Financial Services Bill (HC Bill 2)

345A Disciplinary measures: PRA

(1) The following provisions of this section have effect only if the
Treasury, by order made after consultation with the PRA, so provide.

(2) Subsection (3) applies if it appears to the PRA that an auditor or
5actuary to whom section 342 applies—

(a) has failed to comply with a duty imposed on the auditor or
actuary by rules made by the PRA, or

(b) has failed to comply with a duty imposed under this Act to
communicate information to the PRA.

(3) 10The PRA may exercise one or more of the specified powers.

(4) The specified powers are such one or more of the following as may
be specified in the order under subsection (1)—

(a) to disqualify the auditor or actuary from being the auditor of,
or (as the case may be) from acting as an actuary for, any
15PRA-authorised person or any particular class of PRA-
authorised person;

(b) to publish a statement to the effect that it appears to the PRA
that the auditor or (as the case may be) actuary has failed to
comply with the duty;

(c) 20to impose on the auditor or actuary a penalty, payable to the
PRA, of such amount as the PRA considers appropriate.

(5) Where the PRA disqualifies a person under subsection (4)(a) it
must—

(a) notify the FCA, and

(b) 25notify the person concerned that it has made a notification
under paragraph (a).

(6) Where the PRA disqualifies a person from being the auditor of a
PRA-authorised person or class of PRA-authorised person, and that
PRA-authorised person is also, or any person within that class is also,
30a recognised clearing house, the PRA must, in addition to complying
with subsection (5)—

(a) notify the Bank of England, and

(b) notify the disqualified person that it has made a notification
under paragraph (a).

(7) 35The PRA may remove any disqualification imposed under
subsection (4)(a) if satisfied that the disqualified person will in future
comply with the duty in question.

345B Procedure and right to refer to Tribunal

(1) If the FCA proposes to act under section 345(2) or the PRA proposes
40to act under section 345A(3), it must give the auditor or actuary to
whom the action would relate 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
45out the terms of the statement.

(4) If the FCA decides to act under section 345(2) or the PRA decides to
act under section 345A(3), it must give the auditor or actuary to
whom the action would relate a decision notice.

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

(6) A decision notice about the publication of a statement must set out
the terms of the statement. “If the FCA decides to act under section 345(2) or the PRA decides to
act under section 345A(3), the auditor or actuary concerned may
10refer the matter to the Tribunal.”

345C Duty on publication of statement

After a statement under section 345(2)(c) or 345A(4)(b) is published,
the regulator that published it must send a copy of the statement to—

(a) the auditor or actuary, and

(b) 15any person to whom a copy of the decision notice was given
under section 393(4).

345D Imposition of penalties on auditors or actuaries: statement of policy

(1) The FCA must prepare and issue a statement of its policy with
respect to—

(a) 20the imposition of penalties under section 345(2)(d), and

(b) the amount of penalties under that provision.

(2) If by virtue of an order under section 345A(1), the PRA has power to
impose penalties under section 345A(4)(c), the PRA must prepare
and issue a statement of its policy with respect to—

(a) 25the imposition of penalties under section 345A(4)(c), and

(b) the amount of penalties under that provision.

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

(a) the seriousness of the contravention, and

(b) 30the extent to which the contravention was deliberate or
reckless.

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

(5) If a statement issued under this section is altered or replaced, the
35regulator must issue the altered or replacement statement.

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

(7) A statement issued under this section must be published by the
regulator in the way appearing to the regulator to be best calculated
40to bring it to the attention of the public.

(8) In deciding whether to exercise a power under section 345(2)(d) in
the case of any particular contravention, the FCA must have regard
to any statement of policy published by it under this section and in
force at a time when the contravention occurred.

(9) In deciding whether to exercise a power under section 345A(4)(c) in
the case of any particular contravention, the PRA must have regard
to any statement of policy published by it under this section and in
force at a time when the contravention occurred.

(10) 5A regulator may charge a reasonable fee for providing a person with
a copy of the statement.

345E Statements of policy: procedure

(1) Before a regulator issues a statement under section 345D, the
regulator must publish a draft of the proposed statement in the way
10appearing 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.

(3) Before issuing the proposed statement, the regulator must have
15regard 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
20(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 must (in addition to complying with subsection (4))
25publish details of the difference.

(6) A regulator may charge a reasonable fee for providing a person with
a copy of a draft under subsection (1).

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

7 (1) Section 392 (application of sections 393 and 394) is amended as follows.

(2) 30In paragraph (a), for “345(2) (whether as a result of subsection (1) of that
section” substitute “345B(1) (whether as a result of section 345(2), 345A(3)”.

(3) In paragraph (b), for “345(3) (whether as a result of subsection (1) of that
section” substitute “345B(4) (whether as a result of section 345(2), 345A(3)”.

Section 41

SCHEDULE 14 35Amendments of Part 24 of FSMA 2000: insolvency

1 Part 24 of FSMA 2000 is amended as follows.

2 In section 355 (interpretation of Part 24) at the end of subsection (1) insert—

• “ “PRA-regulated person” means a person who—

  (a)

  is or has been a PRA-authorised person,

  Financial Services BillPage 263

  (b)

  is or has been an appointed representative whose
  principal (or one of whose principals) is, or was, a
  PRA-authorised person, or

  (c)

  is carrying on or has carried on a PRA-regulated
  5activity in contravention of the general prohibition.”

3 (1) Section 356 (powers to participate in proceedings: company voluntary
arrangements) is amended as follows.

(2) In subsections (1) and (2), for “the Authority” substitute “the appropriate
regulator”.

(3) 10In subsection (3)—

(a) for “the Authority”, in the first place, substitute “a regulator”, and

(b) for “the Authority”, in the second place, substitute “the appropriate
regulator”.

(4) After subsection (3) insert—

“(4) 15The appropriate regulator” means—

(a) in the case of a PRA-authorised person—

(i) for the purposes of subsections (1) and (2), the FCA or
the PRA, and

(ii) for the purposes of subsection (3), each of the FCA
20and the PRA;

(b) in any other case, the FCA.

(5) If either regulator makes an application to the court under any of
those provisions in relation to a PRA-authorised person, the other
regulator is entitled to be heard at any hearing relating to the
25application.”

(5) In the heading, for “Authority’s powers” substitute “Powers of FCA and
PRA”.

4 (1) Section 357 (powers to participate in proceedings: individual voluntary
arrangements) is amended as follows.

(2) 30In subsections (1) to (5), for “Authority” substitute “appropriate regulator”.

(3) In subsection (6)—

(a) for “the Authority”, in the first place, substitute “a regulator”, and

(b) for “the Authority”, in the second place, substitute “the appropriate
regulator”.

(4) 35After subsection (6) insert—

“(7) The appropriate regulator” means—

(a) in the case of a PRA-authorised person—

(i) for the purposes of subsections (1) and (4) to (6), each
of the FCA and the PRA, and

(ii) 40for the purposes of subsection (3), the FCA or the
PRA;

(b) in any other case, the FCA.

(8) If either regulator makes an application to the court under any of the
provisions mentioned in subsection (5) in relation to a PRA-

authorised person, the other regulator is entitled to be heard at any
hearing relating to the application.”

(5) In the heading, for “Authority’s powers” substitute “Powers of FCA and
PRA”.

5 (1) 5Section 358 (powers to participate in proceedings: trust deeds for creditors
in Scotland) is amended as follows.

(2) In subsections (2) to (4), for “Authority” substitute “appropriate regulator”.

(3) In subsection (5)—

(a) for “the Authority”, in the first place, substitute “the appropriate
10regulator”, and

(b) for “the Authority”, in the second place, substitute “that regulator”.

(4) In subsection (6), for “the Authority” substitute “a regulator”.

(5) After subsection (6) insert—

“(6A) The appropriate regulator” means—

(a) 15in the case of a PRA-authorised person—

(i) for the purposes of subsections (2), (3) and (4), each of
the FCA and the PRA, and

(ii) for the purposes of subsection (5), the FCA or the
PRA;

(b) 20in any other case, the FCA.”

(6) In the heading, for “Authority’s powers” substitute “Powers of FCA and
PRA”.

6 (1) Section 359 (administration order) is amended as follows.

(2) In subsection (1), for “Authority” substitute “FCA”.

(3) 25After subsection (1) insert—

“(1A) The PRA may make an administration application under Schedule
B1 to the 1986 Act or Schedule B1 to the 1989 Order in relation to a
company or insolvent partnership which is a PRA-regulated
person.”

(4) 30In subsection (2), for “the Authority” substitute “a regulator”, and

(5) In subsection (4), in the definition of “authorised deposit taker”, for “Part
IV”, in both places, substitute “Part 4A”.

7 (1) Section 361 (administrator’s duty to report) is amended as follows.

(2) In subsection (2), for “Authority” substitute “appropriate regulator”.

(3) 35After subsection (2) insert—

“(2A) The appropriate regulator” means—

(a) where the regulated activity is a PRA-regulated activity, the
FCA and the PRA;

(b) in any other case, the FCA.”

(4) For subsection (3) substitute—

“(3) Subsection (2) does not apply where—

(a) the administration arises out of an administration order
made on an application made or petition presented by a
5regulator, and

(b) the regulator’s application or petition depended on a
contravention by the company or partnership of the general
prohibition.”

(5) In the heading, for “Authority” substitute “FCA and PRA”.

8 (1) 10Section 362 (powers to participate in proceedings: administration orders) is
amended as follows.

(2) In subsection (1), omit “other than the Authority”.

(3) After subsection (1A) insert—

“(1B) This section also applies in relation to—

(a) 15the appointment under paragraph 22 of Schedule B1 to the
1986 Act (as applied by order under section 420 of the 1986
Act), or under paragraph 23 of Schedule B1 to the 1989 Order
(as applied by order under Article 364 of the 1989 Order), of
an administrator of a partnership of a kind described in
20subsection (1)(a) to (c), or

(b) the filing with the court of a copy of notice of intention to
appoint an administrator under either of those paragraphs
(as so applied).”

(4) In subsections (2) to (6), for “Authority” substitute “appropriate regulator”,

(5) 25After subsection (6) insert—

“(7) The appropriate regulator” means—

(a) for the purposes of subsections (2) to (4) and (6)—

(i) where the company or partnership is a PRA-
regulated person, each of the FCA and the PRA, and

(ii) 30in any other case, the FCA;

(b) for the purposes of subsection (5)—

(i) where the company or partnership is a PRA-
regulated person, the FCA or the PRA, and

(ii) in any other case, the FCA.

(8) 35But where the administration application was made by a regulator
“the appropriate regulator” does not include that regulator.”

(6) In the heading, for “Authority’s powers” substitute “Powers of FCA and
PRA”.

9 (1) Section 362A (administrator appointed by company or directors) is
40amended as follows.

(2) In subsection (1), after “company” insert “or partnership”.

(3) For subsection (2) substitute—

“(2) An administrator of the company or partnership may not be
appointed under a provision specified in subsection (2A) without the
consent of the appropriate regulator.

(2A) 5Those provisions are—

(a) paragraph 22 of Schedule B1 to the 1986 Act (including that
paragraph as applied in relation to partnerships by order
under section 420 of that Act);

(b) paragraph 23 of Schedule B1 to the 1989 Order (including that
10paragraph as applied in relation to partnerships by order
under article 364 of that Order).

(2B) “The appropriate regulator” means—

(a) where the company or partnership is a PRA-regulated
person, the PRA, and

(b) 15in any other case, the FCA.”

10 (1) Section 363 (powers to participate in proceedings: receivership) is amended
as follows.

(2) In subsections (2) to (5), for “Authority” substitute “appropriate regulator”.

(3) After subsection (5) insert—

“(6) 20The appropriate regulator” means—

(a) for the purposes of subsections (2) to (4)—

(i) where the company is a PRA-regulated person, each
of the FCA and the PRA, and

(ii) in any other case, the FCA;

(b) 25for the purposes of subsection (5)—

(i) where the company is a PRA-regulated person, the
FCA or the PRA, and

(ii) in any other case, the FCA.”

(4) In the heading, for “Authority’s powers” substitute “Powers of FCA and
30PRA”.

11 In section 364 (receiver’s duty to report to Authority)—

(a) for “to the Authority without delay” substitute “without delay to the
FCA and, if the regulated activity concerned is a PRA-regulated
activity, to the PRA”, and

(b) 35in the heading, for “Authority” substitute “FCA and PRA”.

12 (1) Section 365 (powers to participate in proceedings: voluntary winding up) is
amended as follows.

(2) In subsections (2) to (7), for “Authority” substitute “appropriate regulator”.

(3) After subsection (7) insert—

“(8) 40The appropriate regulator” means—

(a) for the purposes of subsections (2) to (4), (6) and (7)—

(i) where the company is a PRA-authorised person, each
of the FCA and the PRA, and

(ii) in any other case, the FCA;

(b) for the purposes of subsection (5)—

(i) where the company is a PRA-authorised person, the
FCA or the PRA, and

(ii) in any other case, the FCA.”

(4) 5In the heading, for “Authority’s powers” substitute “Powers of FCA and
PRA”.

13 (1) Section 366 (insurers effecting or carrying out long-term contracts of
insurance) is amended as follows.

(2) In subsections (1), (2) and (5), for “Authority” substitute “PRA”.

(3) 10At the end insert—

“(9) Before giving or refusing consent under subsection (1), the PRA must
consult the FCA.

(10) In the event that the activity of effecting or carrying out long-term
contracts of insurance as principal is not to any extent a PRA-
15regulated activity—

(a) references to the PRA in subsections (1), (2) and (5) are to be
read as references to the FCA, and

(b) subsection (9) does not apply.”

14 (1) Section 367 (winding-up petitions) is amended as follows.

(2) 20In subsection (1), for “Authority” substitute “FCA”.

(3) After that subsection insert—

“(1A) The PRA may present a petition to the court for the winding up of a
body which is a PRA-regulated person.”

(4) In subsection (2), for “subsection (1)” substitute “subsections (1) and (1A)”.

(5) 25In subsection (6), after “(1)” insert “or (1A)”.

15 (1) Section 368 (winding-up petitions: EEA and Treaty firms) is amended as
follows.

(2) The existing provision becomes subsection (1).

(3) In that subsection—

(a) 30for “The Authority” substitute “A regulator”, and

(b) after “it” insert “or the other regulator”.

(4) After that subsection insert—

“(2) If a regulator receives from the home state regulator of a body falling
within subsection (1)(a) or (b) a request to present a petition to the
35court under section 367 for the winding up of the body, it must—

(a) notify the other regulator of the request, and

(b) provide the other regulator with such information relating to
the request as it thinks fit.”

16 (1) Section 369 (insurers: service of petition etc. on Authority) is amended as
40follows.

(2) In subsection (1)—

(a) for “the Authority” substitute “a regulator”, and

(b) for “on the Authority” substitute “on the appropriate regulator”.

(3) In subsection (2)—

(a) for “the Authority” substitute “a regulator”, and

(b) 5for “on the Authority” substitute “on the appropriate regulator”.

(4) After that subsection insert—

“(3) The appropriate regulator” means—

(a) in relation to a PRA-authorised person, the FCA and the PRA,
and

(b) 10in any other case, the FCA.

(4) If either regulator—

(a) presents a petition for the winding up of a PRA-authorised
person with permission to effect or carry out contracts of
insurance, or

(b) 15applies to have a provisional liquidator appointed under
section 135 of the 1986 Act (or Article 115 of the 1989 Order)
in respect of a PRA-authorised person with permission to
effect or carry out contracts of insurance,

that regulator must serve a copy of the petition or application (as the
20case requires) on the other regulator.”

(5) In the heading, for “Authority” substitute “FCA and PRA”.

17 (1) Section 369A (reclaim funds: service of petition etc. on Authority) is
amended as follows.

(2) In subsection (1)—

(a) 25for “other than the Authority” substitute “other than a regulator”,
and

(b) for “on the Authority” substitute “on the appropriate regulator”.

(3) In subsection (2)—

(a) for “other than the Authority” substitute “other than a regulator”,
30and

(b) for “on the Authority” substitute “on the appropriate regulator”.

(4) After subsection (3) insert—

“(4) The appropriate regulator” means—

(a) in relation to an authorised reclaim fund that is a PRA-
35authorised person, the FCA and the PRA, and

(b) in relation to any other authorised reclaim fund, the FCA.

(5) If either regulator—

(a) presents a petition for the winding up of an authorised
reclaim fund that is a PRA-authorised person, or

(b) 40applies to have a provisional liquidator appointed under
section 135 of the 1986 Act (or Article 115 of the 1989 Order)
in respect of an authorised reclaim fund that is a PRA-
authorised person,

that regulator must serve a copy of the petition or application (as the
45case requires) on the other regulator.”

(5) In the heading, for “Authority” substitute “FCA and PRA”.

18 (1) Section 370 (liquidator’s duty to report to Authority) is amended as follows.

(2) The existing provision becomes subsection (1).

(3) In subsection (1)—

(a) 5in paragraph (a), for “a person other than the Authority” substitute
“any person”, and

(b) in paragraph (b), for “to the Authority without delay” substitute
“without delay to the FCA and, if the regulated activity concerned is
a PRA-regulated activity, to the PRA”.

(4) 10After that subsection insert—

“(2) Subsection (1) does not apply where—

(a) a body is being wound up on a petition presented by a
regulator, and

(b) the regulator’s petition depended on a contravention by the
15body of the general prohibition.”

(5) In the heading, for “Authority” substitute “FCA and PRA”.

19 (1) Section 371 (power to participate in proceedings: winding up by the court)
is amended as follows.

(2) In subsection (1), omit “other than the Authority”.

(3) 20In subsections (2) to (5), for “Authority” substitute “appropriate regulator”.

(4) After subsection (5) insert—

“(6) The appropriate regulator” means—

(a) for the purposes of subsections (2), (3) and (5)—

(i) where the body is a PRA-regulated person, each of
25the FCA and the PRA, and

(ii) in any other case, the FCA;

(b) for the purposes of subsection (4)—

(i) where the body is a PRA-regulated person, the FCA
or the PRA, and

(ii) 30in any other case, the FCA.

(7) But where the petition was presented by a regulator “the appropriate
regulator” does not include the regulator which presented the
petition.”

(5) In the heading, for “Authority’s powers” substitute “Powers of FCA and
35PRA”.

20 (1) Section 372 (bankruptcy petitions) is amended as follows.

(2) In subsection (1), for “Authority” substitute “FCA”.

(3) After that subsection insert—

“(1A) The PRA may present a petition to the court—

(a) 40under section 264 of the 1986 Act (or Article 238 of the 1989
Order) for a bankruptcy order to be made against an
individual who is a PRA-regulated person;