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Undertakings for Collective Investment in Transferable Securities Regulations 2011

My Lords, I thank the noble Lord, Lord Eatwell, for his contribution to the discussion, but I am sorry that he does not seem to see much of merit in what should be a sensible piece of tidying-up of a regime in Europe which has been in place since 1988. It has taken with it the interests of not only the industry but also the consumer groups as it has been developed successfully through three amendments—and now the fourth—to the directive. We have transposed the directive by way of copy-out without any gold-plating. It rather surprises me that the noble Lord takes this basic stance to a framework which has stood consumers across Europe very well for a considerable number of years and not to date raised any of the concerns that he suggests that this series of amendments might raise. I shall go through those concerns. I hope that the noble Lord agrees that there is considerable work to be done to complete the single market, whether it is fund management, other parts of financial services or business services more generally. In areas of completing the single market, consumer protection has to be taken seriously but I would interpret that, as a starting position, as not wanting to help complete the single market. That is protectionist in its import if not in the intention, given how the noble Lord, Lord Eatwell, spells it out. That is an unfortunate starting point. We should be looking at ways to sensibly advance what is a well worked regime and to see how we can enable both consumers and the financial services industry to take advantage of sensible further development and the opening up of the single market. On the noble Lord’s specific concerns, there are two aspects to the question of regulatory arbitrage. First, in the regime, the directive leaves little room for member states’ discretion. It is not that the UK will be transposing these rules in one way and other member states in a radically different way. I know that this is probably not the main thrust of the charge that the noble Lord made on this but it is important to be clear that it is not the rules themselves that will give any significant scope for regulatory arbitrage. Beyond that, it is of course important that we ensure in the UK that funds passported into the UK are suitably regulated. Broadly speaking, that is what has happened under UCITS to date. There are already a good number of funds passporting into the UK under the UCITS directive. The FSA has powers to regulate their marketing activities. This is not opening up some completely new avenue here.