Regulation of actuaries etc
1672.These provisions are the first step in implementing the central recommendation of the Morris Review of the Actuarial Profession: that the Financial Reporting Council (the «FRC») take on a similar role in relation to the oversight of the actuarial profession to the one it currently exercises in relation to accountancy and the auditors’ profession.
1673.The Government announced in Budget 2005 its intention to legislate in due course to put the oversight regime onto a full statutory footing. It has not been possible to develop such a regime in time for inclusion in this Act. It was therefore agreed with the FRC and the Institute and Faculty of Actuaries that, pending the introduction of a full statutory regime, the FRC would begin voluntary oversight of the actuarial profession at the earliest possible opportunity. The FRC assumed this responsibility for actuarial standards and oversight of the profession in April 2006.
1674.The aim of these provisions is to provide the minimum necessary statutory underpinning for a voluntary regime. They amend the C(AICE) Act 2004 in two ways:
they extend the statutory immunity conferred on the FRC and its companion bodies so that it covers acts or omissions relating to oversight of the actuarial profession;
they allow the Secretary of State, if necessary, to make regulations to require beneficiaries of the actuarial oversight to contribute towards the funding costs of the proposed regime.
1675.This latter is a reserve power. It is proposed, as is currently the case with accountancy and the auditors’ professions, to fund this activity on a non-statutory basis by agreement with the insurance and pensions industries and the actuarial profession. The FRC published its final funding proposals in March 2006.
Section 1274: Grants to bodies concerned with actuarial standards etc
1676.This section amends section 16(2) of the C(AICE) Act 2004 so as to include in the list of matters carried on by bodies eligible for grants activities concerned with the setting of actuarial standards, compliance with those standards, oversight of the actuarial profession and related matters.
1677.A body to which a grant has been paid under section 16 is protected by section 18 of that Act from certain liabilities in connection with its section 16(2) activities.
Section 1275: Levy to pay expenses of bodies concerned with actuarial standards etc
1678.This section amends section 17 of the C(AICE) Act 2004 so as to include amongst those by whom a levy may be payable—
the administrators of a public service pension scheme, and
the trustees and managers of an occupational or personal pension scheme.
1679.The effect of the amendments is to enable the Secretary of State to make regulations specifying such persons as liable to pay a levy if he considers that the oversight activities of the FRC are relevant to them to a significant extent.
1680.Subsection (4) enables regulations under section 17 to make different provision for different cases so that, for example, they can provide for different rates of levy to be payable by different kinds of bodies or persons.
1681.Subsection (5) prevents the first regulations under section 17, and any other regulations under that section that would result in any change in the bodies or persons by whom the levy is payable, from being treated as hybrid instruments for the purposes of the standing orders of either House of Parliament. The effect is that such regulations are not subject to the special procedures in the House of Lords that apply to such instruments.
1682.Subsection (7) amends Schedule 3 to the Pensions Act 2004 to enable the Pensions Regulator to disclose restricted information to the Secretary of State to enable or assist him in the exercise of his functions under section 17 of the C(AICE) Act 2004.
Section 1276: Application of provisions to Scotland and Northern Ireland
1683.This section amends the C(AICE) Act 2004 as regards the application of certain provisions to Scotland and Northern Ireland.
1684.Subsection (2) amends section 16 of that Act so that paragraphs (a) to (t) of subsection (2) of that section, which list matters carried on by bodies eligible for grants, only apply to Scotland insofar as they relate to matters for which provision would be outside the legislative competence of the Scottish Parliament. This is necessary because, whilst section 16 and the provisions of this Act amending it extend to Scotland, some of the matters listed in paragraphs (a) to (t) are not reserved matters for the purposes of section 30 of the Scotland Act 1998 and are therefore within the legislative competence of the Scottish Parliament.
1685.Subsections (3) to (5) amend section 16(2) and (5) and section 66(2) of the C(AICE) Act 2004 so that sections 16 and 18, as well as section 17, of that Act extend to Northern Ireland.
Exercise of voting rights by institutional investors
1686.Institutional investors own and manage assets on behalf of and for the benefit of clients or members and have an obligation to manage those assets in their interests. In some cases there is a trustee-beneficiary relationship between the institution and the client, and in all cases there are contractual and regulatory requirements imposing duties of asset management on the institution. Voting is central to the exercise of ownership control. However, the ability of ultimate beneficiaries (e.g. members of a pension fund) to monitor the way in which institutional investors exercise voting rights is limited in practice.
1687.The CLR (Final Report, paragraph 6.39) concluded that disclosure of voting by institutional shareholders was a desirable objective. There has been a growing trend internationally to require disclosure. There has also been an increasing trend by UK fund managers towards voluntary disclosure.
Section 1277: Power to require information about exercise of voting rights
1688.This section confers a power on the Secretary of State and the Treasury to make regulations requiring certain categories of institutional investor to provide information about the exercise of their voting rights. The power is drawn intentionally widely to enable any mandatory disclosure regime to respond to varied corporate governance arrangements and to capture a range of institutions investing in different markets. Exercise of the power is subject to affirmative resolution procedure.
1689.Subsection (4) provides that the obligation imposed by regulations under this section is enforceable by civil proceedings brought either by the person to whom the information should have been provided or by a regulatory authority specified in the regulations (which could, for example, be the FSA).
Section 1278: Institutions to which information provisions apply
1690.This section lists the categories of institutions in relation to which the power conferred by section 1277 is exercisable. Subsection (2) enables the Treasury or Secretary of State to add to or amend the categories. Subsection (3) requires that the regulations specify by whom the duty imposed by the regulations is to be fulfilled.
Section 1279: Shares to which the information provisions apply
1691.This section confers power to specify by regulations the descriptions of shares in relation to which the information provisions apply. They will apply wherever a listed institution has an interest in such shares. Subsections (2) to (4) provide that an institution is taken to have an interest in shares in certain cases.
Section 1280: Obligations with respect to provision of information
1692.This section specifies the information that can be required. This covers the exercise or non-exercise of voting rights, instructions given by the institution and any delegation of a function related to the exercise or non-exercise of voting rights.
1693.Subsection (1) contains a power to require institutional investors to procure disclosure of voting or of any instructions given by any person acting on the institution’s behalf. Institutional investors would need to make sure that their investment contracts required such information to be passed on to them or disclosed on their behalf.
1694.Under subsection (4), the regulations may specify how and to whom the disclosure is to be made. This would allow the regulations to both specify the manner of disclosure and require disclosure to (for example) clients and members only, or to the public generally.
Disclosure of information under the Enterprise Act 2002
1695.Part 9 of the Enterprise Act applies to information which public authorities receive in connection with competition and consumer functions under certain Parts of the Enterprise Act 2002 and under other specified competition and consumer protection legislation. Information relating to the affairs of an individual or business must be kept confidential unless Part 9 permits its disclosure.
1696.This provision amends Part 9 so as to enable public authorities to disclose information for the purposes of civil proceedings or otherwise for the purpose of establishing, enforcing or defending legal rights.
Section 1281: Disclosure of information under the Enterprise Act 2002
1697.The new section 241A allows a public authority to disclose prescribed information to any person for the purposes of prescribed civil proceedings in the United Kingdom or elsewhere. Prescribed means prescribed by the Secretary of State by order. The new provision extends to prospective proceedings, taking legal advice about proceedings and other ways of establishing, enforcing or defending legal rights (such as alternative dispute resolution schemes).
1698.Information obtained by a public authority in connection with competition functions is excluded from the new provision.
Expenses of winding up
1699.The House of Lords decided in Buchler and another v Talbot and others, in re Leyland Daf [2004] UKHL 9 that property subject to a floating charge is not available to fund the general expenses of winding up. This provision is intended to reverse that decision.
Section 1282: Payment of expenses of winding up (England and Wales)
1700.Subsection (1) inserts a new section 176ZA in the Insolvency Act 1986 under which property subject to a floating charge may, where necessary, be used to fund the general expenses of winding up in priority to the floating charge holder and to any preferential creditors entitled to be paid out of that property. There is power to make provision by rules requiring the authorisation or approval of the floating charge holder, or any preferential creditors, or the court, in certain circumstances.
1701.Subsection (2) makes a corresponding amendment of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I.19)).
Commonhold associations
1702.Commonhold associations are a new form of company limited by guarantee established under the Commonhold and Leasehold Reform Act 2002. Commonhold associations must register their memorandum and articles of association both with Companies House (on formation) and with HM Land Registry (on registration of the commonhold).
1703.At present paragraph 3(1) of Schedule 3 to the Commonhold and Leasehold Reform Act 2002 provides that an alteration of a commonhold association's memorandum or articles is of no effect if it is not registered with the Land Registry. The purpose of the provision is to ensure that the version of those documents held by the Land Registry is up to date. An unintended consequence of it, however, is that it effectively prohibits any change of an association’s memorandum or articles before the land which the commonhold association is established to manage is registered as commonhold land or after it has stopped being commonhold land.
Section 1283: Amendment of memorandum or articles of commonhold association
1704.This section amends paragraph 3(1) of Schedule 3 to the Commonhold and Leasehold Reform Act 2002 so as to limit the application of the provision to alterations made at a time when the land the association is established to manage is commonhold land.