Hewitt defends FSA's sweeping powers

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The Independent Online
PATRICIA HEWITT, the Economic Secretary to the Treasury, yesterday defended the Government's decision not to impose major curbs on the sweeping powers of the new Financial Services Authority (FSA) to deal with City practitioners who fall foul of the rules.

"It is important that we are not naive in being prepared to deal with people who profit from the abuse of financial services," she said. She insisted it was important "not to be soft on people" who take advantage of the investing public.

Ms Hewitt yesterday went before a joint committee, composed of MPs and members of the House of Lords, which has been set up specifically to scrutinise the new Financial Services Markets Bill which gives legal basis to the new City watchdog.

The minister was joined by her legal adviser, Sydney Kentridge, QC, who defended the Government unsuccessfully in the Ernest Saunders case, and James Eadie.

She was responding to criticism in the committee's report last month that the Bill as drafted was not compatible with the European Convention on Human Rights.

Ms Hewitt was quizzed by MPs, who argued that the fact that the FSA's disciplinary powers include levying unlimited fines meant the regime was punitive in intent and therefore those brought to book should be entitled to the same degree of protection as those facing a full criminal trial.

The minister said that, given the type of businesses the FSA is dealing with, limiting the fines would make no sense. "These people are very big players. In the case of some of the kinds of transaction, the sort of fine that would bankrupt most businesses is just a blip on their balance sheet," she said. "The fine must fit the crime."

Ms Hewitt said the Treasury has decided to err on the side of caution. Ms Hewitt said the regime would be "Saunders-proofed", by which she meant that evidence obtained under compulsion would not be admissible.

This is a reference to the former Guinness chief, Ernest Saunders, who succeeded in bringing a case against the British government to the Human Rights Court in Strasbourg, for using evidence obtained by Department of Trade and Industry inspectors in proceedings against him.