142.8-14

House of Commons

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Lords Amendments to the Financial Services (Banking Reform) Bill

8
38
Insert the following new Clause—


“Reviews of proprietary trading: interpretation

(1)
This section has effect for the interpretation of sections (PRA review of

proprietary trading) and (Independent review of proprietary trading).

(2)
A person engages in “proprietary trading” where the person trades in

commodities or financial instruments as principal.

(3)
In subsection (2)—

(a)
“commodity” includes any produce of agriculture, forestry or

fisheries, or any mineral, either in its natural state or having

undergone only such processes as are necessary or customary to

prepare the produce or mineral for the market;

(b)
“financial instrument” includes anything specified in Section C of

Annex I to Directive 2004/39/EC of the European Parliament and

of the Council of 21 April 2004 on markets in financial instruments.

(4)
“Relevant authorised person” means a PRA-authorised person which—

(a)
is a UK institution,

(b)
meets condition A or B, and

(c)
is not an insurer.

(5)
Condition A is that the UK institution has permission under Part 4A of

FSMA 2000 to carry on the regulated activity of accepting deposits.

(6)
Condition B is that—

(a)
the institution is for the purposes of FSMA 2000 an investment firm

(see section 424A of that Act),

(b)
it has permission under Part 4A to carry on the regulated activity of

dealing in investments as principal, and

(c)
when carried on by it, that activity is a PRA-regulated activity.

(7)
In subsections (4) to (6)—

(a)
“UK institution” means an institution which is incorporated in, or

formed under the law of any part of, the United Kingdom;

(b)
“insurer” means an institution which is authorised under FSMA

2000 to carry on the regulated activity of effecting or carrying out

contracts of insurance as principal;

(c)
“PRA-authorised person” and “PRA-regulated activity” have the

same meaning as in FSMA 2000.

(8)
Subsections (5), (6)(b) and (7)(b) are to be read in accordance with section

22 of FSMA 2000, taken with Schedule 2 to that Act and any order under

that section.”
39
Insert the following new Clause—


“Right to obtain documents and information

(1)
A review panel appointed under section (Independent review of operation of

legislation relating to ring-fencing) or (Independent review of proprietary

trading)—

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(a)
has a right of access at any reasonable time to all such documents as

the panel may reasonably require for the purposes of the review,

and

(b)
may require any person holding or accountable for any such

document to provide such information and explanation as are

reasonably necessary for that purpose.

(2)
An obligation imposed on a person as a result of the exercise of the powers

conferred by subsection (1) is enforceable by injunction or, in Scotland, by

an order for specific performance under section 45 of the Court of Session

Act 1988.”
After Clause 12
40
Insert the following new Clause—

“Part 3

Bail-in stabilisation option

Bail-in stabilisation option

(1)
Schedule (Bail-in stabilisation option) (which contains amendments relating

to a new stabilisation option in Part 1 of the Banking Act 2009) has effect.

(2)
The Treasury may by order make any provision they consider appropriate

in consequence of the application to building societies of the amendments

made by this Part.

(3)
An order may, in particular—

(a)
enable the Bank of England, for the purpose of enabling it to

exercise in relation to the business of a building society any of the

powers exercisable as a result of the amendments made by this

Part—

(i)
to convert the building society into a company, or

(ii)
to transfer the business of the building society to a company

which immediately before the transfer is owned by the Bank

or by a person of a description specified in the order;

(b)
enable the Bank of England, in connection with the exercise of a

power conferred by virtue of paragraph (a), to cancel membership

rights or shares in the building society;

(c)
provide for any power exercisable as a result of the amendments

made by this Part to be exercisable in relation to the company—

(i)
into which the building society is converted, or

(ii)
to which the business of the building society is transferred;

(d)
enable the Bank of England, in a case where it has transferred the

business of a building society by virtue of paragraph (a)(ii), to

dissolve the building society at any time after the transfer;

(e)
confer functions on the Treasury, the Bank of England, the FCA, the

PRA or a bail-in administrator;

(f)
make further amendments of Part 1 of the Banking Act 2009;

(g)
amend or modify the effect of the Building Societies Act 1986 or any

other enactment to which this subsection applies.

10

(4)
Subsection (3) applies to any enactment (including a fiscal enactment)

passed or made—

(a)
before the passing of this Act, or

(b)
on or before the last day of the Session in which this Act is passed.

(5)
In this section—

“bail-in administrator” is to be read in accordance with section 12B of

the Banking Act 2009 (as inserted by paragraph 2 of Schedule (Bail-

in stabilisation option));

“building society” has the same meaning as in section 84 of the

Banking Act 2009;

“company” means a company as defined in section 1(1) of the

Companies Act 2006 which is a public company limited by shares.”
41
Insert the following new Clause—

“Part 4

Conduct of persons working in financial services sector

Amendments of FSMA 2000


Professional standards

After section 65 of FSMA 2000 insert—

“65A
Professional standards

(1)
The regulator will raise standards of professionalism in financial

services by mandating a licensing regime based on training and

competence.

(2)
This licensing regime must—

(a)
apply to all approved persons exercising controlled

functions, regardless of financial sector;

(b)
specify minimum thresholds of competence including

integrity, professional qualifications, continuous

professional development and adherence to a recognised

code of conduct and revised Banking Standards Rules;

(c)
make provisions in connection with—

(i)
the granting of a licence;

(ii)
the refusal of a licence;

(iii)
the withdrawal of a licence; and

(iv)
the revalidation of a licensed person of a prescribed

description whenever the appropriate regulator sees

fit, either as a condition of the person continuing to

hold a licence or of the person’s licence being

restored;

(d)
be evidenced by individuals holding an annual validation

of competence;

(e)
include specific provision for a Senior Persons Regime in

relation to activities involving the exercise of a significant

influence over a controlled function under section 59 of the

Act.

11

(3)
In section 59, for “authorised” substitute “licensed” throughout the

section.””
42
Insert the following new Clause—


“Functions for which approval is required

(1)
Section 59 of FSMA 2000 (approval for particular arrangements) is

amended as follows.

(2)
Omit subsection (5).

(3)
For subsection (6) substitute—

“(6)
The PRA may specify a description of function under subsection

(3)(a) only if, in relation to the carrying on of a regulated activity by

a PRA-authorised person, it is satisfied that the function is a senior

management function as defined in section 59ZA.”

(4)
After subsection (6) insert—

“(6A)
If—

(a)
a function of a description specified in rules made by the

FCA under subsection (3)(a) or (b) is a controlled function in

relation to the carrying on of a regulated activity by a

relevant authorised person, and

(b)
the FCA is satisfied that, in relation to the carrying on of a

regulated activity by a relevant authorised person, the

function is a senior management function as defined in

section 59ZA,


the FCA must designate the function in the rules as a senior

management function.

(6B)
If a function of a description specified in rules made by the PRA

under subsection (3)(a) is a controlled function in relation to the

carrying on of a regulated activity by a relevant authorised person,

the PRA must designate the function in the rules as a senior

management function.

(6C)
For the meaning of “relevant authorised person”, see section 71A.”

(5)
Omit subsections (7) to (7B) and (11).”
43
Insert the following new Clause—


“Senior management functions

After section 59 of FSMA 2000 insert—

“59ZA
Senior management functions

(1)
This section has effect for determining whether a function is for the

purposes of section 59(6) or (6A) a senior management function.

(2)
A function is a “senior management function”, in relation to the

carrying on of a regulated activity by an authorised person, if—

(a)
the function will require the person performing it to be

responsible for managing one or more aspects of the

12

authorised person’s affairs, so far as relating to the activity,

and

(b)
those aspects involve, or might involve, a risk of serious

consequences—

(i)
for the authorised person, or

(ii)
for business or other interests in the United

Kingdom.

(3)
In subsection (2)(a) the reference to managing one or more aspects

of an authorised person’s affairs includes a reference to taking

decisions, or participating in the taking of decisions, about how one

or more aspects of those affairs should be carried on.””
44
Insert the following new Clause—


“Statements of responsibilities

(1)
Section 60 of FSMA 2000 (applications for approval) is amended as follows.

(2)
After subsection (2) insert—

“(2A)
If—

(a)
the application is for the approval of a person to perform a

designated senior management function, and

(b)
the authorised person concerned is a relevant authorised

person (see section 71A),


the appropriate regulator must require the application to contain,

or be accompanied by, a statement setting out the aspects of the

affairs of the authorised person concerned which it is intended that

the person will be responsible for managing in performing the

function.

(2B)
A statement provided under subsection (2A) is known as a

“statement of responsibilities”.

(2C)
In subsection (2A) “designated senior management function”

means a function designated as a senior management function

under section 59(6A) or (6B).”

(3)
After subsection (6) insert—

“(6A)
Subsection (6) applies to references to a relevant authorised person

as it applies to references to the authorised person concerned.””
45
Insert the following new Clause—

“Vetting by relevant authorised persons of candidates for approval

After section 60 of FSMA 2000 insert—

“60A
Vetting of candidates by relevant authorised persons

(1)
Before a relevant authorised person may make an application for a

regulator’s approval under section 59, the authorised person must

be satisfied that the person in respect of whom the application is

made (“the candidate”) is a fit and proper person to perform the

function to which the application relates.

13

(2)
In deciding that question, the authorised person must have regard,

in particular, to whether the candidate, or any person who may

perform a function on the candidate’s behalf—

(a)
has obtained a qualification,

(b)
has undergone, or is undergoing, training,

(c)
possesses a level of competence, or

(d)
has the personal characteristics,


required by general rules made by the regulator in relation to

persons performing functions of the kind to which the application

relates.

(3)
For the meaning of “relevant authorised person”, see section 71A.””
46
Insert the following new Clause—


“Determination of applications for approval

In section 61 of FSMA 2000 (determination of applications), in subsection

(2)—

(a)
omit the “or” at the end of paragraph (b), and

(b)
after paragraph (c) insert “or

(d)
has the personal characteristics,”.”
47
Insert the following new Clause—


“Power to give approval subject to conditions or for limited period

(1)
Section 61 of FSMA 2000 (determination of applications) is amended as

follows.

(2)
For subsection (1) substitute—

“(1)
The regulator to which an application for approval is made under

section 60 may grant the application only if—

(a)
it is satisfied that the person in respect of whom the

application is made (“the candidate”) is a fit and proper

person to perform the function to which the application

relates, or

(b)
in a case where the application is for approval to perform a

designated senior management function in relation to the

carrying on of a regulated activity by a relevant authorised

person (a “relevant senior management application”), it is

satisfied that the condition in paragraph (a) will be met if the

application is granted subject to one or more conditions (as

to which, see subsection (2B)).”

(3)
In subsection (2), for “deciding that question” substitute “determining the

application”.

(4)
After subsection (2A) insert—

“(2B)
The regulator to which a relevant senior management application is

made under section 60 may in particular—

(a)
grant the application subject to any conditions that the

regulator considers appropriate, and

14

(b)
grant the application so as to give approval only for a

limited period.

(2C)
A regulator may exercise the power under paragraph (a) or (b) of

subsection (2B) only if—

(a)
where the regulator is the FCA, it appears to the FCA that it

is desirable to do so in order to advance one or more of its

operational objectives, and

(b)
where the regulator is the PRA, it appears to the PRA that it

is desirable to do so in order to advance any of its objectives.

(2D)
Consent given by the FCA for the granting of the application may

be conditional on the manner in which the PRA exercises its power

under subsection (2B).”

(5)
After subsection (3) insert—

“(3ZA)
In the case of a relevant senior management application, the

reference in subsection (3)(a) to granting the application is a

reference to granting it without imposing conditions or limiting the

period for which the approval has effect.”

(6)
After subsection (5) insert—

“(6)
In this section—

(a)
“designated senior management function” means a function

designated as a senior management function under section

59(6A) or (6B);

(b)
any reference to a relevant authorised person includes a

reference to a person who has applied for permission under

Part 4A and will be a relevant authorised person if

permission is given.

(7)
For the meaning of “relevant authorised person”, see section 71A.”

(7)
In section 62 of FSMA 2000 (applications for approval: procedure and right

to refer to Tribunal)—

(a)
in subsection (2), after “the application” insert “, or to grant the

application subject to conditions or for a limited period (or both)”;

(b)
in subsection (3), after “the application” insert “, or to grant the

application subject to conditions or for a limited period (or both)”;

(c)
in subsection (4), after “the application” insert “, or to grant the

application subject to conditions or for a limited period (or both)”.”
48
Insert the following new Clause—


“Changes in responsibilities of senior managers

After section 62 of FSMA 2000 insert—

“62A
Changes in responsibilities of senior managers

(1)
This section applies where—

(a)
an authorised person has made an application to the

appropriate regulator for approval under section 59 for a

person to perform a designated senior management

function,