Financial Services Bill (HC Bill 2)

14 (1) The FCA must send a copy of its annual accounts to the
Comptroller and Auditor General as soon as is reasonably
practicable.

(2) The Comptroller and Auditor General must—

(a) 5examine, certify and report on accounts received under
this paragraph, 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
10report before Parliament.

(4) Except as provided by paragraph 13(1), the FCA is exempt from
the requirements of Part 16 of the Companies Act 2006 (audit), and
its balance sheet must contain a statement to that effect.

(5) In this paragraph “annual accounts” has the meaning given in
15section 471 of the Companies Act 2006.

Part 2 Status

Status

15 In relation to any of its functions—

(a) 20the FCA is not to be regarded as acting on behalf of the
Crown, and

(b) its members, officers and staff are not to be regarded as
Crown servants.

Exemption from requirement for use of “limited” in name of FCA

16 25The FCA is to continue to be exempt from the requirements of the
Companies Act 2006 relating to the use of “limited” as part of its
name.

17 If the Secretary of State is satisfied that any action taken by the
FCA makes it inappropriate for the exemption given by paragraph
3016 to continue, the Secretary of State may, after consulting the
Treasury, give a direction removing it.

Part 3 Penalties and fees

Penalties

18 (1) 35In determining its policy with respect to the amounts of penalties
to be imposed by it under this Act, the FCA must take no account
of the expenses which it incurs, or expects to incur, in discharging
its functions.

(2) The FCA must prepare and operate a scheme (“the financial
40penalty scheme”) for ensuring that—

(a) the amounts paid to it by way of penalties imposed under
this Act (other than Part 6 or 18) are applied for the benefit
of authorised persons, and

(b) the amounts paid to it by way of penalties imposed under
5Part 6 of this Act are applied for the benefit of—

(i) issuers of securities admitted to the official list, and

(ii) issuers who have requested or approved the
admission of financial instruments to trading on a
regulated market.

(3) 10The financial penalty scheme may, in particular, make different
provision with respect to different classes of authorised person or
issuer.

(4) Up-to-date details of the financial penalty scheme must be set out
in a document (“the scheme details”).

19 (1) 15The scheme details must be published by the FCA in the way
appearing to it to be best calculated to bring them to the attention
of the public.

(2) Before making the financial penalty scheme, the FCA must
publish a draft of the proposed scheme in the way appearing to the
20FCA to be best calculated to bring it to the attention of the public.

(3) The draft must be accompanied by notice that representations
about the proposals may be made to the FCA within a specified
time.

(4) Before making the scheme, the FCA must have regard to any
25representations made to it in accordance with sub-paragraph (3).

(5) If the FCA makes the proposed scheme, it must publish an
account, in general terms, of—

(a) the representations made to it in accordance with sub-
paragraph (3), and

(b) 30its response to them.

(6) If the scheme differs from the draft published under sub-
paragraph (2) in a way which is, in the opinion of the FCA,
significant, the FCA must (in addition to complying with sub-
paragraph (5)) publish details of the difference.

(7) 35The FCA must, without delay, give the Treasury a copy of any
scheme details published by it.

(8) The FCA may charge a reasonable fee for providing a person with
a copy of—

(a) a draft published under sub-paragraph (2);

(b) 40 scheme details.

(9) Sub-paragraphs (2) to (6) and (8)(a) also apply to a proposal to
alter or replace the financial penalty scheme.

Fees

20 (1) The FCA may make rules providing for the payment to it of such
45fees, in connection with the discharge of any of its qualifying

functions, as it considers will (taking account of its expected
income from fees and charges provided for by any other provision
of this Act) enable it—

(a) to meet expenses incurred in carrying out its functions or
5for any incidental purpose,

(b) to repay the principal of, and pay any interest on, any
relevant borrowing and to meet relevant commencement
expenses, and

(c) to maintain adequate reserves.

(2) 10The “qualifying functions” of the FCA are—

(a) its functions under or as a result of this Act, and

(b) its functions under or as a result of a qualifying EU
provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
15order.

(3) In sub-paragraph (1)(b)—

• “relevant borrowing” means any money borrowed by the
  FCA which has been used for the purpose of meeting
  expenses incurred in relation to its assumption of
  20functions under this Act, and

• “relevant commencement expenses” means expenses
  incurred by the FCA—

  (a)

  in preparation for the exercise of functions by the
  FCA under this Act, or

  (b)

  25for the purpose of facilitating the exercise by the FCA
  of those functions or otherwise in connection with
  their exercise by it.

(4) For the purposes of sub-paragraph (3) it is irrelevant when the
borrowing of the money, the incurring of the expenses or the
30assumption of functions took place (and, in particular, it is
irrelevant if any of those things were done at a time when the FCA
was known as the Financial Services Authority).

(5) In the case of rules made under Part 6 of this Act, the rules may, in
particular, require the payment of fees in respect of—

(a) 35the continued inclusion of securities or persons in any list
or register required to be kept by the FCA as a result of any
provision made by or under that Part,

(b) access to any list or register within paragraph (a), and

(c) the continued admission of financial instruments to
40trading on a regulated market.

(6) In fixing the amount of any fee which is to be payable to the FCA,
no account is to be taken of any sums which the FCA receives, or
expects to receive, by way of penalties imposed by it under this
Act.

(7) 45Any fee which is owed to the FCA under any provision made by
or under this Act may be recovered as a debt due to the FCA.

Services for which fees may not be charged

21 The power conferred by paragraph 20 may not be used to
require—

(a) a fee to be paid in respect of the discharge of any of the
5FCA’s functions under paragraph 13, 14, 19 or 20 of
Schedule 3, or

(b) a fee to be paid by any person whose application for
approval under section 59 has been granted.

Part 4 10Miscellaneous

Exemption from liability in damages

22 (1) None of the following is to be liable in damages for anything done
or omitted in the discharge, or purported discharge, of the FCA’s
functions—

(a) 15the FCA;

(b) any person (“P”) who is, or is acting as, an officer of, or
member of the staff of, the FCA or a member of its
governing body;

(c) any person who could be held vicariously liable for things
20done or omitted by P, but only in so far as the liability
relates to P’s conduct.

(2) Sub-paragraph (1) does not apply—

(a) if the act or omission is shown to have been in bad faith, or

(b) so as to prevent an award of damages made in respect of
25an act or omission on the ground that the act or omission
was unlawful as a result of section 6(1) of the Human
Rights Act 1998.

Accredited financial investigators

23 For the purposes of this Act anything done by an accredited
30financial investigator within the meaning of the Proceeds of Crime
Act 2002 who—

(a) is, or is acting as, an officer of, or member of the staff of, the
FCA or a member of its governing body, or

(b) is appointed by the FCA under section 97, 167 or 168 to
35conduct an investigation,

is to be treated as done in the exercise or discharge of a function of
the FCA.

Amounts required by rules to be paid to the FCA

24 Any amount (other than a fee) which is required by rules to be
40paid to the FCA may be recovered as a debt due to the FCA.

Section 2A

Schedule 1ZA The Prudential Regulation Authority

Part 1 General

Interpretation

1 5In this Schedule—

• “the Bank” means the Bank of England;

• “functions”, in relation to the PRA, means functions
  conferred on the PRA by or under any provision of this Act
  (see section 2A(6) which affects the meaning of references
  10to such functions).

Constitution

2 The constitution of the PRA must provide—

(a) for the Governor of the Bank to be the chair of the PRA,

(b) for the Bank’s Deputy Governor for prudential regulation
15to be the chief executive of the PRA, and

(c) for the PRA to have a governing body.

3 The governing body must consist of —

(a) the chair,

(b) the chief executive,

(c) 20the Bank’s Deputy Governor for financial stability,

(d) the chief executive of the FCA, and

(e) other members (in this Schedule referred to as “appointed
members”).

4 The validity of any act of the PRA is not affected—

(a) 25by any vacancy resulting from a vacancy in the office of
Governor of the Bank, Deputy Governor of the Bank for
prudential regulation, Deputy Governor of the Bank for
financial stability, or chief executive of the FCA, or

(b) by a defect in the appointment of a person—

(i) 30to any of those offices, or

(ii) as an appointed member.

5 The chief executive of the FCA must not take part in any
discussion by or decision of the PRA which relates to—

(a) the exercise of the PRA’s functions in relation to a
35particular person, or

(b) a decision not to exercise those functions.

Appointed members of governing body

6 The appointed members must be appointed by the Bank with the
approval of the Treasury.

7 Paragraphs 8 to 12 apply to the exercise by the Bank of its power
to appoint appointed members.

8 The Bank must secure that the majority of the members of the
governing body of the PRA are non-executive members.

9 5For the purposes of paragraph 8, and for the purposes of the
PRA’s duty in section 3C (duty to follow principles of good
governance) none of the following is a non-executive member—

(a) the members referred to in paragraph 3(a), (b) and (c), and

(b) a member who is an employee of the PRA or of the Bank.

10 10The Bank must have regard to generally accepted principles of
good practice relating to the making of public appointments.

11 (1) Before appointing a person as an appointed member, the Bank
must consider whether the person has any financial or other
interests that could have a material effect on the extent of the
15functions as member that it would be proper for the person to
discharge.

(2) The terms on which an appointed member (“M”) is appointed
must be such as—

(a) to secure that M is not subject to direction by the Bank,

(b) 20to require M not to act in accordance with the directions of
any other person, and

(c) to prohibit M from acquiring any financial or other
interests that have a material effect on the extent of the
functions as member that it would be proper for M to
25discharge.

(3) If M is an employee of the PRA, M’s interest as employee is to be
disregarded for the purposes of sub-paragraphs (1) and (2)(c) and
paragraph 14.

12 An employee of the FCA is disqualified for appointment as an
30appointed member.

13 The PRA must pay to the Bank the amount of any expenses
incurred by the Bank in connection with the appointment of
appointed members.

14 The Bank may, with the approval of the Treasury, remove an
35appointed member from office—

(a) on the grounds of incapacity or serious misconduct, or

(b) on the grounds that in all the circumstances the member’s
financial or other interests are such as to have a material
effect on the extent of the functions as member that it
40would be proper for the person to discharge.

Terms of service

15 (1) The terms of service of the members of the governing body are to
be determined by the Bank.

(2) The PRA must pay to the members of its governing body such
45remuneration as may be determined by the Bank.

(3) The functions of the Bank under sub-paragraphs (1) and (2) are to
stand delegated to the sub-committee constituted by section 3 of
the Bank of England Act 1998 (functions to be carried out by non-
executive members).

5Arrangements for discharging functions

16 (1) The PRA may make arrangements for any of its functions to be
discharged by a committee, sub-committee, officer or member of
staff of the PRA, but subject to the following provision.

(2) In exercising its legislative functions, the PRA must act through its
10governing body.

(3) For that purpose, the following are the PRA’s legislative
functions—

(a) making rules;

(b) issuing codes under section 64;

(c) 15issuing statements under—

(i) section 63C, 64, 69, 192H, 192N, 210 or 345D, or

(ii) section 76 of the Financial Services Act 2012;

(d) giving directions under section 316 or 318;

(e) issuing guidance under section 2H.

20Records

17 The PRA must maintain satisfactory arrangements for—

(a) recording decisions made in the exercise of its functions,
and

(b) the safe-keeping of those records which it considers ought
25to be preserved.

Annual report

18 (1) At least once a year the PRA must make a report to the Treasury
on—

(a) the discharge of its functions,

(b) 30the extent to which, in its opinion, its objectives have been
advanced,

(c) how it has complied with sections 2K and 2L,

(d) its consideration of the principles in section 3B,

(e) how it has complied with section 3D,

(f) 35any direction given under section 3I during the period to
which the report relates,

(g) how it has complied with section 354B(1) so far as relating
to co-operation with persons outside the United Kingdom,
and

(h) 40such other matters as the Treasury may from time to time
direct.

(2) Sub-paragraph (1) does not require the inclusion in the report of
any information whose publication would in the opinion of the
PRA be against the public interest.

(3) The report must be accompanied by—

(a) a statement of the remuneration of the members of the
governing body of the PRA during the period to which the
report relates, and

(b) 5such other reports or information, prepared by such
persons, as the Treasury may from time to time direct.

(4) The Treasury must lay before Parliament a copy of each report
received by them under this paragraph.

Consultation about annual report

19 (1) 10In relation to each report made under paragraph 18, the PRA must
publish at the same time as the report an invitation to members of
the public to make representations to the PRA, within the 3
months beginning with the date of publication—

(a) about the report,

(b) 15about the way in which the PRA has discharged, or failed
to discharge, its functions during the period to which the
report relates, and

(c) about the extent to which, in their opinion, the PRA’s
objectives have been advanced and the PRA has
20considered the regulatory principles in section 3B.

(2) The invitation must be published in the way appearing to it to be
best calculated to bring the invitation to the attention of the public.

Report on consultation

20 (1) The PRA must publish a report about its consultation in
25accordance with paragraph 19.

(2) The report must contain an account, in general terms, of any
representations received in pursuance of the invitation published
under that paragraph.

(3) The report must be published not later than 4 months after the
30date on which the report under paragraph 18 was published.

Accounts and audit

21 (1) The Treasury may—

(a) require the PRA to comply with any provisions of the
Companies Act 2006 about accounts and their audit which
35would not otherwise apply to it, or

(b) direct that any provision of that Act about accounts and
their audit is to apply to the PRA with such modifications
as are specified in the direction, whether or not the
provision would otherwise apply to the PRA.

(2) 40Compliance with any requirement under sub-paragraph (1)(a) or
(b) is enforceable by injunction or, in Scotland, an order for specific
performance under section 45 of the Court of Session Act 1988.

(3) Proceedings under sub-paragraph (2) may be brought only by the
Treasury.

22 (1) The PRA must send a copy of its annual accounts to the
Comptroller and Auditor General as soon as is reasonably
practicable.

(2) The Comptroller and Auditor General must—

(a) 5examine, certify and report on accounts received under
this paragraph, 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
10report before Parliament.

(4) The PRA must send a copy of the certified accounts and the report
to the Bank.

(5) Except as provided by paragraph 21(1), the PRA is exempt from
the requirements of Part 16 of the Companies Act 2006 (audit), and
15its balance sheet must contain a statement to that effect.

(6) In this paragraph “annual accounts” has the meaning given in
section 471 of the Companies Act 2006.

Part 2 Status

20Status

23 In relation to any of its functions—

(a) the PRA is not to be regarded as acting on behalf of the
Crown, and

(b) its members, officers and staff are not to be regarded as
25Crown servants.

Exemption from requirement for use of “limited” in name of PRA

24 The PRA is to be exempt from the requirements of the Companies
Act 2006 relating to the use of “limited” as part of its name.

25 If the Secretary of State is satisfied that any action taken by the
30PRA makes it inappropriate for the exemption given by paragraph
24 to continue, the Secretary of State may, after consulting the
Treasury, give a direction removing it.

Part 3 Penalties and fees

35Penalties

26 (1) In determining its policy with respect to the amounts of penalties
to be imposed by it under this Act, the PRA must take no account
of the expenses which it incurs, or expects to incur, in discharging
its functions.

(2) The PRA must prepare and operate a scheme (“the financial
penalty scheme”) for ensuring that the amounts paid to the PRA
by way of penalties imposed under this Act are applied for the
benefit of authorised persons.

(3) 5The financial penalty scheme may, in particular, make different
provision with respect to different classes of authorised person.

(4) Up-to-date details of the financial penalty scheme must be set out
in a document (“the scheme details”).

27 (1) The scheme details must be published by the PRA in the way
10appearing to it to be best calculated to bring them to the attention
of the public.

(2) Before making the financial penalty scheme, the PRA must
publish a draft of the proposed scheme in the way appearing to the
PRA to be best calculated to bring it to the attention of the public.

(3) 15The draft must be accompanied by notice that representations
about the proposals may be made to the PRA within a specified
time.

(4) Before making the scheme, the PRA must have regard to any
representations made to it in accordance with sub-paragraph (3).

(5) 20If the PRA makes the proposed scheme, it must publish an
account, in general terms, of—

(a) the representations made to it in accordance with sub-
paragraph (3), and

(b) its response to them.

(6) 25If the scheme differs from the draft published under sub-
paragraph (2) in a way which is, in the opinion of the PRA,
significant, the PRA must (in addition to complying with sub-
paragraph (5)) publish details of the difference.

(7) The PRA must, without delay, give the Treasury a copy of any
30scheme details published by it.

(8) The PRA may charge a reasonable fee for providing a person with
a copy of—

(a) a draft published under sub-paragraph (2);

(b) scheme details.

(9) 35Sub-paragraphs (2) to (6) and (8)(a) also apply to a proposal to
alter or replace the financial penalty scheme.

Fees

28 (1) The PRA may make rules providing for the payment to it of such
fees, in connection with the discharge of any of its qualifying
40functions, as it considers will (taking account of its expected
income from fees and charges provided for by any other provision
of this Act) enable it—

(a) to meet expenses incurred in carrying out its functions or
for any incidental purpose,