---

Financial Services Bill

Clause 16 enables the regulator to impose a penalty on a person who is performing a controlled function without the necessary FSA approval. Amendments 184A, 184B and 186A change that drafting so that the FSA will be able to impose a penalty only where it is satisfied that the person concerned knew or could reasonably be expected to have known that they were performing a controlled function without approval. The noble Baroness, Lady Noakes, tabled similar amendments, for which I express my appreciation. A limitation period applies to the FSA's enforcement action. Currently, the FSA must begin proceedings against an individual within two years. The Bill increases this limit to four years because the current two-year limit does not give the FSA enough time to investigate the most complex cases. In addition, cases against individuals are usually hard-fought, and the FSA suspects that individuals are often deliberately unco-operative as a delaying tactic to frustrate enforcement action. Individuals can therefore deliberately obstruct an investigation in order to run down the clock and evade disciplinary action. This is clearly wrong. However, I am also mindful of the concerns expressed in another place and by the noble Baroness, Lady Noakes, who tabled amendments to this part of the Bill. Amendments 194 and 204 reduce the proposed increase in the limitation period from four to three years. I believe that this strikes the right balance between providing the FSA with enough time to conduct a proper investigation and addressing the concerns of the Opposition Front Benches here and in the other place. Amendments 200, 201 and 202 ensure that the FSA must have regard to a number of factors when determining both the level of a fine and whether it should be imposed in the first place on an individual who has performed a controlled function without approval. The Bill states that the FSA's policy on penalties must require it to have regard to the conduct of the individual and the length of time during which they performed a controlled function without approval. Amendments 200, 201 and 202 would ensure that the FSA's policy would have regard to two additional factors when determining whether to impose a fine, and the level of that fine: first, the extent to which the individual could reasonably have been expected to know that they were performing a controlled function without approval; and secondly, whether it is appropriate to take enforcement action against the individual as opposed to, or in addition to, the firm. The amendments also require the FSA to set out the sorts of circumstances in which it would reasonably expect an individual to know that they were performing a controlled function. This provides a comprehensive set of safeguards. I beg to move.