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Lords Amendments to the Financial Services (Banking Reform) Bill


 
 

87

 
 

holds itself out to be the successor of a firm of which the person was

 

a member or employee at that time.

 

(12)    

The Treasury must pay into the Consolidated Fund sums received by them

 

as a result of subsection (5).”

151

Insert the following new Clause—

 

Interpretation

 

         

Interpretation of Part

 

(1)    

In this Part—

 

“the 1986 Act” means the Insolvency Act 1986;

 

“business”, “member”, “property” and “security” have the same

 

meaning as in the 1986 Act;

 

“company” has the meaning given by section (Interpretation: other

 

expressions);

 

“the court” means—

 

(a)    

in England and Wales and Northern Ireland, the High

 

Court;

 

(b)    

in Scotland, the Court of Session;

 

“FMI administration order” and “FMI administrator” are to be read in

 

accordance with section (FMI administration orders);

 

“infrastructure company” has the meaning given by section

 

(Interpretation: infrastructure companies);

 

“operator”, in relation to a recognised inter-bank payment system, has

 

the meaning given by section (Interpretation: other expressions);

 

“recognised inter-bank payment system” has the meaning given by

 

section (Interpretation: other expressions);

 

“regulated activity” has the same meaning as in FSMA 2000;

 

“the relevant system” has the meaning given by section (Interpretation:

 

other expressions);

 

“securities settlement system” has the meaning given by section

 

(Interpretation: other expressions).

 

(2)    

In this Part references to the FMI administrator of a company include a

 

person appointed under paragraph 91 or 103 of Schedule B1 to the 1986

 

Act, as applied by Schedule (Conduct of FMI administration) to this Act, to be

 

the FMI administrator of a company.

 

(3)    

In this Part references to a person qualified to act as an insolvency

 

practitioner in relation to a company are to be read in accordance with Part

 

13 of the 1986 Act, but as if references in that Part to a company included a

 

company registered under the Companies Act 2006 in Northern Ireland.”

152

Insert the following new Clause—

 

Application of Part to Northern Ireland

 

         

Northern Ireland

 

(1)    

This section makes provision about this Part in its application to Northern

 

Ireland.


 
 

88

 
 

(2)    

Any reference to any provision of the 1986 Act is to have effect as a

 

reference to the corresponding provision of the Insolvency (Northern

 

Ireland) Order 1989.

 

(3)    

Section (Interpretation: general)(3) is to have effect as if the reference to

 

Northern Ireland were a reference to England and Wales or Scotland.”

Before Clause 13

153

Insert the following new Clause—

 

“Part 7

 

Miscellaneous

 

Competition

 

         

Functions of FCA under competition legislation

 

Schedule (Functions of FCA under competition legislation) (which contains

 

provision conferring on the FCA functions under competition legislation)

 

has effect.”

154

Insert the following new Clause—

 

         

“Competition as a secondary objective of the PRA

 

(1)    

For section 2H of FSMA 2000 substitute—

 

“2H    

Secondary competition objective and duty to have regard to

 

regulatory principles

 

(1)    

When discharging its general functions in a way that advances its

 

objectives (see section 2F), the PRA must so far as is reasonably

 

possible act in a way which, as a secondary objective, facilitates

 

effective competition in the markets for services provided by PRA-

 

authorised persons in carrying on regulated activities.

 

(2)    

In discharging its general functions, the PRA must also have regard

 

to the regulatory principles in section 3B.”

 

(2)    

In section 3B (regulatory principles to be applied by both regulators), in

 

subsection (1), for “2H(1)(a)” substitute “2H(2)”.

 

(3)    

In Schedule 1ZB to FSMA 2000 (the Prudential Regulation Authority)—

 

(a)    

in paragraph 19 (annual report), in sub-paragraph (1)—

 

(i)    

after paragraph (b) insert—

 

“(ba)    

how it has complied with section 2H(1),”, and

 

(ii)    

in paragraph (c), omit the words from “and of” onwards,

 

and

 

(b)    

in paragraph 20 (consultation about annual report), in sub-

 

paragraph (1)(c), for the words from “and the PRA” onwards

 

substitute “and the PRA has facilitated effective competition in

 

accordance with section 2H and has considered the regulatory

 

principles in section 3B”.”

155

Insert the following new Clause—


 
 

89

 
 

         

“Duty of FCA to make rules restricting charges for high-cost short-term credit

 

(1)    

In section 137C of FSMA 2000 (FCA general rules: cost of credit and

 

duration of credit agreements), after subsection (1) insert—

 

“(1A)    

The FCA must make rules by virtue of subsection (1)(a)(ii) and (b)

 

in relation to one or more specified descriptions of regulated credit

 

agreement appearing to the FCA to involve the provision of high-

 

cost short-term credit, with a view to securing an appropriate

 

degree of protection for borrowers against excessive charges.

 

(1B)    

Before the FCA publishes a draft of any rules to be made by virtue

 

of subsection (1)(a)(ii) or (b), it must consult the Treasury.”

 

(2)    

In Schedule 1ZA to FSMA 2000, in paragraph 11 (FCA’s annual report), in

 

sub-paragraph (1), after paragraph (h) insert—

 

“(ha)    

any rules that it has made as a result of section 137C during

 

the period to which the report relates and the kinds of

 

regulated credit agreement (within the meaning of that

 

section) to which the rules apply,”.

 

(3)    

The FCA must ensure any rules that it is required to make as a result of the

 

amendment made by subsection (1) are made not later than 2 January 2015

 

and apply (at least) to agreements entered into on or after that date.”

156

Insert the following new Clause—

 

         

“Role of FCA Consumer Panel in relation to PRA

 

In section 1Q of FSMA 2000 (the Consumer Panel), after subsection (5)

 

insert—

 

“(5A)    

If it appears to the Consumer Panel that any matter being

 

considered by it is relevant to the extent to which the general

 

policies and practices of the PRA are consistent with the PRA’s

 

general duties under sections 2B to 2H, it may communicate to the

 

PRA any views relating to that matter.

 

(5B)    

The PRA may arrange to meet any of the FCA’s expenditure on the

 

Consumer Panel which is attributable to the Panel’s functions

 

under subsection (5A).””

157

Insert the following new Clause—

 

“Parent undertakings

 

         

Power of FCA and PRA to make rules applying to parent undertakings

 

(1)    

After section 192J of FSMA 2000 insert—

 

“Rules applying to parent undertakings of ring-fenced bodies

 

192JA

 Rules applying to parent undertakings of ring-fenced bodies

 

(1)    

The appropriate regulator may make such rules applying to bodies

 

corporate falling within subsection (2) as appear to the regulator to

 

be necessary or expedient for the group ring-fencing purposes.

 

(2)    

A body corporate falls within this subsection if—


 
 

90

 
 

(a)    

it is incorporated in the United Kingdom or has a place of

 

business in the United Kingdom,

 

(b)    

it is a parent undertaking of a ring-fenced body, and

 

(c)    

it is not itself an authorised person.

 

(3)    

The “group ring-fencing purposes” are the purposes set out in

 

section 142H(4).

 

(4)    

“The appropriate regulator” means—

 

(a)    

in relation to the parent undertaking of a ring-fenced body

 

that is a PRA-authorised person, the PRA;

 

(b)    

in any other case, the FCA.

 

Rules requiring parent undertakings to facilitate resolution

 

192JB

 Rules requiring parent undertakings to facilitate resolution

 

(1)    

The appropriate regulator may make rules requiring a qualifying

 

parent undertaking to make arrangements that would in the

 

opinion of the regulator allow or facilitate the exercise of the

 

resolution powers in relation to the qualifying parent undertaking

 

or any of its subsidiary undertakings in the event of a situation

 

arising where all or part of the business of the parent undertaking

 

or the subsidiary undertaking encounters or is likely to encounter

 

financial difficulties.

 

(2)    

The “resolution powers” are—

 

(a)    

the powers conferred on the Treasury and the Bank of

 

England by or under Parts 1 to 3 of the Banking Act 2009,

 

and

 

(b)    

any similar powers exercisable by an authority outside the

 

United Kingdom.

 

(3)    

The arrangements that may be required include arrangements

 

relating to—

 

(a)    

the issue of debt instruments by the parent undertaking;

 

(b)    

the provision to a subsidiary undertaking (“S”) or a

 

transferee by the parent undertaking, or by any other

 

subsidiary undertaking of the parent undertaking, of such

 

services and facilities as would be required to enable S or the

 

transferee to operate the business, or part of the business,

 

effectively.

 

(4)    

In subsection (3)(b) “transferee” means a person to whom all or part

 

of the business of the parent undertaking or the subsidiary

 

undertaking could be transferred as a result of the exercise of the

 

resolution powers.

 

(5)    

“Debt instrument” has the same meaning as in section 142Y.

 

(6)    

“The appropriate regulator” means—

 

(a)    

where the subsidiary undertakings of the qualifying parent

 

undertaking include a ring-fenced body that is a PRA-

 

authorised person, the PRA;

 

(b)    

where the subsidiary undertakings of the qualifying parent

 

undertaking include one or more PRA-authorised persons


 
 

91

 
 

but do not include any authorised person that is not a PRA-

 

authorised person, the PRA;

 

(c)    

where the subsidiary undertakings of the qualifying parent

 

undertaking do not include any PRA-authorised person, the

 

FCA;

 

(d)    

in any other case, the PRA or the FCA.”

 

(2)    

In section 192K of FSMA 2000 (power to impose penalty or issue censure)—

 

(a)    

in subsection (1), after “section 192J” insert “or 192JB”, and

 

(b)    

after that subsection insert—

 

“(1A)    

This section also applies if a regulator is satisfied that a

 

person (“P”) who is or has been a parent undertaking of a

 

ring-fenced body has contravened a provision of rules made

 

by that regulator under section 192JA.””

158

Insert the following new Clause—

 

“Duty to meet auditors of certain institutions

 

(1)    

Part 22 of FSMA 2000 (auditors and actuaries) is amended as follows.

 

(2)    

After section 339A insert—

 

“339B

Duty to meet auditors of certain institutions

 

(1)    

The FCA must make arrangements for meetings to take place at

 

least once a year between—

 

(a)    

the FCA, and

 

(b)    

the auditor of any PRA-authorised person to which section

 

339C applies.

 

(2)    

The PRA must make arrangements for meetings to take place at

 

least once a year between—

 

(a)    

the PRA, and

 

(b)    

the auditor of any PRA-authorised person to which section

 

339C applies.

 

(3)    

The annual report of each regulator must include the number of

 

meetings that have taken place during the period to which the

 

report relates between the regulator and auditors of PRA-

 

authorised persons to which section 339C applies.

 

(4)    

In subsection (3) “the annual report” means—

 

(a)    

in relation to the FCA, every report which it is required by

 

paragraph 11 of Schedule 1ZA to make to the Treasury, and

 

(b)    

in relation to the PRA, every report which it is required by

 

paragraph 19 of Schedule 1ZB to make to the Treasury.

 

(5)    

In this section “auditor” means an auditor appointed under or as a

 

result of a statutory provision.

 

339C  

PRA-authorised persons to which this section applies

 

(1)    

This section applies to a PRA-authorised person which—

 

(a)    

is a UK institution,

 

(b)    

meets condition A or B,

 

(c)    

is not an insurer or a credit union, and


 
 

92

 
 

(d)    

is, in the opinion of the PRA, important to the stability of the

 

UK financial system.

 

(2)    

Condition A is that the person has permission under Part 4A to

 

carry on the regulated activity of accepting deposits.

 

(3)    

Condition B is that—

 

(a)    

the person is an investment firm that has permission under

 

Part 4A to carry on the regulated activity of dealing in

 

investments as principal, and

 

(b)    

when carried on by the person, that activity is a PRA-

 

regulated activity.

 

(4)    

In this section—

 

(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

 

this Act to carry on the regulated activity of effecting or

 

carrying out contracts of insurance as principal;

 

(c)    

“credit union” means a credit union as defined by section 31

 

of the Credit Unions Act 1979 or a credit union as defined by

 

Article 2(2) of the Credit Unions (Northern Ireland) Order

 

1985.

 

(5)    

Subsections (2), (3) and (4)(b) are to be read in accordance with

 

Schedule 2, taken together with any order under section 22.”

 

(3)    

The italic cross-heading before section 339A becomes “General duties of

 

regulator”.”

Clause 13

159

Page 27, line 5, at end insert—

 

“(2)    

In section 3A of FSMA 2000 (meaning of “regulator”), in subsection (3)—

 

(a)    

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

 

(b)    

after paragraph (b) insert “or

 

(c)    

the meaning of “regulator” in sections 410A and

 

410B (fees to meet certain expenses of Treasury).””

Clause 14

160

Page 27, line 10, after “procedure)” insert “—

 

(a)    

after “55C,” insert “71A(4),”, and

 

(b)    

After Clause 15

161

Insert the following new Clause—


 
 

93

 
 

“Building societies

 

Building societies

 

Schedule (Building societies) (which contains provision about building

 

societies) has effect.”

Before Clause 16

162

Insert the following new Clause—

 

Claims management services

 

         

Power to impose penalties on persons providing claims management services

 

(1)    

The Schedule to the Compensation Act 2006 (claims management

 

regulations) is amended as follows.

 

(2)    

In paragraph 8 (rules about conduct of authorised persons), in sub-

 

paragraph (2)(b), after sub-paragraph (i) insert—

 

“(ia)    

provision enabling the Regulator to require an

 

authorised person to pay a penalty;”.

 

(3)    

In paragraph 9 (codes of practice about conduct of authorised persons), in

 

sub-paragraph (2)(b), after sub-paragraph (i) insert—

 

“(ia)    

enable the Regulator to require an authorised

 

person to pay a penalty;”.

 

(4)    

In paragraph 10 (complaints about conduct of authorised persons), after

 

sub-paragraph (2) insert—

 

  “(3)  

Regulations under sub-paragraph (1) may enable the Regulator

 

to require an authorised person to pay a penalty.”

 

(5)    

In paragraph 11 (requirement to have indemnity insurance), in sub-

 

paragraph (2)(b), after “Regulator” insert “to require the payment of a

 

penalty by an authorised person or”.

 

(6)    

In paragraph 14 (enforcement), in sub-paragraph (4), for the words from

 

“impose” to “authorisation” substitute “require an authorised person to

 

pay a penalty, or to impose conditions on, suspend or cancel a person’s

 

authorisation,”.

 

(7)    

After paragraph 15 insert—

 

“Penalties: supplementary provision

 

16  (1)  

This paragraph applies in any case where regulations include

 

provision enabling the Regulator to require an authorised person

 

to pay a penalty.

 

      (2)  

The regulations—

 

(a)    

shall include provision about how the Regulator is to

 

determine the amount of a penalty, and

 

(b)    

may, in particular, include provision specifying a

 

minimum or maximum amount.

 

      (3)  

The regulations—


 
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