(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) 5A function conferred on either regulator by or under this Act relates to
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
10persons but relate to similar subject-matter, or

(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) 15The regulators must prepare and maintain a memorandum which
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) 20how the regulators intend to comply with section 3D in relation
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) 25the variation of permission;

(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
30persons (whether or not PRA-authorised persons);

(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) 35powers to appoint competent persons under Part 11
(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
40regulator);

(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) 45The memorandum must contain provision about the co-ordination by
the regulators of—

(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
5European Securities and Markets Authority),

(b) their relations with regulatory bodies outside the United
Kingdom, and

(c) the exercise of their functions in relation to the compensation
scheme.

(4) 10The regulators must review the memorandum at least once in each
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
15received by them under this section.

(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
20section 3D if the regulators consider—

(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) 25The reference in subsection (1)(a) to matters of common regulatory
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
30responsibility that, in relation to with-profits policies, belongs to the
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
35insurers relating to the making of payments under with-profits policies
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
40read, in relation to measures designed for the purpose mentioned in
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
45insurer.

(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
5FCA may be expected to have particular expertise.

(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) 10This section applies only if the effecting or carrying out of with-profits
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
15persons, are to be, or are to be primarily, the responsibility of one
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) 20require one regulator to consult the other.

(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
25approved by a resolution of each House, or

(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
30approved.

(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
35resolution of each House of Parliament (but without that
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) 40In calculating the relevant period no account is to be taken of any time
during which Parliament is dissolved or prorogued or during which
both Houses are adjourned for more than 4 days.

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) 5The first condition is that the FCA is proposing—

(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) 10a PRA-authorised person,

(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) 15In subsection (2)—

(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) 20“insolvency powers”, in relation to the FCA, means its powers
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) 25result in the failure of a PRA-authorised person in a way that
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) 30A direction under this section is a direction requiring the FCA not to
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
35if or to the extent that in the opinion of the FCA compliance would be
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 40Revocation of directions under section 3I

(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.

3K Further provisions about directions under section 3I

(1) Before giving a direction under section 3I, the PRA must consult the
FCA.

(2) A direction under section 3I must be given or confirmed in writing, and
5must be accompanied by a statement of the reasons for giving it.

(3) A notice revoking a direction under section 3I must be given or
confirmed in writing.

(4) The PRA must give the Treasury a copy of—

(a) a direction under section 3I;

(b) 10a statement relating to such a direction;

(c) a notice revoking such a direction.

(5) The Treasury must lay before Parliament any document received by
them under subsection (4).

(6) The PRA must also—

(a) 15publish the direction and statement, or the notice, in such
manner as it thinks fit, and

(b) where the direction or notice relates to a particular authorised
person, give a copy of the direction and statement, or the notice,
to that person.

(7) 20But subsections (5) and (6) do not apply in a case where the PRA
considers that compliance with those subsections would be against the
public interest.

(8) Where the PRA decides that compliance with subsections (5) and (6)
would be against the public interest, it must from time to time review
25that decision and if it subsequently decides that compliance is no longer
against the public interest it must—

(a) notify the Treasury for the purposes of subsection (5), and

(b) comply with subsection (6).

Directions relating to consolidated supervision

3L 30Directions relating to consolidated supervision of groups

(1) This section applies where one of the regulators (“the supervising
regulator”), but not the other, is the competent authority for the
purpose of consolidated supervision that is required in relation to some
or all of the members of a group (“the relevant group”) in pursuance of
35any of the relevant directives.

(2) “Consolidated supervision” includes supplementary supervision.

(3) The “relevant directives” are—

(a) the banking consolidation directive;

(b) Directive 2002/87/EC of the European Parliament and of the
40Council on the supplementary supervision of credit
institutions, insurance undertakings and investment firms in a
financial conglomerate;

(c) Directive 2006/49/EC on the capital adequacy of investment
firms and credit institutions;

(d) Directive 2009/138/EC of the European Parliament and the
Council of 25 November 2009 on the taking-up and pursuit of
the business of Insurance and Reinsurance (Solvency II).

(4) The supervising regulator may, if it considers it necessary to do so for
5the effective consolidated supervision of the relevant group, give the
other regulator a direction under this section.

(5) A direction under this section is a direction requiring the other
regulator to exercise, or not to exercise, a relevant function in a
specified manner in relation to authorised persons who are members of
10the relevant group.

(6) The direction may relate to members of the relevant group other than
the members in respect of which consolidated supervision is required.

(7) A “relevant function”, in relation to either regulator, is a function
conferred by or under this Act which relates to the regulation of
15authorised persons, but does not include—

(a) the regulator’s function of making rules under this Act;

(b) its function of preparing and issuing codes under this Act;

(c) its function of determining the general policy and principles by
reference to which it performs particular functions;

(d) 20the FCA’s functions in relation to the giving of general
guidance;

(e) the PRA’s functions in relation to the giving of guidance under
section 2H;

(f) the FCA’s functions in relation to consent for the purposes of
25section 55F or 55I.

(8) The direction may not require the regulator to which it is given (“the
directed regulator”) to do anything that it has no power to do, but the
direction is relevant to the exercise of any discretion conferred on the
directed regulator.

(9) 30The directed regulator must comply with the direction as soon as
practicable, but this is subject to subsections (10) and (11).

(10) The directed regulator is not required to comply with a direction under
this section if or to the extent that in its opinion compliance would be
incompatible with any EU obligation or any other international
35obligation of the United Kingdom.

(11) Directions given by the FCA under this section are subject to any
directions given to the FCA under section 3I.

3M Revocation of directions under section 3L

(1) The supervising regulator may at any time by notice to the other
40regulator revoke a direction under section 3L.

(2) The revocation of the direction does not affect the validity of anything
previously done in accordance with it.

(3) Expressions defined for the purposes of section 3L have the same
meaning in this section.

3N Further provisions about directions under section 3L

(1) Before giving a direction under section 3L, the supervising regulator
must consult the other regulator.

(2) A direction under section 3L must be given or confirmed in writing,
5and must be accompanied by a statement of the reasons for giving it.

(3) A notice revoking a direction under section 3L must be given or
confirmed in writing.

(4) The regulator to which a direction under section 3L is given must give
a copy of the direction and statement to each of the authorised persons
10to whom the direction relates.

(5) The supervising regulator must publish the direction and statement, or
the notice, in such manner as it thinks fit.

(6) But subsection (4) or (5) does not apply in a case where the regulator on
which the duty is imposed considers that compliance with that
15subsection would be against the public interest.

(7) In a case where a regulator decides that compliance with subsection (4)
or (5) would be against the public interest, the regulator must from time
to time review that decision and if it subsequently decides that
compliance is no longer against the public interest it must comply with
20the subsection.

(8) Expressions defined for the purposes of section 3L have the same
meaning in this section.

3O Consultation by regulator complying with direction

(1) If the directed regulator is required by this Act to consult any person
25other than the supervising regulator before exercising the relevant
function to which the direction relates, the directed regulator must give
the supervising regulator copies of any written representations
received from the persons consulted.

(2) Expressions defined for the purposes of section 3L have the same
30meaning in this section.

Co-operation with Bank of England

3P Co-operation by FCA and PRA with Bank of England

(1) Each regulator must take such steps as it considers appropriate to co-
operate with the Bank of England in connection with—

(a) 35the pursuit by the Bank of its Financial Stability Objective, and

(b) the Bank’s compliance with its duties under sections 54 and 55
of the Financial Services Act 2012 (duty to notify Treasury of
possible need for public funds and of subsequent changes).

(2) Co-operation under subsection (1) may include the sharing of
40information that the regulator is not prevented from disclosing.

Arrangements for provision of services

3Q Arrangements for provision of services

(1) The regulators may enter into arrangements with each other for the
provision of services by one of them to the other.

(2) 5Either regulator may enter into arrangements with the Bank of England
for the provision of services—

(a) by the Bank to the regulator, or

(b) by the regulator to the Bank.

(3) Either regulator may enter into arrangements with any of the bodies
10specified in subsection (4) for the provision of services by the regulator
to that body.

(4) Those bodies are—

(a) the consumer financial education body (see section 3R(2)),

(b) the scheme manager (see section 212(1)), and

(c) 15the scheme operator (see section 225(2)).

(5) Arrangements under this section are to be on such terms as may be
agreed by the parties.

Enhancing public understanding of financial matters etc.

3R The consumer financial education body

(1) 20The consumer financial education body continues to have the
consumer financial education function.

(2) The “consumer financial education body” means the body corporate
originally established by the Financial Services Authority under section
6A of this Act (as it had effect before the passing of the Financial
25Services Act 2012).

(3) The consumer financial education function is to enhance—

(a) the understanding and knowledge of members of the public of
financial matters (including the UK financial system), and

(b) the ability of members of the public to manage their own
30financial affairs.

(4) The consumer financial education function includes, in particular—

(a) promoting awareness of the benefits of financial planning;

(b) promoting awareness of the financial advantages and
disadvantages in relation to the supply of particular kinds of
35goods or services;

(c) promoting awareness of the benefits and risks associated with
different kinds of financial dealing (which includes informing
the FCA and other bodies of those benefits and risks);

(d) the publication of educational materials or the carrying out of
40other educational activities;

(e) the provision of information and advice to members of the
public;

(f) assisting members of the public with the management of debt;

(g) working with other organisations which provide debt services,
with a view to improving—

(i) the availability to the public of those services;

(ii) the quality of the services provided;

(iii) 5consistency in the services available, in the way in which
they are provided and in the advice given.

(5) In subsection (4) “debt services” means debt advice or assistance with
the management of debt.

(6) Schedule 1A makes further provision about the consumer financial
10education body.”

(2) For Schedule 1 to FSMA 2000 substitute the Schedules 1ZA and 1ZB set out in
Schedule 3 to this Act.

Regulated activities

6 Extension of scope of regulation

(1) 15In section 22 of FSMA 2000 (the classes of activity and categories of
investment)—

(a) after subsection (1) insert—

“(1A) An activity is also a regulated activity for the purposes of this
Act if it is an activity of a specified kind which is carried on by
20way of business and relates to information about a person’s
financial standing.”

(b) in subsection (3), after “(1)” insert “or (1A)”, and

(c) for the heading substitute “Regulated activities”.

(2) Schedule 2 to FSMA 2000 (regulated activities) is amended as follows.

(3) 25For paragraph 23 (and the italic heading before it) substitute—

“Loans and other forms of credit

23 (1) Rights under any contract under which one person provides another
with credit.

(2) “Credit” includes any cash loan or other financial accommodation.

(3) 30“Cash” includes money in any form.

(4) It is immaterial for the purposes of sub-paragraph (1) whether or not
the obligation of the borrower is secured on property of any kind.”

(4) After paragraph 23A insert—

“Contracts for hire of goods

23B (1) 35Rights under a contract for the bailment or (in Scotland) hiring of
goods to a person other than a body corporate.

(2) “Goods” has the meaning given in section 61(1) of the Sale of Goods
Act 1979.

(3) It is immaterial for the purposes of sub-paragraph (1) whether the
rights of the person to whom the goods are bailed or hired have been
assigned to a body corporate.”

(5) After paragraph 24 insert—

5“ Part 2A Regulated activities relating to information about persons’ financial
standing

24A General

The matters with respect to which provision may be made under
10section 22(1A) include, in particular, those described in general
terms in this Part of this Schedule.

24B Providing credit reference services

Furnishing persons with information that—

(a) is relevant to the financial standing of persons other than
15bodies corporate, and

(b) is collected for that purpose by the person furnishing it.

24C Providing credit information services

(1) Taking steps on behalf of a person other than a body corporate in
connection with information relevant to that person’s financial
20standing that is or may be held by a regulated person.

(2) “Regulated person” means—

(a) a person who is carrying on a regulated activity, or

(b) a person who is carrying on a business in respect of which a
licence under section 21 of the Consumer Credit Act 1974 is
25required.

Giving advice to a person other than a body corporate in relation to
the taking of any steps of the kind mentioned in paragraph 24C(1).”

7 Orders under section 22 of FSMA 2000

(1) Schedule 2 to FSMA 2000 (regulated activities) is amended as follows.

(2) 30In paragraph 25(1), for “the Authority”, in each place, substitute “either
regulator”.

(3) For paragraph 26 substitute—

“Parliamentary control

26 (1) This paragraph applies to any order made under section 22(1) or (1A)
35which contains a statement by the Treasury that, in their opinion, the
effect (or one of the effects) of the proposed order would be that an
activity which is not a regulated activity would become a regulated
activity.