Financial Services Bill

Session 2012 - 13
Internet Publications
Other Bills before Parliament

Financial Services Bill

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
117

312F
Financial penalties
If the appropriate regulator considers that a recognised body has
contravened a relevant requirement imposed on the body, it may
impose on the body a penalty, in respect of the contravention, of such
amount as it considers appropriate.
5
312G
Proposal to take disciplinary measures
(1)
If the appropriate regulator proposes—
(a)
to publish a statement in respect of a recognised body under
section 312E, or
(b)
to impose a penalty on a recognised body under section 312F,
10

it must give the body a warning notice.
(2)
A warning notice about a proposal to publish a statement must set out
the terms of the statement.
(3)
A warning notice about a proposal to impose a penalty must state the
amount of the penalty.
15
312H
Decision notice
(1)
If the appropriate regulator decides—
(a)
to publish a statement in respect of a recognised body under
section 312E (whether or not in the terms proposed), or
(b)
to impose a penalty on a recognised body under section 312F
20
(whether or not of the amount proposed),

it must give the body a decision notice.
(2)
In the case of a statement, the decision notice must set out the terms of
the statement.
(3)
In the case of a penalty, the decision notice must state the amount of the
25
penalty.
(4)
If the appropriate regulator decides—
(a)
to publish a statement in respect of a recognised body under
section 312E, or
(b)
to impose a penalty on a recognised body under section 312F,
30

the body may refer the matter to the Tribunal.
312I
Publication
After an appropriate regulator publishes a statement under section
312E, it must send a copy of the statement to—
(a)
the recognised body concerned, and
35
(b)
any person to whom a copy of the decision notice was given
under section 393(4).
312J
Statement of policy
(1)
Each appropriate regulator must prepare and issue a statement of its
policy with respect to—
40
(a)
the imposition of penalties under section 312F, and
(b)
the amount of penalties under that section.

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
118

(2)
An appropriate regulator’s policy in determining what the amount of a
penalty should be must include having regard to—
(a)
the seriousness of the contravention in question in relation to
the nature of the requirement concerned, and
(b)
the extent to which that contravention was deliberate or
5
reckless.
(3)
An appropriate regulator may at any time alter or replace a statement
issued by it under this section.
(4)
If a statement issued by an appropriate regulator under this section is
altered or replaced, the regulator must issue the altered or replaced
10
statement.
(5)
In exercising, or deciding whether to exercise, its power under section
312F in the case of any particular contravention, an appropriate
regulator must have regard to any statement of policy published by it
under this section and in force at a time when the contravention in
15
question occurred.
(6)
A statement issued by an appropriate regulator under this section must
be published by the regulator in the way appearing to the regulator to
be best calculated to bring it to the attention of the public.
(7)
An appropriate regulator may charge a reasonable fee for providing a
20
person with a copy of the statement.
(8)
An appropriate regulator must, without delay, give the Treasury a
copy of any statement which it publishes under this section.
312K
Statement of policy: procedure
(1)
Before issuing a statement under section 312J, an appropriate regulator
25
must publish a draft of the proposed statement in the way appearing to
the regulator to be best calculated to bring it to the attention of the
public.
(2)
The draft must be accompanied by notice that representations about the
proposal may be made to the regulator within a specified time.
30
(3)
Before issuing the proposed statement, the regulator must have regard
to any representations made to it in accordance with subsection (2).
(4)
If the regulator issues the proposed statement it must publish an
account, in general terms, of—
(a)
the representations made to it in accordance with subsection (2),
35
and
(b)
its response to them.
(5)
If the statement differs from the draft published under subsection (1) in
a way which is, in the opinion of the regulator, significant, the regulator
must (in addition to complying with subsection (4)) publish details of
40
the difference.
(6)
An appropriate regulator may charge a reasonable fee for providing a
person with a copy of a draft published under subsection (1).
(7)
This section also applies to a proposal to alter or replace a statement.”

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
119

31
Repeal of special competition regime
In Part 18 of FSMA 2000 (recognised investment exchanges and clearing
houses)—
(a)
omit Chapter 2 (competition scrutiny), and
(b)
omit Chapter 3 (exclusion from the Competition Act 1998).
5
32
Sections 26 to 31: minor and consequential amendments
Schedule 8 contains—
(a)
minor amendments of FSMA 2000 in connection with provision made
by sections 26 to 31, and
(b)
other amendments of that Act in consequence of that provision.
10
Suspension and removal of financial instruments from trading
33
Suspension and removal of financial instruments from trading
In every provision of Part 18A of FSMA 2000 (suspension and removal of
financial instruments from trading)—
(a)
for “Authority”, in each place, substitute “FCA”, and
15
(b)
for “Authority’s”, in each place, substitute “FCA’s”.
Discipline and enforcement
34
Discipline and enforcement
Schedule 9 contains miscellaneous amendments of FSMA 2000 relating to
discipline and enforcement.
20
Financial Services Compensation Scheme
35
The Financial Services Compensation Scheme
(1)
Schedule 10 contains amendments of Part 15 of FSMA 2000 (the Financial
Services Compensation Scheme).
(2)
In section 224F(1) of that Act (power to require FSCS manager to act in relation
25
to other schemes: rules about the schemes), for “Authority” substitute
“regulators”.
Financial ombudsman service
36
The financial ombudsman service
Schedule 11 contains amendments of FSMA 2000 relating to the financial
30
ombudsman service.

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
120

Lloyd’s
37
Lloyd’s
(1)
Part 19 of FSMA 2000 (Lloyd’s) is amended as follows.
(2)
In section 314 (Authority’s general duty)—
(a)
for subsection (1) substitute—
5
“(1)
So far as it is appropriate to do so for the purpose of advancing
one or more of its operational objectives, the FCA must keep
itself informed about—
(a)
the way in which the Council supervises and regulates
the market at Lloyd’s, and
10
(b)
the way in which regulated activities are being carried
on in that market.
(1A)
So far as it is appropriate to do so for the purpose of advancing
its general objective or (if section 2C applies) its insurance
objective, the PRA must keep itself informed about—
15
(a)
the way in which the Council supervises and regulates
the market at Lloyd’s, and
(b)
the way in which any PRA-regulated activities are being
carried on in that market.”,
(b)
in subsection (2), for “The Authority” substitute “Each regulator”, and
20
(c)
in the title, for “Authority’s” substitute “Regulators’”.
(3)
After that section insert—
“314A
The PRA’s objectives in relation to Lloyd’s etc
(1)
This section modifies—
(a)
the effect of sections 2B and 2C (the PRA’s general objective and
25
insurance objective), and
(b)
the effect of section 3I (power of PRA to require FCA to refrain
from specified action),

in relation to anything done, or proposed to be done, by the PRA under
or for the purposes of this Part.
30
(2)
This section applies only if PRA-authorised persons include—
(a)
the Society, or
(b)
other persons who carry on regulated activities in relation to
anything done at Lloyd’s.
(3)
Section 2B(2) and (3) have effect as if references to PRA-authorised
35
persons (or a PRA-authorised person) were references to the Society,
and the members of the Society, taken together (and sections 2F and
2I(3) are to be read accordingly).
(4)
Section 2C(1) has effect as if the reference to the discharge of the PRA’s
general functions so far as relating to the activity mentioned there were
40
a reference to the discharge of its general functions so far as relating to
the carrying on by the Society or other persons of PRA-regulated
activities in relation to anything done at Lloyd’s.

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
121

(5)
Section 3I(4)(b) has effect as if the reference to a PRA-authorised person
were a reference to the Society, and the members of the Society, taken
together.”
(4)
For section 315 substitute—
“315
The Society: regulated activities
5
(1)
This section applies if an activity carried on by the Society is of a kind
specified in an order made under section 22 (regulated activities).
(2)
The order may provide that the Society is not to be subject to any
requirement of this Act concerning the registered office of a body
corporate.”
10
(5)
In section 316 (direction by Authority)—
(a)
in subsection (1), for “the Authority” substitute “a regulator”,
(b)
after that subsection insert—
“(1A)
A direction under subsection (1)—
(a)
may be given by the FCA only if it considers that giving
15
the direction is necessary or expedient for the purpose of
advancing one or more of its operational objectives, and
(b)
may be given by the PRA only if it considers that giving
the direction is necessary or expedient for the purpose of
advancing its general objective or (if section 2C applies)
20
the insurance objective.
(1B)
A direction under subsection (1) which applies the general
prohibition to a member of the Society, or to the members of the
Society taken together, may be given by a regulator only with
the consent of the other regulator.”,
25
(c)
in subsection (4), for “the Authority”, in both places, substitute “the
regulator concerned”,
(d)
in subsection (9)—
(i)
after “subsection (1)” insert “given by a regulator”, and
(ii)
for “the Authority” substitute “the regulator”,
30
(e)
in subsection (10), for “The Authority” substitute “A regulator who
gives a direction under subsection (1)”,
(f)
in subsection (11)—
(i)
for “The Authority” substitute “A regulator who gives a
direction under subsection (1)”, and
35
(ii)
for “any direction which it gives under this section” substitute
“the direction”, and
(g)
in the heading, for “Authority” substitute “a regulator”.
(6)
In section 318 (exercise of powers through Council)—
(a)
in subsection (1), for “The Authority” substitute “A regulator”,
40
(b)
after subsection (3) insert—
“(3A)
A direction under subsection (1)—
(a)
may be given by the FCA only if it considers that giving
the direction is necessary or expedient for the purpose of
advancing one or more of its operational objectives, and
45

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
122

(b)
may be given by the PRA only if it considers that giving
the direction is necessary or expedient for the purpose of
advancing its general objective or (if section 2C applies)
the insurance objective.”,
(c)
in subsection (4)(b), for “the Authority” substitute “the regulator
5
concerned”,
(d)
in subsection (6)(a), for “the Authority” substitute “a regulator”,
(e)
in subsection (7)—
(i)
after “subsection (1)” insert “given by a regulator”, and
(ii)
for “the Authority” substitute “the regulator”,
10
(f)
in subsection (8), for “The Authority” substitute “A regulator who gives
a direction under subsection (1)”, and
(g)
in subsection (9)—
(i)
for “The Authority” substitute “A regulator who gives a
direction under subsection (1)”, and
15
(ii)
for “any direction which it gives under this section” substitute
“the direction”.
(7)
In section 319 (consultation)—
(a)
for subsection (1) substitute—
“(1)
Before a regulator gives a direction under section 316 or 318, it
20
must—
(a)
in a case where section 316(1B) requires the regulator to
obtain the consent of the other regulator, obtain that
consent,
(b)
in any other case, consult the other regulator, and
25
(c)
after complying with paragraph (a) or (b), publish a
draft of the proposed direction.”,
(b)
in subsection (2)(b), for “the Authority” substitute “the regulator”,
(c)
for subsection (3) substitute—
“(3)
Before a regulator gives the proposed direction—
30
(a)
it must have regard to any representations made to it in
accordance with subsection (2)(b), and
(b)
if it was required by subsection (1)(b) to consult the
other regulator and proposes to give a direction which
differs from the draft published under subsection (1) in
35
a way which is, in the opinion of the regulator,
significant, it must again consult the other regulator.”,
(d)
in subsections (4) and (5) (in both places), for “the Authority” substitute
“the regulator”,
(e)
for subsection (6) substitute—
40
“(6)
Subsections (1)(c) and (2) to (5) do not apply in relation to—
(a)
a direction given by the FCA if it considers that the delay
involved in complying with them would be prejudicial
to the interests of consumers, as defined in section 425A,
or
45
(b)
a direction given by the PRA if it considers that the delay
involved in complying with them would—

Financial Services Bill
Part 2 — Amendments of Financial Services and Markets Act 2000
123

(i)
be prejudicial to the safety and soundness of the
Society, and the members of the Society, taken
together, or
(ii)
in a case where section 2C applies, be prejudicial
to securing the appropriate degree of protection
5
for policy holders.”,
(f)
in subsection (7), for “the Authority” substitute “the regulator
concerned”,
(g)
in subsection (8)—
(i)
for “The Authority” substitute “A regulator who publishes a
10
draft under subsection (1)”, and
(ii)
for “a draft published under subsection (1)” substitute “the
draft”,
(h)
in subsection (9), for “the Authority” substitute “a regulator”, and
(i)
for subsection (10) substitute—
15
“(10)
“Cost benefit analysis” means—
(a)
an analysis of the costs together with an analysis of the
benefits that will arise—
(i)
if the proposed direction is given, or
(ii)
if subsection (5)(b) applies, from the direction
20
that has been given, and
(b)
subject to subsection (10A), an estimate of those costs
and of those benefits.
(10A)
If, in the opinion of the regulator concerned—
(a)
the costs or benefits referred to in subsection (10) cannot
25
reasonably be estimated, or
(b)
it is not reasonably practicable to produce an estimate,

the cost benefit analysis need not estimate them, but must
include a statement of the opinion of the regulator concerned
and an explanation of it.”
30
(8)
In section 320 (former underwriting members)—
(a)
in subsection (2), for “Part IV permission” substitute “Part 4A
permission”,
(b)
in subsection (3), for “The Authority” substitute “The PRA”, and
(c)
at the end insert—
35
“(5)
In the event that the activity of effecting or carrying out
contracts of insurance as principal is not to any extent a PRA-
regulated activity, the function conferred on the PRA by
subsection (3) is exercisable instead by the FCA.
(6)
Accordingly, in that case—
40
(a)
references in section 321 to the PRA are to be read as
references to the FCA, and
(b)
the reference in section 321(13) to the FCA is to be read
as a reference to the PRA.”
(9)
In section 321 (requirements imposed under section 320)—
45
(a)
in subsection (2), for “the Authority” substitute “the PRA”,
(b)
in subsection (3)(b), for “the Authority’s” substitute “the PRA’s”,