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
23

1R
Duty to consider representations made by the Panels
(1)
The FCA must consider representations that are made to it in
accordance with arrangements made under section 1M.
(2)
The FCA must from time to time publish in such manner as it thinks fit
responses to the representations.
5
Reviews
1S
Reviews
(1)
The Treasury may appoint an independent person to conduct a review
of the economy, efficiency and effectiveness with which the FCA has
used its resources in discharging its functions.
10
(2)
A review may be limited by the Treasury to such functions of the FCA
(however described) as the Treasury may specify in appointing the
person to conduct it.
(3)
A review is not to be concerned with the merits of the FCA’s general
policy or principles in complying with its general duties under section
15
1B(1) and (4).
(4)
On completion of a review, the person conducting it must make a
written report to the Treasury—
(a)
setting out the result of the review, and
(b)
making such recommendations (if any) as the person considers
20
appropriate.
(5)
A copy of the report must be—
(a)
laid before Parliament, and
(b)
published in such manner as the Treasury consider appropriate.
(6)
Any expenses reasonably incurred in the conduct of the review are to
25
be met by the Treasury out of money provided by Parliament.
(7)
“Independent” means appearing to the Treasury to be independent of
the FCA.
1T
Right to obtain documents and information
(1)
A person conducting a review under section 1S—
30
(a)
has a right of access at any reasonable time to all such
documents as the person may reasonably require for the
purposes of the review, and
(b)
may require any person holding or accountable for any such
document to provide such information and explanation as are
35
reasonably necessary for that purpose.
(2)
Subsection (1) applies only to documents in the custody of or under the
control of the FCA.
(3)
An obligation imposed on a person as a result of the exercise of the
powers conferred by subsection (1) is enforceable by injunction or, in
40
Scotland, by an order for specific performance under section 45 of the
Court of Session Act 1988.

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
24

Chapter 2
The Prudential Regulation Authority
The Prudential Regulation Authority
2A
The Prudential Regulation Authority
(1)
The body corporate originally incorporated as the Prudential
5
Regulation Authority Limited is renamed as the Prudential Regulation
Authority.
(2)
The Prudential Regulation Authority is in this Act referred to as “the
PRA”.
(3)
The PRA is to have the functions conferred on it by or under this Act.
10
(4)
The PRA must comply with the requirements as to its constitution set
out in Schedule 1ZB.
(5)
Schedule 1ZB also confers on the Bank of England functions in relation
to the PRA and makes provision about the status of the PRA and the
exercise of certain of its functions.
15
(6)
References in this Act or any other enactment to functions conferred on
the PRA by or under this Act include references to functions conferred
on the PRA by or under—
(a)
the Insolvency Act 1986,
(b)
the Banking Act 2009, or
20
(c)
the Financial Services Act 2012.
The PRA’s general duties
2B
The PRA’s general objective
(1)
In discharging its general functions the PRA must, so far as is
reasonably possible, act in a way which advances its general objective.
25
(2)
The PRA’s general objective is: promoting the safety and soundness of
PRA-authorised persons.
(3)
That objective is to be advanced primarily by—
(a)
seeking to ensure that the business of PRA-authorised persons
is carried on in a way which avoids any adverse effect on the
30
stability of the UK financial system, and
(b)
seeking to minimise the adverse effect that the failure of a PRA-
authorised person could be expected to have on the stability of
the UK financial system.
(4)
The adverse effects mentioned in subsection (3) may, in particular,
35
result from the disruption of the continuity of financial services.
(5)
In this Act “PRA-authorised person” means an authorised person who
has permission—
(a)
given under Part 4A, or
(b)
resulting from any other provision of this Act,
40

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
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to carry on regulated activities that consist of or include one or more
PRA-regulated activities (see section 22A).
(6)
Subsection (1) is subject to sections 2C and 2D.
2C
Insurance objective
(1)
In discharging its general functions so far as relating to a PRA-
5
regulated activity relating to the effecting or carrying out of contracts of
insurance or PRA-authorised persons carrying on that activity, the PRA
must, so far as is reasonably possible, act in a way—
(a)
which is compatible with its general objective and its insurance
objective, and
10
(b)
which the PRA considers most appropriate for the purpose of
advancing those objectives.
(2)
The PRA’s insurance objective is: contributing to the securing of an
appropriate degree of protection for those who are or may become
policyholders.
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(3)
This section applies only if the effecting or carrying out of contracts of
insurance as principal is to any extent a PRA-regulated activity.
2D
Power to provide for additional objectives
(1)
Subsection (2) applies to an order under section 22A which—
(a)
is made at any time after the coming into force of the first order
20
under that section, and
(b)
contains a statement by the Treasury that, in their opinion, the
effect (or one of the effects) of the proposed order is that an
activity would become a PRA-regulated activity.
(2)
An order to which this subsection applies may specify an additional
25
objective (“the specified objective”) in relation to specified activities
that become PRA-regulated activities by virtue of the order (“the
additional activities”).
(3)
In discharging its general functions so far as relating the additional
activities or PRA-authorised persons carrying on those activities, the
30
PRA must, so far as is reasonably possible, act in a way—
(a)
which is compatible with its general objective and the specified
objective, and
(b)
which the PRA considers most appropriate for the purpose of
advancing those objectives.
35
2E
Interpretation of references to objectives
In this Act, a reference, in relation to any function of the PRA, to the
objectives of the PRA, is a reference to its general objective but—
(a)
so far as the function is exercisable in relation to the activity of
effecting or carrying out contracts of insurance, or PRA-
40
authorised persons carrying on that activity, is a reference to its
general objective and its insurance objective;
(b)
so far as the function is exercisable in relation to an activity to
which an objective specified by order by virtue of section 2D(2)
relates, or PRA-authorised persons carrying on that activity, is
45

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
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a reference to its general objective and the objective specified by
the order.
2F
Limit on effect of section 2B to 2D
Nothing in section 2B to 2D is to be regarded as requiring the PRA to
ensure that no PRA-authorised person fails.
5
2G
Duty to have regard to regulatory principles
In discharging its general functions, the PRA must also have regard to
the regulatory principles in section 3B.
2H
Guidance about objectives
(1)
The PRA must give, and from time to time review, guidance about how
10
it intends to advance its objectives in discharging its general functions
in relation to different categories of PRA-authorised person or PRA-
regulated activity.
(2)
Before giving or altering any guidance complying with subsection (1),
the PRA must consult the FCA.
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(3)
The PRA must publish the guidance as for the time being in force.
2I
Interpretation of Chapter 2
(1)
For the purposes of this Chapter, the PRA’s general functions are—
(a)
its function of making rules under this Act (considered as a
whole),
20
(b)
its function of preparing and issuing codes under this Act
(considered as a whole), and
(c)
its function of determining the general policy and principles by
reference to which it performs particular functions under this
Act.
25
(2)
Except to the extent that an order under section 47 of the Financial
Services Act 2012 (orders relating to mutual societies functions) so
provides, the PRA’s general functions do not include functions that are
transferred functions within the meaning of section 48 of that Act.
(3)
For the purposes of this Chapter, the cases in which a PRA-authorised
30
person (“P”) is to be regarded as failing include those where—
(a)
P enters insolvency,
(b)
any of the stabilisation options in Part 1 of the Banking Act 2009
is achieved in relation to P, or
(c)
P falls to be taken for the purposes of the compensation scheme
35
to be unable, or likely to be unable, to satisfy claims against P.
(4)
In subsection (3)(a) “insolvency” includes—
(a)
bankruptcy,
(b)
liquidation,
(c)
bank insolvency,
40
(d)
administration,
(e)
bank administration,
(f)
receivership,
(g)
a composition between P and P’s creditors, and

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
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(h)
a scheme of arrangement of P’s affairs.
Supervision
2J
Arrangements for supervision of PRA-authorised persons
The PRA must maintain arrangements for supervising PRA-authorised
persons.
5
Arrangements for consulting practitioners
2K
The PRA’s general duty to consult
(1)
The PRA must make and maintain effective arrangements for
consulting PRA-authorised persons or, where appropriate, persons
appearing to the PRA to represent the interests of such persons on the
10
extent to which its general policies and practices are consistent with its
general duties under sections 2B to 2G.
(2)
Those arrangements may include the establishment of such panels as
the PRA thinks fit.
(3)
The PRA must publish details of any arrangements made under this
15
section.
2L
Duty to consider representations
(1)
The PRA must consider representations that are made to it in
accordance with arrangements made under section 2K.
(2)
The PRA must from time to time publish in such manner as it thinks fit
20
responses to the representations.
Reviews
2M
Reviews
(1)
The Treasury may appoint an independent person to conduct a review
of the economy, efficiency and effectiveness with which the PRA has
25
used its resources in discharging its functions.
(2)
A review may be limited by the Treasury to such functions of the PRA
(however described) as the Treasury may specify in appointing the
person to conduct it.
(3)
A review is not to be concerned with the merits of the PRA’s general
30
policy or principles in pursuing the PRA’s objectives.
(4)
On completion of a review, the person conducting it must make a
written report to the Treasury—
(a)
setting out the result of the review, and
(b)
making such recommendations (if any) as the person considers
35
appropriate.
(5)
A copy of the report must be—
(a)
laid before Parliament, and
(b)
published in such manner as the Treasury consider appropriate.

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
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(6)
Any expenses reasonably incurred in the conduct of the review are to
be met by the Treasury out of money provided by Parliament.
(7)
“Independent” means appearing to the Treasury to be independent of
the PRA.
2N
Right to obtain documents and information
5
(1)
A person conducting a review under section 2M—
(a)
has a right of access at any reasonable time to all such
documents as the person may reasonably require for the
purposes of the review, and
(b)
may require any person holding or accountable for any such
10
document to provide such information and explanation as are
reasonably necessary for that purpose.
(2)
Subsection (1) applies only to documents in the custody of or under the
control of the PRA.
(3)
An obligation imposed on a person as a result of the exercise of the
15
powers conferred by subsection (1) is enforceable by injunction or, in
Scotland, by an order for specific performance under section 45 of the
Court of Session Act 1988.
Chapter 3
Further provisions relating to FCA and PRA
20
Introductory
3A
Meaning of “regulator”
(1)
This section has effect for the interpretation of this Act.
(2)
The FCA and the PRA are the “regulators”, and references to a
regulator are to be read accordingly.
25
(3)
Subsection (2) does not affect—
(a)
the meaning of the following expressions—
“home state regulator”;
“host state regulator”;
“overseas regulator”, or
30
(b)
the meaning of “the appropriate regulator” in Part 18
(recognised investment exchanges and clearing houses).
Regulatory principles
3B
Regulatory principles to be applied by both regulators
(1)
In relation to the regulators, the regulatory principles referred to in
35
section 1B(5)(a) and 2G are as follows—
(a)
the need to use the resources of each regulator in the most
efficient and economic way;
(b)
the principle that a burden or restriction which is imposed on a
person, or on the carrying on of an activity, should be
40
proportionate to the benefits, considered in general terms,

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
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which are expected to result from the imposition of that burden
or restriction;
(c)
the general principle that consumers should take responsibility
for their decisions;
(d)
the responsibilities of the senior management of persons subject
5
to requirements imposed by or under this Act, including those
affecting consumers, in relation to compliance with those
requirements;
(e)
the desirability in appropriate cases of each regulator
publishing information relating to persons on whom
10
requirements are imposed by or under this Act, or requiring
such persons to publish information, as a means of contributing
to the advancement by each regulator of its objectives;
(f)
the principle that the regulators should exercise their functions
as transparently as possible.
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(2)
“Consumer” has the meaning given in section 1G.
(3)
“Objectives”, in relation to the FCA, means operational objectives.
(4)
The Treasury may by order amend subsection (2).
Corporate governance
3C
Duty to follow principles of good governance
20
In managing its affairs, each regulator must have regard to such
generally accepted principles of good corporate governance as it is
reasonable to regard as applicable to it.
Relationship between FCA and PRA
3D
Duty of FCA and PRA to ensure co-ordinated exercise of functions
25
(1)
The regulators must co-ordinate the exercise of their respective
functions conferred by or under this Act with a view to ensuring—
(a)
that each regulator consults the other regulator (where not
otherwise required to do so) in connection with any proposed
exercise of a function in a way that may have a material adverse
30
effect on the advancement by the other regulator of any of its
objectives;
(b)
that where appropriate each regulator obtains information and
advice from the other regulator in connection with the exercise
of its functions in relation to matters of common regulatory
35
interest in cases where the other regulator may be expected to
have relevant information or relevant expertise;
(c)
that where either regulator exercises functions in relation to
matters of common regulatory interest, both regulators comply
with their respective duties under section 1B(5)(a) or 2G, so far
40
as relating to the regulatory principles in section 3B(1)(a) and
(b).
(2)
The duty in subsection (1) applies only to the extent that compliance
with the duty—