Financial Services Bill

Session 2012 - 13
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Financial Services Bill

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
104

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Short selling rules
(1)
In every provision of Part 8A of FSMA 2000 (short selling) for “Authority”, in
each place, substitute “FCA”.
(2)
In section 131D of FSMA 2000 (procedure in urgent cases)—
(a)
in subsection (1)—
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(i)
for “section 155 (consultation in relation to proposed rules)”
substitute “subsections (1)(b) and (2) to (5) of section 138I
(public consultation in relation to proposed rules)”, and
(ii)
for paragraphs (a) and (b) substitute “advance one or more of its
operational objectives.”, and
10
(b)
in subsection (4), for paragraphs (a) and (b) substitute “advance one or
more of its operational objectives.”.
Control over authorised persons
24
Control over authorised persons
(1)
FSMA 2000 is amended as follows.
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(2)
In every provision of Part 12 (control over authorised persons), for “Authority”
or “Authority’s”, in each place (where not expressly amended by the following
provisions), substitute “appropriate regulator” or “appropriate regulator’s”.
(3)
In section 178 (obligation to notify an acquisition of control), after subsection
(2) insert—
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“(2A)
In this Part, “the appropriate regulator” means—
(a)
where the UK authorised person is a PRA-authorised person,
the PRA;
(b)
in any other case, the FCA.”
(4)
In section 179 (requirements for section 178 notices) in subsection (2), for “The
25
Authority” substitute “Each regulator”.
(5)
In section 187 (approval with conditions), for subsection (2) substitute—
“(2)
The appropriate regulator may only impose conditions where—
(a)
if it did not impose those conditions, it would propose to object
to the acquisition, or
30
(b)
it is required to do so by a direction under section 187A(3)(b) or
section 187B(3).”
(6)
After section 187 insert—
“187A
Assessment: consultation by PRA with FCA
(1)
The PRA must consult the FCA before acting under section 185.
35
(2)
The FCA may make representations to the PRA in relation to any of the
matters set out in sections 185(2) and 186.
(3)
If the FCA considers that on the basis of the matters set out in section
186(f) there are reasonable grounds to object to the acquisition, the FCA
may—
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(a)
direct the PRA to object to the acquisition, or

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Part 2 — Amendments of Financial Services and Markets Act 2000
105

(b)
direct the PRA not to approve the acquisition unless it does so
subject to conditions specified in the direction (with or without
other conditions).
(4)
Before giving a direction under subsection (3), the FCA must notify the
PRA of its proposal to do so.
5
(5)
In order to comply with the obligation under subsection (1), the PRA
must provide the FCA with—
(a)
copies of—
(i)
the section 178 notice, and
(ii)
any document included with that notice,
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(b)
any further information provided pursuant to section 190, and
(c)
any other information in the possession of the PRA which—
(i)
in the opinion of the PRA, is relevant to the application,
or
(ii)
is reasonably requested by the FCA.
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(6)
If the PRA acts under section 185(1)(b), it must indicate to the section
178 notice-giver any representations or directions received from the
FCA.
(7)
Directions given by the FCA under this section are subject to any
directions given to the FCA under section 3I.
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187B
Assessment: consultation by FCA with PRA
(1)
The FCA must consult the PRA before acting under section 185 if—
(a)
the UK authorised person to which the section 178 notice relates
has as a member of its immediate group a PRA-authorised
person, or
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(b)
the section 178 notice-giver is a PRA-authorised person.
(2)
The PRA may make representations to the FCA in relation to any of the
matters set out in sections 185(2) and 186.
(3)
If the PRA considers that on the basis of relevant matters that there are
reasonable grounds to object to the acquisition, the PRA may direct the
30
FCA not to approve the acquisition unless it does so subject to
conditions specified in the direction (with or without other conditions).
(4)
In subsection (3) “relevant matters” means—
(a)
the matters in paragraphs (d) and (e)(i) of section 186, and
(b)
in a case falling within subsection (1)(b) of this section, also
35
includes the matter in paragraph (c) of section 186.
(5)
In order to comply with the obligation under subsection (1), the FCA
must provide the PRA with—
(a)
copies of—
(i)
the section 178 notice, and
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(ii)
any document included with that notice,
(b)
any further information provided pursuant to section 190, and
(c)
any other information in the possession of the FCA which—
(i)
in the opinion of the FCA, is relevant to the application,
or
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Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
106

(ii)
is reasonably requested by the PRA.
(6)
If the FCA acts under section 185(1)(b), it must indicate to the section
178 notice-giver any representations or directions received from the
PRA.
187C
Variation etc of conditions
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(1)
Where the PRA has imposed conditions required by a direction given
by the FCA under section 187A(3)—
(a)
the FCA may direct the PRA to exercise its power under section
187(4) to vary or cancel any of those conditions;
(b)
the PRA must consult the FCA before it exercises that power in
10
relation to those conditions otherwise than in accordance with
a direction under paragraph (a).
(2)
Where the FCA has imposed conditions required by a direction given
by the PRA under section 187B(3)—
(a)
the PRA may direct the FCA to exercise its power under section
15
187(4) to vary or cancel any of those conditions;
(b)
the FCA must consult the PRA before it exercises that power in
relation to those conditions otherwise than in accordance with
a direction under paragraph (a).”
(7)
In section 191A (objection to control), after subsection (4) insert—
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“(4A)
Where the appropriate regulator is the PRA, it must consult the FCA
before giving a warning notice under this section.
(4B)
Where the appropriate regulator is the FCA, it must consult the PRA
before giving a warning notice under this section if—
(a)
the UK authorised person has as a member of its immediate
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group a PRA-authorised person, or
(b)
the person to whom the warning notice is to be given is a PRA-
authorised person.”
(8)
In section 191B (restriction notices), after subsection (2) insert—
“(2A)
Where the appropriate regulator is the PRA, it must consult the FCA
30
before giving a restriction notice under this section.
(2B)
Where the appropriate regulator is the FCA, it must consult the PRA
before giving a restriction notice under this section if—
(a)
the UK authorised person has as a member of its immediate
group a PRA-authorised person, or
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(b)
the person to whom the restriction notice is to be given is a PRA-
authorised person.”
(9)
In section 191C (orders for the sale of shares), after subsection (2) insert—
“(2A)
Where the appropriate regulator is the PRA, it must consult the FCA
before making an application to the court under this section.
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(2B)
Where the appropriate regulator is the FCA, it must consult the PRA
before making an application to the court under this section if—
(a)
the UK authorised person has as a member of its immediate
group a PRA-authorised person, or

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Part 2 — Amendments of Financial Services and Markets Act 2000
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(b)
the person holding the shares or voting power is a PRA-
authorised person.”
(10)
In section 191D (obligation to notify of disposition of control), after subsection
(1) insert—
“(1A)
The PRA must give the FCA a copy of any notice it receives under this
5
section.
(1B)
The FCA must give the PRA a copy of any notice it receives under this
section which—
(a)
relates to a UK authorised person who has as a member of its
immediate group a PRA-authorised person, or
10
(b)
is given by a PRA-authorised person.”
(11)
In section 191E (requirements for notices under section 191D), in subsection (2),
for “The Authority” substitute “Each regulator”.
(12)
In section 191G (interpretation), in subsection (1), after the definition of
“acquisition” insert—
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““the appropriate regulator” is to be read in accordance with
section 178(2A);”.
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Powers of regulators in relation to parent undertakings
(1)
After section 192 of FSMA 2000 insert—
“Part 12A
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Powers exercisable in relation to parent undertakings
Introductory
192A
Meaning of “qualifying authorised person”
(1)
In this Part “qualifying authorised person” means an authorised person
satisfying the following conditions.
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(2)
Condition A is that the authorised person is a body corporate
incorporated in any part of the United Kingdom.
(3)
Condition B is that the authorised person is—
(a)
a PRA-authorised person, or
(b)
an investment firm.
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(4)
The Treasury may by order—
(a)
amend subsection (3) so as to add to or restrict the descriptions
of authorised person who can be qualifying authorised persons,
or
(b)
provide that while the order is in force subsection (3) is not to
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have effect.
(5)
Except as provided by subsection (6), an order under subsection (4) is
not to be made unless a draft of the order has been laid before
Parliament and approved by a resolution of each House.

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Part 2 — Amendments of Financial Services and Markets Act 2000
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(6)
An order under subsection (4) may be made without a draft having
been laid and approved as mentioned in subsection (5) if the order
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.
5
(7)
An order under subsection (4) made in accordance with subsection
(6)—
(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
10
resolution of each House of Parliament (but without affecting
anything done under the order or the power to make a new
order).
(8)
The “relevant period” is a period of 28 days beginning with the day on
which the order is made.
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(9)
In 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.
192B
Meaning of “qualifying parent undertaking”
(1)
The parent undertaking of a qualifying authorised person or
20
recognised UK investment exchange is for the purposes of this Part a
“qualifying parent undertaking” if the following conditions are
satisfied in relation to it.
(2)
Condition A is that the parent undertaking is a body corporate
incorporated in any part of the United Kingdom.
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(3)
Condition B is that the parent undertaking is not itself an authorised
person, a recognised investment exchange or a recognised clearing
house.
(4)
Condition C is that the parent undertaking is a financial institution of a
kind prescribed by the Treasury by order.
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(5)
“Recognised UK investment exchange” means a recognised investment
exchange that is not an overseas investment exchange as defined in
section 313(1).
(6)
The Treasury may by order—
(a)
amend subsection (4) by omitting the words “a financial
35
institution”, and
(b)
make any amendment of subsection (2) that they consider
desirable in connection with an amendment made under
paragraph (a).
Power of direction
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192C
Power to direct qualifying parent undertaking
(1)
The appropriate regulator may give a direction under this section to a
qualifying parent undertaking if either the general condition or the
consolidated supervision condition is satisfied.

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Part 2 — Amendments of Financial Services and Markets Act 2000
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(2)
The general condition is that the appropriate regulator considers that
the acts or omissions of the qualifying parent undertaking are having
or may have a material adverse effect on the regulation by the regulator
of one or more qualifying authorised persons or recognised investment
exchanges in pursuance of any of the regulator’s objectives.
5
(3)
The consolidated supervision condition is that—
(a)
the appropriate regulator is the competent authority for the
purpose of consolidated supervision that is required, in relation
to some or all of the members of the group of a qualifying
authorised person, in pursuance of any of the directives
10
mentioned in section 3L(3), and
(b)
the appropriate regulator considers that the acts or omissions of
the qualifying parent undertaking are having or may have a
material adverse effect on the effectiveness of that consolidated
supervision.
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(4)
In subsection (3)(a) “consolidated supervision” includes supplemental
supervision.
(5)
In deciding whether to give a direction under this section, a regulator
must have regard—
(a)
to the desirability where practicable of exercising its powers in
20
relation to authorised persons or recognised investment
exchanges rather than its powers under this section, and
(b)
to the principle that a burden or restriction which is imposed on
a person should be proportionate to the benefits, considered in
general terms, which are expected to result from its imposition.
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(6)
“The appropriate regulator” means—
(a)
where a direction relates to a qualifying authorised person or
recognised investment exchange who is a PRA-authorised
person, the FCA or the PRA;
(b)
in any other case, the FCA.
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(7)
“Objectives”, in relation to the FCA, means operational objectives.
192D
Requirements that may be imposed
(1)
A direction under section 192C may require the parent undertaking—
(a)
to take specified action, or
(b)
to refrain from taking specified action.
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(2)
A requirement may be imposed by reference to the parent
undertaking’s relationship with—
(a)
its group, or
(b)
other members of its group.
(3)
A requirement may refer to the past conduct of the parent undertaking
40
(for example, by requiring the parent undertaking to review or take
remedial action in respect of past conduct).
(4)
The direction must specify the period during which each requirement
remains in force.