Financial Services Bill (HL Bill 25)

Financial Services BillPage 70

(a) proposes to take action against a sponsor under that section, or

(b) takes action against a sponsor under that section with
immediate effect,

it must give the sponsor written notice.

(3) 5The notice must—

(a) give details of the action,

(b) state the FCA’s reasons for taking the action and for its
determination as to when the action takes effect,

(c) inform the sponsor that the sponsor may make representations
10to the FCA within such period as may be specified in the notice
(whether or not the matter has been referred to the Tribunal),

(d) inform the sponsor of when the action takes effect,

(e) inform the sponsor of the right to refer the matter to the
Tribunal, and

(f) 15give an indication of the procedure on such a reference.

(4) The FCA may extend the period allowed under the notice for making
representations.

(5) If the FCA decides—

(a) to take the action in the way proposed, or

(b) 20if the action has taken effect, not to rescind it,

the FCA must give the sponsor written notice.

(6) If the FCA decides—

(a) not to take the action in the way proposed,

(b) to take action under section 88E that differs from the action
25originally proposed, or

(c) to rescind action which has taken effect,

the FCA must give the sponsor written notice.

(7) A notice under subsection (5) must—

(a) inform the sponsor of the right to refer the matter to the
30Tribunal, and

(b) give an indication of the procedure on such a reference.

(8) A notice under subsection (6)(b) must comply with subsection (3).

(5) In section 392 (warning and decisions notices: application of provisions
relating to third party rights and access to evidence)—

(a) 35for “section 89(2),” substitute “section 88B(1),”, and

(b) for “section 89(3),” substitute “section 88B(5),”.

(6) In section 395(13) (meaning of “supervisory notice”), after paragraph (bza)
insert—

(bzb) section 88F(2), (5) or (6)(b);.

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17 Primary information providers

(1) In Part 6 of FSMA 2000 (official listing), after section 89O insert—

Primary information providers
89P Primary information providers

(1) 5Part 6 rules may require issuers of financial instruments to use primary
information providers for the purpose of giving information of a
specified description to a market of a specified description.

(2) “Primary information provider” means a person approved by the FCA
for the purposes of this section.

(3) 10“Specified” means specified in the Part 6 rules.

(4) Part 6 rules made by virtue of subsection (1) may—

(a) provide for the FCA to maintain a list of providers;

(b) impose requirements on a provider in relation to the giving of
information or of information of a specified description;

(c) 15specify the circumstances in which a person is qualified for
being approved as a provider;

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

(e) 20provide for the approval of a provider to be suspended on the
application of the provider.

(5) If the FCA proposes—

(a) to refuse a person’s application under information provider
rules,

(b) 25to impose limitations or other restrictions on the giving of
information to which a person’s approval relates, or

(c) to cancel a person’s approval as a provider otherwise than at the
person’s request,

it must give the person a warning notice.

(6) 30If the FCA decides—

(a) to grant the application under information provider rules,

(b) not to impose limitations or other restrictions on the giving of
information to which a person’s approval relates, or

(c) not to cancel the approval,

35it must give the person concerned written notice of its decision.

(7) If the FCA decides—

(a) to refuse to grant the application under information provider
rules,

(b) to impose limitations or other restrictions on the giving of
40information to which a person’s approval relates, or

(c) to cancel the approval,

it must give the person concerned a decision notice.

(8) A person to whom a decision notice is given under this section may
refer the matter to the Tribunal.

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(9) In this section any reference to an application under information
provider rules means—

(a) an application for approval as a provider,

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

(c) 5an application for the withdrawal of the suspension of an
approval as a provider, or

(d) an application for the withdrawal or variation of a limitation or
other restriction on the giving of information to which a
provider’s approval relates.

89Q 10Disciplinary powers: contravention of s.89P(4)(b) or (d)

(1) The FCA may take action against a provider under this section if it
considers that the provider has contravened a requirement or
restriction imposed on the provider by rules made as a result of section
89P(4)(b) or (d).

(2) 15If the FCA is entitled to take action under this section against a
provider, it may do one or more of the following—

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

(b) suspend, for such period as it considers appropriate, the
20provider’s approval;

(c) impose, for such period as it considers appropriate, such
limitations or other restrictions in relation to the giving by the
provider of information as it considers appropriate;

(d) publish a statement to the effect that the provider has
25contravened a requirement or restriction imposed on the
provider by rules made as a result of section 89P(4)(b) or (d).

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

(4) A suspension may relate only to the giving of information in specified
30circumstances.

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

(6) 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.

(7) The FCA may not take action against a provider under this section after
the end of the limitation period unless, before the end of that period, it
has given a warning notice to the provider under section 89R(1).

(8) 40“The limitation period” means the period of 3 years beginning with the
first day on which the FCA knew that the provider had contravened the
requirement or restriction.

(9) For this purpose the FCA is to be treated as knowing that a provider has
contravened a requirement or restriction if it has information from
45which that can reasonably be inferred.

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89R Action under s.89Q: procedure and right to refer to Tribunal

(1) If the FCA proposes to take action against a provider under section
89Q, it must give the provider a warning notice.

(2) A warning notice about a proposal to impose a penalty must state the
5amount 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 giving of information,

must state the period for which the suspension or restriction is to have
10effect.

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

(5) If the FCA decides to take action against a provider under section 89Q,
it must give the provider a decision notice.

(6) 15A decision notice about the imposition of a penalty must state the
amount of the penalty.

(7) A decision notice about—

(a) the suspension of an approval, or

(b) the imposition of a restriction in relation to the giving of
20information,

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

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

(9) 25If the FCA decides to take action against a provider under section 89Q,
the provider may refer the matter to the Tribunal.

89S Action under s.89Q: statement of policy

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

(a) 30the imposition of penalties, suspensions or restrictions under
section 89Q,

(b) the amount of penalties under that section,

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

(d) 35the matters in relation to 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
effect should be, must include having regard to—

(a) 40the 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) whether the provider concerned is an individual.

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(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) 5In exercising, or deciding whether to exercise, its power under section
89Q 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
10the 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
15statement which it publishes under this section.

89T Statement of policy under s.89S: procedure

(1) Before issuing a statement under section 89S, 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.

(2) 20The 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) If the FCA issues the proposed statement it must publish an account, in
25general terms, of—

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

(b) its response to them.

(5) If the statement differs from the draft published under subsection (1) in
30a 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
copy of a draft published under subsection (1).

(7) 35This section also applies to a proposal to alter or replace a statement.

89U Powers exercisable to advance operational objectives

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

(2) 40If the FCA is entitled to take action under this section against a
provider, it may—

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

Financial Services BillPage 75

(b) impose, for such period as it considers appropriate, such
limitations or other restrictions in relation to the giving by the
provider of information as it considers appropriate.

(3) A suspension may relate only to the giving of information in specified
5circumstances.

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

(5) The FCA may—

(a) withdraw a suspension or restriction, or

(b) 10vary 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.

89V Action under s.89U: procedure

(1) 15Action against a provider under section 89U takes effect—

(a) immediately, if the notice given under subsection (2) so
provides, or

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

(2) If the FCA—

(a) 20proposes to take action against a provider under that section, or

(b) takes action against a provider under that section with
immediate effect,

it must give the provider written notice.

(3) The notice must—

(a) 25give details of the action,

(b) state the FCA’s reasons for taking the action and for its
determination as to when the action takes effect,

(c) inform the provider that the provider may make
representations to the FCA within such period as may be
30specified in the notice (whether or not the matter has been
referred to the Tribunal),

(d) inform the provider of when the action takes effect,

(e) inform the provider of the right to refer the matter to the
Tribunal, and

(f) 35give an indication of the procedure on such a reference.

(4) The FCA may extend the period allowed under the notice for making
representations.

(5) If the FCA decides—

(a) to take the action in the way proposed, or

(b) 40if the action has taken effect, not to rescind it,

the FCA must give the provider written notice.

(6) If the FCA decides—

(a) not to take the action in the way proposed,

(b) to take action under section 89U that differs from the action
45originally proposed, or

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(c) to rescind action which has taken effect,

the FCA must give the provider written notice.

(7) A notice under subsection (5) must—

(a) inform the provider of the right to refer the matter to the
5Tribunal; and

(b) give an indication of the procedure on such a reference.

(8) A notice under subsection (6)(b) must comply with subsection (3).

(2) In section 395(13) (meaning of “supervisory notice”), after paragraph (bzb) (as
inserted by section 16(6)) insert—

(bzc) 10section 89V(2), (5) or (6)(b);.

18 Penalties for breach of Part 6 rules

In section 91(6) of FSMA 2000 (penalties for breach of Part 6 rules: limitation
period), for “two years” substitute “3 years”.

19 Repeal of competition scrutiny power

15Section 95 of FSMA 2000 (competition scrutiny) is repealed.

Control of business transfers

20 Control of business transfers

(1) In section 104 of FSMA 2000 (control of business transfers) omit “or banking
business transfer scheme”.

(2) 20Schedule 6 contains further amendments of Part 7 of FSMA 2000 (control of
business transfers).

Hearings and appeals

21 Proceedings before Tribunal

(1) Part 9 of FSMA 2000 (hearings and appeals) is amended as follows.

(2) 25In section 133 (proceedings before Tribunal: general provision)—

(a) in subsection (1)(a), for “the Authority” substitute “the FCA or the
PRA”,

(b) for subsections (5) and (6) substitute—

(5) In the case of a disciplinary reference or a reference under
30section 393(11), the Tribunal—

(a) must determine what (if any) is the appropriate action
for the decision-maker to take in relation to the matter;
and

(b) on determining the reference, must remit the matter to
35the decision-maker with such directions (if any) as the
Tribunal considers appropriate for giving effect to its
determination.

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(6) In any other case, the Tribunal must determine the reference or
appeal by either—

(a) dismissing it; or

(b) remitting the matter to the decision-maker with a
5direction to reconsider and reach a decision in
accordance with the findings of the Tribunal.

(6A) The findings mentioned in subsection (6)(b) are limited to
findings as to—

(a) issues of fact or law;

(b) 10the matters to be, or not to be, taken into account in
making the decision; and

(c) the procedural or other steps to be taken in connection
with the making of the decision., and

(c) after subsection (7) insert—

(7A) 15A reference is a “disciplinary reference” for the purposes of this
section if it is in respect of any of the following decisions—

(a) a decision to impose a penalty under section 63A;

(b) a decision to take action under section 66;

(c) a decision to take action under section 87M;

(d) 20a decision to take action under section 88A;

(e) a decision to take action under section 89K;

(f) a decision to take action under section 89Q;

(g) a decision to take action under section 91;

(h) a decision to take action under section 123;

(i) 25a decision to take action under section 131G;

(j) a decision to take action under section 192K;

(k) a decision to publish a statement under section 205,
impose a penalty under section 206 or suspend a
permission or impose a restriction under section 206A;

(l) 30a decision to take action under section 249;

(m) a decision to publish a statement under section 312E or
impose a penalty under section 312F;

(n) a decision to take action under section 345 or 345A.

(3) In section 133A (proceedings before Tribunal: decision and supervisory
35notices, etc)—

(a) in subsection (1)—

(i) after “determining” insert “in accordance with section 133(5)”,
and

(ii) for the words from “given by the Authority” to “the Authority
40would” substitute “given by a body, the Tribunal may not direct
the body to take action which it would”,

(b) omit subsections (2) and (3),

(c) in subsection (4), for the words from the beginning to “a decision
notice—” substitute “The action specified in a decision notice must not
45be taken—”, and

(d) in subsection (5)—

(i) for “the Authority” substitute “the FCA or the PRA”, and

(ii) for “the Authority’s” substitute “its”.

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(4) In section 133B (offences), in subsection (1)(a), for “the Authority” substitute
“the FCA or the PRA”.

(5) In section 136 (funding of the legal assistance scheme), in subsections (1), (2),
(6)(a), (7) (in both places) and (8), for “Authority” substitute “FCA”.

5Rules and guidance

22 Rules and guidance

(1) For sections 138 to 164 of FSMA 2000 substitute—

Part 9A Rules and Guidance
CHAPTER 1 10Rule-making powers
General rule-making powers of the FCA and the PRA
137A The FCA’s general rules

(1) The FCA may make such rules applying to authorised persons—

(a) with respect to the carrying on by them of regulated activities,
15or

(b) with respect to the carrying on by them of activities which are
not regulated activities,

as appear to the FCA to be necessary or expedient for the purpose of
advancing one or more of its operational objectives.

(2) 20Rules made under this section are referred to in this Act as the FCA’s
general rules.

(3) The FCA’s general rules may make provision applying to authorised
persons even though there is no relationship between the authorised
persons to whom the rules will apply and the persons whose interests
25will be protected by the rules.

(4) The FCA’s general rules may contain requirements which take into
account, in the case of an authorised person who is a member of a
group, any activity of another member of the group.

(5) The FCA’s general rules may not—

(a) 30make provision prohibiting an EEA firm from carrying on, or
holding itself out as carrying on, any activity which it has
permission conferred by Part 2 of Schedule 3 to carry on in the
United Kingdom;

(b) make provision, as respects an EEA firm, about any matter for
35which responsibility is, under any of the single market
directives, reserved to the firm’s home state regulator.

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137B FCA general rules: clients’ money, right to rescind etc.

(1) Rules relating to the handling of money held by an authorised person
in specified circumstances (“clients’ money”) may—

(a) make provision which results in that clients’ money being held
5on trust in accordance with the rules,

(b) treat 2 or more accounts as a single account for specified
purposes (which may include the distribution of money held in
the accounts),

(c) authorise the retention by the authorised person of interest
10accruing on the clients’ money, and

(d) make provision as to the distribution of such interest which is
not to be retained by the authorised person.

(2) An institution with which an account is kept in pursuance of rules
relating to the handling of clients’ money does not incur any liability as
15constructive trustee if the money is wrongfully paid from the account,
unless the institution permits the payment—

(a) with knowledge that it is wrongful, or

(b) having deliberately failed to make enquiries in circumstances in
which a reasonable and honest person would have done so.

(3) 20Rules may—

(a) confer rights on persons to rescind agreements with, or
withdraw offers to, authorised persons within a specified
period, and

(b) make provision, in respect of authorised persons and persons
25exercising those rights, for the restitution of property and the
making or recovery of payments where those rights are
exercised.

(4) “Rules” means general rules of the FCA.

(5) “Specified” means specified in the rules.

137C 30FCA general rules: product intervention

(1) The power of the FCA to make general rules includes power to make
such rules (“product intervention rules”) prohibiting authorised
persons from doing anything mentioned in subsection (2) as appear to
it to be necessary or expedient for the purpose of advancing—

(a) 35the consumer protection objective or the competition objective,
or

(b) if the Treasury by order provide for this paragraph to apply, the
integrity objective.

(2) Those prohibited things are—

(a) 40entering into specified agreements with any person or specified
person;

(b) entering into specified agreements with any person or specified
person unless requirements specified in the rules have been
satisfied;

(c) 45doing anything that would or might result in the entering into
of specified agreements by persons or specified persons, or the
holding by them of a beneficial or other kind of economic
interest in specified agreements;