and to introduce a failure to prevent fraud or facilitation of fraud offence. She said the proposals the Government says it will make in the Economic Crime and Corporate Transparency Bill are not tailored to financial services. Other members spoke to their supporting proposals, including imposing a duty on the Treasury to produce a national strategy on the detection, prevention and investigation of fraud in relation to financial services within 6 months of the Act being passed. In response, Baroness Penn summarised FCA’s powers, including explaining that it does not have power to investigate a firm that is not authorised and is not carrying on any regulated activity unless it is carrying on market abuse. It was suggested it would be a good idea for ministers involved in all the current proposals relating to financial crime to speak together. But, ultimately, amendment 67 was withdrawn and 67A (a financial inclusion objective for FCA) not moved;
- clause 25 (regulatory principles: net zero emissions target) was agreed;
- amendments 70-73 (on regulatory duties, and the “relevant market” definition) were not moved;
- Clause 26 was agreed;
- Amendments 74-75 (on proportionality and financial inclusion) were not moved;
- amendment 76 was a proposal to impose on FCA a duty to make rules introducing a duty of care to replace the Consumer Duty. Those suggesting amendments also noted FCA’s slowness to respond in a number of crises of maladministration within firms. They felt the Consumer Duty does not help rebalance the imbalance of information nor does it really help vulnerable customers. Others said FCA had not understood what a “duty of care” is, and said that promises made during the debate of the Financial Services Bill in 2021 had not been honoured. Despite high feelings in the Lords, the amendment was withdrawn and Amendments 77 (on specifically taking account of protection of consumer mental health) and 77A (basis of taking regulatory action) not moved.