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Investment Exchanges and Clearing Houses Bill

My Lords, I start by thanking the Minister for not using the phrase ““light touch”” in relation to the Bill. I have spent some time in the venture capital area. In the context of light touch, it is worth reminding the House that the Financial Services Authority’s handbook has some 23 volumes with approximately 10,000 pages, which would probably reach from the Table to the ceiling of this House. You can purchase a copy for £2,258. It may be a slight exaggeration to call that light touch but, as the noble Lord, Lord MacGregor, said, it is somewhat preferable to many other regimes elsewhere in the globe. In general I very much support the Bill although questions were asked on it in the other place. Questions need to be asked about it. For instance, the FSA already has complete control over the listing rules and produces the disclosure and prospectus rules. There is a source book on recognised insurance exchanges and recognised clearing houses, in which the FSA can lay down regulations. It is already very powerful in that area. In what circumstances is the Bill needed? I hope that the Minister will forgive me if I have completely misunderstood the position with regard to the alternative investment market. Having looked at the Bill, and the Financial Services and Markets Act to which it refers, I note that Section 300 refers solely to recognised investment exchanges and recognised clearing houses. That is fine for the main London Stock Exchange market and many of its recognised bodies, which it lists, but although the alternative investment market is a subsidiary owned by the London Stock Exchange, it is very specifically not a registered investment exchange; it is an exchange regulated market. It is very differentiated to avoid some heavy touch European regulation, particularly the prospective directive. The alternative investment market is not an RIE. I do not understand how it is protected by this legislation. Over the past 10 years AIM has been one of the great successes of the London market. It has raised some £34 billion worth of capital and has 1,500 listed companies. It is particularly successful in attracting overseas listings from 26 countries. I believe that some 250 overseas companies are listed on it. It has a great reputation for growth and light regulation. Unlike the LSE’s internal rule book of some 250 pages, the AIM rule book has only some 35 pages and exists wholly to promote light-touch regulation. Yet, if the LSE were taken over as a corporation by NASDAQ or any other external body, clearly it would have ownership of AIM. I do not understand how this legislation covers AIM because it is not a recognised investment exchange. There is confusion regarding my next question. Who are we concerned about regarding over-regulation? Is it the recognised investment exchanges themselves or the corporations that list on them? The Minister mentioned the exchanges themselves. I should have thought that the FSA’s current source books and powers enable it to control that totally. I refer to registration and deregistration. The rules regarding recognised bodies are laid out and come within FSA powers. However, the indirect regulation and rules concerning the companies that are listingon those exchanges are more difficult. If those companies also have listings on the New York stock exchange or elsewhere, or if the LSE is a subsidiary of a foreign listed corporation based in America, they will be subject to Sarbanes-Oxley whether we like it or not. It seems to me that we have a clash of legislation, rather than necessarily annulling the effects of Acts such as the Sarbanes-Oxley Act. This Bill gives the FSA powers generally to interfere in the way in which registered investment exchanges and clearing houses make rules, which may in no way be related to a takeover by a foreign, or any other, business. I would like to have the Minister’s assurance that the legislation does not give an open book for the FSA to over-interfere in such exchanges and clearing houses. I very much welcome the legislation as an insurance policy, but I would like to be far clearer about what the dangers are, particularly whether the alternative investment market—which is one of London’s jewels in the crown—is actually protected by the legislation, because I do not understand how it is.