Financial Services Bill (HC Bill 323)

13 The Committee may invite other persons to attend, or to attend
and speak at, any meeting of the Committee.

14 If a member of the Committee (“M”) has any direct or indirect
interest (including any reasonably likely future interest) in any
5dealing or business which falls to be considered by the
Committee—

(a) M must disclose that interest to the Committee when it
considers the dealing or business, and

(b) the Committee must decide whether M is to be permitted
10to participate in any proceedings of the Committee relating
to any question arising from its consideration of the
dealing or business, and if so to what extent and subject to
what conditions (if any).”

Part 2 15Other amendments relating to Financial Policy Committee

Bank of England Act 1998 (c. 11)1998 (c. 11)

1 In section 4 of the Bank of England Act 1998 (annual report by Bank), in
subsection (2), for the “and” at the end of paragraph (a) substitute—

“(aa) a report by the court of directors on the activities of the
20Financial Policy Committee of the Bank, and”.

2 In section 15 of the Bank of England Act 1998 (publication of minutes of
meetings of Monetary Policy Committee) after subsection (4) insert—

“(4A) The Bank shall exclude from minutes published under this section
information which relates to proceedings of the Financial Policy
25Committee if the Bank considers that publication of that information
would be against the public interest.”

3 In section 40 of the Bank of England Act 1998 (orders), after subsection (4)
insert—

“(4A) Section 9M contains its own provisions about parliamentary
30procedure in relation to an order under section 9K.”

House of Commons Disqualification Act 1975 (c. 24)1975 (c. 24)

4 In Part 3 of Schedule 1 to the House of Commons Disqualification Act 1975
(other disqualifying offices), at the appropriate place insert—

• “Member of the Financial Policy Committee of the Bank of
  35England appointed under section 9B(1)(d) or (e) of the Bank
  of England Act 1998.”

Northern Ireland Assembly Disqualification Act 1975 (c. 25)1975 (c. 25)

5 In Part 3 of Schedule 1 to the Northern Ireland Assembly Disqualification
Act 1975 (other disqualifying offices), at the appropriate place insert—

• 40“Member of the Financial Policy Committee of the Bank of
  England appointed under section 9B(1)(d) or (e) of the Bank
  of England Act 1998.”

Section 4

SCHEDULE 2 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
5about the court of directors) is amended as follows.

(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
10of 5 years.

(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
15shall work exclusively for the Bank; and for this purpose work in
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) 20Omit paragraph 3.

(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) 25For paragraph 6 substitute—

“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
30director of the Bank does not disqualify that person from re-
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) 35after that provision insert—

“(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
40to inability or unfitness to discharge functions as Chief
Executive of the Prudential Regulation Authority.”

(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
5before the commencement of that provision.

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
10this is subject to paragraph 2B”.

(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
15the end of the 3 years for which a person is appointed as a member
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) 20If a person whose first term of office is extended is subsequently
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
25under sub-paragraph (1).”

(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
30section 13(2)(c), the Bank must give a copy of the notice to
the Treasury.”

(6) In paragraph 4—

(a) omit sub-paragraph (1),

(b) in sub-paragraph (2), for the words from the beginning to “sub-
35paragraph (1)” substitute “The terms and conditions on which a
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 40A member of the Financial Policy Committee of the Bank
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”.

(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
5the commencement of that sub-paragraph, and sub-paragraph (6) does not
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 10In section 244 of the Banking Act 2009 (immunity) in subsection (2)—

(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”.

15Changes in terminology

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”.

Section 5

SCHEDULE 3 Financial Conduct Authority and Prudential Regulation Authority:
20Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000

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

Section 1A

“Schedule 1ZA The Financial Conduct Authority

Part 1 25General

Interpretation

1 In this Schedule—

• “the Bank” means the Bank of England;

• “functions” means functions conferred on the FCA by or
  30under 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.

(2) 35The governing body must consist of—

(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
5the Treasury, and

(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
10executive or non-executive members, the Treasury must secure
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) 15In the following provisions of this Schedule an “appointed
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) 20In the case of a member appointed under paragraph 2(2)(d), the
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)
25must consider whether the person has any financial or other
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
30as—

(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) 35to prohibit M from acquiring any financial or other
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
40interest as employee is to be disregarded for the purposes of sub-
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
45prudential regulation in respect of that person’s service as a
member.

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
5effect on the extent of the functions as member that it
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 10The validity of any act of the FCA is not affected—

(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) 15as an appointed member.

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
20particular person, or

(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) 25in the case of the non-executive members, by the Treasury;

(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
30staff of the FCA, but subject to the following provisions.

(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) 35making rules;

(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) 40section 345D (whether as a result of section 345(2)
or section 249(1)), or

(iii) section 76 of the Financial Services Act 2012;

(d) giving directions under section 316, 318 or 328.

(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 5The FCA must maintain satisfactory arrangements for—

(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.

10Annual report

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
15objectives have been advanced,

(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) 20its consideration of the matter mentioned in section
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
25to which the report relates,

(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
30direct.

(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) 35a statement of the remuneration of the appointed members
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) 40The Treasury must lay before Parliament a copy of each report
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
45purposes of enabling that report to be considered.

(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
5to put questions to the FCA about the way in which it
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) 10The FCA must give reasonable notice of its annual meeting.

(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) 15indicate the proposed duration of the meeting,

(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
20public.

(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) 25publish that notice in the way appearing to the FCA to be
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.

30Accounts and audit

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) 35direct that any provision of that Act about accounts and
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
40(b) is enforceable by injunction or, in Scotland, an order for specific
performance under section 45 of the Court of Session Act 1988.

(3) Proceedings under sub-paragraph (2) may be brought only by the
Treasury.

14 (1) The FCA must send a copy of its annual accounts to the
Comptroller and Auditor General as soon as is reasonably
practicable.

(2) The Comptroller and Auditor General must—

(a) 5examine, certify and report on accounts received under
this paragraph, and

(b) send a copy of the certified accounts and the report to the
Treasury.

(3) The Treasury must lay the copy of the certified accounts and the
10report before Parliament.

(4) Except as provided by paragraph 13(1), the FCA is exempt from
the requirements of Part 16 of the Companies Act 2006 (audit), and
its balance sheet must contain a statement to that effect.

(5) In this paragraph “annual accounts” has the meaning given in
15section 471 of the Companies Act 2006.

Part 2 Status

Status

15 In relation to any of its functions—

(a) 20the FCA is not to be regarded as acting on behalf of the
Crown, and

(b) its members, officers and staff are not to be regarded as
Crown servants.

Exemption from requirement for use of “limited” in name of FCA

16 25The FCA is to continue to be exempt from the requirements of the
Companies Act 2006 relating to the use of “limited” as part of its
name.

17 If the Secretary of State is satisfied that any action taken by the
FCA makes it inappropriate for the exemption given by paragraph
3016 to continue, the Secretary of State may, after consulting the
Treasury, give a direction removing it.

Part 3 Penalties and fees

Penalties

18 (1) 35In determining its policy with respect to the amounts of penalties
to be imposed by it under this Act, the FCA must take no account
of the expenses which it incurs, or expects to incur, in discharging
its functions.

(2) The FCA must prepare and operate a scheme (“the financial
40penalty scheme”) for ensuring that—

(a) the amounts paid to it by way of penalties imposed under
this Act (other than Part 6 or 18) are applied for the benefit
of authorised persons, and

(b) the amounts paid to it by way of penalties imposed under
5Part 6 of this Act are applied for the benefit of—

(i) issuers of securities admitted to the official list, and

(ii) issuers who have requested or approved the
admission of financial instruments to trading on a
regulated market.

(3) 10The financial penalty scheme may, in particular, make different
provision with respect to different classes of authorised person or
issuer.

(4) Up-to-date details of the financial penalty scheme must be set out
in a document (“the scheme details”).

19 (1) 15The scheme details must be published by the FCA in the way
appearing to it to be best calculated to bring them to the attention
of the public.

(2) Before making the financial penalty scheme, the FCA must
publish a draft of the proposed scheme in the way appearing to the
20FCA to be best calculated to bring it to the attention of the public.

(3) The draft must be accompanied by notice that representations
about the proposals may be made to the FCA within a specified
time.

(4) Before making the scheme, the FCA must have regard to any
25representations made to it in accordance with sub-paragraph (3).

(5) If the FCA makes the proposed scheme, it must publish an
account, in general terms, of—

(a) the representations made to it in accordance with sub-
paragraph (3), and

(b) 30its response to them.

(6) If the scheme differs from the draft published under sub-
paragraph (2) in a way which is, in the opinion of the FCA,
significant, the FCA must (in addition to complying with sub-
paragraph (5)) publish details of the difference.

(7) 35The FCA must, without delay, give the Treasury a copy of any
scheme details published by it.

(8) The FCA may charge a reasonable fee for providing a person with
a copy of—

(a) a draft published under sub-paragraph (2);

(b) 40 scheme details.

(9) Sub-paragraphs (2) to (6) and (8)(a) also apply to a proposal to
alter or replace the financial penalty scheme.

Fees

20 (1) The FCA may make rules providing for the payment to it of such
45fees, in connection with the discharge of any of its qualifying