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Financial Services Bill (HL Bill 48)

Financial Services BillPage 80

(d) the 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
5effect 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) 10whether the provider 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) 15In 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
20the 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
25statement 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) 30The 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
35general 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
40a 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).

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(7) This 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
5its operational objectives.

(2) If 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

(b) 10impose, 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
circumstances.

(4) 15A 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) vary a suspension or restriction so as to reduce the period for
20which 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) Action against a provider under section 89U takes effect—

(a) 25immediately, 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) proposes to take action against a provider under that section, or

(b) 30takes action against a provider under that section with
immediate effect,

it must give the provider written notice.

(3) The notice must—

(a) give details of the action,

(b) 35state 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
specified in the notice (whether or not the matter has been
40referred 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) give an indication of the procedure on such a reference.

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(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) 5if 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
10originally proposed, or

(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
15Tribunal; 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 17(6)) insert—

(bzc) 20section 89V(2), (5) or (6)(b);.

19 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”.

20 Repeal of competition scrutiny power

25Section 95 of FSMA 2000 (competition scrutiny) is repealed.

Control of business transfers

21 Control of business transfers

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

(2) 30Schedule 6 contains further amendments of Part 7 of FSMA 2000 (control of
business transfers).

Hearings and appeals

22 Proceedings before Tribunal

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

(2) 35In section 133 (proceedings before Tribunal: general provision)—

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

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

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

(a) must determine what (if any) is the appropriate action
5for the decision-maker to take in relation to the matter;
and

(b) on determining the reference, must remit the matter to
the decision-maker with such directions (if any) as the
Tribunal considers appropriate for giving effect to its
10determination.

(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
15direction 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) 20the 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) 25A 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) 30a 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) 35a 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) 40a 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
45notices, etc)—

(a) in subsection (1)—

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

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(ii) for the words from “given by the Authority” to “the Authority
would” 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) 5in subsection (4), for the words from the beginning to “a decision
notice—” substitute “The action specified in a decision notice must not
be taken—”, and

(d) in subsection (5)—

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

(ii) 10for “the Authority’s” substitute “its”.

(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”.

15Rules and guidance

23 Rules and guidance

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

Part 9A Rules and Guidance
CHAPTER 1 20Rule-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,
25or

(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) 30Rules 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
35will 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.

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(5) The FCA’s general rules may not—

(a) make 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
5United Kingdom;

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

137B 10FCA 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
on trust in accordance with the rules,

(b) 15treat 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
accruing on the clients’ money, and

(d) 20make 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
constructive trustee if the money is wrongfully paid from the account,
25unless 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) Rules may—

(a) 30confer 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
exercising those rights, for the restitution of property and the
35making 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 FCA general rules: product intervention

(1) 40The 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) the consumer protection objective or the competition objective,
45or

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

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(2) Those prohibited things are—

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

(b) entering into specified agreements with any person or specified
5person unless requirements specified in the rules have been
satisfied;

(c) doing 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
10interest in specified agreements;

(d) doing anything within paragraph (c) unless requirements
specified in the rules have been satisfied.

(3) “Specified agreements” means agreements of a description specified in
general rules made by the FCA.

(4) 15“Specified persons” means persons of a description specified in general
rules made by the FCA.

(5) It is of no relevance—

(a) whether the entering into of a specified agreement itself
constitutes the carrying on of a regulated activity, or

(b) 20whether, in a case within subsection (2)(c) or (d), the specified
agreements are with the authorised persons concerned or
anyone else.

(6) The requirements that may be specified under subsection (2)(b) or (d)
include in particular—

(a) 25requirements as to the terms and conditions that are to be, or are
not to be, included in specified or other agreements, and

(b) requirements limiting invitations or inducements to enter into
specified or other agreements to those made to specified
persons.

(7) 30In relation to contraventions of product intervention rules, the rules
may—

(a) provide for a relevant agreement or obligation to be
unenforceable against any person or specified person;

(b) provide for the recovery of any money or other property paid or
35transferred under a relevant agreement or obligation by any
person or specified person;

(c) provide for the payment of compensation for any loss sustained
by any person or specified person as a result of paying or
transferring any money or other property under a relevant
40agreement or obligation.

(8) “A relevant agreement or obligation” means—

(a) a specified agreement;

(b) an agreement entered into in contravention of any rule made as
a result of subsection (2)(c) or (d);

(c) 45an obligation to which a person is subject as a result of
exercising a right conferred by an agreement within paragraph
(a) or (b) of this subsection.

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(9) The provision that may be made as a result of subsection (7) includes
provision corresponding to that made by section 30 (enforceability of
agreements resulting from unlawful communications).

(10) In this section—

(a) 5any reference to entering into an agreement includes inviting or
inducing persons to enter into an agreement, and

(b) any reference to an agreement includes an arrangement.

137D Orders under s.137C(1)(b)

(1) No order may be made under section 137C(1)(b) unless—

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

(b) subsection (3) applies.

(2) Subsection (3) applies if an order under section 137C(1)(b) contains a
statement that the Treasury are of the opinion that, by reason of
15urgency, it is necessary to make the order without a draft being so laid
and approved.

(3) Where this subsection 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
20before 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).

(4) The “relevant period” is a period of 28 days beginning with the day on
25which the order is made.

(5) 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.

137E The PRA’s general rules

(1) 30The PRA may make such rules applying to PRA-authorised persons—

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

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

35as appear to the PRA to be necessary or expedient for the purpose of
advancing any of its objectives.

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

(3) The PRA’s general rules may make provision applying to PRA-
40authorised persons even though there is no relationship between the
PRA-authorised persons to whom the rules will apply and the persons
whose interests will be protected by the rules.

(4) The PRA’s general rules may contain requirements which take into
account, in the case of a PRA-authorised person who is a member of a
45group, any activity of another member of the group.

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(5) The PRA’s general rules may not—

(a) make 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
5United Kingdom;

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

137F 10General rules about remuneration

(1) This section applies where either regulator exercises its power to make
general rules so as to make rules prohibiting persons, or persons of a
specified description, from being remunerated in a specified way.

(2) The rules may—

(a) 15provide that any provision of an agreement that contravenes
such a prohibition is void, and

(b) provide for the recovery of any payment made, or other
property transferred, in pursuance of a provision that is void by
virtue of paragraph (a).

(3) 20A provision that, at the time the rules are made, is contained in an
agreement made before that time may not be rendered void under
subsection (2)(a) unless it is subsequently amended so as to contravene
a prohibition referred to in that subsection.

137G Remuneration policies: Treasury direction to consider compliance

(1) 25This section applies where either regulator exercises its power to make
general rules so as to make rules requiring authorised persons, or
authorised persons of a description specified in the rules, to act in
accordance with a remuneration policy.

(2) A “remuneration policy” is a policy about the remuneration by an
30authorised person of—

(a) officers,

(b) employees, or

(c) other persons,

of a description specified in the rules.

(3) 35The Treasury may direct the regulator to consider whether the
remuneration policies of authorised persons specified in the direction
(or of authorised persons of a description so specified) comply with
requirements imposed by rules made by that regulator as to the
contents of the policies.

(4) 40Before giving a direction under subsection (3), the Treasury must
consult the regulator concerned.

(5) If the regulator considers that a remuneration policy of an authorised
person fails to make provision which complies with the requirements
mentioned in subsection (3), the regulator must take such steps as it
45considers appropriate to deal with the failure.

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(6) The steps that the regulator may take include requiring the
remuneration policy to be revised.

(7) “Authorised person”, in relation to the PRA, means PRA-authorised
person.

137H 5Rules about recovery plans: duty to consult

(1) Before either regulator prepares a draft of any general rules that require
each relevant person (or each relevant person of a specified description)
to prepare a recovery plan, the regulator must consult—

(a) the Treasury, and

(b) 10the Bank of England.

(2) A “relevant person” is an authorised person in relation to whom any
power under Part 1 of the Banking Act 2009 (special resolution regime)
is exercisable.

(3) A “recovery plan” is a document containing information within
15subsection (4) or (5).

(4) Information is within this subsection if it relates to action to be taken to
secure that, in the event of specified circumstances affecting the
carrying on of the business (or any part of the business) of an
authorised person—

(a) 20the business of the authorised person, or

(b) a specified part of that business,

is capable of being carried on (whether or not by the authorised person
and whether or not in the same way as previously).

(5) Information is within this subsection if it would facilitate the carrying
25on of the business (or any part of the business) of an authorised person
by any other person.

(6) In this section—

  • “authorised person”, in relation to the PRA, means PRA-
    authorised person;

  • 30“specified” means specified in the rules.

137I PRA rules about resolution plans: duty to consult

(1) Before the PRA prepares a draft of any general rules that require each
relevant person (or each relevant person of a specified description) to
prepare a resolution plan, the PRA must consult—

(a) 35the Treasury, and

(b) the Bank of England.

(2) A “relevant person” is a PRA-authorised person in relation to whom
any power under Part 1 of the Banking Act 2009 (special resolution
regime) is exercisable.

(3) 40A “resolution plan” is a document containing information within
subsection (4) or (5).

(4) Information is within this subsection if it relates to action to be taken in
the event of—

(a) circumstances arising in which it is likely that the business (or
45any part of the business) of an authorised person will fail, or