Financial Services Bill (HC Bill 278)

(a) the need for each party when exercising a function in
relation to any person (“A”) who is a recognised body, or
any member of A’s group, to have regard to the exercise
(or possible exercise) of any function by the other party in
5relation to A or any member of A’s group;

(b) the role of each party in cases where they are both
exercising functions in relation to the same persons;

(c) the obtaining and disclosure of information;

(d) the co-ordination by the parties of the exercise of their
10powers to appoint competent persons under Part 11
(information gathering and investigations) to conduct
investigations on their behalf.

(3) In this paragraph any reference to a function is to any function
whether conferred by or under any provision of this Part of this
15Act or any other provision of this Act or otherwise.

2 (1) The appropriate regulators and the PRA must prepare and
maintain a memorandum describing how they intend to work
together in exercising their functions in relation to persons who
are recognised bodies and who—

(a) 20are PRA-authorised persons; or

(b) are members of a group of which a member is a PRA-
authorised person.

(2) The memorandum must in particular make provision about—

(a) the need for each party when exercising a function in
25relation to any person (“A”) who is a recognised body, or
any member of A’s group, to have regard to the exercise
(or possible exercise) of any function by the other party in
relation to A or any member of A’s group;

(b) the role of each party in cases where they are both
30exercising functions in relation to the same persons;

(c) the obtaining and disclosure of information;

(d) the co-ordination by the parties of the exercise of their
powers to appoint competent persons under Part 11
(information gathering and investigations) to conduct
35investigations on their behalf.

(3) In this paragraph any reference to a function is to any function
whether conferred by or under any provision of this Part of this
Act or any other provision of this Act or otherwise.

3 The parties to a memorandum under paragraph 1 or 2 must
40review the memorandum at least once in each calendar year.

4 The parties to a memorandum under paragraph 1 or 2 must give
the Treasury a copy of the memorandum and any revised
memorandum.

5 The Treasury must lay before Parliament a copy of any document
45received by them under paragraph 4.

6 The parties to a memorandum under paragraph 1 or 2 must ensure
that the memorandum as currently in force is published in the way

appearing to them to be best calculated to bring it to the attention
of the public.

Notification by FCA of action in relation to recognised clearing houses

7 The FCA must notify the Bank of England of any direction given
5by it under section 128 to a recognised clearing house (market
abuse: suspension of investigations).

8 The FCA must notify the Bank of England of any requirement
imposed by it under section 313A on a recognised clearing house
(power to require suspension or removal of financial instruments
10from trading).

Part 2 Application of provisions of this Act in relation to Bank of England

Introduction

9 (1) The provisions of this Act mentioned in this Part of this Schedule
15are to apply in relation to the Bank of England in accordance with
the provision made by this Part of this Schedule.

(2) In any case where sub-paragraph (1) applies—

(a) any reference in this Act to the FCA or the PRA which is
contained in, or relates to, any of those provisions
20(however expressed) is to be read as a reference to the
Bank; and

(b) this Act has effect with any other necessary modifications.

Rules

10 (1) The following provisions of Part 9A of this Act are to apply in
25relation to rules made by the Bank under any provision made by
or under this Act—

(a) section 137R (general supplementary powers);

(b) sections 138A and 138B (modification or waiver of rules),
but with the omission of subsection (4)(b) of section 138A
30and subsection (4) of section 138B;

(c) section 138C (evidential provisions);

(d) section 138D (actions for damages), but with the omission
of subsection (2);

(e) section 138E (limits on effect of contravening rules);

(f) 35section 138F (notification of rules);

(g) section 138G (rule-making instruments);

(h) section 138H (verification of rules);

(i) section 138J (consultation), but with the omission of
subsections (1)(a), (2)(c) and (5)(b); and

(j) 40section 138L (consultation: general exemptions), but with
the omission of subsections (1) and (3).

(2) Any reference in any of those provisions to an authorised person
is to be read as a reference to a recognised clearing house.

(3) Section 138J(2)(d) has effect in relation to rules proposed to be
made by the Bank as if the reference to the compatibility of the
proposed rules with the provisions mentioned in section
138J(2)(d) were a reference to their compatibility with the Bank’s
5financial stability objective.

(4) Section 138L(2) has effect as if for paragraphs (a) and (b) there
were substituted “be prejudicial to financial stability”.

Information gathering and investigations

11 (1) The powers conferred by section 165(1) and (3) (power to require
10information) are exercisable by the Bank or (as the case may be) its
officers to impose requirements on—

(a) a recognised clearing house;

(b) a person who for the purposes of section 165 is connected
with a recognised clearing house.

(2) 15The information or documents that the Bank may require to be
provided or produced are limited to—

(a) information or documents reasonably required in
connection with the exercise by the Bank of functions
conferred on it by or under this Part of this Act;

(b) 20information or documents reasonably required in
connection with the exercise by the Bank of any of its other
functions in pursuance of its financial stability objective;
and

(c) information or documents which the Bank reasonably
25considers may enable or assist the FCA in discharging
functions conferred on the FCA by or under this Act.

(3) In consequence of the provision made by sub-paragraph (2),
section 165(4) is not to apply in relation to section 165(1) and (3) as
applied by this paragraph.

12 30The power conferred by section 166 (reports by skilled person) is
exercisable by the Bank as if references in that section to an
authorised person were to a recognised clearing house.

13 (1) The powers conferred by section 167 (appointment of persons to
carry out general investigations) are exercisable by the Bank as if
35references in that section to an authorised person were to any
recognised clearing house other than an overseas clearing house.

(2) In addition to the powers conferred by section 171, a person
conducting an investigation under section 167 as a result of this
paragraph is to have the powers conferred by sections 172 and 173
40(and for this purpose the references in those sections to an
investigator are to be read accordingly).

14 (1) The power conferred by section 168(5) (appointment of persons to
carry out investigations in particular cases) is exercisable by the
Bank.

(2) 45That power is exercisable if it appears to the Bank that there are
circumstances suggesting that—

(a) a clearing house may be guilty of an offence under section
398(1) or an offence under prescribed regulations relating
to money laundering;

(b) a clearing house may have contravened a rule made by the
5Bank under Part 18 of this Act;

(c) a clearing house may have contravened the recognition
requirements;

(d) a clearing house may have contravened any qualifying EU
provision that is specified, or of a description specified, for
10the purposes of this sub-paragraph by the Treasury by
order;

(e) a clearing house may have breached the general
prohibition.

(3) In addition to the powers conferred by section 171, a person
15conducting an investigation under section 168(5) as a result of this
paragraph is to have the powers conferred by sections 172 and 173
(and for this purpose the references in those sections to an
investigator are to be read accordingly).

15 An overseas regulator may, in accordance with section 169,
20request the Bank to exercise the power conferred by section 165 (as
applied by paragraph 11 of this Schedule).

16 The power to give information under section 176(1) (entry of
premises under warrant) is exercisable by the Bank, or an
investigator appointed by the Bank, as if the reference to the
25second set of conditions were omitted.

Powers in relation to parent undertakings

17 (1) The following provisions of Part 12A of this Act are to apply in
relation to the Bank—

(a) section 192C (power to direct qualifying parent
30undertaking);

(b) section 192D (requirements that may be imposed);

(c) section 192E (direction: procedure);

(d) section 192G (references to Tribunal);

(e) section 192H (statement of policy);

(f) 35section 192I (statement of policy: procedure);

(g) section 192J (rules requiring provision of information);

(h) sections 192K to 192N (enforcement).

(2) For the purposes of those provisions section 192B (meaning of
“qualifying parent undertaking”) is to apply as if the reference in
40subsection (1) to a qualifying authorised person or recognised UK
investment exchange were a reference to a recognised clearing
house other than an overseas clearing house.

(3) Section 192C has effect as if—

(a) the reference in subsection (2) to the regulation of one or
45more qualifying authorised persons or recognised
investment exchanges in pursuance of any of the
regulator’s objectives were a reference to the regulation of
one or more recognised clearing houses,

(b) subsections (3) and (4) were omitted, and

(c) the reference in subsection (5)(a) to authorised persons or
recognised investment exchanges were a reference to
recognised clearing houses.

(4) 5Section 192E has effect as if the reference in subsection (1) to an
authorised person or recognised investment exchange were a
reference to a recognised clearing house.

(5) Section 192I has effect as if the reference in subsection (1)(a) to the
other regulator and the Bank were a reference to the FCA and the
10PRA.

(6) Before the Bank gives a notice under section 192E(1) or (8)(b)—

(a) if the notice relates to the parent undertaking of an
authorised person or recognised investment exchange, the
Bank must consult the FCA, and

(b) 15if the notice relates to the parent undertaking of a PRA-
authorised person, the Bank must also consult the PRA.

Auditors

18 (1) Section 342 (information given by auditor to a regulator) applies
in relation to a relevant auditor as if—

(a) 20the references in that section to a recognised investment
exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
which is also an authorised person or recognised
investment exchange, the references to a regulator
25included the Bank, and

(c) in the case of an auditor of a recognised clearing house not
falling within paragraph (b), the references to a regulator
were to the Bank.

(2) A “relevant auditor” is a person who is, or has been, an auditor of
30a recognised clearing house appointed under or as a result of a
statutory provision.

19 (1) Section 343 (information given by auditor: person with close links)
applies in relation to a relevant auditor as if—

(a) the references in that section to a recognised investment
35exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
which is an authorised person or which is a recognised
investment exchange, the references to a regulator
included the Bank, and

(c) 40in the case of an auditor of a recognised clearing house not
falling within paragraph (b), the references to a regulator
were to the Bank.

(2) A “relevant auditor” is a person who—

(a) is, or has been, an auditor of a recognised clearing house
45appointed under or as a result of a statutory provision, and

(b) is, or has been, an auditor of a person who has close links
with the recognised clearing house.

20 Section 344 (duty of auditor resigning to give notice) applies to an
auditor to whom section 342 applies (whether by virtue of
paragraph 18 or otherwise) as if—

(a) the references in that section to a recognised investment
5exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
which is neither an authorised person nor a recognised
investment exchange, the reference in the definition of “the
appropriate regulator” to the FCA were a reference to the
10Bank,

(c) in the case of an auditor of a recognised clearing house
which is a PRA-authorised person, the reference in the
definition of “the appropriate regulator” to the PRA were
a reference to the PRA and the Bank,

(d) 15in the case, not falling within paragraph (c), of an auditor
of a recognised clearing house which is an authorised
person or which is a recognised investment exchange, the
reference in the definition of “the appropriate regulator” to
the FCA were a reference to the FCA and the Bank.

21 20Sections 345A to 345E apply to auditors to whom section 342
applies only by virtue of paragraph 18 as if—

(a) the references in those sections to an auditor or actuary to
whom section 342 applies were to an auditor to whom
section 342 applies by virtue of paragraph 18,

(b) 25the references in those sections to a PRA-authorised person
were to a recognised clearing house,

(c) in a case where the Bank disqualifies a person from being
an auditor of a recognised clearing house that is also a
recognised investment exchange, section 345A(5)(a)
30required the Bank to notify the FCA, and

(d) the references in sections 345D and 345E to a regulator
included the Bank.

Public record and disclosure of information

22 Section 347 (record of authorised persons, recognised investment
35exchanges, etc), so far as it relates to recognised investment
exchanges, applies in relation to the Bank as if references in that
section to a recognised investment exchange were to a recognised
clearing house.

23 Sections 348 to 350 and 353 (disclosure of information) apply in
40relation to information received by the Bank for the purposes of,
or in the discharge of, any of its functions relating to recognised
clearing houses.

Injunctions and restitution

24 (1) The power to make an application under section 380(1), (2) or (3)
45(injunctions) is exercisable by the Bank.

(2) For the purposes of the application, any reference in that section to
a relevant requirement is to—

(a) a requirement that is imposed by or under any provision of
Part 18 of this Act that relates to a recognised clearing
house;

(b) a requirement that is imposed under any other provision
5of this Act by the Bank;

(c) a requirement that is imposed by any qualifying EU
provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
order; or

(d) 10a requirement that is imposed by this Act and whose
contravention constitutes an offence that the Bank has
power to prosecute under this Act (see section 401, as
applied by paragraph 29).

25 (1) The power to make an application under section 382(1) (restitution
15order) is exercisable by the Bank.

(2) For the purposes of the application, any reference in that section to
a relevant requirement is to be read in accordance with paragraph
24(2) of this Schedule.

26 (1) The power conferred by section 384(5) (power of FCA to require
20restitution order) is exercisable by the Bank.

(2) That power is exercisable if the Bank is satisfied that a recognised
clearing house has contravened a relevant requirement, or been
knowingly concerned in the contravention of a relevant
requirement, and—

(a) 25that profits have accrued to the recognised clearing house
as a result of the contravention; or

(b) that one or more persons have suffered loss or been
otherwise adversely affected as a result of the
contravention.

(3) 30For the purposes of that power, “relevant requirement” is to be
read in accordance with paragraph 24(2) of this Schedule.

(4) Where this paragraph applies, section 384(5) and (6) are to have
effect as if—

(a) any reference to the person concerned were a reference to
35the recognised clearing house; and

(b) any reference to subsection (1) were a reference to sub-
paragraph (2) of this paragraph.

Notices

27 The provisions of Part 26 of this Act (notices) apply in relation to a
40warning or decision notice given by the Bank under section 192L,
312G or 312H as they apply in relation to such a notice given by
the FCA under that section.

Offences

28 Section 398 (misleading the FCA: residual cases) applies to
45information given to the Bank in purported compliance with—

(a) a requirement that is imposed by or under any provision of
Part 18 of this Act that relates to a recognised clearing
house;

(b) a requirement that is imposed under any other provision
5of this Act by the Bank; or

(c) a requirement that is imposed by any qualifying EU
provision specified, or of a description specified, for the
purposes of this paragraph by the Treasury by order.

29 (1) Section 401 (proceedings for an offence) applies to the Bank as if
10for the purposes of subsections (2)(a) and (3)(a) of that section the
Bank were an appropriate regulator in respect of each of the
following offences—

(a) an offence under section 177(3) where the investigation is
being, or is likely to be, conducted on behalf of the Bank;

(b) 15an offence under section 177(4) where the requirement is
imposed by the Bank;

(c) an offence under section 177(6) where the warrant is issued
as a result of information on oath given by the Bank or a
person appointed by it to conduct an investigation on its
20behalf;

(d) an offence under section 398(1) where the information was
given to the Bank.

(2) Section 401(3B) has effect subject to the provision made by this
paragraph (so that the FCA is not the appropriate regulator for the
25purposes of subsections (2)(a) and (3)(a) in respect of the above
offences).

Records

30 Paragraph 17 of Schedule 1ZB (records) applies in relation to the
recording of decisions made by the Bank in the exercise of its
30functions relating to recognised clearing houses.

Annual report

31 Paragraph 18 of Schedule 1ZB (annual report by PRA) applies in
relation to the Bank, but—

(a) as if for paragraphs (a) to (g) of sub-paragraph (1) there
35were substituted—

“(a) the discharge of its functions relating to recognised
clearing houses,

(b) the extent to which, in its opinion, in discharging
those functions its financial stability objective has
40been met,”, and

(b) as if sub-paragraph (3) were omitted.

Part 3 Fees

32 (1) The Bank of England may, in connection with the discharge of any
of its qualifying functions, require recognised clearing houses to
5pay fees to the Bank.

(2) The “qualifying functions” of the Bank are—

(a) its functions under or as a result of this Part of this Act, and

(b) its functions under or as a result of a qualifying EU
provision that is specified, or of a description specified, for
10the purposes of this sub-paragraph by the Treasury by
order.

(3) The power of the Bank to set fees includes power to set fees for the
purpose of meeting expenses incurred by it or the FCA—

(a) in preparation for the exercise of functions by the Bank
15under this Part of this Act, or

(b) for the purpose of facilitating the exercise by the Bank of
those functions or otherwise in connection with their
exercise by it.

(4) It is irrelevant when the expenses were incurred (and, in
20particular, it is irrelevant if expenses were incurred by the FCA at
a time when it was known as the Financial Services Authority).

33 Any fee which is owed to the Bank under paragraph 32 may be
recovered as a debt due to the Bank.”

Section 32

SCHEDULE 8 25Sections 26 to 31: minor and consequential amendments

1 FSMA 2000 is amended as follows.

2 (1) Section 286 (qualification for recognition) is amended as follows.

(2) In subsection (1)(a), for “the Authority” substitute “the appropriate
regulator”.

(3) 30In subsections (4A), (4C) and (6), for “the Authority” substitute “the FCA”.

3 In section 287 (application by an investment exchange), in subsections (1), (2)
(in both places) and (3)(d) and (e), for “the Authority” substitute “the FCA”.

4 (1) Section 288 (application by a clearing house) is amended as follows.

(2) In subsection (1), for “the Authority” substitute “the Bank of England”.

(3) 35In subsection (2)—

(a) in the opening words, for “the Authority” substitute “the Bank of
England”, and

(b) in paragraph (d), for “the Authority” substitute “the Bank”.

5 In section 289 (applications: supplementary), in subsections (1), (2) (in both
places) and (3), for “the Authority” substitute “the appropriate regulator”.

6 (1) Section 290 (recognition orders) is amended as follows.

(2) In subsection (1)—

(a) 5for “the Authority”, in the first place, substitute “the appropriate
regulator”, and

(b) for “the Authority”, in the second place, substitute “the regulator
concerned”.

(3) In subsection (1B), for “the Authority” substitute “the FCA”.

(4) 10Omit subsection (2).

(5) In subsection (3), for “the Authority” substitute “the appropriate regulator”.

(6) Omit subsection (6).

7 (1) Section 290A (refusal of recognition on ground of excessive regulatory
provision) is amended as follows.

(2) 15In subsection (1)—

(a) for “The Authority must” substitute “The appropriate regulator
must”, and

(b) for “the Authority that” substitute “it that”.

(3) In subsection (3), for “Authority” substitute “appropriate regulator”.

8 20In section 292 (overseas investment exchanges and overseas clearing house),
in subsections (2), (3)(c) and (d), (4) and (5)(c), for “the Authority” substitute
“the appropriate regulator”.

9 In section 292A (publication of information by recognised investment
exchange), in subsections (1), (3), (5) and (6), for “Authority” substitute
25“FCA”.

10 (1) Section 293 (notification requirements) is amended as follows.

(2) In subsections (1) to (3) and (5), for “Authority” substitute “appropriate
regulator”.

(3) In subsection (6), for “the Authority” substitute “the FCA and the Bank of
30England”.

(4) In subsection (7), for “the Authority” substitute “the Bank of England and
the FCA”.

(5) In subsection (9), for “the Authority’s” substitute “the appropriate
regulator’s”.

11 35For section 293A substitute—

293A   Information: compliance with EU requirements

The appropriate regulator may require a recognised body to give the
appropriate regulator such information as the appropriate regulator
reasonably requires in order to satisfy itself that the body is
40complying with any qualifying EU provision that is specified, or of a
description specified, for the purposes of this section by the Treasury
by order.”