Financial Services Bill

Session 2010 - 12
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Financial Services Bill

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
86

(6)
In this section—
“authorised person”, in relation to rules of the PRA, means a PRA-
authorised person;
“relevant requirement” means a requirement to collect, and keep
up to date, information of a specified description for the
5
purposes of a recovery plan or a resolution plan;
“specified” means specified in the rules.
Specific rule-making powers
137M
Threshold condition code
(1)
Either regulator may make rules supplementing any of the conditions
10
for the time being set out in Schedule 6 that is expressed to be relevant
to the discharge of that regulator’s functions.
(2)
Rules made under this section by a regulator are referred to as that
regulator’s “threshold condition code”.
(3)
A threshold condition code may in particular—
15
(a)
specify requirements which a person must satisfy in order to be
regarded as satisfying a particular condition in relation to any
regulated activities;
(b)
specify matters which are, or may be, or are not, relevant in
determining whether a person satisfies a particular condition in
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relation to any regulated activities.
(4)
Except where a regulator’s threshold condition code so provides, it is
not to be regarded as limiting the matters that are, or may be, relevant
in determining whether a person satisfies a particular condition in
relation to any regulated activities.
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(5)
A threshold condition code cannot impose obligations that are
enforceable against authorised persons otherwise than through the
threshold conditions.
137N
Control of information rules
(1)
Either regulator may make rules (“control of information rules”) about
30
the disclosure and use of information held by an authorised person
(“A”).
(2)
Control of information rules may—
(a)
require the withholding of information which A would
otherwise be required to disclose to a person (“B”) for or with
35
whom A does business in the course of carrying on any
regulated or other activity;
(b)
specify circumstances in which A may withhold information
which A would otherwise be required to disclose to B;
(c)
require A not to use for the benefit of B information—
40
(i)
which is held by A, and
(ii)
which A would otherwise be required to use for the
benefit of B;
(d)
specify circumstances in which A may decide not to use for the
benefit of B information within paragraph (c).
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Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
87

137O
Price stabilising rules
(1)
The FCA may make rules (“price stabilising rules”) as to—
(a)
the circumstances and manner in which,
(b)
the conditions subject to which, and
(c)
the time when or the period during which,
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action may be taken for the purpose of stabilising the price of
investments of specified kinds.
(2)
Price stabilising rules—
(a)
are to be made so as to apply only to authorised persons;
(b)
may make different provision in relation to different kinds of
10
investment.
(3)
The FCA may make rules which, for the purposes of section 397(5)(b),
treat a person who acts or engages in conduct—
(a)
for the purpose of stabilising the price of investments, and
(b)
in conformity with such provisions corresponding to price
15
stabilising rules and made by a body or authority outside the
United Kingdom as may be specified in rules made by the FCA,

as acting, or engaging in that conduct, for that purpose and in
conformity with price stabilising rules.
137P
Financial promotion rules
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(1)
The FCA may make rules applying to authorised persons about the
communication by them, or their approval of the communication by
others, of invitations or inducements—
(a)
to engage in investment activity, or
(b)
to participate in a collective investment scheme.
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(2)
Rules under this section may, in particular, make provision about the
form and content of communications.
(3)
Subsection (1) applies only to communications which—
(a)
if made by a person other than an authorised person, without
the approval of an authorised person, would contravene section
30
21(1), and
(b)
may be made by an authorised person without contravening
section 238(1).
(4)
But subsection (3) does not prevent the FCA from making rules under
subsection (1) in relation to a communication that would not
35
contravene section 21(1) if made by a person other than an authorised
person, without the approval of an authorised person, if the conditions
set out in subsection (5) are satisfied.
(5)
Those conditions are—
(a)
that the communication would not contravene subsection (1) of
40
section 21 because it is a communication to which that
subsection does not apply as a result of an order under
subsection (5) of that section,
(b)
that the FCA considers that any of the requirements of—
(i)
paragraphs 1 to 8 of Article 19 of the markets in financial
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instruments directive,

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
88

(ii)
any implementing measure made under paragraph 10
of that Article, or
(iii)
Article 77 of the UCITS directive,

apply to the communication, and
(c)
that the FCA considers that the rules are necessary to secure that
5
the communication satisfies such of the requirements
mentioned in paragraph (b) as the FCA considers apply to the
communication.
(6)
“Engage in investment activity” has the same meaning as in section 21.
(7)
The Treasury may by order impose limitations on the power to make
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rules under this section.
137Q
Financial promotion rules: directions given by FCA
(1)
The FCA may give a direction under this section if—
(a)
an authorised person has made, or proposes to make, a
communication or has approved, or proposes to approve,
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another person’s communication, and
(b)
the FCA considers that there has been, or is likely to be, a
contravention of financial promotion rules in respect of the
communication or approval.
(2)
A direction under this section may require the authorised person—
20
(a)
to withdraw the communication or approval;
(b)
to refrain from making the communication or giving the
approval (whether or not it has previously been made or given);
(c)
to publish details of the direction;
(d)
to do anything else specified in the direction in relation to the
25
communication or approval.
(3)
A requirement in a direction under this section to refrain from making
or approving a communication includes a requirement to refrain from
making or approving another communication where—
(a)
the other communication is in all material respects the same as,
30
or substantially the same as, the communication to which the
direction relates, and
(b)
in all the circumstances a reasonable person would think that
another direction would be given under this section in relation
to the other communication.
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(4)
The requirements contained in a direction under this section have effect
as follows—
(a)
a requirement to publish details of the direction has effect at
such time (if any) as the FCA gives a notice under subsection
(8)(a);
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(b)
any other requirement takes effect immediately.
(5)
If the FCA gives a direction under this section to an authorised
person—
(a)
it must give written notice to the authorised person, and
(b)
if the direction relates to the approval by the authorised person
45
of another person’s communication, it must also give written
notice to that other person.

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
89

(6)
The notice must—
(a)
give details of the direction;
(b)
inform the person to whom the notice is given that the direction
takes effect immediately;
(c)
state the FCA’s reasons for giving the direction; and
5
(d)
inform the person to whom the notice is given that the person
may make representations to the FCA within such period as
may be specified in the notice (which may be extended by the
FCA).
(7)
The FCA may amend the direction if, having considered any
10
representations made by a person to whom notice is given under
subsection (5), it considers it appropriate to do so.
(8)
If, having considered any such representations, the FCA decides not to
revoke the direction—
(a)
the FCA must give separate written notice to the persons
15
mentioned in subsection (5)(a) or (b), and
(b)
any such person may refer the matter to the Tribunal.
(9)
A notice under subsection (8)(a) must—
(a)
give details of the direction and of any amendment of it,
(b)
state the FCA’s reasons for deciding not to revoke the direction
20
and, if relevant, for amending it,
(c)
inform the person to whom the notice is given of the person’s
right to refer the matter to the Tribunal, and
(d)
give an indication of the procedure on such a reference.
(10)
If, having considered any representations made by a person to whom
25
notice is given under subsection (5), the FCA decides to revoke the
direction, it must give separate written notice to those persons.
(11)
After the period for making representations in relation to a direction
given under this section has ended, the FCA must publish such
information about the direction as it considers appropriate (even if the
30
direction is revoked).
(12)
Nothing in this section requires a notice to be given to a person
mentioned in subsection (5)(b) if the FCA considers it impracticable to
do so.
Supplementary powers
35
137R
General supplementary powers
Rules made by either regulator—
(a)
may make different provision for different cases and may, in
particular, make different provision in respect of different
descriptions of authorised persons, activity or investment,
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(b)
may make provision by reference to rules made by the other
regulator, as those rules have effect from time to time, and
(c)
may contain such incidental, supplemental, consequential and
transitional provision as the regulator making the rule
considers appropriate.
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Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
90

Chapter 2
Rules: modification, waiver, contravention and procedural provisions
Modification or waiver of rules
138A
Modification or waiver of rules
(1)
Either regulator may, on the application or with the consent of a person
5
who is subject to rules made by that regulator, direct that all or any of
those rules—
(a)
are not to apply to that person, or
(b)
are to apply to that person with such modifications as may be
specified in the direction.
10
(2)
Subsection (1) does not apply to—
(a)
rules made by either regulator under section 137M (threshold
condition code);
(b)
rules made by the FCA under section 247 (trust scheme rules) or
section 248 (scheme particulars rules).
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(3)
An application must be made in such manner as the regulator may
direct.
(4)
A regulator may not give a direction unless it is satisfied that—
(a)
compliance by the person with the rules, or with the rules as
unmodified, would be unduly burdensome or would not
20
achieve the purpose for which the rules were made, and
(b)
the direction would not adversely affect the advancement of
any of the regulator’s objectives.
(5)
In subsection (4)(b) “objectives”, in relation to the FCA, means
operational objectives.
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(6)
A direction may be given subject to conditions.
(7)
The regulator may—
(a)
revoke a direction, or
(b)
vary it on the application, or with the consent, of the person to
whom it relates.
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(8)
“Direction” means a direction under this section.
138B
Publication of directions under section 138A
(1)
Subject to subsection (2), a direction must be published by the regulator
concerned in the way appearing to the regulator to be best calculated
for bringing it to the attention of—
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(a)
persons likely to be affected by it, and
(b)
persons who are, in the opinion of the regulator, likely to make
an application for a similar direction.
(2)
Subsection (1) does not apply if the regulator is satisfied that it is
inappropriate or unnecessary to publish the direction.
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(3)
In deciding whether it is satisfied as mentioned in subsection (2), the
regulator must—

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
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(a)
consider whether the publication of the direction would be
detrimental to the stability of the UK financial system,
(b)
take into account whether the direction relates to a rule
contravention of which is actionable in accordance with section
138D,
5
(c)
consider whether publication of the direction would prejudice,
to an unreasonable degree, the commercial interests of the
person concerned or any other member of the person’s
immediate group, and
(d)
consider whether its publication would be contrary to an
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international obligation of the United Kingdom.
(4)
The FCA must consult the PRA before publishing or deciding not to
publish a direction which relates to—
(a)
a PRA-authorised person, or
(b)
an authorised person who has as a member of its immediate
15
group a PRA-authorised person.
(5)
For the purposes of paragraphs (c) and (d) of subsection (3), the
regulator must consider whether it would be possible to publish the
direction without either of the consequences mentioned in those
paragraphs by publishing it without disclosing the identity of the
20
person concerned.
(6)
“Direction” means a direction under section 138A.
Contravention of rules
138C
Evidential provisions
(1)
If a particular rule made by either regulator so provides, contravention
25
of the rule does not give rise to any of the consequences provided for
by other provisions of this Act.
(2)
A rule made by a regulator which so provides must also provide—
(a)
that contravention may be relied on as tending to establish
contravention of such other rule made by that regulator as may
30
be specified, or
(b)
that compliance may be relied on as tending to establish
compliance with such other rule made by that regulator as may
be specified.
(3)
A rule may include the provision mentioned in subsection (1) only if
35
the regulator making the rule considers that it is appropriate for it also
to include the provision required by subsection (2).
(4)
In this section “rule” does not include a rule made under—
(a)
section 137M (threshold condition code);
(b)
section 192J (provision of information by parent undertakings).
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138D
Actions for damages
(1)
A rule made by the PRA may provide that contravention of the rule is
actionable at the suit of a private person who suffers loss as a result of
the contravention, subject to the defences and other incidents applying
to actions for breach of statutory duty.
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Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
92

(2)
A contravention by an authorised person of a rule made by the FCA is
actionable at the suit of a private person who suffers loss as a result of
the contravention, subject to the defences and other incidents applying
to actions for breach of statutory duty.
(3)
If rules made by the FCA so provide, subsection (2) does not apply to a
5
contravention of a specified provision of the rules.
(4)
In prescribed cases, a contravention of a rule which by virtue of
subsection (1) or (2) would be actionable at the suit of a private person
is actionable at the suit of a person who is not a private person, subject
to the defences and other incidents applying to actions for breach of
10
statutory duty.
(5)
In subsections (1), (2) and (3) “rule” does not include—
(a)
Part 6 rules;
(b)
rules under section 131B (short selling rules);
(c)
rules under section 137M (threshold condition code);
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(d)
rules under section 192J (provision of information by parent
undertakings);
(e)
a rule requiring an authorised person to have or maintain
financial resources.
(6)
“Private person” has such meaning as may be prescribed.
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138E
Limits on effect of contravening rules
(1)
A person is not guilty of an offence by reason of a contravention of a
rule made by either regulator.
(2)
No such contravention makes any transaction void or unenforceable.
(3)
Subsection (2) does not apply in relation to product intervention rules
25
made by the FCA under section 137C.
Procedural provisions
138F
Notification of rules
If either regulator makes, alters or revokes any rules, that regulator
must without delay give written notice—
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(a)
to the Treasury, and
(b)
to the Bank of England.
138G
Rule-making instruments
(1)
Any power conferred on either regulator to make rules is exercisable in
writing.
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(2)
An instrument by which rules are made by either regulator (“a rule-
making instrument”) must specify the provision under which the rules
are made.
(3)
To the extent that a rule-making instrument does not comply with
subsection (2), it is void.
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