Railtrack: FSA response to Michael Howards letter of 18th October

The attached letter was issued today in response to the letter from The Rt Hon Michael Howard QC MP, to Howard Davies, Chairman of the Financial Services Authority.

Thank you for your further letter of 18 October.

My letter of 17 October made clear our view that section 47 of the Financial Services Act 1986 does not bind the Crown. I am not aware of any authority which would support the distinction you seek to draw in the application of the Crowns immunity to Ministers of the Crown between commercial or non-commercial activities. It follows that we do not see that it is necessary to revisit the view we have taken as to the applicability of section 47. Further, we do not think it would be possible for the FSA to seek to obtain from the Court civil remedies under section 61 by reference to section 47 of the Act where, as here, there can have been no contravention of that provision. Nor do we consider we have grounds to take action on the basis that the Secretary of State has acted as a shadow director of Railtrack.

You ask whether the FSA has considered making enquiries into the conduct of authorised or registered persons under FSA and who have been involved in the decisions which were taken. As my previous letter indicated, the UKLA has written to Railtrack seeking further information on recent contacts between Railtrack and the Government, and this is to cover the period since 24 May 2001 when the company announced its preliminary results. The UKLAs disciplinary powers extend to issuers and to sponsors and were our enquiries to disclose other possible regulatory contraventions involving authorised persons then we would, in the normal way, consider whether an investigation and subsequent enforcement action would be appropriate.

You have asked about our new powers under section 168 of the Financial Services and Markets Act 2000. The position is that we could not use our powers to appoint investigators were the grounds to do so to relate only to matters for which the Crown has immunity such that there could not be a contravention of section 397 of the Act.

Notes for editors

1. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

   The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.