Financial Services Bill (HL Bill 25)

Financial Services BillPage 60

(4) In subsection (3), for paragraph (b) substitute—

(b) all persons falling within subsection (3A) or a particular
paragraph of that subsection or all persons within a specified
class of person falling within a particular paragraph of that
5subsection.

(5) After subsection (3) insert—

(3A) A person falls within this subsection if the person is—

(a) an authorised person,

(b) an exempt person, or

(c) 10a person to whom, as a result of Part 20, the general prohibition
does not apply in relation to a regulated activity.

(3A)(b)an exempt person, or

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

(6) 15In subsection (6), for “An authorised person” substitute “A person falling
within subsection (3A)”.

(7) In subsection (7)—

(a) for “The Authority” substitute “The regulator that has made a
prohibition order”, and

(b) 20for “a prohibition order” substitute “the order”.

(8) After subsection (7) insert—

(7A) If—

(a) the FCA proposes to vary or revoke a prohibition order, and

(b) as a result of the proposed variation or revocation, an
25individual—

(i) will no longer be prohibited from performing a function
of interest to the PRA, or

(ii) will be prohibited from performing such a function,

the FCA must consult the PRA before varying or revoking the order.

(7B) 30A function is of interest to the PRA if it is performed in relation to a
regulated activity carried on by—

(a) a PRA-authorised person, or

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

(7C) 35The PRA must consult the FCA before varying or revoking a
prohibition order.

(9) Omit subsection (8).

(10) Section 57 of FSMA 2000 (prohibition orders: procedure and right to refer to
Tribunal) is amended as follows.

(11) 40In subsections (1) and (3), for “the Authority” substitute “a regulator”.

(12) At the end insert—

(6) If—

(a) the FCA proposes to make a prohibition order, and

(b) as a result of the proposed order, an individual will be
45prohibited from performing a function of interest to the PRA,

the FCA must consult the PRA before giving a warning notice under
this section.

Financial Services BillPage 61

(7) A function is of interest to the PRA if it is performed in relation to a
regulated activity carried on by—

(a) a PRA-authorised person, or

(b) a person who is an exempt person in relation to a PRA-
5regulated activity carried on by the person.

(8) The PRA must consult the FCA before giving a warning notice under
this section.

12 Approval for particular arrangements

(1) In section 59 of FSMA 2000 (approval for particular arrangements)—

(a) 10in subsections (1) and (2), for “the Authority” substitute “the
appropriate regulator”, and

(b) for subsections (3) to (7) substitute—

(3) Controlled function”—

(a) in relation to the carrying on of a regulated activity by a
15PRA-authorised person, means a function of a
description specified in rules made by the FCA or the
PRA, and

(b) in relation to the carrying on of a regulated activity by
any other authorised person, means a function of a
20description specified in rules made by the FCA.

(4) “The appropriate regulator”—

(a) in relation to a controlled function which is of a
description specified in rules made by the FCA, means
the FCA, and

(b) 25in relation to a controlled function which is of a
description specified in rules made by the PRA, means
the PRA with the consent of the FCA.

(5) The FCA may specify a description of function under
subsection (3)(a) or (b) only if, in relation to the carrying on of a
30regulated activity by an authorised person, it is satisfied that the
function is—

(a) a customer-dealing function, or

(b) a significant-influence function.

(6) The PRA may specify a description of function under
35subsection (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 significant-influence function.

(7) In determining whether a function is a significant-influence
function, the FCA or the PRA may take into account the likely
40consequences of a failure to discharge the function properly.

(7A) “Customer-dealing function”, in relation to the carrying on of a
regulated activity by an authorised person (“A”), means a
function that will involve the person performing it in dealing
with—

(a) 45customers of A, or

(b) property of customers of A,

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in a manner substantially connected with the carrying on of the
activity.

(7B) “Significant-influence function”, in relation to the carrying on of
a regulated activity by an authorised person, means a function
5that is likely to enable the person responsible for its
performance to exercise a significant influence on the conduct
of the authorised person’s affairs, so far as relating to the
activity.

(2) After section 59 of FSMA 2000 insert—

59A 10Specifying functions as controlled functions: supplementary

(1) The FCA must—

(a) keep under review the exercise of its power under section
59(3)(a) to specify any significant-influence function as a
controlled function, and

(b) 15exercise that power in a way that it considers will minimise the
likelihood that approvals fall to be given by both the FCA and
the PRA in respect of the performance by a person of
significant-influence functions in relation to the carrying on of a
regulated activity by the same PRA-authorised person.

(2) 20The FCA and the PRA must each consult the other before exercising
any power under section 59(3)(a).

(3) Any reference in this section to the exercise of a power includes its
exercise by way of amendment or revocation of provision previously
made in the exercise of the power.

(4) 25“Approval” means an an approval under section 59.

(5) Any expression which is used both in this section and section 59 has the
same meaning in this section as in that section.

59B Role of FCA in relation to PRA decisions

(1) The FCA may arrange with the PRA that in such cases as may be
30described in the arrangements the PRA may give approval under
section 59 without obtaining the consent of the FCA.

(2) Arrangements under this section must be in writing, and must specify
the date on which they come into force.

(3) The regulators must publish any arrangements under this section in
35such manner as they think fit.

(4) Section 59(4)(b) has effect subject to any arrangements in force under
this section.

(3) In section 63 (withdrawal of approval), for subsection (1) substitute—

(1) The FCA may withdraw an approval under section 59 given by the
40FCA or the PRA in relation to the performance by a person of a function
if the FCA considers that the person is not a fit and proper person to
perform the function.

(1A) The PRA may withdraw an approval under section 59 in relation to the
performance by a person (“A”) of a function if—

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(a) the PRA gave the approval, or the FCA gave the approval and
the function is a significant-influence function performed in
relation to the carrying on by a PRA-authorised person of a
regulated activity, and

(b) 5the PRA considers that A is not a fit and proper person to
perform the function.

(1B) “Significant-influence function” has the same meaning as in section 59.

(1C) Before one regulator withdraws an approval given by the other
regulator, it must consult the other regulator.

(4) 10In section 64 of FSMA 2000 (conduct of approved persons: statement and
codes), for subsection (1) substitute—

(1) The FCA may issue statements of principle with respect to the conduct
expected of persons in relation to whom either regulator has given its
approval under section 59.

(1A) 15The PRA may issue statements of principle with respect to—

(a) the conduct expected of persons in relation to whom it has
given its approval under section 59, and

(b) the conduct expected of persons in relation to whom the FCA
has given its approval under section 59 in respect of the
20performance by them of significant-influence functions in
relation to the carrying on by PRA-authorised persons of
regulated activities.

(1B) A statement of principle issued by either regulator may relate to
conduct expected of persons in relation to—

(a) 25the performance by them of controlled functions, or

(b) the performance by them of any other functions in relation to
the carrying on by authorised persons of regulated activities.

13 Further amendments relating to performance of regulated activities

Schedule 5 contains further amendments of Part 5 of FSMA 2000 (performance
30of regulated activities).

Official listing

14 FCA to exercise functions under Part 6 of FSMA 2000

(1) FSMA 2000 is amended as follows.

(2) In each of the provisions of Part 6 (official listing etc) mentioned in subsection
35(3)

(a) for “competent authority” or “competent authority’s”, in each place,
substitute “FCA” or “FCA’s”, and

(b) for “the authority” or “the Authority”, in each place, substitute “the
FCA”.

(3) 40Those provisions are—

(a) sections 73A to 84;

(b) section 86;

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(c) section 87A to 87D (including the heading to section 87A);

(d) section 87G;

(e) sections 87J to 87O (including the italic heading before section 87J);

(f) sections 87Q to 88;

(g) 5sections 89A to 97 (including the italic heading before section 89H and
the heading to that section);

(h) section 101(2);

(i) section 103(1).

(4) Before section 73A insert an italic heading “Rules”.

(5) 10In section 77(3) (discontinuance and suspension of listing), for “sections 96 and
99” substitute “section 96 and paragraph 20(5) of Schedule 1ZA”.

(6) In section 87E (transfer by competent authority of application for approval)—

(a) in subsection (1), for “competent authority”, in the first place, substitute
“FCA”,

(b) 15in subsections (2) to (4), for “competent authority” substitute “FCA”,
and

(c) in the heading, for “competent authority” substitute “FCA”.

(7) In section 87F (transfer to competent authority of application for approval)—

(a) in subsection (1)—

(i) 20for “Where the competent authority” substitute “Where the
FCA”, and

(ii) in paragraph (b), for “competent authority” substitute “FCA”,

(b) in subsection (2), for “competent authority” substitute “FCA”, and

(c) in the heading, for “competent authority” substitute “FCA”.

(8) 25In section 87H (prospectus approved in another EEA State), in subsection (1),
for “competent authority”, in the second and third places, substitute “FCA”.

(9) In section 87I (provision of information to host member State)—

(a) in subsection (1)—

(i) for “competent authority”, in the first place, substitute “FCA”,

(ii) 30in paragraph (b), for “competent authority” substitute “FCA”,
and

(iii) in paragraph (c), omit “other”, and

(b) in subsections (3) to (5), for “competent authority” substitute “FCA”.

(10) In section 87P (exercise of powers at request of competent authority of another
35EEA State)—

(a) in subsection (1)(c), for “competent authority”, in the second place,
substitute “FCA”, and

(b) in subsection (2), for “competent authority” substitute “FCA”.

(11) In section 100A (exercise of powers where UK is host member State)—

(a) 40in subsections (1) and (2), for “competent authority” substitute “FCA”,

(b) in subsection (3), for “the authority”, in both places, substitute “the
FCA”,

(c) in subsection (4), for “The authority” substitute “The FCA”,

(d) in subsections (5) and (6), for “the authority” substitute “the FCA”.

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(12) In Schedule 10 (compensation: exemptions), for “competent authority”, in each
place, substitute “FCA”.

(13) Omit the following provisions—

(a) section 72 (Financial Services Authority to exercise functions of the
5competent authority under Part 6) and the italic heading before it;

(b) section 73 (general duty of the competent authority);

(c) section 99 (fees);

(d) section 100 (penalties);

(e) in section 101 (general provisions), subsections (1) and (3) to (8);

(f) 10section 102 (exemption from liability in damages);

(g) in section 103 (interpretation), subsections (2) and (3);

(h) in section 195 (exercise of power in support of overseas regulator),
subsection (4)(b);

(i) in section 410 (international obligations), subsection (4)(b);

(j) 15in section 415 (jurisdiction in civil proceedings), subsection (1)(b);

(k) Schedule 7 (modification of Act in its application to the Financial
Services Authority when acting as competent authority for purposes of
Part 6);

(l) Schedule 8 (power to transfer functions under Part 6 to other persons).

15 20Discontinuance or suspension at the request of the issuer: procedure

(1) FSMA 2000 is amended as follows.

(2) In section 78A (discontinuance or suspension at the request of the issuer:
procedure)—

(a) in subsection (1), for paragraphs (a) and (b) substitute—

(a) 25immediately, if the notification under subsection (2) so
provides;

(b) in any other case, on such date as may be provided for
in that notification.,

(b) in subsection (2), for “give him written notice” substitute “notify the
30issuer (whether in writing or otherwise)”, and

(c) for subsection (3) substitute—

(3) The notification must—

(a) notify the issuer of the date on which the discontinuance
or suspension took effect or will take effect, and

(b) 35notify the issuer of such other matters (if any) as are
specified in listing rules.

(3) In section 395(13) (definition of “supervisory notice”), after “a notice” insert “or
notification”.

16 Listing rules: disciplinary powers in relation to sponsors

(1) 40FSMA 2000 is amended as follows.

(2) In section 88 (provision that may be made by listing rules in relation to
sponsors)—

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(a) in subsection (3), at the end insert—

(e) provide for limitations or other restrictions to be
imposed on the services to which an approval relates
(whether or not the approval has already been granted);

(f) 5provide for the approval of a sponsor to be suspended
on the application of the sponsor.,

(b) in subsection (4), in paragraph (a), for “for approval as a sponsor”
substitute “under sponsor rules”,

(c) after that paragraph (but before the “or” at the end) insert—

(aa) 10to impose limitations or other restrictions on the services
to which a person’s approval relates,,

(d) in subsection (5), in paragraph (a), for “for approval” substitute “under
sponsor rules”,

(e) after that paragraph (but before the “or” at the end) insert—

(aa) 15not to impose limitations or other restrictions on the
services to which a person’s approval relates,,

(f) in subsection (6), in paragraph (a), for “for approval” substitute “under
sponsor rules”,

(g) after that paragraph (a) (but before the “or” at the end) insert—

(aa) 20to impose limitations or other restrictions on the services
to which a person’s approval relates,, and

(h) after subsection (7) insert—

(8) In this section any reference to an application under sponsor
rules means—

(a) 25an application for approval as a sponsor,

(b) an application for the suspension of an approval as a
sponsor,

(c) an application for the withdrawal of the suspension of
an approval as a sponsor, or

(d) 30an application for the withdrawal or variation of a
limitation or other restriction on the services to which a
sponsor’s approval relates.

(3) The power to make provision under section 88(3)(e) of FSMA 2000 (as inserted
by subsection (2)(a) above) includes power to make provision in relation to
35persons who were approved as sponsors before the coming into force of
subsection (2)(a) above.

(4) For section 89 substitute—

88A Disciplinary powers: contravention of s.88(3)(c) or (e)

(1) The FCA may take action against a sponsor under this section if it
40considers that the sponsor has contravened a requirement or restriction
imposed on the sponsor by rules made as a result of section 88(3)(c) or
(e).

(2) If the FCA is entitled to take action under this section against a sponsor,
it may do one or more of the following—

(a) 45impose a penalty on the sponsor of such amount as it considers
appropriate;

(b) suspend, for such period as it considers appropriate, the
sponsor’s approval;

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(c) impose, for such period as it considers appropriate, such
limitations or other restrictions in relation to the performance of
services to which the sponsor’s approval relates as it considers
appropriate;

(d) 5publish a statement to the effect that the sponsor has
contravened a requirement or restriction imposed on the
sponsor by rules made as a result of section 88(3)(c) or (e).

(3) The period for which a suspension or restriction is to have effect may
not exceed 12 months.

(4) 10A suspension may relate only to the performance in specified
circumstances of a service to which the approval relates.

(5) A restriction may, in particular, be imposed so as to require the sponsor
to take, or refrain from taking, specified action.

(6) The FCA may—

(a) 15withdraw a suspension or restriction; or

(b) vary a suspension or restriction so as to reduce the period for
which it has effect or otherwise to limit its effect.

(7) The FCA may not take action against a sponsor under this section after
the end of the limitation period unless, before the end of that period, it
20has given a warning notice to the sponsor under section 88B(1).

(8) “The limitation period” means the period of 3 years beginning with the
first day on which the FCA knew that the sponsor had contravened the
requirement or restriction.

(9) For this purpose the FCA is to be treated as knowing that a sponsor has
25contravened a requirement or restriction if it has information from
which that can reasonably be inferred.

88B Action under s.88A: procedure and right to refer to Tribunal

(1) If the FCA proposes to take action against a sponsor under section 88A,
it must give the sponsor a warning notice.

(2) 30A warning notice about a proposal to impose a penalty must state the
amount of the penalty.

(3) A warning notice about a proposal—

(a) to suspend an approval, or

(b) to impose a restriction in relation to the performance of a
35service,

must state the period for which the suspension or restriction is to have
effect.

(4) A warning notice about a proposal to publish a statement must set out
the terms of the statement.

(5) 40If the FCA decides to take action against a sponsor under section 88A,
it must give the sponsor a decision notice.

(6) A decision notice about the imposition of a penalty must state the
amount of the penalty.

(7) A decision notice about—

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(a) the suspension of an approval, or

(b) the imposition of a restriction in relation to the performance of
a service,

must state the period for which the suspension or restriction is to have
5effect.

(8) A decision notice about the publication of a statement must set out the
terms of the statement.

(9) If the FCA decides to take action against a sponsor under section 88A,
the sponsor may refer the matter to the Tribunal.

88C 10Action under s.88A: statement of policy

(1) The FCA must prepare and issue a statement of its policy with respect
to—

(a) the imposition of penalties, suspensions or restrictions under
section 88A,

(b) 15the amount of penalties under that section, and

(c) the period for which suspensions or restrictions under that
section are to have effect.

(2) The FCA’s policy in determining what the amount of a penalty should
be, or what the period for which a suspension or restriction is to have
20effect should be, must include having regard to—

(a) the seriousness of the contravention in question in relation to
the nature of the requirement concerned,

(b) the extent to which that contravention was deliberate or
reckless, and

(c) 25whether the sponsor concerned is an individual.

(3) The FCA may at any time alter or replace a statement issued under this
section.

(4) If a statement issued under this section is altered or replaced, the FCA
must issue the altered or replaced statement.

(5) 30In exercising, or deciding whether to exercise, its power under section
88A in the case of any particular contravention, the FCA must have
regard to any statement of policy published under this section and in
force at a time when the contravention in question occurred.

(6) A statement issued under this section must be published by the FCA in
35the way appearing to the FCA to be best calculated to bring it to the
attention of the public.

(7) The FCA may charge a reasonable fee for providing a person with a
copy of the statement.

(8) The FCA must, without delay, give the Treasury a copy of any
40statement which it publishes under this section.

88D Statement of policy under s.88C: procedure

(1) Before issuing a statement under section 88C, the FCA must publish a
draft of the proposed statement in the way appearing to the FCA to be
best calculated to bring it to the attention of the public.

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(2) The draft must be accompanied by notice that representations about the
proposal may be made to the FCA within a specified time.

(3) Before issuing the proposed statement, the FCA must have regard to
any representations made to it in accordance with subsection (2).

(4) 5If the FCA issues the proposed statement it must publish an account, in
general terms, of—

(a) the representations made to it in accordance with subsection (2),
and

(b) its response to them.

(5) 10If the statement differs from the draft published under subsection (1) in
a way which is, in the opinion of the FCA, significant, the FCA must (in
addition to complying with subsection (4)) publish details of the
difference.

(6) The FCA may charge a reasonable fee for providing a person with a
15copy of a draft published under subsection (1).

(7) This section also applies to a proposal to alter or replace a statement.

88E Powers exercisable to advance operational objectives

(1) The FCA may take action against a sponsor under this section if it
considers that it is desirable to do so in order to advance one or more of
20its operational objectives.

(2) If the FCA is entitled to take action under this section against a sponsor,
it may—

(a) suspend, for such period as it considers appropriate, the
sponsor’s approval, or

(b) 25impose, for such period as it considers appropriate, such
limitations or other restrictions in relation to the performance of
services to which the sponsor’s approval relates as it considers
appropriate.

(3) A suspension may relate only to the performance in specified
30circumstances of a service to which the approval relates.

(4) A restriction may, in particular, be imposed so as to require the sponsor
to take, or refrain from taking, specified action.

(5) The FCA may—

(a) withdraw a suspension or restriction, or

(b) 35vary a suspension or restriction so as to reduce the period for
which it has effect or otherwise to limit its effect.

(6) A person against whom the FCA takes action under this section may
refer the matter to the Tribunal.

88F Action under s.88E: procedure

(1) 40Action against a sponsor under section 88E takes effect—

(a) immediately, if the notice given under subsection (3) so
provides, or

(b) on such later date as may be specified in the notice.

(2) If the FCA—