Session 2012 - 13
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Other Bills before Parliament

Financial Services Bill


Financial Services Bill
Part 5 — Inquiries and investigations

142

 

68      

Obstruction and contempt

(1)   

If a person (“P”)—

(a)   

fails to comply with a requirement imposed on P by a person holding

an inquiry under section 65, or

(b)   

otherwise obstructs such an inquiry,

5

   

the person holding the inquiry may certify the matter to the High Court (or, in

Scotland, the Court of Session).

(2)   

The court may enquire into the matter.

(3)   

If, after hearing—

(a)   

any witnesses who may be produced against or on behalf of P, and

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(b)   

any statement made by or on behalf of P,

   

the court is satisfied that P would have been in contempt of court if the inquiry

had been proceedings before the court, it may deal with P as if P were in

contempt.

Investigations

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69      

Duty of FCA to investigate and report on possible regulatory failure

(1)   

Subsection (3) applies where it appears to the FCA that—

(a)   

events have occurred in relation to a regulated person or collective

investment scheme which—

(i)   

indicated a significant failure to secure an appropriate degree of

20

protection for consumers,

(ii)   

had or could have had a significant adverse effect on the

integrity of the UK financial system, as defined by section 1D of

FSMA 2000 (the integrity objective), or

(iii)   

had or could have had a significant adverse effect on effective

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competition in the interests of consumers in the markets for the

services described in paragraphs (a) and (b) of section 1E(1) of

FSMA 2000 (the competition objective), and

(b)   

those events might not have occurred, or the failure or adverse effect

might have been reduced, but for a serious failure in—

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(i)   

the system established by FSMA 2000 for the regulation of

authorised persons and their activities, for the listing of

securities or for the regulation of collective investment schemes,

so far as it relates to the functions of the FCA, or

(ii)   

the operation of that system, so far as it relates to those

35

functions.

(2)   

Subsection (3) also applies where the Treasury direct the FCA that it appears to

the Treasury that the conditions in subsection (1) are met in relation to

specified events.

(3)   

The FCA must carry out an investigation into the events and the circumstances

40

surrounding them and report to the Treasury on the result of the investigation.

(4)   

Subsection (3) does not apply by virtue of subsection (1) if the Treasury direct

the FCA that it is not required to carry out an investigation into the events

concerned.

(5)   

“Regulated person” means—

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Financial Services Bill
Part 5 — Inquiries and investigations

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(a)   

an authorised person,

(b)   

a recognised investment exchange,

(c)   

any other person lawfully carrying on a regulated activity,

(d)   

a person carrying on business in contravention of the general

prohibition in section 19 of FSMA 2000, or

5

(e)   

an issuer of listed securities.

70      

Duty of PRA to investigate and report on possible regulatory failure

(1)   

Subsection (4) applies where it appears to the PRA that—

(a)   

relevant public expenditure has been incurred in respect of a PRA-

authorised person, and

10

(b)   

that expenditure might not have been incurred but for a serious failure

in—

(i)   

the system established by FSMA 2000 for the regulation of PRA-

authorised persons and their activities, so far as it relates to the

functions of the PRA, or

15

(ii)   

the operation of that system, so far as it relates to those

functions.

(2)   

Subsection (4) also applies where it appears to the PRA that—

(a)   

events have occurred which—

(i)   

had or could have had a significant adverse effect on the safety

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or soundness of one or more PRA-authorised persons, or

(ii)   

if the effecting and carrying out of contracts of insurance is a

PRA-regulated activity for the purposes of FSMA 2000, related

to a PRA-authorised person carrying on that activity and

indicated a significant failure to secure an appropriate degree of

25

protection for policyholders, and

(b)   

those events might not have occurred, or the adverse effect or failure

might have been reduced, but for a serious failure in—

(i)   

the system established by FSMA 2000 for the regulation of PRA-

authorised persons and their activities, so far as it relates to the

30

functions of the PRA, or

(ii)   

the operation of that system, so far as it relates to those

functions.

(3)   

Subsection (4) also applies where the Treasury direct the PRA that it appears to

the Treasury—

35

(a)   

that the conditions in subsection (1)(a) and (b) are met in relation to a

specified person, or

(b)   

that the conditions in subsection (2)(a) and (b) are met in relation to

specified events.

(4)   

The PRA must—

40

(a)   

carry out an investigation into—

(i)   

the events that gave rise to the incurring of the public

expenditure mentioned in subsection (1)(a) and the

circumstances surrounding them, or

(ii)   

the events mentioned in subsection (2)(a) and the circumstances

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surrounding them, and

(b)   

report to the Treasury on the result of the investigation.

 
 

Financial Services Bill
Part 5 — Inquiries and investigations

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(5)   

Subsection (4) does not apply by virtue of subsection (1) if the Treasury direct

the PRA that it is not required to carry out an investigation into the events

concerned.

71      

Interpretation of section 70

(1)   

This section has effect for the interpretation of section 70.

5

(2)   

“Policyholder” has the same meaning as in FSMA 2000.

(3)   

Relevant public expenditure has been incurred in respect of a PRA-authorised

person (“P”) in each of the following cases (but no others)—

(a)   

where the Treasury or the Secretary of State have provided financial

assistance to or in respect of P for the purposes of resolving or reducing

10

a threat to the stability of the UK financial system;

(b)   

where the Treasury have incurred expenditure in connection with the

exercise by the Treasury, the Secretary of State or the Bank of England

of any power under Parts 1 to 3 of the Banking Act 2009 in relation to P;

(c)   

where the scheme manager of the Financial Services Compensation

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Scheme has received a loan from the National Loans Fund, or financial

assistance from the Treasury, for the purpose of funding expenses

incurred or expected to be incurred under the Financial Services

Compensation Scheme by reason of events relating to P.

(4)   

In subsection (3)(a) and (c) “financial assistance” includes giving guarantees or

20

indemnities and any other kind of financial assistance (actual or contingent),

but does not include the giving by the Treasury of an indemnity or guarantee

in respect of the provision of financial assistance by the Bank of England.

(5)   

The Treasury may by order made by statutory instrument provide that a

specified activity or transaction, or class of activity or transaction, is to be or is

25

not to be treated as financial assistance for the purposes of subsection (3)(a),

and subsection (4) is subject to this subsection.

72      

Modification of section 70 in relation to Lloyd’s

(1)   

This section applies only if PRA-authorised persons include—

(a)   

the Society, or

30

(b)   

other persons who carry on regulated activities in relation to anything

done at Lloyd’s.

(2)   

Section 70 has effect as if—

(a)   

in subsection (1)(a) (and section 71(3)), the reference to a PRA-

authorised person included a reference to a member of the Society,

35

(b)   

in subsection (2)(a)(i), the reference to one or more PRA-authorised

persons included a reference to the Society, and the members of the

Society, taken together, and

(c)   

in subsection (2)(a)(ii), the reference to a PRA-authorised person

carrying on the activity of effecting and carrying out contracts of

40

insurance included a reference to—

(i)   

the Society, or

(ii)   

any other person who carries on PRA-regulated activities in

relation to anything done at Lloyd’s.

(3)   

In this section—

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Financial Services Bill
Part 5 — Inquiries and investigations

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(a)   

“PRA-regulated activity” is to be read in accordance with section 22A

of FSMA 2000, and

(b)   

terms which are defined in Lloyd’s Act 1982 have the same meaning as

in that Act.

73      

Power of Treasury to require FCA or PRA to undertake investigation

5

(1)   

If the Treasury considers that it is in the public interest that either regulator

should undertake an investigation into any relevant events, it may give the

regulator a direction specifying the relevant events and requiring the regulator

to undertake an investigation into those events and the circumstances

surrounding them and to report to the Treasury on the result of the

10

investigation.

(2)   

“Relevant events” means events that have occurred in relation to—

(a)   

a collective investment scheme,

(b)   

a person who is, or was at the time of the events, carrying on a regulated

activity (whether or not as an authorised person), or

15

(c)   

listed securities or an issuer of listed securities.

(3)   

“Relevant events” do not include any events occurring before 1 December 2001

(but no such limitation applies to the reference in subsection (1) to surrounding

circumstances).

74      

Conduct of investigation

20

(1)   

Where a regulator is required by section 69 or 70 or under section 73 to carry

out an investigation, it is for the regulator to decide how it is to be carried out,

but this is subject to the following provisions.

(2)   

In carrying out such an investigation, the regulator must have regard to the

desirability of minimising any adverse effect that the carrying out of the

25

investigation may have on the exercise by the regulator of any of its other

functions.

(3)   

The regulator may postpone the start of, or suspend, an investigation if it

considers it necessary to do so to avoid a material adverse effect on the exercise

by it of any of its other functions.

30

(4)   

The regulator must notify the Treasury if it postpones the start of, or suspends,

an investigation under subsection (3), and the notification must specify when

the investigation will begin or resume.

(5)   

The Treasury may, by a direction to the regulator, control—

(a)   

the scope of the investigation;

35

(b)   

the period during which the investigation is to be carried out;

(c)   

the conduct of the investigation;

(d)   

the making of reports.

(6)   

A direction may, in particular—

(a)   

confine the investigation to particular matters;

40

(b)   

extend the investigation to additional matters;

(c)   

require the regulator to postpone the start of, or suspend, an

investigation until a specified time or until a further direction;

 
 

Financial Services Bill
Part 5 — Inquiries and investigations

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(d)   

where a notification has been received under subsection (3), require the

regulator to begin or resume the investigation immediately or at a

specified time;

(e)   

require the regulator to discontinue the investigation or to take only

such steps as are specified in the direction;

5

(f)   

require the regulator to make such interim reports as are so specified.

(7)   

In exercising the power conferred on them by this section, the Treasury must

have regard to the desirability of minimising any adverse effect that the

carrying out of the investigation may have on the exercise by the regulator of

any of its other functions.

10

75      

Conclusion of investigation

On completion of an investigation required by section 69 or 70 or under section

73, the regulator must make a written report to the Treasury—

(a)   

setting out the result of the investigation,

(b)   

setting out the lessons (if any) that the regulator considers that it should

15

learn from the investigation, and

(c)   

making such recommendations (if any) as the regulator considers

appropriate.

76      

Statements of policy

(1)   

Each regulator must prepare and issue a statement of its policy with respect to

20

the exercise of its functions under sections 69 to 75 (“the relevant sections”)

and, in particular—

(a)   

the matters it will take into account in determining whether the

conditions which give rise to its duty to carry out an investigation

under section 69 or 70 (as the case may be) are met, and

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(b)   

how it will carry out investigations under the relevant sections.

(2)   

A regulator may at any time alter or replace a statement issued by it under this

section.

(3)   

If a statement issued under this section is altered or replaced by a regulator, the

regulator must issue the altered or replaced statement.

30

(4)   

A regulator must obtain the consent of the Treasury before issuing a statement

under this section.

(5)   

A statement issued under this section by a regulator 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.

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(6)   

A regulator must, without delay, give the Treasury a copy of any statement

which it publishes under this section.

(7)   

In exercising, or deciding whether to exercise, its functions under the relevant

sections a regulator must have regard to any statement published by it under

this section and for the time being in force.

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(8)   

A regulator may charge a reasonable fee for providing a person with a copy of

a statement issued by it.

 
 

 
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Revised 28 May 2012