Financial Services Bill (HL Bill 25)

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(2) The PRA may exercise its power under subsection (3) in relation to a
PRA-authorised person with a Part 4A permission (“P”) if it appears to
the PRA that—

(a) P is failing, or is likely to fail, to satisfy the threshold conditions
5for which the PRA is responsible,

(b) P 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 any of
the PRA’s objectives.

(3) 10The PRA’s power under this subsection is a power—

(a) to impose a new requirement,

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

(c) to cancel such a requirement.

(4) 15The PRA’s power under subsection (3) is referred to in this Part as its
own-initiative requirement power.

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

(a) impose a new requirement,

(b) 20vary a requirement imposed by the PRA under this section, or

(c) cancel such a requirement.

(6) The PRA must consult the FCA before imposing or varying a
requirement.

55N Requirements under section 55L or 55M: further provisions

(1) 25A requirement may, in particular, be imposed—

(a) so as to require the person concerned to take specified action, or

(b) so as to require the person concerned to refrain from taking
specified action.

(2) A requirement may extend to activities which are not regulated
30activities.

(3) A requirement may be imposed by reference to the person’s
relationship with—

(a) the person’s group, or

(b) other members of the person’s group.

(4) 35A requirement expires at the end of such period as the regulator
imposing it may specify, but this does not affect the regulator’s power
to impose a new requirement.

(5) A requirement may refer to the past conduct of the person concerned
(for example, by requiring the person concerned to review or take
40remedial action in respect of past conduct).

(6) In this section “requirement” means a requirement imposed under
section 55L or 55M.

55O Imposition of requirements on acquisition of control

(1) This section applies if it appears to the appropriate regulator that—

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(a) a person has acquired control over a UK authorised person who
has a Part 4A permission, but

(b) there are no grounds for exercising its own-initiative
requirement power.

(2) 5If it appears to the appropriate regulator that the likely effect of the
acquisition of control on the UK authorised person, or on any of its
activities, is uncertain, the appropriate regulator may—

(a) impose on the UK authorised person a requirement that could
be imposed by that regulator under section 55L or 55M (as the
10case may be) on the giving of permission, or

(b) vary a requirement imposed by that regulator under that
section on the UK authorised person.

(3) “The appropriate regulator” means—

(a) in a case where the UK authorised person is a PRA-authorised
15person, the FCA or the PRA;

(b) in any other case, the FCA.

(4) This section does not affect any duty of the appropriate regulator to
consult or obtain the consent of the other regulator in connection with
the imposition of the requirement.

(5) 20Any reference to a person having acquired control is to be read in
accordance with Part 12.

55P Prohibitions and restrictions

(1) This section applies if—

(a) on a person being given a Part 4A permission, either regulator
25imposes an assets requirement on that person,

(b) an assets requirement is imposed on an authorised person, or

(c) an assets requirement previously imposed on such a person is
varied.

(2) A person on whom an assets requirement is imposed is referred to in
30this section as “A”.

(3) The “appropriate regulator” is the regulator which imposed the
requirement.

(4) “Assets requirement” means a requirement under section 55L or 55M

(a) prohibiting the disposal of, or other dealing with, any of A’s
35assets (whether in the United Kingdom or elsewhere) or
restricting such disposals or dealings, or

(b) that all or any of A’s assets, or all or any assets belonging to
consumers but held by A or to A’s order, must be transferred to
and held by a trustee approved by the appropriate regulator.

(5) 40If the appropriate regulator—

(a) imposes a requirement of the kind mentioned in subsection
(4)(a), and

(b) gives notice of the requirement to any institution with whom A
keeps an account,

45the notice has the effects mentioned in subsection (6).

(6) Those effects are that—

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(a) the institution does not act in breach of any contract with A if,
having been instructed by A (or on A’s behalf) to transfer any
sum or otherwise make any payment out of A’s account, it
refuses to do so in the reasonably held belief that complying
5with the instruction would be incompatible with the
requirement, and

(b) if the institution complies with such an instruction, it is liable to
pay to the appropriate regulator an amount equal to the amount
transferred from, or otherwise paid out of, A’s account in
10contravention of the requirement.

(7) If the appropriate regulator imposes a requirement of the kind
mentioned in subsection (4)(b), no assets held by a person as trustee in
accordance with the requirement may, while the requirement is in
force, be released or dealt with except with the consent of the
15appropriate regulator.

(8) If, while a requirement of the kind mentioned in subsection (4)(b) is in
force, A creates a charge over any assets of A held in accordance with
the requirement, the charge is (to the extent that it confers security over
the assets) void against the liquidator and any of A’s creditors.

(9) 20Assets held by a person as trustee (“T”) are to be taken to be held by T
in accordance with any requirement mentioned in subsection (4)(b)
only if—

(a) A has given T written notice that those assets are to be held by
T in accordance with the requirement, or

(b) 25they are assets into which assets to which paragraph (a) applies
have been transposed by T on the instructions of A.

(10) A person who contravenes subsection (7) is guilty of an offence and
liable on summary conviction to a fine not exceeding level 5 on the
standard scale.

(11) 30“Charge” includes a mortgage (or in Scotland a security over property).

(12) Subsections (7) and (9) do not affect any equitable interest or remedy in
favour of a person who is a beneficiary of a trust as a result of a
requirement of the kind mentioned in subsection (4)(b).

Exercise of power in support of overseas regulator
55Q 35Exercise of power in support of overseas regulator

(1) Either UK regulator’s own-initiative powers may be exercised in
respect of an authorised person at the request of, or for the purpose of
assisting, an overseas regulator of a prescribed kind.

(2) Subsection (1) applies whether or not the UK regulator has powers
40which are exercisable in relation to the authorised person by virtue of
any provision of Part 13.

(3) Subsection (1) does not affect any duty of one UK regulator to consult
or obtain the consent of the other UK regulator in relation to the
exercise of its own-initiative powers.

(4) 45If a request to a UK regulator for the exercise of its own-initiative
powers has been made by an overseas regulator who is—

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(a) of a prescribed kind, and

(b) acting in pursuance of provisions of a prescribed kind,

the UK regulator must, in deciding whether or not to exercise those
powers in response to the request, consider whether it is necessary to
5do so in order to comply with an EU obligation.

(5) In deciding whether or not to do so, in any case in which the UK
regulator does not consider that the exercise of its own-initiative
powers is necessary in order to comply with an EU obligation, it may
take into account in particular—

(a) 10whether in the country or territory of the overseas regulator
concerned, corresponding assistance would be given to a
United Kingdom regulatory authority;

(b) whether the case concerns the breach of a law, or other
requirement, which has no close parallel in the United Kingdom
15or involves the assertion of a jurisdiction not recognised by the
United Kingdom;

(c) the seriousness of the case and its importance to persons in the
United Kingdom;

(d) whether it is otherwise appropriate in the public interest to give
20the assistance sought.

(6) The UK regulator may decide not to exercise its own-initiative powers,
in response to a request, unless the overseas regulator concerned
undertakes to make such contribution towards the cost of their exercise
as the UK regulator considers appropriate.

(7) 25Subsection (6) does not apply if the UK regulator decides that it is
necessary for it to exercise its own-initiative powers in order to comply
with an EU obligation.

(8) In subsection (6) “request” means a request of a kind mentioned in
subsection (1).

(9) 30In this section—

(a) UK regulator” means the FCA or the PRA;

(b) “overseas regulator” means a regulator outside the United
Kingdom;

(c) “own-initiative powers”, in relation to the FCA or the PRA,
35means its own-initiative variation power and its own-initiative
requirement power.

Connected persons
55R Persons connected with an applicant

(1) In considering—

(a) 40an application for a Part 4A permission,

(b) whether to vary or cancel a Part 4A permission,

(c) whether to impose or vary a requirement under this Part, or

(d) whether to give any consent required by any provision of this
Part,

45the regulator concerned may have regard to any person appearing to it
to be, or likely to be, in a relationship with the applicant or a person
given permission which is relevant.

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(2) Before—

(a) giving permission in response to an application under section
55A made by a person who is connected with an EEA firm
(other than an EEA firm falling within paragraph 5(e) of
5Schedule 3 (insurance and reinsurance intermediaries)), or

(b) cancelling or varying a Part 4A permission given to such a
person,

the regulator concerned must in prescribed circumstances consult the
firm’s home state regulator.

(3) 10A person (“A”) is connected with an EEA firm if—

(a) A is a subsidiary undertaking of the firm, or

(b) A is a subsidiary undertaking of a parent undertaking of the
firm.

Additional permissions
55S 15Duty of FCA or PRA to consider other permissions

(1) “Additional Part 4A permission” —

(a) in relation to either regulator, means a Part 4A permission
which is in force in relation to an EEA firm or a Treaty firm, and

(b) in relation to the FCA, also includes Part 4A permission which
20is in force in relation to a person authorised as a result of
paragraph 1(1) of Schedule 5.

(2) If either regulator is considering whether, and if so how, to exercise its
own-initiative variation power or its own-initiative requirement power
in relation to an additional Part 4A permission, it must take into
25account—

(a) the home state authorisation of the authorised person
concerned,

(b) any relevant directive, and

(c) relevant provisions of the Treaty.

30Persons whose interests are protected
55T Persons whose interests are protected

For the purpose of any provision of this Part which refers to the FCA’s
operational objectives or the PRA’s objectives in relation to the exercise
of a power in relation to a particular person, it does not matter whether
35there is a relationship between that person and the persons whose
interests will be protected by the exercise of the power.

Procedure
55U Applications under this Part

(1) An application for a Part 4A permission must—

(a) 40contain a statement of the regulated activity or regulated
activities which the applicant proposes to carry on and for
which the applicant wishes to have permission, and

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(b) give the address of a place in the United Kingdom for service on
the applicant of any notice or other document which is required
or authorised to be served on the applicant under this Act.

(2) An application for the variation of a Part 4A permission must contain a
5statement—

(a) of the desired variation, and

(b) of the regulated activity or regulated activities which the
applicant proposes to carry on if the permission is varied.

(3) An application for the variation of a requirement imposed under
10section 55L or 55M or for the imposition of a new requirement must
contain a statement of the desired variation or requirement.

(4) An application under this Part must—

(a) be made in such manner as the regulator to which it is to be
made may direct, and

(b) 15contain, or be accompanied by, such other information as that
regulator may reasonably require.

(5) At any time after the application is received and before it is determined,
the appropriate regulator may require the applicant to provide it with
such further information as it reasonably considers necessary to enable
20it to determine the application or, as the case requires, to decide
whether to give consent.

(6) In subsection (5), the “appropriate regulator” means—

(a) in a case where the application is made to the FCA, the FCA;

(b) in a case where the application is made to the PRA, the FCA or
25the PRA.

(7) Different directions may be given, and different requirements imposed,
in relation to different applications or categories of application.

(8) Each regulator may require an applicant to provide information which
the applicant is required to provide to it under this section in such form,
30or to verify it in such a way, as the regulator may direct.

(9) The PRA must consult the FCA before—

(a) giving a direction under this section in relation to a class of
applications, or

(b) imposing a requirement under this section in relation to a class
35of applications.

55V Determination of applications

(1) An application under this Part must be determined by the regulator to
which it is required to be made (“the appropriate regulator”) before the
end of the period of 6 months beginning with the date on which it
40received the completed application.

(2) The appropriate regulator may determine an incomplete application if
it considers it appropriate to do so; and it must in any event determine
such an application within 12 months beginning with the date on which
it received the application.

(3) 45Where the application cannot be determined by the appropriate
regulator without the consent of the other regulator, the other

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regulator’s decision must also be made within the period required by
subsection (1) or (2).

(4) The applicant may withdraw the application, by giving the appropriate
regulator written notice, at any time before the appropriate regulator
5determines it.

(5) If the appropriate regulator grants an application—

(a) for Part 4A permission,

(b) for the variation or cancellation of a Part 4A permission,

(c) for the variation or cancellation of a requirement imposed
10under section 55L or 55M, or

(d) for the imposition of a new requirement under either of those
sections,

it must give the applicant written notice.

(6) The notice must state the date from which the permission, variation,
15cancellation or requirement has effect.

(7) A notice under this section which is given by the PRA and relates to the
grant of an application for Part 4A permission or for the variation of a
Part 4A permission must state that the FCA has given its consent to the
grant of the application.

55W 20Applications under this Part: communications between regulators

The PRA must as soon as practicable notify the FCA of the receipt or
withdrawal of—

(a) an application for permission under section 55A,

(b) an application under section 55I, or

(c) 25an application under section 55M(5).

55X Determination of applications: warning notices and decision notices

(1) If a regulator proposes—

(a) to give a Part 4A permission but to exercise its power under
section 55E(5)(a) or (b) or 55F(4)(a) or (b),

(b) 30to give a Part 4A permission but to exercise its power under
section 55L(1) or 55M(1) in connection with the application for
permission,

(c) to vary a Part 4A permission on the application of an authorised
person but to exercise its power under section 55E(5)(a) or (b) or
3555F(4)(a) or (b),

(d) to vary a Part 4A permission but to exercise its power under
section 55L(1) or 55M(1) in connection with the application for
variation,

(e) in the case of the FCA, to exercise its power under section 55L(1)
40in connection with an application to the PRA for a Part 4A
permission or the variation of a Part 4A permission,

it must give the applicant a warning notice.

(2) If a regulator proposes to refuse an application made under this Part, it
must (unless subsection (3) applies) give the applicant a warning
45notice.

(3) This subsection applies if it appears to the regulator that—

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(a) the applicant is an EEA firm, and

(b) the application is made with a view to carrying on a regulated
activity in a manner in which the applicant is, or would be,
entitled to carry on that activity in the exercise of an EEA right
5whether through a United Kingdom branch or by providing
services in the United Kingdom.

(4) If a regulator decides—

(a) to give a Part 4A permission but to exercise its power under
section 55E(5)(a) or (b) or 55F(4)(a) or (b),

(b) 10to give a Part 4A permission but to exercise its power under
section 55L(1) or 55M(1) in connection with the giving of the
permission,

(c) to vary a Part 4A permission on the application of an authorised
person but to exercise its power under section 55E(5)(a) or (b) or
1555F(4)(a) or (b),

(d) to vary a Part 4A permission on the application of an authorised
person but to exercise its power under section 55L(1) or 55M(1)
in connection with the variation,

(e) in the case of the FCA, to exercise its power under section 55L(1)
20in connection with an application to the PRA for a Part 4A
permission or the variation of a Part 4A permission, or

(f) to refuse an application under this Part,

it must give the applicant a decision notice.

55Y Exercise of own-initiative power: procedure

(1) 25This section applies to an exercise of either regulator’s own-initiative
variation power or own-initiative requirement power in relation to an
authorised person (“A”).

(2) A variation of a permission or the imposition or variation of a
requirement takes effect—

(a) 30immediately, if the notice given under subsection (4) states that
that is the case,

(b) on such date as may be specified in the notice, or

(c) if no date is specified in the notice, when the matter to which the
notice relates is no longer open to review.

(3) 35A variation of a permission, or the imposition or variation of a
requirement, may be expressed to take effect immediately (or on a
specified date) only if the regulator concerned, having regard to the
ground on which it is exercising its own-initiative variation power or
own-initiative requirement power, reasonably considers that it is
40necessary for the variation, or the imposition or variation of the
requirement, to take effect immediately (or on that date).

(4) If either regulator proposes to vary a Part 4A permission or to impose
or vary a requirement, or varies a Part 4A permission or imposes or
varies a requirement, with immediate effect, it must give A written
45notice.

(5) The notice must—

(a) give details of the variation of the permission or the
requirement or its variation,

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(b) state the regulator’s reasons for the variation of the permission
or the imposition or variation of the requirement,

(c) inform A that A may make representations to the regulator
within such period as may be specified in the notice (whether or
5not A has referred the matter to the Tribunal),

(d) inform A of when the variation of the permission or the
imposition or variation of the requirement takes effect, and

(e) inform A of A’s right to refer the matter to the Tribunal.

(6) The regulator may extend the period allowed under the notice for
10making representations.

(7) If, having considered any representations made by A, the regulator
decides—

(a) to vary the permission, or impose or vary the requirement, in
the way proposed, or

(b) 15if the permission has been varied or the requirement imposed or
varied, not to rescind the variation of the permission or the
imposition or variation of the requirement,

it must give A written notice.

(8) If, having considered any representations made by A, the regulator
20decides—

(a) not to vary the permission, or impose or vary the requirement,
in the way proposed,

(b) to vary the permission or requirement in a different way, or
impose a different requirement, or

(c) 25to rescind a variation or requirement which has effect,

it must give A written notice.

(9) A notice under subsection (7) must inform A of A’s right to refer the
matter to the Tribunal.

(10) A notice under subsection (8)(b) must comply with subsection (5).

(11) 30If a notice informs A of A’s right to refer a matter to the Tribunal, it
must give an indication of the procedure on such a reference.

(12) For the purposes of subsection (2)(c), whether a matter is open to
review is to be determined in accordance with section 391(8).

55Z Cancellation of Part 4A permission: procedure

(1) 35If a regulator proposes to cancel an authorised person’s Part 4A
permission otherwise than at the person’s request, it must give the
person a warning notice.

(2) If a regulator decides to cancel an authorised person’s Part 4A
permission otherwise than at the person’s request, it must give the
40person a decision notice.

References to the Tribunal
55Z1 Right to refer matters to the Tribunal

(1) An applicant who is aggrieved by the determination of an application
made under this Part may refer the matter to the Tribunal.

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(2) An authorised person who is aggrieved by the exercise by either
regulator of its own-initiative variation power or its own-initiative
requirement power may refer the matter to the Tribunal.

Interpretation
55Z2 5Interpretation of Part 4A

In this Part—

  • “own-initiative requirement power”, in relation to the FCA or the
    PRA, is to be read in accordance with section 55L(4) or 55M(4);

  • “own-initiative variation power”, in relation to the FCA or the
    10PRA, is to be read in accordance with section 55J(11).

(3) In Schedule 6 to FSMA 2000 (the threshold conditions), omit paragraph 9.

Passporting

10 Passporting: exercise of EEA rights and Treaty rights

Schedule 4 contains amendments of the following provisions of FSMA 2000—

(a) 15Schedule 3 (EEA passport rights),

(b) Schedule 4 (Treaty rights),

(c) sections 34 and 35 (EEA firms and Treaty firms), and

(d) Part 13 (incoming firms: powers of intervention).

Performance of regulated activities

11 20Prohibition orders

(1) Section 56 of FSMA 2000 (performance of regulated activities: prohibition
orders) is amended as follows.

(2) For subsection (1) substitute—

(1) The FCA may make a prohibition order if it appears to it that an
25individual is not a fit and proper person to perform functions in
relation to a regulated activity carried on by—

(a) an authorised person,

(b) a person who is an exempt person in relation to that activity, or

(c) a person to whom, as a result of Part 20, the general prohibition
30does not apply in relation to that activity.

(1A) The PRA may make a prohibition order if it appears to it that an
individual is not a fit and proper person to perform functions in
relation to a regulated activity carried on by—

(a) a PRA-authorised person, or

(b) 35a person who is an exempt person in relation to a PRA-
regulated activity carried on by the person.

(3) In subsection (2), for “The Authority may make an order (“a prohibition
order”)” substitute “A “prohibition order” is an order”.