Financial Services Bill

Session 2010 - 12
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Other Bills before Parliament

Financial Services Bill

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
128

Miscellaneous amendments of FSMA 2000
42
The consumer financial education body
Schedule 15 contains amendments of FSMA 2000 relating to the consumer
financial education body.
43
Members of the professions
5
Schedule 16 contains miscellaneous amendments of FSMA 2000 relating to
financial services provided by members of the professions.
44
International obligations
In section 410 of FSMA 2000 (international obligations), in subsection (4), for
paragraphs (a) and (b) substitute—
10
“(a)
the FCA;
(aa)
the PRA;
(ab)
the Bank of England when exercising functions conferred on it
by Part 18;”.
45
Interpretation of FSMA 2000
15
(1)
In section 417 of FSMA 2000 (definitions), in subsection (1)—
(a)
omit the definition of “the Authority”,
(b)
in the definition of “control of information rules” for “section 147(1)”
substitute “section 137N”,
(c)
after the definition of “exempt person” insert—
20
““the FCA” means the Financial Conduct Authority;”,
(d)
in the definition of “financial promotion rules” for “section 145”
substitute “section 137P”,
(e)
for the definition of “general rules” substitute—
““general rules”—
25
(a)
in relation to the FCA, has the meaning given in
section 137A(2), and
(b)
in relation to the PRA, has the meaning given in
section 137E(2);”,
(f)
omit the definition of “money laundering rules”;
30
(g)
for the definition of “Part IV permission” substitute—
““Part 4A permission” has the meaning given in section
55A(5);”,
(h)
after the definition of “partnership” insert—
““the PRA” means the Prudential Regulation Authority;
35
“PRA-authorised person” has the meaning given in section
2B(5);
“PRA-regulated activity” has the meaning given in section
22A;”,
(i)
in the definition of “price stabilising rules” for “section 144” substitute
40
“section 137O”,

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
129

(j)
after that definition insert—
““principal” in relation to an appointed representative, is
to be read in accordance with section 39;”,
(k)
in the definition of “regulating provisions” for “section “159(1)”
substitute “section 140A”,
5
(l)
after that definition insert—
““regulator” has the meaning given in section 3A(2);”,
(m)
omit the definitions of “regulatory objectives” and “regulatory
provisions”,
(n)
for the definition of “rule” substitute—
10
““rule” means a rule made by the FCA or the PRA under
this Act;”,
(o)
in the definition of “rule-making instrument” for “section 153”
substitute “section 138G”,
(p)
for the definition of “threshold conditions” substitute—
15
““threshold conditions”, in relation to a regulated activity,
has the meaning given in section 55B(1);”,
(q)
in the definition of “UK authorised person” for “section 178(4)”
substitute “section 191G(1)”, and
(r)
in the definition of “the UK financial system” for “section 3” substitute
20
“section 1I”.
(2)
After section 421 of FSMA 2000 insert—
“421ZA
Immediate group
In this Act “immediate group”, in relation to a person (“A”), means—
(a)
A;
25
(b)
a parent undertaking of A;
(c)
a subsidiary undertaking of A;
(d)
a subsidiary undertaking of a parent undertaking of A;
(e)
a parent undertaking of a subsidiary undertaking of A.”
(3)
After section 425B of FSMA 2000 insert—
30
“425C
“Qualifying EU provision”
(1)
In this Act “qualifying EU provision” means a provision of—
(a)
a directly applicable EU regulation, or
(b)
an EU decision for whose enforcement the United Kingdom is
required by an EU obligation to make provision.
35
(2)
In subsection (1)(b) “EU decision” means a decision under an EU
directive or EU regulation.”
46
Parliamentary control of statutory instruments
(1)
Section 429 of FSMA 2000 (Parliamentary control of statutory instruments) is
amended as follows.
40
(2)
In subsection (1) (orders subject to the affirmative resolution procedure)—
(a)
in paragraph (a)—
(i)
after “section” insert “1J, 3B(4), 55C,”,
(ii)
after “or (e),” insert “138K(6)(c), 192B(6), 204A(7), 213(1A),”, and

Financial Services Bill
Part 3 — Mutual societies
130

(iii)
after “236(5),” insert “285(4), 380(12), 382(15), 384(13),”, and
(b)
omit paragraph (b).
(3)
In subsection (8)—
(a)
after “under section” insert “3G(1), 137C(1)(b),”,
(b)
after “165A(2)(d)” insert “, 192A(4)”, and
5
(c)
after “which” insert “section 22B or”.
Part 3
Mutual societies
Transfer of functions
47
Mutual societies: power to transfer functions
10
(1)
The Treasury may by order amend the legislation relating to mutual societies
for any of the relevant purposes.
(2)
“The legislation relating to mutual societies” means—
(a)
the Industrial and Provident Societies Act 1965;
(b)
the Industrial and Provident Societies 1967;
15
(c)
the Friendly and Industrial and Provident Societies Act 1968;
(d)
the Industrial and Provident Societies Act (Northern Ireland) 1969;
(e)
the Friendly Societies Act 1974;
(f)
the Credit Unions Act 1979;
(g)
the Credit Unions (Northern Ireland) Order 1985;
20
(h)
the Building Societies Act 1986;
(i)
the Friendly Societies Act 1992.
(3)
The relevant purposes are—
(a)
providing for any function of the FSA to be exercisable by that body
corporate as the FCA;
25
(b)
providing for any function of the FSA to be transferred to the PRA;
(c)
providing for any function of the FSA to be exercisable by that body
corporate as the FCA and also to be exercisable concurrently by the
PRA;
(d)
providing for any function which is exercisable by the FCA or the PRA
30
(whether by virtue of a previous order under this section or otherwise)
to be transferred to, or to be exercisable concurrently by, the other
regulator;
(e)
providing for any function which is exercisable by the FCA and the
PRA (whether by virtue of a previous order under this section or
35
otherwise) to be exercisable only by one of them;
(f)
making provision that appears to the Treasury to be necessary or
expedient in consequence of the provisions of this Act.
(4)
In relation to the Industrial and Provident Societies Act (Northern Ireland)
1969 and the Credit Unions (Northern Ireland) Order 1985, the relevant
40
purposes also include—
(a)
providing for any function of a Northern Ireland department or the
Registrar of Credit Unions for Northern Ireland to be transferred to the

Financial Services Bill
Part 3 — Mutual societies
131

FCA or the PRA, or to both the FCA and PRA to be exercised
concurrently;
(b)
providing for any function of a Northern Ireland department or the
Registrar of Credit Unions for Northern Ireland which relates to the
determination of disputes to be exercisable instead by a court.
5
48
Further provision that may be included in orders under section 47
(1)
In this section a “transfer order” means an order under section 47 making
provision for any of the purposes mentioned in subsection (3)(a) to (e) or (4) of
that section.
(2)
The additional powers conferred by section 95(2) on a person making an order
10
under this Act include power for the Treasury, when making a transfer order,
to include—
(a)
such consequential provision as the Treasury consider appropriate;
(b)
provision for the transfer of any property, rights or liabilities held,
enjoyed or incurred by any person in connection with transferred
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functions;
(c)
provision for the application of the Transfer of Undertakings
(Protection of Employment) Regulations 2006 in connection with any
transfer of staff;
(d)
provision for the carrying on and completion by or under the authority
20
of the person to whom the functions are transferred of any proceedings,
investigations or other matters commenced, before the order takes
effect, by or under the authority of the person from whom the functions
are transferred;
(e)
provision amending any enactment relating to transferred functions in
25
connection with their exercise by, or under the authority of, the person
to whom they are transferred;
(f)
provision requiring either regulator to consult the other, notify the
other or obtain the consent of the other in connection with the exercise
of transferred functions;
30
(g)
provision for the substitution of the person to whom functions are
transferred for the person from whom they are transferred, in any
instrument, contract or legal proceedings made or begun before the
order takes effect.
(3)
A transfer order may provide for—
35
(a)
any provision of FSMA 2000 that would not otherwise apply in relation
to transferred functions to apply in relation to those functions with
such modifications as may be specified, or
(b)
any provision of FSMA 2000 that would otherwise apply in relation to
transferred functions not to apply in relation to them or to apply with
40
such modifications as may be specified.
(4)
For the purposes of subsections (2) and (3), a transfer order is to be taken to
transfer functions to any person by whom any function becomes exercisable by
virtue of the order.
(5)
On or after the making of a transfer order (“the original order”) the Treasury
45
may by order make any incidental, supplemental, consequential or transitional
provision or provision by virtue of subsection (2) or (3) which they had power
to include in the original order.

Financial Services Bill
Part 3 — Mutual societies
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(6)
The provisions of this section do not limit—
(a)
the powers conferred by section 98 or 99(3), or
(b)
the powers exercisable under Schedule 21 in connection with a transfer
order that transfers functions to the PRA or to the FCA and the PRA.
49
Evidence
5
(1)
A certificate issued by the Treasury that property vested in a person
immediately before a transfer order takes effect has been transferred as a result
of the order is conclusive evidence of the transfer.
(2)
“Transfer order” means—
(a)
an order under section 47,
10
(b)
an order under section 48(5), or
(c)
an order under Part 21 of FSMA 2000 (mutual societies).
50
Repeals in Part 21 of FSMA 2000
(1)
The following provisions of Part 21 of FSMA 2000 are repealed—
(a)
in section 334 (the Friendly Societies Commission), subsections (1) and
15
(2);
(b)
section 335 (the Registry of Friendly Societies);
(c)
section 336 (the Building Societies Commission);
(d)
section 337 (the Building Societies Investor Protection Board);
(e)
section 338 (industrial and provident societies and credit unions);
20
(f)
section 339 (supplemental provisions).
(2)
The repeals in subsection (1) do not have the effect of revoking any order made
under any provision of Part 21 of FSMA 2000 before the commencement of this
section.
Building societies: miscellaneous
25
51
Building societies: creation of floating charges
(1)
Section 9B of the Building Societies Act 1986 (restriction on creation of floating
charges) is amended as follows.
(2)
In subsection (1), at the end insert “unless it complies with the requirements in
subsection (1A)”.
30
(3)
After that subsection insert—
“(1A)
The requirements are that the floating charge—
(a)
is created in favour of a participant in a system, and
(b)
is created for the purpose of securing any rights and obligations
that may arise in connection with participation in that system.”
35
(4)
After subsection (2) insert—
“(3)
In this section “participant” and “system” have the meaning given by
Article 2 of Directive 98/26/EC of the European Parliament and of the
Council of 19th May 1998 on settlement finality in payment and

Financial Services Bill
Part 4 — Collaboration between Treasury and Bank of England, FCA or PRA
133

securities settlement systems (as amended by Directives 2009/44/EC
and 2010/78/EU).”
52
Power to direct transfer of building society’s business
(1)
Section 42B of the Building Societies Act 1986 (power to direct transfers of
engagements or business) is amended as follows.
5
(2)
In subsection (1)—
(a)
before the “or” at the end of paragraph (a) insert—
“(aa)
direct the society, within a specified period, to transfer
its business under section 97 to an existing or specially
formed company that is a subsidiary of another mutual
10
society by a transfer to which provision made by order
under section 3 of the 2007 Act (transfers to subsidiaries
of other mutuals) applies;”, and
(b)
in paragraph (b), for “to an existing company under section 97”
substitute “under section 97 to an existing company that is not a
15
subsidiary of another mutual society”.
(3)
After subsection (1) insert—
“(1A)
In this section—
(a)
“the 2007 Act” means the Building Societies (Funding) and
Mutual Societies (Transfers) Act 2007;
20
(b)
“mutual society” has the same meaning as in section 3 of that
Act.”
(4)
In subsection (4)—
(a)
in paragraph (a), for “(1)(b)” substitute “(1)(aa) or (b)”, and
(b)
in paragraph (b), after “existing company” insert “, or to a specially
25
formed company that is a subsidiary of another mutual society,”.
(5)
In Schedule 8A to that Act (directions under section 42B(4)), in paragraph 9(3),
for “section 42B(1)(b)” substitute “section 42B(1)(aa) or (b)”.
Interpretation
53
Interpretation of Part 3
30
(1)
In this Part “regulator” means the FCA or the PRA.
(2)
In this Part a reference to a person’s functions under an enactment includes a
reference to the person’s functions under any other enactment as applied by
that enactment.
Part 4
35
Collaboration between Treasury and Bank of England, FCA or PRA
54
Duty of Bank to notify Treasury of possible need for public funds
(1)
Where it appears to the Bank of England that there is a material risk of
circumstances within any of the following cases arising, the Bank must
immediately notify the Treasury.
40

Financial Services Bill
Part 4 — Collaboration between Treasury and Bank of England, FCA or PRA
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(2)
A notification under subsection (1) or section 55(2) is referred to in this Part as
a “public funds notification”.
(3)
The first case is where the Treasury or the Secretary of State might reasonably
be expected to regard it as appropriate to provide financial assistance to or in
respect of a financial institution.
5
(4)
The second case is where—
(a)
the Treasury, the Bank of England, the PRA, the FCA or the Secretary
of State might reasonably be expected to regard it as appropriate to
exercise any of their respective powers under Parts 1 to 3 of the Banking
Act 2009, and
10
(b)
the Treasury might reasonably be expected to regard it as appropriate
to incur expenditure in connection with the exercise of any of those
powers (whether by the Treasury, the Bank, the PRA, the FCA or the
Secretary of State).
(5)
The third case is where the scheme manager of the Financial Services
15
Compensation Scheme might reasonably be expected to request—
(a)
a loan from the National Loans Fund under section 223B of FSMA 2000,
or
(b)
financial assistance from the Treasury,

for the purpose of funding expenses incurred or expected to be incurred under
20
the Financial Services Compensation Scheme.
(6)
A public funds notification must give a general indication of the matters giving
rise to the notification.
(7)
A public funds notification must be given or confirmed in writing.
55
Duty of Bank to notify Treasury of changes
25
(1)
This section applies where a public funds notification has been given.
(2)
If the Bank of England is of the opinion that the risk to which the notification
relates continues but that there is a substantial change in the matters which
gave rise to the notification, the Bank must notify the Treasury.
(3)
If the Bank of England is of the opinion that the risk to which the notification
30
relates has ceased, it must notify the Treasury.
(4)
Before giving a notification under subsection (3), the Bank must consult the
Treasury.
(5)
A notification under subsection (3) must be given or confirmed in writing.
56
Circumstances in which Treasury power of direction exercisable
35
(1)
This section makes provision about the circumstances in which the Treasury’s
power of direction under section 57 is exercisable, subject to the provisions of
that section.
(2)
Where a public funds notification has been given, the power of direction is
exercisable by reference to the notification unless the notification has been
40
superseded by a notification under section 55(3).