Financial Services Bill (HL Bill 48)

(b) the failure of the business (or any part of the business) of an
authorised person.

(5) Information is within this subsection if it would facilitate anything
falling to be done by any person in consequence of that failure.

(6) 5An example of information within subsection (5) is information that, in
the event of that failure, would facilitate—

(a) planning by the Treasury in relation to the possible exercise of
any of its powers under Part 1 of the Banking Act 2009, or

(b) planning by the Bank of England in relation to the possible
10exercise of any of its powers under Part 1, 2 or 3 of that Act.

137J Interpretation of sections 137H and 137I

(1) This section has effect for the interpretation of sections 137H and 137I.

(2) References to the taking of action include the taking of action by—

(a) the authorised person,

(b) 15any other person in the same group as the authorised person, or

(c) a partnership of which the authorised person is a member.

(3) In subsection (2)(b) the definition of “group” in section 421 applies with
the omission of subsection (1)(e) and (f) of that section.

(4) References to the business of an authorised person include the business
20of—

(a) any person in the same group as the authorised person, and

(b) a partnership of which the authorised person is a member.

(5) For the purposes of section 137I the cases in which the business (or any
part of the business) of the authorised person (“A”) is to be regarded as
25having failed include those where—

(a) A enters insolvency,

(b) any of the stabilisation options in Part 1 of the Banking Act 2009
is achieved in relation to A, or

(c) A falls to be taken for the purposes of the compensation scheme
30to be unable, or likely to be unable, to satisfy claims against A.

(6) In subsection (5)(a) “insolvency” includes—

(a) bankruptcy,

(b) liquidation,

(c) bank insolvency,

(d) 35administration,

(e) bank administration,

(f) receivership,

(g) a composition between A and A’s creditors, and

(h) a scheme of arrangement of A’s affairs.

137K 40Special provision relating to adequacy of resolution plans

(1) This section applies where the PRA has exercised its power to make
general rules so as to make rules requiring PRA-authorised persons, or
PRA-authorised persons of a specified description, to prepare a
resolution plan.

(2) The PRA must consult the Treasury and the Bank of England (“the
Bank”) about the adequacy of resolution plans required to be prepared
by those rules, so far as relating to any matter which may be relevant to
the exercise by the Treasury or the Bank of any power under Part 1, 2
5or 3 of the Banking Act 2009.

(3) After being consulted under subsection (2)—

(a) the Treasury or the Bank may notify the PRA that, in the
opinion of the Treasury or the Bank, a resolution plan fails to
make satisfactory provision in relation to any such matter, and

(b) 10if the Treasury or the Bank give a notification under paragraph
(a), the Treasury or the Bank must give reasons for being of that
opinion to the PRA.

(4) The PRA must have regard to any notification given under subsection
(3)(a) before considering whether any resolution plan makes
15satisfactory provision in relation to any such matter.

(5) If—

(a) a notification is given under subsection (3)(a), but

(b) the PRA is nonetheless of the opinion that the resolution plan
makes satisfactory provision in relation to any such matter,

20the PRA must give reasons for being of that opinion to the person who
gave the notification.

(6) In this section—

• “resolution plan” has the same meaning as in section 137I;

• “specified” means specified in the rules.

137L 25Recovery plans and resolution plans: restriction on duty of confidence

(1) A contractual or other requirement imposed on a person (“P”) to keep
information in confidence does not apply if—

(a) the information is or may be relevant to anything required to be
done as a result of a requirement imposed by general rules
30made by either regulator to prepare a recovery plan or a
resolution plan,

(b) an authorised person or a skilled person requests or requires P
to provide the information for the purpose of securing that
those things are done, and

(c) 35the regulator in question has approved the making of the
request or the imposition of the requirement before it is made or
imposed.

(2) An authorised person may provide information (whether received
under subsection (1) or otherwise) that would otherwise be subject to a
40contractual or other requirement to keep it in confidence if it is
provided for the purposes of anything required to be done as a result of
a requirement imposed by general rules to prepare a recovery plan or a
resolution plan.

(3) In this section, references to preparing a recovery plan or a resolution
45plan include—

(a) keeping that plan up to date, and

(b) collecting specified information for the purposes of that plan.

(4) In this section, references to a skilled person are to a person appointed
in accordance with section 166A.

(5) In this section—

• “authorised person”, in relation to rules of the PRA, means a PRA-
  5authorised person;

• “specified” means specified in the rules.

Specific rule-making powers

137M Threshold condition code

(1) Either regulator may make rules supplementing any of the conditions
10for the time being set out in Schedule 6 that is expressed to be relevant
to the discharge of that regulator’s functions.

(2) Rules made under this section by a regulator are referred to as that
regulator’s “threshold condition code”.

(3) A threshold condition code may in particular—

(a) 15specify requirements which a person must satisfy in order to be
regarded as satisfying a particular condition in relation to any
regulated activities;

(b) specify matters which are, or may be, or are not, relevant in
determining whether a person satisfies a particular condition in
20relation to any regulated activities.

(4) Except where a regulator’s threshold condition code so provides, it is
not to be regarded as limiting the matters that are, or may be, relevant
in determining whether a person satisfies a particular condition in
relation to any regulated activities.

(5) 25A threshold condition code cannot impose obligations that are
enforceable against authorised persons otherwise than through the
threshold conditions.

137N Control of information rules

(1) Either regulator may make rules (“control of information rules”) about
30the disclosure and use of information held by an authorised person
(“A”).

(2) Control of information rules may—

(a) require the withholding of information which A would
otherwise be required to disclose to a person (“B”) for or with
35whom A does business in the course of carrying on any
regulated or other activity;

(b) specify circumstances in which A may withhold information
which A would otherwise be required to disclose to B;

(c) require A not to use for the benefit of B information—

(i) 40which is held by A, and

(ii) which A would otherwise be required to use for the
benefit of B;

(d) specify circumstances in which A may decide not to use for the
benefit of B information within paragraph (c).

137O Price stabilising rules

(1) The FCA may make rules (“price stabilising rules”) as to—

(a) the circumstances and manner in which,

(b) the conditions subject to which, and

(c) 5the time when or the period during which,

action may be taken for the purpose of stabilising the price of
investments of specified kinds.

(2) Price stabilising rules—

(a) are to be made so as to apply only to authorised persons;

(b) 10may make different provision in relation to different kinds of
investment.

(3) The FCA may make rules which, for the purposes of section 397(5)(b),
treat a person who acts or engages in conduct—

(a) for the purpose of stabilising the price of investments, and

(b) 15in conformity with such provisions corresponding to price
stabilising rules and made by a body or authority outside the
United Kingdom as may be specified in rules made by the FCA,

as acting, or engaging in that conduct, for that purpose and in
conformity with price stabilising rules.

137P 20Financial promotion rules

(1) The FCA may make rules applying to authorised persons about the
communication by them, or their approval of the communication by
others, of invitations or inducements—

(a) to engage in investment activity, or

(b) 25to participate in a collective investment scheme.

(2) Rules under this section may, in particular, make provision about the
form and content of communications.

(3) Subsection (1) applies only to communications which—

(a) if made by a person other than an authorised person, without
30the approval of an authorised person, would contravene section
21(1), and

(b) may be made by an authorised person without contravening
section 238(1).

(4) But subsection (3) does not prevent the FCA from making rules under
35subsection (1) in relation to a communication that would not
contravene section 21(1) if made by a person other than an authorised
person, without the approval of an authorised person, if the conditions
set out in subsection (5) are satisfied.

(5) Those conditions are—

(a) 40that the communication would not contravene subsection (1) of
section 21 because it is a communication to which that
subsection does not apply as a result of an order under
subsection (5) of that section,

(b) that the FCA considers that any of the requirements of—

(i) 45paragraphs 1 to 8 of Article 19 of the markets in financial
instruments directive,

(ii) any implementing measure made under paragraph 10
of that Article, or

(iii) Article 77 of the UCITS directive,

apply to the communication, and

(c) 5that the FCA considers that the rules are necessary to secure that
the communication satisfies such of the requirements
mentioned in paragraph (b) as the FCA considers apply to the
communication.

(6) “Engage in investment activity” has the same meaning as in section 21.

(7) 10The Treasury may by order impose limitations on the power to make
rules under this section.

137Q Financial promotion rules: directions given by FCA

(1) The FCA may give a direction under this section if—

(a) an authorised person has made, or proposes to make, a
15communication or has approved, or proposes to approve,
another person’s communication, and

(b) the FCA considers that there has been, or is likely to be, a
contravention of financial promotion rules in respect of the
communication or approval.

(2) 20A direction under this section may require the authorised person—

(a) to withdraw the communication or approval;

(b) to refrain from making the communication or giving the
approval (whether or not it has previously been made or given);

(c) to publish details of the direction;

(d) 25to do anything else specified in the direction in relation to the
communication or approval.

(3) A requirement in a direction under this section to refrain from making
or approving a communication includes a requirement to refrain from
making or approving another communication where—

(a) 30the other communication is in all material respects the same as,
or substantially the same as, the communication to which the
direction relates, and

(b) in all the circumstances a reasonable person would think that
another direction would be given under this section in relation
35to the other communication.

(4) The requirements contained in a direction under this section have effect
as follows—

(a) a requirement to publish details of the direction has effect at
such time (if any) as the FCA gives a notice under subsection
40(8)(a);

(b) any other requirement takes effect immediately.

(5) If the FCA gives a direction under this section to an authorised
person—

(a) it must give written notice to the authorised person, and

(b) 45if the direction relates to the approval by the authorised person
of another person’s communication, it must also give written
notice to that other person.

(6) The notice must—

(a) give details of the direction;

(b) inform the person to whom the notice is given that the direction
takes effect immediately;

(c) 5state the FCA’s reasons for giving the direction; and

(d) inform the person to whom the notice is given that the person
may make representations to the FCA within such period as
may be specified in the notice (which may be extended by the
FCA).

(7) 10The FCA may amend the direction if, having considered any
representations made by a person to whom notice is given under
subsection (5), it considers it appropriate to do so.

(8) If, having considered any such representations, the FCA decides not to
revoke the direction—

(a) 15the FCA must give separate written notice to the persons
mentioned in subsection (5)(a) or (b), and

(b) any such person may refer the matter to the Tribunal.

(9) A notice under subsection (8)(a) must—

(a) give details of the direction and of any amendment of it,

(b) 20state the FCA’s reasons for deciding not to revoke the direction
and, if relevant, for amending it,

(c) inform the person to whom the notice is given of the person’s
right to refer the matter to the Tribunal, and

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

(10) 25If, having considered any representations made by a person to whom
notice is given under subsection (5), the FCA decides to revoke the
direction, it must give separate written notice to those persons.

(11) After the period for making representations in relation to a direction
given under this section has ended, the FCA must publish such
30information about the direction as it considers appropriate (even if the
direction is revoked).

(12) Nothing in this section requires a notice to be given to a person
mentioned in subsection (5)(b) if the FCA considers it impracticable to
do so.

35Supplementary powers

137R General supplementary powers

Rules made by either regulator—

(a) may make different provision for different cases and may, in
particular, make different provision in respect of different
40descriptions of authorised persons, activity or investment,

(b) may make provision by reference to rules made by the other
regulator, as those rules have effect from time to time, and

(c) may contain such incidental, supplemental, consequential and
transitional provision as the regulator making the rule
45considers appropriate.

CHAPTER 2 Rules: modification, waiver, contravention and procedural provisions

Modification or waiver of rules

138A Modification or waiver of rules

(1) Either regulator may, on the application or with the consent of a person
5who is subject to rules made by that regulator, direct that all or any of
those rules—

(a) are not to apply to that person, or

(b) are to apply to that person with such modifications as may be
specified in the direction.

(2) 10Subsection (1) does not apply to—

(a) rules made by either regulator under section 137M (threshold
condition code);

(b) rules made by the FCA under section 247 (trust scheme rules) or
section 248 (scheme particulars rules).

(3) 15An application must be made in such manner as the regulator may
direct.

(4) A regulator may not give a direction unless it is satisfied that—

(a) compliance by the person with the rules, or with the rules as
unmodified, would be unduly burdensome or would not
20achieve the purpose for which the rules were made, and

(b) the direction would not adversely affect the advancement of
any of the regulator’s objectives.

(5) In subsection (4)(b) “objectives”, in relation to the FCA, means
operational objectives.

(6) 25A direction may be given subject to conditions.

(7) The regulator may—

(a) revoke a direction, or

(b) vary it on the application, or with the consent, of the person to
whom it relates.

(8) 30“Direction” means a direction under this section.

138B Publication of directions under section 138A

(1) Subject to subsection (2), a direction must be published by the regulator
concerned in the way appearing to the regulator to be best calculated
for bringing it to the attention of—

(a) 35persons likely to be affected by it, and

(b) persons who are, in the opinion of the regulator, likely to make
an application for a similar direction.

(2) Subsection (1) does not apply if the regulator is satisfied that it is
inappropriate or unnecessary to publish the direction.

(3) 40In deciding whether it is satisfied as mentioned in subsection (2), the
regulator must—

(a) consider whether the publication of the direction would be
detrimental to the stability of the UK financial system,

(b) take into account whether the direction relates to a rule
contravention of which is actionable in accordance with section
5138D,

(c) consider whether publication of the direction would prejudice,
to an unreasonable degree, the commercial interests of the
person concerned or any other member of the person’s
immediate group, and

(d) 10consider whether its publication would be contrary to an
international obligation of the United Kingdom.

(4) The FCA must consult the PRA before publishing or deciding not to
publish a direction which relates to—

(a) a PRA-authorised person, or

(b) 15an authorised person who has as a member of its immediate
group a PRA-authorised person.

(5) For the purposes of paragraphs (c) and (d) of subsection (3), the
regulator must consider whether it would be possible to publish the
direction without either of the consequences mentioned in those
20paragraphs by publishing it without disclosing the identity of the
person concerned.

(6) “Direction” means a direction under section 138A.

Contravention of rules

138C Evidential provisions

(1) 25If a particular rule made by either regulator so provides, contravention
of the rule does not give rise to any of the consequences provided for
by other provisions of this Act.

(2) A rule made by a regulator which so provides must also provide—

(a) that contravention may be relied on as tending to establish
30contravention of such other rule made by that regulator as may
be specified, or

(b) that compliance may be relied on as tending to establish
compliance with such other rule made by that regulator as may
be specified.

(3) 35A rule may include the provision mentioned in subsection (1) only if
the regulator making the rule considers that it is appropriate for it also
to include the provision required by subsection (2).

(4) In this section “rule” does not include a rule made under—

(a) section 137M (threshold condition code);

(b) 40section 192J (provision of information by parent undertakings).

138D Actions for damages

(1) A rule made by the PRA may provide that contravention of the rule is
actionable at the suit of a private person who suffers loss as a result of
the contravention, subject to the defences and other incidents applying
45to actions for breach of statutory duty.

(2) A contravention by an authorised person of a rule made by the FCA is
actionable at the suit of a private person who suffers loss as a result of
the contravention, subject to the defences and other incidents applying
to actions for breach of statutory duty.

(3) 5If rules made by the FCA so provide, subsection (2) does not apply to a
contravention of a specified provision of the rules.

(4) In prescribed cases, a contravention of a rule which by virtue of
subsection (1) or (2) would be actionable at the suit of a private person
is actionable at the suit of a person who is not a private person, subject
10to the defences and other incidents applying to actions for breach of
statutory duty.

(5) In subsections (1), (2) and (3) “rule” does not include—

(a) Part 6 rules;

(b) rules under section 131B (short selling rules);

(c) 15rules under section 137M (threshold condition code);

(d) rules under section 192J (provision of information by parent
undertakings);

(e) a rule requiring an authorised person to have or maintain
financial resources.

(6) 20“Private person” has such meaning as may be prescribed.

138E Limits on effect of contravening rules

(1) A person is not guilty of an offence by reason of a contravention of a
rule made by either regulator.

(2) No such contravention makes any transaction void or unenforceable.

(3) 25Subsection (2) does not apply in relation to product intervention rules
made by the FCA under section 137C.

Procedural provisions

138F Notification of rules

If either regulator makes, alters or revokes any rules, that regulator
30must without delay give written notice—

(a) to the Treasury, and

(b) to the Bank of England.

138G Rule-making instruments

(1) Any power conferred on either regulator to make rules is exercisable in
35writing.

(2) An instrument by which rules are made by either regulator (“a rule-
making instrument”) must specify the provision under which the rules
are made.

(3) To the extent that a rule-making instrument does not comply with
40subsection (2), it is void.

(4) A rule-making instrument must be published by the regulator making
the rule in the way appearing to that regulator to be best calculated to
bring it to the attention of the public.

(5) The regulator making the rule may charge a reasonable fee for
5providing a person with a copy of a rule-making instrument.

(6) A person is not to be taken to have contravened any rule made by a
regulator if the person shows that at the time of the alleged
contravention the rule-making instrument concerned had not been
made available in accordance with this section.

138H 10Verification of rules

(1) The production of a printed copy of a rule-making instrument
purporting to be made by a regulator—

(a) on which is endorsed a certificate signed by a member of staff of
that regulator who is authorised by the regulator for that
15purpose, and

(b) which contains the required statements,

is evidence (or in Scotland sufficient evidence) of the facts stated in the
certificate.

(2) The required statements are—

(a) 20that the instrument was made by the FCA or the PRA (as the
case may be),

(b) that the copy is a true copy of the instrument, and

(c) that on a specified date the instrument was made available to
the public in accordance with section 138G(4).

(3) 25A certificate purporting to be signed as mentioned in subsection (1) is
to be taken to have been properly signed unless the contrary is shown.

(4) A person who wishes in any legal proceedings to rely on a rule-making
instrument may require the regulator that made the rule to endorse a
copy of the instrument with a certificate of the kind mentioned in
30subsection (1).

138I Consultation by the FCA

(1) Before making any rules, the FCA must—

(a) consult the PRA, and

(b) after doing so, publish a draft of the proposed rules in the way
35appearing to the FCA to be best calculated to bring them to the
attention of the public.

(2) The draft must be accompanied by—

(a) a cost benefit analysis,

(b) an explanation of the purpose of the proposed rules,

(c) 40any statement prepared under section 138K(2),

(d) an explanation of the FCA’s reasons for believing that making
the proposed rules is compatible with its duties under section
1B(1) and (5)(a), and

(e) notice that representations about the proposals may be made to
45the FCA within a specified time.