Financial Services Bill (HC Bill 323)

Section 13

SCHEDULE 5 Performance of regulated activities

1 Part 5 of FSMA 2000 is amended as follows.

2 (1) Section 58 (applications relating to prohibition orders: procedure and right
5to refer to Tribunal) is amended as follows.

(2) In subsections (2) to (5), for “Authority” substitute “appropriate regulator”.

(3) After subsection (5) insert—

“(6) The appropriate regulator” means the regulator to which the
application is made.”

3 10In section 59 (approval for particular arrangements), omit subsection (9).

4 (1) Section 60 (applications for approval), for “Authority” or “Authority’s”, in
each place, substitute “appropriate regulator” or “appropriate regulator’s”.

(2) For subsection (3) substitute—

“(3) At any time after the application is received and before it is
15determined, the appropriate regulator may require the applicant to
provide it with such further information as it reasonably considers
necessary to enable it to determine the application or, as the case
requires, to decide whether to give consent.”

(3) In subsection (6), for “Part IV” substitute “Part 4A”.

(4) 20After subsection (6) insert—

“(7) The PRA must consult the FCA before—

(a) giving a direction under subsection (2)(a) in relation to a class
of applicants, or

(b) imposing a requirement under subsection (2)(b) on a class of
25applicants.

(8) The PRA must as soon as practicable notify the FCA of the receipt or
withdrawal of an application to the PRA, unless the case is one in
which by virtue of arrangements under section 59B the consent of the
FCA is not required.

(9) 30“The appropriate regulator”—

(a) in relation to a controlled function which is of a description
specified in rules made by the FCA, means the FCA;

(b) in relation to a controlled function which is of a description
specified in rules made by the PRA, means the PRA, and for
35the purposes of subsection (3) also includes the FCA in cases
where the consent of the FCA is required.”

5 (1) Section 61 (determination of applications) is amended as follows.

(2) In subsection (1), for “The Authority may grant an application made under
section 60” substitute “The regulator to which an application is made under
40section 60 may grant the application”.

(3) In subsection (2)—

(a) for “the Authority” substitute “the regulator”, and

(b) after “general rules” insert “made by that regulator”.

(4) After subsection (2) insert—

“(2A) Subsections (1) and (2) apply in relation to the giving by the FCA of
any required consent as they apply in relation to the grant of the
5application.”

(5) In subsection (3), for the words from the beginning to “determine” substitute
“The regulator to which an application is made under section 60 must,
before the end of the period for consideration, determine”.

(6) After subsection (3) insert—

“(3A) 10The period for consideration”—

(a) in any case where the application under section 60 is made by
a person applying for permission under Part 4A (see section
60(6)), means whichever ends last of—

(i) the period within which the application for that
15permission must be determined under section 55V(1)
or (2), and

(ii) the period of 3 months beginning with the date on
which the regulator receives the application under
section 60, and

(b) 20in any other case, means the period of 3 months beginning
with the date on which the regulator receives the application
under section 60.”

(7) In subsection (4), for “the Authority”, in each place, substitute “a regulator”.

(8) In subsection (5)—

(a) 25for “Authority”, in the first place, substitute “regulator to which the
application was made”, and

(b) for “Authority”, in the second place, substitute “regulator”.

6 (1) Section 62 (applications for approval: procedure and right to refer to
Tribunal) is amended as follows.

(2) 30In subsection (1), for the words from “If” to “, it” substitute “If the regulator
to which an application is made under section 60 (“an application”) decides
to grant the application, it”.

(3) In subsections (2) to (4)—

(a) for “the Authority” substitute “the regulator to which an application
35is made”, and

(b) for “an application” substitute “the application”.

7 (1) Section 63 (withdrawal of approval) is amended as follows.

(2) In subsection (2)—

(a) for “its approval, the Authority may take into account any matter
40which it could take into account if it were” substitute “an approval,
the FCA or the PRA may take into account any matter which could
be taken into account in”, and

(b) at the end insert “(on the assumption, if it is not the case, that the
application was one falling to be considered by it)”.

(3) 45In subsections (3) to (5)—

(a) for “the Authority” substitute “a regulator”, and

(b) for “its approval” substitute “an approval”.

8 In section 63A (performance of controlled functions without approval:
power to impose penalties), for “Authority”, in each place, substitute
5“appropriate regulator”.

9 In section 63B (procedure and right to refer to Tribunal), for “the Authority”,
in each place, substitute “a regulator”.

10 (1) Section 63C (statement of policy) is amended as follows.

(2) In subsection (1), for “The Authority” substitute “Each regulator”.

(3) 10In subsections (2) and (3), for “The Authority’s” substitute “Each
regulator’s”.

(4) In subsection (4), for “the Authority” substitute “the regulator that has
issued the statement”.

(5) In subsection (5)—

(a) 15for “The Authority” substitute “A regulator”, and

(b) after “issued” insert “by it”.

(6) In subsection (6), for “replaced, the Authority” substitute “replaced by a
regulator, the regulator”.

(7) In subsection (7), for “The Authority” substitute “A regulator”.

(8) 20In subsection (8)—

(a) after “section” insert “by a regulator”, and

(b) for “Authority”, in both places, substitute “regulator”.

(9) In subsection (9), for “Authority” substitute “regulator”.

(10) In subsection (10)—

(a) 25for “the Authority” substitute “a regulator”, and

(b) after “published” insert “by it”.

11 (1) Section 63D (statement of policy: procedure) is amended as follows.

(2) In subsection (1)—

(a) for “issuing” substitute “a regulator issues”, and

(b) 30for “Authority”, in both places, substitute “regulator”.

(3) In subsections (2), (3), (4) and (5) (in both places), for “Authority” substitute
“regulator”.

(4) In subsection (6)—

(a) for “The Authority” substitute “A regulator”, and

(b) 35after “published” insert “by it”.

12 (1) Section 64 (conduct of approved persons: statement and codes) is amended
as follows.

(2) In subsection (2)—

(a) for “the Authority” substitute “a regulator”, and

(b) 40after “subsection (1)” insert “or (1A)”.

(3) In subsection (3)(a) to (c), for “Authority” substitute “regulator issuing the
code”.

(4) In subsection (4)—

(a) for “The Authority” substitute “A regulator”, and

(b) 5after “issued” insert “by it”.

(5) In subsection (5)—

(a) after “replaced” insert “by a regulator”, and

(b) for “Authority” substitute “regulator”.

(6) In subsection (6)—

(a) 10for “the Authority”, in the first place, substitute “the regulator that
issued it”, and

(b) for “the Authority”, in the second place, substitute “that regulator”.

(7) In subsection (10), for “The Authority” substitute “A regulator”.

(8) In subsection (11), for paragraph (b) substitute—

“(b) 15is to be treated for the purposes of section 1B(6)(a) as part of
the FCA’s rule-making functions (where the power is
exercisable by the FCA) and is to be treated for the purposes
of section 2I(1)(a) as part of the PRA’s rule-making functions
(where the power is exercisable by the PRA).”

(9) 20In subsection (12)—

(a) for “The Authority” substitute “A regulator”, and

(b) after “published” insert “by it”.

(10) For subsection (13) substitute—

“(13) Any expression which is used both in this section and section 59 has
25the same meaning in this section as in that section.”

13 (1) Section 65 (statements and codes: procedure) is amended as follows.

(2) For subsection (1) substitute—

“(1) Before a regulator issues a statement or code under section 64, it
must—

(a) 30consult the other regulator; and

(b) after doing so, publish a draft of the statement or code in the
way appearing to it to be best calculated to bring the
statement or code to the attention of the public.

(1A) The duty of the FCA to consult the PRA under subsection (1)(a)
35applies only in so far as the statement or code applies to persons in
relation to whom approval is given under section 59 in respect of the
performance by them of significant-influence functions (within the
meaning of that section) in relation to the carrying on by PRA-
authorised persons of regulated activities.”

(3) 40In subsection (2)(b), for “the Authority” substitute “the regulator publishing
the draft”.

(4) In subsection (3)—

(a) for “issuing” substitute “a regulator issues”, and

(b) for “the Authority” substitute “it”.

(5) In subsection (4), for “the Authority” substitute “a regulator”.

(6) In subsection (5)—

(a) for “the Authority”, in the first place, substitute “the regulator
issuing the statement or code”, and

(b) 5for “the Authority”, in the second place, substitute “the regulator”.

(7) In subsection (6), for “the Authority” substitute “the regulator concerned”.

(8) For subsection (7) substitute—

“(7) Subsections (1)(b) and (2) to (6) do not apply in relation to—

(a) a statement or code issued by the FCA if it considers that the
10delay involved in complying with them would be prejudicial
to the interests of consumers, as defined in section 425A; or

(b) a statement or code issued by the PRA if it considers that the
delay involved in complying with them would—

(i) be prejudicial to the safety and soundness of PRA-
15authorised persons, or

(ii) in a case where section 2C applies, be prejudicial to
securing the appropriate degree of protection for
policyholders.”

(9) In subsection (9)—

(a) 20for “The Authority” substitute “A regulator”, and

(b) after “published” insert “by it”.

(10) For subsection (11) substitute—

“(11) Cost benefit analysis” means—

(a) an analysis of the costs together with an analysis of the
25benefits that will arise—

(i) if the proposed statement or code is issued, or

(ii) if subsection (5)(b) applies, from the statement or
code that has been issued, and

(b) subject to subsection (11A), an estimate of those costs and of
30those benefits.

(11A) If, in the opinion of the regulator concerned—

(a) the costs or benefits referred to in subsection (11) cannot
reasonably be estimated, or

(b) it is not reasonably practicable to produce an estimate,

35the cost benefit analysis need not estimate them, but must include a
statement of the opinion of the regulator concerned and an
explanation of it.”

14 (1) Section 66 (disciplinary powers) is amended as follows.

(2) In subsection (1)—

(a) 40in the opening words—

(i) for “The Authority” substitute “A regulator”, and

(ii) after “this section” insert “(whether or not it has given its
approval in relation to the person)”, and

(b) in paragraphs (a) and (b), for “ Authority” substitute “ regulator”.

(3) For subsection (2) substitute—

“(2) For the purposes of action by the FCA, a person is guilty of
misconduct if, while an approved person—

(a) the person has failed to comply with a statement of principle
5issued by the FCA under section 64, or

(b) the person has been knowingly concerned in a contravention
by the relevant authorised person of a requirement imposed
on that authorised person—

(i) by or under this Act, or

(ii) 10by any qualifying EU provision specified, or of a
description specified, for the purposes of this
subsection by the Treasury by order.

(2A) For the purposes of action by the PRA, a person is guilty of
misconduct if, while an approved person in respect of the
15performance of a significant-influence function in relation to the
carrying on by a PRA-authorised person of a regulated activity—

(a) the person has failed to comply with a statement of principle
issued by the PRA under section 64, or

(b) the person has been knowingly concerned in a contravention
20by the relevant authorised person of a requirement imposed
on that authorised person—

(i) by or under this Act, or

(ii) by any qualifying EU provision specified, or of a
description specified, for the purposes of this
25subsection by the Treasury by order.”

(4) In subsection (3), for “ Authority” substitute “regulator”.

(5) In subsection (3D), for “The Authority” substitute “The regulator taking
action under this section”.

(6) In subsection (4)—

(a) 30for “The Authority”, in the first place, substitute “A regulator”, and

(b) for “the Authority”, in the second place, substitute “the regulator”.

(7) In subsection (5)(a), for “the Authority” substitute “a regulator”.

(8) For subsection (6) substitute—

“(6) Approved person” means a person in relation to whom an approval
35is given under that section.”

15 (1) Section 67 (disciplinary measures: procedure and right to refer to Tribunal)
is amended as follows.

(2) In subsections (1) and (4), for “the Authority” substitute “a regulator”.

(3) In subsection (7)—

(a) 40for “the Authority”, in the first place, substitute “a regulator”, and

(b) for “the Authority”, in the second place, substitute “the regulator”.

(4) In subsection (9)—

(a) for “an approved person (“A”),” substitute “a person (“A”) in relation
to whom approval has been given,”, and

(b) 45omit the second sentence.

16 In section 68 (publication), for “the Authority” substitute “the regulator
publishing it”.

17 (1) Section 69 (statement of policy) is amended as follows.

(2) In subsection (1), for “The Authority must” substitute “Each regulator must”.

(3) 5In subsection (2), for “The Authority’s” substitute “A regulator’s”.

(4) In subsection (3)—

(a) for “The Authority” substitute “A regulator”, and

(b) after “issued” insert “by it”.

(5) In subsection (4), for “replaced, the Authority” substitute “replaced by a
10regulator, the regulator”.

(6) In subsection (5), for “The Authority” substitute “A regulator”.

(7) In subsection (6)—

(a) after “section” insert “by a regulator”, and

(b) for “the Authority”, in both places, substitute “the regulator”.

(8) 15In subsection (7), for “Authority” substitute “regulator”.

(9) In subsection (8)—

(a) for “the Authority” substitute “a regulator”, and

(b) after “published” insert “by it”.

18 (1) Section 70 (statements of policy: procedure) is amended as follows.

(2) 20In subsection (1)—

(a) for “issuing” substitute “a regulator issues”, and

(b) for “Authority”, in both places, substitute “regulator”.

(3) In subsections (2), (3), (4) and (5) (in both places), for “Authority” substitute
“regulator”.

(4) 25In subsection (6)—

(a) for “The Authority” substitute “A regulator”, and

(b) after “published” insert “by it”.

Section 20

SCHEDULE 6 Control of business transfers

1 30Part 7 of FSMA 2000 is amended as follows.

2 Before section 104 insert—

“103A Meaning of “the appropriate regulator”

(1) In this Part “the appropriate regulator” means—

(a) in relation to a scheme in respect of which the authorised
35person concerned is a PRA-authorised person, the PRA;

(b) in any other case, the FCA.

(2) In this Part, “the authorised person concerned”—

(a) in the case of an insurance business transfer scheme, is to be
read in accordance with section 105(2);

(b) in the case of a banking business transfer scheme, is to be read
in accordance with section 106(2);

(c) 5in the case of a reclaim fund business transfer scheme, means
the reclaim fund to whose business the scheme relates.”

3 (1) Section 109 (scheme reports) is amended as follows.

(2) For “Authority”, in each place, substitute “appropriate regulator”.

(3) After subsection (3) insert—

“(4) 10Where the appropriate regulator is the PRA, it must consult the FCA
before—

(a) nominating or approving a person under subsection (2)(b), or

(b) approving a form under subsection (3).

(5) Subsection (6) applies where the appropriate regulator is the FCA
15and either—

(a) the transferee is a PRA-authorised person, or

(b) the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.

(6) The FCA must consult the PRA before—

(a) 20nominating or approving a person under subsection (2)(b), or

(b) approving a form under subsection (3).”

4 (1) Section 110 (right to participate in proceedings) is amended as follows.

(2) The existing provision becomes subsection (1).

(3) For paragraph (a) of that subsection substitute—

“(a) 25the FCA,

(aa) in the case of a scheme falling within subsection (2), the PRA,
and”.

(4) After that subsection insert—

“(2) A scheme falls within this subsection if—

(a) 30the authorised person concerned or the transferee is a PRA-
authorised person, or

(b) the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.”

5 In section 112 (effect of order sanctioning business transfer scheme), in
35subsections (10) and (11), for “Authority” substitute “appropriate regulator”.

6 After section 112 insert—

“112ZA Duty of regulator to provide copy of order

(1) Where the PRA receives under section 112(10) a copy of an order it
must, without delay, give a copy of it to the FCA.

(2) 40Where the FCA receives under section 112(10) a copy of an order it
must, without delay, give a copy of it to the PRA if the order relates
to a scheme in respect of which—

(a) the transferee is a PRA-authorised person, or

(b) the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.”

7 (1) Section 113 (appointment of actuary) is amended as follows.

(2) 5In subsection (2)—

(a) for “the Authority”, in the first place, substitute “either regulator”,
and

(b) for “Authority”, in the second place, substitute “regulator which
made the application”.

(3)
10After that subsection insert—

“(3) An application under subsection (2) may be made by the PRA only
if—

(a) the authorised person concerned or the transferee is a PRA-
authorised person, or

(b) 15the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.”

8 In section 115 (certificates for purposes of insurance business transfers
overseas), for “Authority” substitute “appropriate regulator”.

9 Schedule 12 to FSMA (transfer schemes: certificates) is amended as follows.

10 20In paragraph 1, for “the Authority”, in each place, substitute “the
appropriate regulator”.

11 (1) Paragraph 2 is amended as follows.

(2) In the following places, for “Authority” substitute “appropriate regulator”—

(a) sub-paragraph (1)(b);

(b) 25in the first place in sub-paragraph (3).

(3) In sub-paragraph (3), after “transferred” insert “certification”.

(4) In sub-paragraph (6)(c), for “, the Authority” substitute “—

(i) the PRA, if the transferee is a PRA-authorised
person with a Part 4A permission or with
30permission under Schedule 4;

(ii) the FCA, if the transferee is a person with a Part 4A
permission or with permission under Schedule 4
but is not a PRA-authorised person.”

12 In paragraph 3, for “Authority” substitute “appropriate regulator”.

13 35In paragraph 4, for “Authority”, in the first place, substitute “appropriate
regulator”.

14 In paragraph 5, for “Authority”, in the first place, substitute “appropriate
regulator”.

15 In paragraph 5A, for “the Authority” substitute “the appropriate regulator”.

16 40In paragraph 8(2)—

(a) for paragraph (a) substitute—

“(a) if the transferee is a PRA-authorised person with a
Part 4A permission or with permission under
Schedule 4, the PRA;

(aa) 5if the transferee is a person with Part 4A permission
or with permission under Schedule 4 but is not a
PRA-authorised person, the FCA;”, and

(b) in paragraph (c), after “(a)” insert “, (aa)”.

17 In paragraph 9, for “Authority” substitute “appropriate regulator”.

18 (1) 10Paragraph 9A is amended as follows.

(2) The existing provision becomes sub-paragraph (1).

(3) In that sub-paragraph, for “Authority” substitute “relevant regulator”.

(4) After that sub-paragraph insert—

“(2) In this paragraph the “relevant regulator” means—

(a) 15if the transferee is a PRA-authorised person, the PRA;

(b) in any other case, the FCA.”

19 (1) Paragraph 10 is amended as follows.

(2) In sub-paragraph (2), for “Authority” substitute “FCA or the PRA”.

(3) In sub-paragraph (5), for “Authority” substitute “regulator which supervises
20the transferee’s margin of solvency”.

(4) In sub-paragraph (6), for “Authority” substitute “FCA or the PRA”.

Section 27

SCHEDULE 7 Application of provisions of FSMA 2000 to Bank of England etc

This is the Schedule 17A to be inserted in FSMA 2000 after Schedule 17—

Section 285A

“Schedule 17A 25Further provision in relation to exercise of Part 18 functions by Bank
of England

Part 1 Co-operation between appropriate regulators

Memorandum of understanding between appropriate regulators and PRA

1 (1) 30The appropriate regulators must prepare and maintain a
memorandum describing how they intend to work together in
exercising their functions in relation to persons who are
recognised bodies.

(2) The memorandum must in particular make provision about—