Financial Services Bill

Session 2012 - 13
Internet Publications
Other Bills before Parliament

Financial Services Bill

Financial Services Bill
Schedule 9 — Discipline and enforcement
Part 7 — Offences
237

29    (1)
Section 396 (statements under s.395: consultation) is amended as follows.
      (2)
In subsection (1)—
(a)
after “a statement of” insert “its”,
(b)
for “the Authority”, in the first place, substitute “the regulator”,
(c)
for “the Authority”, in the second place, substitute “it”, and
5
(d)
for “it” substitute “the draft”.
      (3)
In subsection (2), for “Authority” substitute “regulator publishing the draft”.
      (4)
In subsection (3), for “Before issuing the proposed statement of procedure,
the Authority” substitute “Before a regulator issues the proposed statement
of its procedure, it”.
10
      (5)
In subsection (4), for “Authority issues the proposed statement of
procedure” substitute “regulator issues the proposed statement of its
procedure,”.
      (6)
In subsection (5)—
(a)
for “statement of procedure differs from the draft published”
15
substitute “statement of the regulator’s procedure differs from the
draft published by it”,
(b)
for “, in the opinion of the Authority,” substitute “, in its opinion,”,
and
(c)
for “the Authority must” substitute “it must”.
20
      (7)
In subsection (6)—
(a)
for “The Authority” substitute “The regulator publishing a draft
under subsection (1)”, and
(b)
for “a draft published under subsection (1)” substitute “the draft”.
Part 7
25
Offences
30    (1)
Section 398 (misleading the Authority: residual cases) is amended as
follows.
      (2)
In subsection (1), for “the Authority” substitute “a regulator”.
      (3)
In the heading, for “the Authority” substitute “FCA or PRA”.
30
31    (1)
Section 401 (proceedings for offences) is amended as follows.
      (2)
In subsections (2)(a) and (3)(a), for “Authority” substitute “appropriate
regulator”.
      (3)
After subsection (3) insert—
“(3A)
For the purposes of subsections (2)(a) and (3)(a), the PRA is the
35
“appropriate regulator” in respect of each of the following offences—
(a)
an offence under section 55P(10) where the contravention is
of a requirement imposed by the PRA;
(b)
an offence under section 56(4) where the prohibition order is
made by the PRA;
40
(c)
an offence under section 177(3) where the investigation is
being, or is likely to be, conducted on behalf of the PRA;

Financial Services Bill
Schedule 9 — Discipline and enforcement
Part 8 — Co-operation
238

(d)
an offence under section 177(4) where the requirement is
imposed by the PRA;
(e)
an offence under section 177(6) where the warrant is issued as
a result of information on oath given by the PRA or a person
appointed by the PRA to conduct an investigation on its
5
behalf;
(f)
an offence under section 191F(1) where the notice should
have been given to the PRA;
(g)
an offence under any of section 191F(2) to (7) where the
notice, approval or information was given to or by the PRA;
10
(h)
an offence under section 366(3), unless the activity of
effecting or carrying out long-term contracts of insurance is
not to any extent a PRA-regulated activity;
(i)
an offence under section 398(1) where the information was
given to the PRA.
15
(3B)
For the purposes of subsections (2)(a) and (3)(a), the FCA is the
“appropriate regulator” in respect of all other offences under this Act
or subordinate legislation made under this Act.”
      (4)
In subsection (5), for “Authority” substitute “appropriate regulator”.
32    (1)
Section 402 (power of the Authority to institute proceedings for certain other
20
offences) is amended as follows.
      (2)
In subsections (1) and (2), for “Authority” substitute “FCA”.
      (3)
In the heading, for “the Authority” substitute “FCA”.
Part 8
Co-operation
25
33
After section 415A insert—
“Consultation
415B
Consultation in relation to taking certain enforcement action
(1)
The FCA must consult the PRA before taking a qualifying step in
relation to a person who—
30
(a)
is a PRA-authorised person, or
(b)
has a qualifying relationship with a PRA-authorised person.
(2)
The PRA must consult the FCA before taking a qualifying step.
(3)
In this section any reference to the taking of a qualifying step is a
reference to—
35
(a)
the giving of a warning notice or decision notice under
section 63B (performance of controlled functions without
approval),
(b)
the giving of a warning notice or decision notice under
section 67 (disciplinary powers in relation to approved
40
person),
(c)
the giving of a warning notice under section 126 or a decision
notice under section 127 (market abuse),

Financial Services Bill
Schedule 10 — The Financial Services Compensation Scheme
239

(d)
the giving of a warning notice or decision notice under
section 131H (short selling),
(e)
the giving of a warning notice under section 207 or a decision
notice under section 208 (breaches of requirements imposed
by or under Act etc.),
5
(f)
the giving of a warning notice under section 312G or a
decision notice under section 312H (recognised bodies),
(g)
the making of an application to the court under section
380, 381, 382 or 383 (injunctions or restitution), or
(h)
the giving of a warning notice under section 385 or a decision
10
notice under section 386 (power of FCA or PRA to require
restitution).
(4)
A person has a qualifying relationship with a PRA-authorised
person (“A”) for the purposes of this section if—
(a)
the person is a member of A’s immediate group, or
15
(b)
in the case of a qualifying step within subsection (3)(a) or (b),
the person performs a significant-influence function under
an arrangement entered into by A, or by a contractor of A, in
relation to the carrying on by A of a regulated activity.

“Significant-influence function” and “arrangement” have the same
20
meanings as in section 59.”
Schedule 10
Section 35

The Financial Services Compensation Scheme
1
Part 15 of FSMA 2000 (the Financial Services Compensation Scheme) is
amended as follows.
25
2     (1)
Section 212 (the scheme manager) is amended as follows.
      (2)
For subsections (1) and (2) substitute—
“(1)
“The scheme manager” means the body corporate established by the
Financial Services Authority under this section as originally enacted.
(2)
The regulators must take such steps as are necessary to ensure that
30
the scheme manager is, at all times, capable of exercising the
functions conferred on it by or under this Part or Part 15A.”
      (3)
In subsections (4) and (5) for “Authority” substitute “regulators”.
3     (1)
Section 213 (the compensation scheme) is amended as follows.
      (2)
In each place, for “Authority” substitute “regulators”.
35
      (3)
In subsection (1)—
(a)
after “rules” insert “made in accordance with an order under
subsection (1A)”, and
(b)
for the words from “cases where” to the end substitute “cases
where—
40
(a)
relevant persons are unable, or likely to be unable, to
satisfy claims against them, or

Financial Services Bill
Schedule 10 — The Financial Services Compensation Scheme
240

(b)
persons who have assumed responsibility for
liabilities arising from acts or omissions of relevant
persons (“successors”) are unable, or likely to be
unable, to satisfy claims against the successors that
are based on those acts or omissions.”
5
      (4)
After subsection (1) insert—
“(1A)
The Treasury must by order specify—
(a)
the cases in which the FCA are, or are not, to make rules
under subsection (1), and
(b)
the cases in which the PRA are, or are not, to make rules
10
under that subsection.”
      (5)
In subsection (2), after “rules” insert “(taken together)”.
      (6)
In subsection (9)(a), after “against him” insert “, or against a successor falling
within subsection (1)(b),”.
4
In section 214 (general provisions of the scheme), in subsection (1), after
15
paragraph (a) insert—
“(aa)
as to the circumstances in which a successor falling within
section 213(1)(b) is to be taken (for the purposes of the
scheme) to be unable, or likely to be unable, to satisfy claims
against the successor that are based on the acts or omissions
20
of a relevant person;”.
5
In section 215 (rights of the scheme in insolvency), for “Authority”, in each
place, substitute “regulators”.
6
In section 217 (insurers in financial difficulties), in subsection (5), for
“Authority” substitute “either regulator or both regulators”.
25
7
After section 217 insert—
“Relationship with the regulators
217A
Co-operation
(1)
Each regulator and the scheme manager must take such steps as they
consider appropriate to co-operate with each other in the exercise of
30
their functions under this Part and Part 15A.
(2)
Each regulator and the scheme manager must prepare and maintain
a memorandum describing how that regulator and the scheme
manager intend to comply with subsection (1).
(3)
The scheme manager must ensure that the memoranda as currently
35
in force are published in the way appearing to it to be best calculated
to bring them to the attention of the public.”
8
For the italic heading before section 218 substitute “Annual plan and report”.
9
Before section 218 insert—
“217B
Annual plan
40
(1)
The scheme manager must in respect of each of its financial years
prepare an annual plan.

Financial Services Bill
Schedule 10 — The Financial Services Compensation Scheme
241

(2)
The plan must be prepared before the start of the financial year.
(3)
An annual plan in respect of a financial year must make provision
about the use of the resources of the scheme manager.
(4)
The plan may include material relating to periods longer than the
financial year in question.
5
(5)
Before preparing an annual plan, the scheme manager must consult
such persons (if any) as the scheme manager considers appropriate.
(6)
The scheme manager must publish each annual plan in the way it
considers appropriate.”
10    (1)
Section 218 (annual report) is amended as follows.
10
      (2)
In subsections (1) and (2)(b), for “Authority” substitute “regulators”.
      (3)
At the end insert—
“(4)
The Treasury may—
(a)
require the scheme manager to comply with any provisions
of the Companies Act 2006 about accounts and their audit
15
which would not otherwise apply to it, or
(b)
direct that any such provision of that Act is to apply to the
scheme manager with such modifications as are specified in
the direction.
(5)
Compliance with any requirement under subsection (4)(a) or (b) is
20
enforceable by injunction or, in Scotland, an order for specific
performance under section 45 of the Court of Session Act 1988.
(6)
Proceedings under subsection (5) may be brought only by the
Treasury.”
11
After section 218 insert—
25
“218ZA
Audit of accounts
(1)
The scheme manager must send a copy of its annual accounts to the
Comptroller and Auditor General and the Treasury as soon as is
reasonably practicable.
(2)
The Comptroller and Auditor General must—
30
(a)
examine, certify and report on accounts received under this
section, 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
35
report before Parliament.
(4)
The scheme manager must send a copy of the certified accounts and
the report to the regulators.
(5)
Except as provided by section 218(4), the scheme manager is exempt
from the requirements of Part 16 of the Companies Act 2006 (audit),
40
and its balance sheet must contain a statement to that effect.

Financial Services Bill
Schedule 11 — The financial ombudsman service
242

(6)
In this section “annual accounts” has the meaning given by section
471 of the Companies Act 2006.”
12    (1)
Section 218A (power to require information) is amended as follows.
      (2)
In subsection (1)—
(a)
for “The Authority”, in the first place, substitute “Each regulator”,
5
and
(b)
for “the Authority”, in the second and third place, substitute “that
regulator”.
      (3)
In subsections (2) and (4), for “Authority” substitute “regulator”.
      (4)
In subsection (5), for “Authority’s” substitute “regulator’s”.
10
      (5)
In the heading, for “Authority’s” substitute “Regulators’”.
13
In section 224 (scheme manager’s power to inspect documents), in
subsection (1), after “relevant person,” insert “or a successor falling within
section 213(1)(b),”.
Schedule 11
15
Section 36

The financial ombudsman service
1
In section 226 (compulsory jurisdiction), in subsection (3)(a), for “Authority”
substitute “FCA”.
2
In section 226A (consumer credit jurisdiction), in subsection (7), for
“Authority” substitute “FCA”.
20
3
In section 227 (voluntary jurisdiction), in subsection (6), for “Authority’s”
substitute “FCA’s”.
4     (1)
Section 228 (determination under the compulsory and consumer credit
jurisdiction) is amended as follows.
      (2)
In subsection (4), in paragraph (c), omit “in writing”.
25
      (3)
After subsection (6) insert—
“(6A)
But the complainant is not to be treated as having rejected the
determination by virtue of subsection (6) if—
(a)
the complainant notifies the ombudsman after the specified
date of the complainant’s acceptance of the determination,
30
(b)
the complainant has not previously notified the ombudsman
of the complainant’s rejection of the determination, and
(c)
the ombudsman is satisfied that such conditions as may be
prescribed by rules made by the scheme operator for the
purposes of this section are satisfied.”
35
      (4)
After subsection (7) insert—
“(7A)
Where a determination is rejected by virtue of subsection (6), the
notification under subsection (7) must contain a general description
of the effect of subsection (6A).”

Financial Services Bill
Schedule 11 — The financial ombudsman service
243

5
In section 229 (awards), in subsection (4), for “Authority” substitute “FCA”.
6
In section 230 (costs), in subsection (2), for “Authority” substitute “FCA”.
7
After section 230 insert—
“230A
Reports of determinations
(1)
The scheme operator must publish a report of any determination
5
made under this Part.
(2)
But if the ombudsman who makes the determination informs the
scheme operator that, in the ombudsman’s opinion, it is
inappropriate to publish a report of that determination (or any part
of it) the scheme operator must not publish a report of that
10
determination (or that part).
(3)
Unless the complainant agrees, a report of a determination published
by the scheme operator may not include the name of the
complainant, or particulars which, in the opinion of the scheme
operator, are likely to identify the complainant.
15
(4)
The scheme operator may charge a reasonable fee for providing a
person with a copy of a report.”
8
After section 232 insert—
“232A
Scheme operator’s duty to provide information to FCA
If the scheme operator considers that it has information that, in its
20
opinion, would or might be of assistance to the FCA in advancing
one or more of the FCA’s operational objectives, it must disclose that
information to the FCA.”
9
In section 234 (industry funding), in subsection (1), for “Authority”
substitute “FCA”.
25
10
In section 234A (funding by consumer credit licensees), in subsection (1), for
“Authority” substitute “FCA”.
11
After section 234A insert—
“Successors to businesses
234B
Transfers of liability
30
(1)
This section applies where a person (the “successor”) has assumed a
liability (including a contingent one) of a person (the “predecessor”)
who was, or (apart from this section) would have been, the
respondent in respect of a complaint falling to be dealt with under
the ombudsman scheme.
35
(2)
The complaint may (but need not) be dealt with under this Part as if
the successor were the respondent.”
12
Schedule 17 (the ombudsman scheme) is amended as follows.