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Financial Services Bill


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

30

 

(a)   

is compatible with the advancement by each regulator of any of

its objectives, and

(b)   

does not impose a burden on the regulators that is

disproportionate to the benefits of compliance.

(3)   

A function conferred on either regulator by or under this Act relates to

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matters of common regulatory interest if—

(a)   

the other regulator exercises similar or related functions in

relation to the same persons,

(b)   

the other regulator exercises functions which relate to different

persons but relate to similar subject-matter, or

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(c)   

its exercise could affect the advancement by the other regulator

of any of its objectives.

(4)   

“Objectives”, in relation to the FCA, means operational objectives.

3E      

Memorandum of understanding

(1)   

The regulators must prepare and maintain a memorandum which

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describes in general terms—

(a)   

the role of each regulator in relation to the exercise of functions

conferred by or under this Act which relate to matters of

common regulatory interest, and

(b)   

how the regulators intend to comply with section 3D in relation

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to the exercise of such functions.

(2)   

The memorandum may in particular contain provisions about how the

regulators intend to comply with section 3D in relation to—

(a)   

applications for Part 4A permission;

(b)   

the variation of permission;

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(c)   

the imposition of requirements;

(d)   

the obtaining and disclosure of information;

(e)   

cases where a PRA-authorised person is a member of a group

whose other members include one or more other authorised

persons (whether or not PRA-authorised persons);

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(f)   

functions under Schedule 3 (EEA passport rights) and Schedule

4 (Treaty rights);

(g)   

the making of rules;

(h)   

directions under section 138A (modification or waiver of rules);

(i)   

powers to appoint competent persons under Part 11

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(information gathering and investigations) to conduct

investigations on their behalf;

(j)   

functions under Part 12 (control over authorised persons);

(k)   

functions under Part 13 (incoming firms: intervention by

regulator);

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(l)   

functions under Part 19 (Lloyd’s);

(m)   

functions under section 347 (record of authorised persons etc.);

(n)   

functions under Part 24 (insolvency);

(o)   

fees payable to either regulator.

(3)   

The memorandum must contain provision about the co-ordination by

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the regulators of—

 
 

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

31

 

(a)   

the exercise of their functions relating to membership of, and

their relations with, the European Supervisory Authorities

(namely, the European Banking Authority, the European

Insurance and Occupational Pensions Authority and the

European Securities and Markets Authority),

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(b)   

their relations with regulatory bodies outside the United

Kingdom, and

(c)   

the exercise of their functions in relation to the compensation

scheme.

(4)   

The regulators must review the memorandum at least once in each

10

calendar year.

(5)   

The regulators must give the Treasury a copy of the memorandum and

any revised memorandum.

(6)   

The Treasury must lay before Parliament a copy of any document

received by them under this section.

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(7)   

The regulators 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.

(8)   

The memorandum need not relate to any aspect of compliance with

section 3D if the regulators consider—

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(a)   

that publication of information about that aspect would be

against the public interest, or

(b)   

that that aspect is a technical or operational matter not affecting

the public.

(9)   

The reference in subsection (1)(a) to matters of common regulatory

25

interest is to be read in accordance with section 3D(3).

3F      

With-profits insurance policies

(1)   

In relation to PRA-authorised persons carrying on the activity of

effecting or carrying out contracts of insurance (“insurers”), the

responsibility that, in relation to with-profits policies, belongs to the

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PRA rather than the FCA includes responsibility for measures designed

for the following purpose.

(2)   

That purpose is the securing of an appropriate degree of protection for

those who are or may become policyholders in relation to decisions by

insurers relating to the making of payments under with-profits policies

35

at the discretion of the insurer (including decisions affecting the

amount, timing or distribution of such payments or the entitlement to

future payments).

(3)   

Accordingly, the PRA’s insurance objective (see section 2C(2)) is to be

read, in relation to measures designed for the purpose mentioned in

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subsection (2), as if for the words “contributing to the securing of” there

were substituted “securing”.

(4)   

A “with-profits policy” is a contract of insurance under which the

policyholder is eligible to receive payments at the discretion of the

insurer.

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

32

 

(5)   

The PRA and the FCA must enter into and maintain arrangements for

the provision by the FCA to the PRA of information and advice in

relation to matters which relate to the regulation by the PRA of insurers

who effect or carry out with-profits policies, but in relation to which the

FCA may be expected to have particular expertise.

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(6)   

The arrangements may be described in the memorandum under section

3E or in a separate document.

(7)   

If the arrangements are in a separate document, the PRA and the FCA

must publish the document in such manner as they think fit.

(8)   

This section applies only if the effecting or carrying out of with-profits

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policies is a PRA-regulated activity.

3G      

Power to establish boundary between FCA and PRA responsibilities

(1)   

The Treasury may by order specify matters that, in relation to the

exercise by either regulator of its functions relating to PRA-authorised

persons, are to be, or are to be primarily, the responsibility of one

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regulator rather than the other.

(2)   

The order may—

(a)   

provide that one regulator is or is not to have regard to specified

matters when exercising specified functions;

(b)   

require one regulator to consult the other.

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(3)   

An order under this section may amend or repeal section 3F.

3H      

Parliamentary control of orders under section 3G

(1)   

No order may be made under section 3G unless—

(a)   

a draft of the order has been laid before Parliament and

approved by a resolution of each House, or

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(b)   

subsection (3) applies.

(2)   

Subsection (3) applies if an order under section 3G contains a statement

that the Treasury are of the opinion that, by reason of urgency, it is

necessary to make the order without a draft being so laid and

approved.

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(3)   

Where this subsection applies the order—

(a)   

must be laid before Parliament after being made, and

(b)   

ceases to have effect at the end of the relevant period unless

before the end of that period the order is approved by a

resolution of each House of Parliament (but without that

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affecting anything done under the order or the power to make

a new order).

(4)   

The “relevant period” is a period of 28 days beginning with the day on

which the order is made.

(5)   

In calculating the relevant period no account is to be taken of any time

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during which Parliament is dissolved or prorogued or during which

both Houses are adjourned for more than 4 days.

 
 

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

33

 

Power of PRA to restrain proposed action by FCA

3I      

Power of PRA to require FCA to refrain from specified action

(1)   

Where the first, second and third conditions are met, the PRA may give

a direction under this section to the FCA.

(2)   

The first condition is that the FCA is proposing—

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(a)   

to exercise any of its regulatory powers in relation to PRA-

authorised persons generally, a class of PRA-authorised

persons or a particular PRA-authorised person, or

(b)   

to exercise any of its insolvency powers in relation to—

(i)   

a PRA-authorised person,

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(ii)   

an appointed representative whose principal, or one of

whose principals, is a PRA-authorised person, or

(iii)   

a person who is carrying on a PRA-regulated activity in

contravention of the general prohibition.

(3)   

In subsection (2)—

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(a)   

“regulatory powers”, in relation to the FCA, means its powers

in relation to the regulation of authorised persons, other than its

powers in relation to consent for the purposes of section 55F or

55I or its powers under Part 24;

(b)   

“insolvency powers”, in relation to the FCA, means its powers

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under Part 24.

(4)   

The second condition is that the PRA is of the opinion that the exercise

of the power in the manner proposed may—

(a)   

threaten the stability of the UK financial system, or

(b)   

result in the failure of a PRA-authorised person in a way that

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would adversely affect the UK financial system.

(5)   

The third condition is that the PRA is of the opinion that the giving of

the direction is necessary in order to avoid the possible consequence

falling within subsection (4).

(6)   

A direction under this section is a direction requiring the FCA not to

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exercise the power or not to exercise it in a specified manner.

(7)   

The direction may be expressed to have effect during a specified period

or until revoked.

(8)   

The FCA is not required to comply with a direction under this section

if or to the extent that in the opinion of the FCA compliance would be

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incompatible with any EU obligation or any other international

obligation of the United Kingdom.

(9)   

The reference in subsection (4)(b) to the “failure” of a PRA-authorised

person is to be read in accordance with section 2I(3) and (4).

3J      

Revocation of directions under section 3I

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(1)   

The PRA may at any time by notice to the FCA revoke a direction under

section 3I.

(2)   

The revocation of a direction under section 3I does not affect the

validity of anything previously done in accordance with it.

 
 

 
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Revised 23 March 2012