Financial Services Bill

Session 2010 - 12
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Financial Services Bill

Financial Services Bill
Schedule 2 — Further amendments relating to Bank of England
171

Schedule 2
Section 4

Further amendments relating to Bank of England
Court of directors
1     (1)
Schedule 1 to the Bank of England Act 1998 (which makes further provision
about the court of directors) is amended as follows.
5
      (2)
For paragraph 1 substitute—
“1    (1)
Appointment as Governor of the Bank shall be for a period of 8
years.
      (2)
Appointment as Deputy Governor of the Bank shall be for a period
of 5 years.
10
      (3)
A person may not be appointed—
(a)
as Governor, more than once, or
(b)
as Deputy Governor, more than twice.
      (4)
A person appointed as Governor or Deputy Governor of the Bank
shall work exclusively for the Bank; and for this purpose work in
15
an office that an enactment requires to be held by the Governor or
a Deputy Governor is to be taken to be work for the Bank.”
      (3)
In paragraph 2, for the words from “3 years” to the end substitute “4 years,
or such shorter period as may be specified in the appointment”.
      (4)
Omit paragraph 3.
20
      (5)
In paragraph 5, for sub-paragraph (2) substitute—
    “(2)
An officer or employee of the Bank, other than a person holding
office under section 9B(1)(e), is disqualified for appointment as
director of the Bank.”
      (6)
For paragraph 6 substitute—
25
“6    (1)
The fact that a person has held office as Governor of the Bank does
not disqualify that person from appointment as Deputy Governor
or director of the Bank.
      (2)
The fact that a person has held office as Deputy Governor or
director of the Bank does not disqualify that person from re-
30
appointment to that office or for appointment to the other office or
as Governor of the Bank, but this is subject to paragraph 1(3)(b).”
      (7)
In paragraph 8—
(a)
the existing provision becomes sub-paragraph (1), and
(b)
after that provision insert—
35
    “(2)
In relation to the Deputy Governor for prudential
regulation, the reference in sub-paragraph (1)(c) to
inability or unfitness to discharge functions as member of
the court of directors is to be read as including a reference
to inability or unfitness to discharge functions as Chief
40
Executive of the Prudential Regulation Authority.”

Financial Services Bill
Schedule 2 — Further amendments relating to Bank of England
172

      (8)
In paragraph 11—
(a)
in paragraph (b), for “servant” substitute “employee”, and
(b)
in paragraph (c)(ii), for “servants” substitute “employees”.
      (9)
No provision of this paragraph affects the term of any appointment made
before the commencement of that provision.
5
Monetary Policy Committee
2     (1)
Schedule 3 to the Bank of England Act 1998 (Monetary Policy Committee)
is amended as follows.
      (2)
In paragraph 1, for the words from “except that” to the end substitute “but
this is subject to paragraph 2B”.
10
      (3)
Omit paragraph 2.
      (4)
After paragraph 2A insert—
“2B   (1)
If it appears to the Chancellor of the Exchequer that in the
circumstances it is desirable to do so, the Chancellor may, before
the end of the 3 years for which a person is appointed as a member
15
of the Committee under section 13(2)(c), extend the persons’s term
of office on one occasion for a specified period of not more than 6
months.
      (2)
The term being extended may be the person’s first or second term.
      (3)
If a person whose first term of office is extended is subsequently
20
re-appointed under section 13(2)(c)—
(a)
the length of the second term is to be reduced by a period
equal to the extension of the first term, but
(b)
the second term may itself subsequently be extended
under sub-paragraph (1).”
25
      (5)
In paragraph 3—
(a)
the existing provision becomes sub-paragraph (1), and
(b)
after that provision insert—
    “(2)
Where the notice relates to a person appointed under
section 13(2)(c), the Bank must give a copy of the notice to
30
the Treasury.”
      (6)
In paragraph 4—
(a)
omit sub-paragraph (1),
(b)
in sub-paragraph (2), for the words from the beginning to “sub-
paragraph (1)” substitute “The terms and conditions on which a
35
person holds office as a member of the Committee appointed under
section 13(2)(c)”, and
(c)
in sub-paragraph (3), for “service” substitute “office”.
      (7)
After paragraph 5 insert—
“5A
A member of the Financial Policy Committee of the Bank
40
appointed under section 9B(1)(e) is disqualified for appointment
under section 13(2)(c).”
      (8)
In paragraphs 10(2) and 11(3), leave out “with executive responsibility”.

Financial Services Bill
Schedule 3 — Financial Conduct Authority and Prudential Regulation Authority: Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000
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      (9)
After paragraph 13 insert—
“13A
The Committee may invite other persons to attend, or to attend
and speak at, any meeting of the Committee.”
     (10)
Sub-paragraph (3) does not affect the term of any appointment made before
the commencement of that sub-paragraph, and sub-paragraph (6) does not
5
affect the status of a person appointed before the commencement of that sub-
paragraph during the remainder of the term for which the person had been
appointed.
Immunity
3
In section 244 of the Banking Act 2009 (immunity) in subsection (2)—
10
(a)
in paragraph (a), for “servant” substitute “employee”, and
(b)
in paragraph (c), for “functions exercised” substitute “the exercise or
purported exercise of the Bank’s regulatory functions or of functions
undertaken”.
Changes in terminology
15
4
In Schedule 7 to the Bank of England Act 1998 (restriction on disclosure of
information), in paragraph 1(3)(a), for “servant” substitute “employee”.
Schedule 3
Section 5

Financial Conduct Authority and Prudential Regulation Authority:
Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000
20

These are the Schedules 1ZA and 1ZB to be substituted for Schedule 1 to
FSMA 2000—
“Schedule 1ZA
Section 1A

The Financial Conduct Authority
Part 1
25
General
Interpretation
1
In this Schedule—
“the Bank” means the Bank of England;
“functions” means functions conferred on the FCA by or
30
under any provision of this Act (see section 1A(6) which
affects the meaning of references to such functions).
Constitution
2     (1)
The constitution of the FCA must provide for the FCA to have a
governing body.
35
      (2)
The governing body must consist of—

Financial Services Bill
Schedule 3 — Financial Conduct Authority and Prudential Regulation Authority: Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000
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(a)
a chair appointed by the Treasury,
(b)
a chief executive appointed by the Treasury,
(c)
the Bank’s Deputy Governor for prudential regulation,
(d)
2 members appointed jointly by the Secretary of State and
the Treasury, and
5
(e)
at least one other member appointed by the Treasury.
      (3)
The members referred to in sub-paragraph (2)(a), (c) and (d) are to
be non-executive members.
      (4)
In exercising its powers under sub-paragraph (2)(e) to appoint
executive or non-executive members, the Treasury must secure
10
that the majority of members of the governing body are non-
executive members.
      (5)
An employee of the FCA may not be appointed as a non-executive
member.
      (6)
In the following provisions of this Schedule an “appointed
15
member” means a member of the governing body appointed
under sub-paragraph (2)(a), (b), (d) or (e).
3     (1)
The terms of service of the appointed members are to be
determined by the Treasury.
      (2)
In the case of a member appointed under paragraph 2(2)(d), the
20
Treasury must consult the Secretary of State about the terms of
service.
      (3)
Before appointing a person as an appointed member, the Treasury
(or as the case requires the Treasury and the Secretary of State)
must consider whether the person has any financial or other
25
interests that could have a material effect on the extent of the
functions as member that it would be proper for the person to
discharge.
      (4)
The terms of service of an appointed member (“M”) must be such
as—
30
(a)
to secure that M is not subject to direction by the Treasury
or the Secretary of State,
(b)
to require M not to act in accordance with the directions of
any other person, and
(c)
to prohibit M from acquiring any financial or other
35
interests that have a material effect on the extent of the
functions as member that it would be proper for M to
discharge.
      (5)
If an appointed member is an employee of the FCA, the member’s
interest as employee is to be disregarded for the purposes of sub-
40
paragraphs (3) and (4)(c) and paragraph 4(1)(b).
      (6)
A person who is an employee of the PRA is disqualified for
appointment as an appointed member.
      (7)
The FCA may pay expenses to the Bank’s Deputy Governor for
prudential regulation in respect of that person’s service as a
45
member.

Financial Services Bill
Schedule 3 — Financial Conduct Authority and Prudential Regulation Authority: Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000
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4     (1)
The Treasury may remove an appointed member from office—
(a)
on the grounds of incapacity or serious misconduct, or
(b)
on the grounds that in all the circumstances the member’s
financial or other interests are such as to have a material
effect on the extent of the functions as member that it
5
would be proper for the person to discharge.
      (2)
Before removing from office a member appointed under
paragraph 2(2)(d), the Treasury must consult the Secretary of
State.
5
The validity of any act of the FCA is not affected—
10
(a)
by any vacancy in any of the offices mentioned in
paragraph 2(2)(a), (b) or (c),
(b)
by a defect in the appointment of a person—
(i)
to any of those offices, or
(ii)
as an appointed member.
15
6
The Bank’s Deputy Governor for prudential regulation must not
take part in any discussion by or decision of the FCA which relates
to—
(a)
the exercise of the FCA’s functions in relation to a
particular person, or
20
(b)
a decision not to exercise those functions.
Remuneration
7
The FCA must pay to the appointed members such remuneration
as may be determined—
(a)
in the case of the non-executive members, by the Treasury;
25
(b)
in the case of the executive members, by the FCA.
Arrangements for discharging functions
8     (1)
The FCA may make arrangements for any of its functions to be
discharged by a committee, sub-committee, officer or member of
staff of the FCA, but subject to the following provisions.
30
      (2)
In exercising its legislative functions, the FCA must act through its
governing body.
      (3)
For that purpose, the following are the FCA’s legislative
functions—
(a)
making rules;
35
(b)
issuing codes under section 64 or 119;
(c)
issuing statements under—
(i)
section 63C, 64, 69, 88C, 89S, 93, 124, 131J, 138N,
192H, 192N, 210 or 312J,
(ii)
section 345D (whether as a result of section 345(2)
40
or section 249(1)), or
(iii)
section 76 of the Financial Services Act 2012;
(d)
giving directions under section 316, 318 or 328.

Financial Services Bill
Schedule 3 — Financial Conduct Authority and Prudential Regulation Authority: Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000
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      (4)
The function of issuing general guidance (as defined in section
139B(5)) may not be discharged by an officer or member of staff of
the FCA.
Records
9
The FCA must maintain satisfactory arrangements for—
5
(a)
recording decisions made in the exercise of its functions,
and
(b)
the safe-keeping of those records which it considers ought
to be preserved.
Annual report
10
10    (1)
At least once a year the FCA must make a report to the Treasury
on—
(a)
the discharge of its functions,
(b)
the extent to which, in its opinion, its operational
objectives have been advanced,
15
(c)
the extent to which, in its opinion, it has acted compatibly
with its strategic objective,
(d)
how, in its opinion, it has complied with the duty in section
1B(4),
(e)
its consideration of the matter mentioned in section
20
1B(5)(b),
(f)
its consideration of the principles in section 3B,
(g)
how it has complied with section 3D,
(h)
any direction received under section 3I during the period
to which the report relates,
25
(i)
how it has complied with section 354A(1) so far as relating
to co-operation with persons outside the United Kingdom,
and
(j)
such other matters as the Treasury may from time to time
direct.
30
      (2)
Sub-paragraph (1) does not require the inclusion in the report of
any information whose publication would in the opinion of the
FCA be against the public interest.
      (3)
The report must be accompanied by—
(a)
a statement of the remuneration of the appointed members
35
of the governing body of the FCA during the period to
which the report relates, and
(b)
such other reports or information, prepared by such
persons, as the Treasury may from time to time direct.
      (4)
The Treasury must lay before Parliament a copy of each report
40
received by them under this paragraph.
Annual public meeting
11    (1)
Not later than 3 months after making a report under paragraph 10,
the FCA must hold a public meeting (“the annual meeting”) for the
purposes of enabling that report to be considered.
45

Financial Services Bill
Schedule 3 — Financial Conduct Authority and Prudential Regulation Authority: Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000
177

      (2)
The FCA must organise the annual meeting so as to allow—
(a)
a general discussion of the contents of the report which is
being considered, and
(b)
a reasonable opportunity for those attending the meeting
to put questions to the FCA about the way in which it
5
discharged, or failed to discharge, its functions during the
period to which the report relates.
      (3)
But otherwise the annual meeting is to be organised and
conducted in such a way as the FCA considers appropriate.
      (4)
The FCA must give reasonable notice of its annual meeting.
10
      (5)
That notice must—
(a)
give details of the time and place at which the meeting is to
be held,
(b)
set out the proposed agenda for the meeting,
(c)
indicate the proposed duration of the meeting,
15
(d)
give details of the FCA’s arrangements for enabling
persons to attend, and
(e)
be published by the FCA in the way appearing to it to be
best calculated to bring the notice to the attention of the
public.
20
      (6)
If the FCA proposes to alter any of the arrangements which have
been included in the notice given under sub-paragraph (5), it
must—
(a)
give reasonable notice of the alteration, and
(b)
publish that notice in the way appearing to the FCA to be
25
best calculated to bring it to the attention of the public.
Report of annual meeting
12
Not later than one month after its annual meeting, the FCA must
publish a report of the proceedings of the meeting.
Accounts and audit
30
13    (1)
The Treasury may—
(a)
require the FCA to comply with any provisions of the
Companies Act 2006 about accounts and their audit which
would not otherwise apply to it, or
(b)
direct that any provision of that Act about accounts and
35
their audit is to apply to the FCA with such modifications
as are specified in the direction, whether or not the
provision would otherwise apply to the FCA.
      (2)
Compliance with any requirement under sub-paragraph (1)(a) or
(b) is enforceable by injunction or, in Scotland, an order for specific
40
performance under section 45 of the Court of Session Act 1988.
      (3)
Proceedings under sub-paragraph (2) may be brought only by the
Treasury.