Financial Services Bill (HC Bill 2)

192E Direction: procedure

(1) If a regulator proposes to give a direction under section 192C, or gives
such a direction with immediate effect, it must give written notice to—

(a) the parent undertaking to which the direction is given (or to be
5given) (“P”), and

(b) any authorised person or recognised investment exchange who
will, in the opinion of the regulator, be significantly affected by
the direction.

(2) In the following provisions of this section “notified person” means a
10person to whom notice under subsection (1) is given.

(3) A direction under section 192C takes effect—

(a) immediately, if the notice under subsection (1) states that that is
the case,

(b) on such other date as may be specified in the notice, or

(c) 15if no date is specified in the notice, when the matter to which the
notice relates is no longer open to review.

(4) A direction may be expressed to take effect immediately (or on a
specified date) only if the regulator reasonably considers that it is
necessary for the direction to take effect immediately (or on that date).

(5) 20The notice under subsection (1) must—

(a) give details of the direction,

(b) state the regulator’s reasons for the direction and for its
determination as to when the direction takes effect,

(c) inform the notified person that the person may make
25representations to the regulator within such period as may be
specified in the notice (whether or not the notified person has
referred the matter to the Tribunal), and

(d) inform the notified person of the person’s right to refer the
matter to the Tribunal.

(6) 30The regulator may extend the period allowed under the notice for
making representations.

(7) If, having considered any representations made by any notified person,
the regulator decides—

(a) to give the direction proposed, or

(b) 35if the direction has been given, not to revoke the direction,

it must give each of the notified persons written notice.

(8) If, having considered any representations made by any notified person,
the regulator decides—

(a) not to give the direction proposed,

(b) 40to give a different direction, or

(c) to revoke a direction which has effect,

it must give each of the notified persons written notice.

(9) A notice given under subsection (7) must inform the notified person of
the person’s right to refer the matter to the Tribunal.

(10) 45A notice under subsection (8)(b) must comply with subsection (5).

(11) If a notice informs the notified person of the person’s right to refer a
matter to the Tribunal, it must give an indication of the procedure on
such a reference.

(12) For the purposes of subsection (3)(c), whether a matter is open to
5review is to be determined in accordance with section 391(8).

192F Consultation between regulators

(1) Before the PRA gives a notice under section 192E(1) or (8)(b), it must
consult the FCA.

(2) Before the FCA gives a notice under section 192E(1) or (8)(b) in relation
10to the parent undertaking of a PRA-authorised person, the FCA must
consult the PRA.

(3) Before either regulator gives a notice under section 192E(1) or (8)(b) in
relation to the parent undertaking of a recognised clearing house, the
regulator must consult the Bank of England.

192G 15References to Tribunal

(1) A notified person who is aggrieved by the exercise by either regulator
of its powers in relation to directions under section 192C may refer the
matter to the Tribunal.

(2) “Notified person” is to be read in accordance with subsection (2) of
20section 192E, except that it includes a person to whom a notice under
subsection (1) of that section ought to have been given.

192H Statement of policy: directions under section 192C

(1) Each regulator must prepare and issue a statement of policy with
respect to the giving of directions under section 192C.

(2) 25A regulator may at any time alter or replace a statement issued under
this section.

(3) If a statement issued under this section is altered or replaced, the
regulator must issue the altered or replacement statement.

(4) In exercising or deciding whether to exercise its power under section
30192C in any particular case, a regulator must have regard to any
statement published under this section and for the time being in force.

(5) A statement under this section must be published by the regulator
concerned in the way appearing to the regulator to be best calculated to
bring it to the attention of the public.

(6) 35A regulator may charge a reasonable fee for providing a person with a
copy of a statement published under this section.

(7) A regulator must, without delay, give the Treasury a copy of any
statement which the regulator publishes under this section.

192I Statement of policy relating to directions: procedure

(1) 40Before issuing a statement of policy under section 192H, a regulator
(“the issuing regulator”) must—

(a) consult the other regulator and the Bank of England, and

(b) publish a draft of the proposed statement in the way appearing
to the issuing 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
5proposal may be made to the issuing regulator within a specified time.

(3) Before issuing the proposed statement, the issuing regulator must have
regard to any representations made to it in accordance with subsection
(2).

(4) If the issuing regulator issues the proposed statement it must publish
10an account, in general terms, of—

(a) the representations made to it in accordance with subsection (2),
and

(b) its response to them.

(5) If the statement differs from the draft published under subsection (2) in
15a way which is, in the opinion of the issuing regulator, significant, the
issuing regulator—

(a) must before issuing it consult the other regulator again, and

(b) must (in addition to complying with subsection (4)), publish
details of the difference.

(6) 20The issuing regulator may charge a reasonable fee for providing a
person with a draft published under subsection (1)(b).

(7) This section also applies to a proposal to alter or replace a statement.

Rules requiring provision of information by parent undertakings

192J Rules requiring provision of information by parent undertakings

(1) 25The appropriate regulator may make rules requiring qualifying parent
undertakings—

(a) to provide to the regulator information of a specified
description;

(b) to produce to the regulator documents of a specified
30description.

(2) The rules may only specify a description of information or documents
that is relevant to the exercise by the regulator of its functions.

(3) The rules may make provision—

(a) as to the time within which information must be provided or
35documents produced;

(b) about the form in which any information is to provided;

(c) about the place where any documents are to be produced;

(d) requiring information provided to be verified in a specified
manner;

(e) 40requiring documents produced to be authenticated in a
specified manner.

(4) “The appropriate regulator” means—

(a) in relation to the parent undertaking of a qualifying authorised
person who is a PRA-authorised person, the FCA or the PRA;

(b) in any other case, the FCA.

Failure to comply with direction or breach of rules

192K Power to impose penalty or issue censure

(1) This section applies if a regulator is satisfied that a person who is or has
5been a qualifying parent undertaking (“P”) has contravened—

(a) a requirement of a direction given to P by that regulator under
section 192C, or

(b) a provision of rules made by that regulator under section 192J.

(2) The regulator may impose a penalty of such amount as it considers
10appropriate on—

(a) P, or

(b) any person who was knowingly concerned in the
contravention.

(3) The regulator may, instead of imposing a penalty on a person, publish
15a statement censuring the person.

(4) The regulator may not take action against a person under this section
after the end of the limitation period unless, before the end of that
period, it has given a warning notice to the person under section 192L.

(5) “The limitation period” means the period of 3 years beginning with the
20first day on which the regulator knew of the contravention.

(6) For this purpose a regulator is to be treated as knowing of a
contravention if it has information from which the contravention can
reasonably be inferred.

192L Procedure and right to refer to Tribunal

(1) 25If a regulator proposes to take action against a person under section
192K, it must give the person a warning notice.

(2) A warning notice about a proposal to impose a penalty must state the
amount of the penalty.

(3) A warning notice about a proposal to publish a statement must set out
30the terms of the statement.

(4) If the regulator decides to take action against a person under section
192K, it must give the person a decision notice.

(5) A decision notice about the imposition of a penalty must state the
amount of the penalty.

(6) 35A decision notice about the publication of a statement must set out the
terms of the statement.

(7) If the regulator decides to take action against a person under section
192K, the person may refer the matter to the Tribunal.

192M Duty on publication of statement

40After a statement under section 192K(3) is published, the regulator
must send a copy of the statement to—

(a) the person in respect of whom it is made, and

(b) any person to whom a copy of the decision notice was given
under section 393(4).

192N Imposition of penalties under section 192K: statement of policy

(1) 5Each regulator must prepare and issue a statement of policy with
respect to—

(a) the imposition of penalties under section 192K, and

(b) the amount of penalties under that section.

(2) A regulator’s policy in determining what the amount of a penalty
10should be must include having regard to—

(a) the seriousness of the contravention,

(b) the extent to which the contravention was deliberate or reckless,
and

(c) whether the person on whom the penalty is to be imposed is an
15individual.

(3) A regulator may at any time alter or replace a statement issued under
this section.

(4) If a statement issued under this section is altered or replaced, the
regulator must issue the altered or replacement statement.

(5) 20In exercising, or deciding whether to exercise, a power under section
192K(2) in the case of any particular contravention, a regulator must
have regard to any statement of policy published under this section and
in force at a time when the contravention occurred.

(6) A statement under this section must be published by the regulator
25concerned in the way appearing to the regulator to be best calculated to
bring it to the attention of the public.

(7) A regulator may charge a reasonable fee for providing a person with a
copy of the statement published under this section.

(8) A regulator must, without delay, give the Treasury a copy of any
30statement which it publishes under this section.

(9) Section 192I applies in relation to a statement under this section as it
applies in relation to a statement under section 192H.”

Recognised investment exchanges and clearing houses

26 Exemption for recognised investment exchanges and clearing houses

(1) 35Section 285 of FSMA 2000 (exemption from general prohibition for recognised
investment exchanges and recognised clearing houses) is amended as follows.

(2) In subsection (2), for paragraph (b) substitute—

“(b) which is carried on for the purposes of, or in connection with,
the provision by the exchange of services designed to facilitate
40the provision of clearing services by another person.”

(3) In subsection (3) for the words from “activity which” to the end substitute

“activity—

“(a) which is carried on for the purposes of, or in connection with,
the provision of clearing services by the clearing house, or

(b) which is carried on for the purposes of, or in connection with,
5the provision by the clearing house of services designed to
facilitate the provision of clearing services by another person.”

(4) After that subsection insert—

“(4) The Treasury may by order amend paragraph (b) of subsection (2) or
(3).”

27 10Powers in relation to recognised investment exchanges and clearing houses

(1) After section 285 of FSMA 2000 insert—

“285A Powers exercisable in relation to recognised investment exchanges
and clearing houses

(1) For the purposes of this Part, the FCA is “the appropriate regulator” in
15relation to recognised investment exchanges.

(2) For the purposes of this Part, the Bank of England is “the appropriate
regulator” in relation to recognised clearing houses.

(3) In Schedule 17A—

(a) Part 1 makes provision for a memorandum of understanding
20between the appropriate regulators and the PRA with respect to
the exercise of their functions in relation to recognised
investment exchanges and clearing houses;

(b) Part 2 applies certain provisions of this Act in relation to the
Bank of England in consequence of the conferring of functions
25on the Bank under this Part of this Act; and

(c) Part 3 makes provision about fees.”

(2) After Schedule 17 of FSMA 2000 insert the Schedule 17A set out in Schedule 7
to this Act.

28 Recognition requirements: power of FCA and Bank to make rules

30In section 286 of FSMA 2000 (qualification for recognition), after subsection
(4E) insert—

“(4F) Regulations under subsection (1) may confer power on the appropriate
regulator to make rules for the purposes of the regulations or of any
specified provision made by the regulations.”

29 35Recognised bodies: procedure for giving directions under s.296 etc

(1) Section 298 of FSMA 2000 (directions under section 296 and revocation orders
under section 297(2) or (2A): procedure) is amended as follows.

(2) In subsection (1), omit paragraphs (b) and (c) (requirements to bring notice to
attention of members of the body and other persons).

(3) 40In subsection (3), omit paragraphs (b) and (c) (members of the body and other
persons may make representations).

(4) For subsection (4) substitute—

“(4) The period for making representations is such period as is specified in
the notice (which may, in any particular case, be extended by the
appropriate regulator).”

(5) 5In subsection (6), omit paragraph (b) (notice of decision to members of the body
and others) and the “and” before it.

(6) In subsection (7), for “considers it essential” substitute “reasonably considers it
necessary”.

30 Power to take disciplinary measures against recognised bodies

10After section 312D of FSMA 2000 insert—

“CHAPTER 3B Disciplinary measures

312E Public censure

(1) If the appropriate regulator considers that a recognised body has
contravened a relevant requirement imposed on the body, it may
15publish a statement to that effect.

(2) Where the FCA is the appropriate regulator, a requirement is a
“relevant requirement” for the purposes of this Chapter if it is—

(a) a requirement that is imposed by or under any provision of this
Part that relates to a recognised investment exchange,

(b) 20a requirement that is imposed under any other provision of this
Act by the FCA that relates to a recognised investment
exchange,

(c) a requirement that is imposed by a qualifying EU provision
specified, or of a description specified, for the purposes of this
25subsection by the Treasury by order, or

(d) a requirement that is imposed by this Act and whose
contravention constitutes an offence that the FCA has power to
prosecute under this Act (see section 401).

(3) Where the Bank of England is the appropriate regulator, a requirement
30is a “relevant requirement” for the purposes of this Chapter if it is—

(a) a requirement that is imposed by or under any provision of this
Part that relates to a recognised clearing house,

(b) a requirement that is imposed under any other provision of this
Act by the Bank,

(c) 35a requirement that is imposed by a qualifying EU provision
specified, or of a description specified, for the purposes of this
subsection by the Treasury by order, or

(d) a requirement that is imposed by this Act and whose
contravention constitutes an offence that the Bank has power to
40prosecute under this Act (see section 401, as applied by
paragraph 24 of Schedule 17A).

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
5amount as it considers appropriate.

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) 10to impose a penalty on a recognised body under section 312F,

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
15amount of the penalty.

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) 20to impose a penalty on a recognised body under section 312F
(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) 25In the case of a penalty, the decision notice must state the amount of the
penalty.

(4) If the appropriate regulator decides—

(a) to publish a statement in respect of a recognised body under
section 312E, or

(b) 30to impose a penalty on a recognised body under section 312F,

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) 35the recognised body concerned, and

(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
40policy with respect to—

(a) the imposition of penalties under section 312F, and

(b) the amount of penalties under that section.

(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) 5the extent to which that contravention was deliberate or
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
10altered or replaced, the regulator must issue the altered or replaced
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
15under this section and in force at a time when the contravention in
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) 20An appropriate regulator may charge a reasonable fee for providing a
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) 25Before issuing a statement under section 312J, an appropriate regulator
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
30proposal may be made to the regulator within a specified time.

(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) 35the representations made to it in accordance with subsection (2),
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
40must (in addition to complying with subsection (4)) publish details of
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.”

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) 5omit Chapter 3 (exclusion from the Competition Act 1998).

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) 10other amendments of that Act in consequence of that provision.

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) 15for “Authority”, in each place, substitute “FCA”, and

(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
20discipline and enforcement.

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) 25In section 224F(1) of that Act (power to require FSCS manager to act in relation
to other schemes: rules about the schemes), for “Authority” substitute
“regulators”.

Financial ombudsman service

36 The financial ombudsman service

30Schedule 11 contains amendments of FSMA 2000 relating to the financial
ombudsman service.