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Financial Services Bill (HL Bill 25)

Financial Services BillPage 40

(3) For paragraph 26 substitute—

Parliamentary control

26 (1) This paragraph applies to any order made under section 22(1) or (1A)
which contains a statement by the Treasury that, in their opinion, the
5effect (or one of the effects) of the proposed order would be that an
activity which is not a regulated activity would become a regulated
activity.

(2) No order to which this paragraph applies may be made unless—

(a) a draft of the order has been laid before Parliament and
10approved by a resolution of each House, or

(b) sub-paragraph (4) applies.

(3) Sub-paragraph (4) applies if an order to which this paragraph
applies also contains a statement that the Treasury are of the opinion
that, by reason of urgency, it is necessary to make the order without
15a draft being so laid and approved.

(4) Where this sub-paragraph applies the order—

(a) must be laid before Parliament after being made, and

(b) ceases to have effect at the end of the relevant period unless
before the end of that period the order is approved by a
20resolution of each House of Parliament (but without that
affecting anything done under the order or the power to
make a new order).

(5) The “relevant period” is a period of 28 days beginning with the day
on which the order is made.

(6) 25In calculating the relevant period no account is to be taken of any
time during which Parliament is dissolved or prorogued or during
which both Houses are adjourned for more than 4 days.

8 Designation of activities requiring prudential regulation by PRA

After section 22 of FSMA 2000 insert—

22A 30Designation of activities requiring prudential regulation by PRA

(1) The Treasury may by order specify the regulated activities that are
“PRA-regulated activities” for the purposes of this Act.

(2) An order under subsection (1) may—

(a) provide for exceptions;

(b) 35confer powers on the Treasury or either regulator;

(c) authorise the making of rules or other instruments by either
regulator for purposes of, or connected with, any relevant
provision;

(d) make provision in respect of any information or document
40which in the opinion of the Treasury or either regulator is
relevant for purposes of, or connected with, any relevant
provision;

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(e) make such consequential, transitional, or supplemental
provision as the Treasury considers appropriate for purposes
of, or connected with, any relevant provision.

(3) Provision made as a result of subsection (2)(e) may amend any primary
5or subordinate legislation, including any provision of, or made under,
this Act.

(4) “Relevant provision” means this section or any provision made under
this section.

22B Parliamentary control in relation to certain orders under section 22A

(1) 10This section applies to the first order made under section 22A(1).

(2) This section also applies to any subsequent order made under section
22A(1) which—

(a) contains a statement by the Treasury that, in their opinion, the
effect (or one of the effects) of the proposed order would be—

(i) 15that an activity would become a PRA-regulated activity,
or

(ii) that a PRA-regulated activity would become a regulated
activity that is not a PRA-regulated activity, or

(b) amends primary legislation.

(3) 20No order to which this section applies may be made unless—

(a) a draft of the order has been laid before Parliament and
approved by a resolution of each House, or

(b) subsection (5) applies.

(4) Subsection (5) applies if an order to which this section applies contains
25a statement that the Treasury are of the opinion that, by reason of
urgency, it is necessary to make the order without a draft being so laid
and approved.

(5) Where this subsection applies the order—

(a) must be laid before Parliament after being made, and

(b) 30ceases to have effect at the end of the relevant period unless
before the end of that period the order is approved by a
resolution of each House of Parliament (but without that
affecting anything done under the order or the power to make
a new order).

(6) 35The “relevant period” is a period of 28 days beginning with the day on
which the order is made.

(7) In calculating the relevant period no account is to be taken of any time
during which Parliament is dissolved or prorogued or during which
both Houses are adjourned for more than 4 days.

40Permission to carry on regulated activities

9 Permission to carry on regulated activities

(1) In section 31 (authorised persons), in subsection (1)(a), for “Part IV permission”
substitute “Part 4A permission”.

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(2) For sections 40 to 55 of FSMA 2000 substitute—

Part 4A Permission to carry on regulated activities
Application for permission
55A 5Application for permission

(1) An application for permission to carry on one or more regulated
activities may be made to the appropriate regulator by—

(a) an individual,

(b) a body corporate,

(c) 10a partnership, or

(d) an unincorporated association.

(2) “The appropriate regulator”, in relation to an application under this
section, means—

(a) the PRA, in a case where—

(i) 15the regulated activities to which the application relates
consist of or include a PRA-regulated activity, or

(ii) the applicant is a PRA-authorised person otherwise than
by virtue of a Part 4A permission;

(b) the FCA, in any other case.

(3) 20An authorised person who has a permission under this Part which is in
force may not apply for permission under this section.

(4) An EEA firm may not apply for permission under this section to carry
on a regulated activity which it is, or would be, entitled to carry on in
exercise of an EEA right, whether through a United Kingdom branch or
25by providing services in the United Kingdom.

(5) A permission given by the appropriate regulator under this Part or
having effect as if so given is referred to in this Act as “a Part 4A
permission”.

55B The threshold conditions

(1) 30“The threshold conditions”, in relation to a regulated activity, means
the conditions set out in Schedule 6, as read with any threshold
condition code made by either regulator under section 137M.

(2) Any reference in this Part to the threshold conditions for which either
regulator is responsible is to be read as a reference to the conditions set
35out in Schedule 6 that are expressed to be relevant to the discharge by
that regulator of its functions, as read with any threshold condition
code made by that regulator under section 137M.

(3) In giving or varying permission, imposing or varying a requirement, or
giving consent, under any provision of this Part, each regulator must
40ensure that the person concerned will satisfy, and continue to satisfy, in
relation to all of the regulated activities for which the person has or will
have permission, the threshold conditions for which that regulator is
responsible.

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(4) But the duty imposed by subsection (3) does not prevent a regulator,
having due regard to that duty, from taking such steps as it considers
are necessary, in relation to a particular person, in order to advance—

(a) in the case of the FCA, any of its operational objectives;

(b) 5in the case of the PRA, any of its objectives.

55C Power to amend Schedule 6

(1) The Treasury may by order amend Parts 1 and 2 of Schedule 6 by
altering, adding or repealing provisions, or by substituting for those
Parts as they have effect for the time being provisions specified in the
10order.

(2) Different provision may be made under this section—

(a) in relation to the discharge of the functions of each regulator;

(b) in relation to different regulated activities;

(c) in relation to persons who carry on, or seek to carry on, activities
15that consist of or include a PRA-regulated activity and in
relation to other persons.

55D Firms based outside EEA

(1) This section applies in relation to a person (“the non-EEA firm”)—

(a) who is a body incorporated in, or formed under the law of, or is
20an individual who is a national of, any country or territory
outside the EEA, and

(b) who is carrying on a regulated activity in any country or
territory outside the United Kingdom in accordance with the
law of that country or territory (“the overseas state”).

(2) 25In determining whether the non-EEA firm is satisfying or will satisfy,
and continue to satisfy, any one or more of the threshold conditions for
which a UK regulator is responsible, the UK regulator may have regard
to any opinion notified to it by a regulatory authority in the overseas
state (“the overseas regulator”) which relates to the non-EEA firm and
30appears to the UK regulator to be relevant to compliance with those
conditions.

(3) In considering how much weight (if any) to attach to the opinion, the
UK regulator must have regard to the nature and scope of the
supervision exercised in relation to the non-EEA firm by the overseas
35regulator.

(4) In this section “UK regulator” means the FCA or the PRA.

55E Giving permission: the FCA

(1) This section applies where the FCA is the appropriate regulator in
relation to an application for permission under section 55A.

(2) 40The FCA may give permission for the applicant to carry on the
regulated activity or activities to which the application relates or such
of them as may be specified in the permission.

(3) If the applicant is a member of a group which includes a PRA-
authorised person, the FCA must consult the PRA before determining
45the application.

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(4) If it gives permission, the FCA must specify the permitted regulated
activity or activities, described in such manner as the FCA considers
appropriate.

(5) The FCA may—

(a) 5incorporate in the description of a regulated activity such
limitations (for example as to circumstances in which the
activity may, or may not, be carried on) as it considers
appropriate;

(b) specify a narrower or wider description of regulated activity
10than that to which the application relates;

(c) give permission for the carrying on of a regulated activity which
is not included among those to which the application relates
and is not a PRA-regulated activity.

55F Giving permission: the PRA

(1) 15This section applies where the PRA is the appropriate regulator in
relation to an application for permission under section 55A.

(2) The PRA may with the consent of the FCA give permission for the
applicant to carry on the regulated activity or activities to which the
application relates or such of them as may be specified in the
20permission.

(3) If it gives permission, the PRA must specify the permitted regulated
activity or activities, described in such manner as the PRA considers
appropriate.

(4) The PRA may—

(a) 25incorporate in the description of a regulated activity such
limitations (for example as to circumstances in which the
activity may, or may not, be carried on) as it considers
appropriate;

(b) specify a narrower or wider description of regulated activity
30than that to which the application relates;

(c) give permission for the carrying on of a regulated activity which
is not included among those to which the application relates.

(5) Consent given by the FCA for the purposes of this section may be
conditional on the manner in which the PRA exercises its powers under
35subsections (3) and (4).

(6) Subsections (3) and (4)(b) and (c) do not enable the PRA to give
permission that relates only to activities that are not PRA-regulated
activities, except where the applicant is a PRA-authorised person
otherwise than by virtue of a Part 4A permission.

55G 40Giving permission: special cases

(1) “The applicant” means an applicant for permission under section 55A.

(2) If the applicant—

(a) in relation to a particular regulated activity, is exempt from the
general prohibition as a result of section 39(1) or an order made
45under section 38(1), but

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(b) has applied for permission in relation to another regulated
activity,

the application is to be treated as relating to all the regulated activities
which, if permission is given, the applicant will carry on.

(3) 5If the applicant—

(a) in relation to a particular regulated activity, is exempt from the
general prohibition as a result of section 285(2) or (3), but

(b) has applied for permission in relation to another regulated
activity,

10the application is to be treated as relating only to that other regulated
activity.

(4) If the applicant—

(a) is a person to whom, in relation to a particular regulated
activity, the general prohibition does not apply as a result of
15Part 19, but

(b) has applied for permission in relation to another regulated
activity,

the application is to be treated as relating only to that other regulated
activity.

(5) 20Subsection (6) applies where either regulator (“the responsible
regulator”) receives an application for permission under section 55A
which is in the regulator’s opinion similar to an application which was
previously made to the other regulator and was either—

(a) treated by the other regulator as not being a valid application to
25that regulator because of the regulated activities to which it
related, or

(b) refused by the other regulator after being considered.

(6) The responsible regulator must have regard to the desirability of
minimising—

(a) 30the additional work for the applicant in dealing with the new
application, and

(b) the time taken to deal with the new application.

Variation and cancellation of Part 4A permission
55H Variation by FCA at request of authorised person

(1) 35This section applies in relation to an authorised person who has a Part
4A permission but is not a PRA-authorised person.

(2) The FCA may, on the application of the authorised person, vary the
permission by—

(a) adding a regulated activity, other than a PRA-regulated
40activity, to those to which the permission relates;

(b) removing a regulated activity from those to which the
permission relates;

(c) varying the description of a regulated activity to which the
permission relates.

(3) 45The FCA may, on the application of the authorised person, cancel the
permission.

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(4) The FCA may refuse an application under this section if it considers
that it is desirable to do so in order to advance any of its operational
objectives.

(5) If the applicant is a member of a group which includes a PRA-
5authorised person, the FCA must consult the PRA before determining
the application.

(6) If as a result of a variation of a Part 4A permission under this section
there are no longer any regulated activities for which the authorised
person concerned has permission, the FCA must, once it is satisfied that
10it is no longer necessary to keep the permission in force, cancel it.

(7) The FCA’s power to vary a Part 4A permission under this section
extends to including in the permission as varied any provision that
could be included if a fresh permission were being given by it in
response to an application under section 55A.

55I 15Variation by PRA at request of authorised person

(1) On the application of a PRA-authorised person with a Part 4A
permission, the PRA may with the consent of the FCA vary the
permission by—

(a) adding a regulated activity to those to which the permission
20relates;

(b) removing a regulated activity from those to which the
permission relates;

(c) varying the description of a regulated activity to which the
permission relates.

(2) 25On the application of a PRA-authorised person with a Part 4A
permission, the PRA may, after consulting the FCA, cancel the
permission.

(3) On the application of an authorised person other than a PRA-
authorised person, the PRA may with the consent of the FCA vary the
30permission by adding to the regulated activities to which the
permission relates one or more regulated activities which include a
PRA-regulated activity.

(4) The PRA may refuse an application under this section if it appears to it
that it is desirable to do so in order to advance any of its objectives.

(5) 35The FCA may withhold its consent to a proposed variation under this
section if it appears to it that it is desirable to do so in order to advance
one or more of its operational objectives.

(6) If as a result of a variation of a Part 4A permission under this section
there are no longer any regulated activities for which the authorised
40person concerned has permission, the PRA must, once it is satisfied
after consulting the FCA that it is no longer necessary to keep the
permission in force, cancel it.

(7) The PRA’s power to vary a Part 4A permission under this section
extends to including in the permission as varied any provision that
45could be included if a fresh permission were being given by it in
response to an application under section 55A.

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(8) Consent given by the FCA for the purposes of subsection (1) may be
conditional on the manner in which the PRA exercises its powers under
section 55F(3) and (4) (as a result of subsection (7)).

55J Variation or cancellation on initiative of regulator

(1) 5Either regulator may exercise its power under this section in relation to
an authorised person with a Part 4A permission (“A”) if it appears to
the regulator that—

(a) A is failing, or is likely to fail, to satisfy the threshold conditions
for which the regulator is responsible,

(b) 10A has failed, during a period of at least 12 months, to carry on a
regulated activity to which the Part 4A permission relates, or

(c) it is desirable to exercise the power in order to advance—

(i) in the case of the FCA, one or more of its operational
objectives,

(ii) 15in the case of the PRA, any of its objectives.

(2) The FCA’s power under this section is the power—

(a) to vary the Part 4A permission by—

(i) adding a regulated activity other than a PRA-regulated
activity to those to which the permission relates,

(ii) 20removing a regulated activity from those to which the
permission relates, or

(iii) varying the description of a regulated activity to which
the permission relates in a way which, if it is a PRA-
regulated activity, does not, in the opinion of the FCA,
25widen the description, or

(b) to cancel the Part 4A permission.

(3) The PRA’s power under this section is the power—

(a) in the case of a PRA-authorised person, to vary the Part 4A
permission in any of the ways mentioned in section 55I(1) or to
30cancel it;

(b) in the case of an authorised person who is not a PRA-authorised
person, to vary the Part 4A permission by adding a PRA-
regulated activity to those to which the permission relates and,
if the PRA does so, to vary the Part 4A permission in any of the
35other ways mentioned in section 55I(1).

(4) The FCA—

(a) must consult the PRA before exercising its power under this
section in relation to—

(i) a PRA-authorised person, or

(ii) 40a member of a group which includes a PRA-authorised
person, and

(b) in the case of a PRA-authorised person, may exercise the power
so as to add a new activity to those to which the permission
relates or to widen the description of a regulated activity to
45which the permission relates, only with the consent of the PRA.

(5) The PRA—

(a) must consult the FCA before exercising its power under this
section, and

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(b) may exercise the power so as to add a new activity to those to
which the permission relates or to widen the description of a
regulated activity to which the permission relates, only with the
consent of the FCA.

(6) 5Without prejudice to the generality of subsections (1) to (3), a regulator
may, in relation to an authorised person who is an investment firm,
exercise its power under this section to cancel the Part 4A permission if
it appears to it that any of the conditions in section 55K is met.

(7) If, as a result of a variation of a Part 4A permission under this section,
10there are no longer any regulated activities for which the authorised
person concerned has permission, the regulator responsible for the
variation must, once it is satisfied that it is no longer necessary to keep
the permission in force, cancel it.

(8) Before cancelling under subsection (7) a Part 4A permission which
15relates to a person who (before the variation) was a PRA-authorised
person, the regulator must consult the other regulator.

(9) The power of either regulator to vary a Part 4A permission under this
section extends to including in the permission as varied any provision
that could be included if a fresh permission were being given in
20response to an application to that regulator under section 55A.

(10) Consent given by one regulator for the purpose of subsection (4)(b) or
(5)(b) may be conditional on the manner in which the other regulator
exercises its powers under section 55E(4) and (5) or 55F(3) and (4) (as a
result of subsection (9)).

(11) 25The power of the FCA or the PRA under this section is referred to in this
Part as its own-initiative variation power.

55K Investment firms: particular conditions that enable cancellation

(1) The conditions referred to in section 55J(6) are as follows—

(a) that the firm has failed, during a period of at least 6 months, to
30carry on a regulated activity which is an investment service or
activity for which it has a Part 4A permission;

(b) that the firm obtained the Part 4A permission by making a false
statement or by other irregular means;

(c) that the firm no longer satisfies the requirements for
35authorisation pursuant to Chapter I of Title II of the markets in
financial instruments directive, or pursuant to or contained in
any EU legislation made under that Chapter, in relation to a
regulated activity which is an investment service or activity for
which it has a Part 4A permission;

(d) 40that the firm has seriously and systematically infringed the
operating conditions pursuant to Chapter II of Title II of the
markets in financial instruments directive, or pursuant to or
contained in any EU legislation made under that Chapter, in
relation to a regulated activity which is an investment service or
45activity for which it has a Part 4A permission.

(2) For the purposes of this section a regulated activity is an investment
service or activity if it falls within the definition of “investment services
and activities” in section 417(1).

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Imposition and variation of requirements
55L Imposition of requirements by FCA

(1) Where a person has applied (whether to the FCA or the PRA) for a Part
4A permission or the variation of a Part 4A permission, the FCA may
5impose on that person such requirements, taking effect on or after the
giving or variation of the permission, as the FCA considers appropriate.

(2) The FCA may exercise its power under subsection (3) in relation to an
authorised person with a Part 4A permission (whether given by it or by
the PRA) (“A”) if it appears to the FCA that—

(a) 10A is failing, or is likely to fail, to satisfy the threshold conditions
for which the FCA is responsible,

(b) A has failed, during a period of at least 12 months, to carry on a
regulated activity to which the Part 4A permission relates, or

(c) it is desirable to exercise the power in order to advance one or
15more of the FCA’s operational objectives.

(3) The FCA’s power under this subsection is a power—

(a) to impose a new requirement,

(b) to vary a requirement imposed by the FCA under this section,
or

(c) 20to cancel such a requirement.

(4) The FCA’s power under subsection (3) is referred to in this Part as its
own-initiative requirement power.

(5) The FCA may, on the application of an authorised person with a Part
4A permission—

(a) 25impose a new requirement,

(b) vary a requirement imposed by the FCA under this section, or

(c) cancel such a requirement.

(6) The FCA must consult the PRA before imposing or varying a
requirement which relates to—

(a) 30a person who is, or will on the granting of an application for
Part 4A permission be, a PRA-authorised person, or

(b) a person who is a member of a group which includes a PRA-
authorised person.

55M Imposition of requirements by PRA

(1) 35Where—

(a) a person has applied for a Part 4A permission in relation to
activities which consist of or include a PRA-regulated activity,

(b) a PRA-authorised person has applied for a Part 4A permission
or the variation of a Part 4A permission, or

(c) 40an authorised person other than a PRA-authorised person has
applied for a Part 4A permission to be varied by adding to the
regulated activities to which it relates one or more regulated
activities which include a PRA-regulated activity,

the PRA may impose on that person such requirements, taking effect on
45or after the giving or variation of the permission, as the PRA considers
appropriate.