Financial Services Bill (HL Bill 48)

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

(4) If the FCA makes the proposed rules, it must publish an account, in
general terms, of—

(a) 5the representations made to it in accordance with subsection
(2)(e), and

(b) its response to them.

(5) If the rules differ from the draft published under subsection (1)(b) in a
way which is, in the opinion of the FCA, significant the FCA must
10publish—

(a) details of the difference (in addition to complying with
subsection (4)) together with a cost benefit analysis, and

(b) any statement prepared under section 138K(4).

(6) The requirements to carry out a cost benefit analysis under this section
15do not apply in relation to rules made under—

(a) section 136(2);

(b) subsection (1) of section 213 as a result of subsection (4) of that
section;

(c) section 234;

(d) 20paragraph 21 of Schedule 1ZA;

(e) paragraph 12 of Schedule 1A.

(7) “Cost benefit analysis” means—

(a) an analysis of the costs together with an analysis of the benefits
that will arise—

(i) 25if the proposed rules are made, or

(ii) if subsection (5) applies, from the rules that have been
made, and

(b) subject to subsection (8), an estimate of those costs and of those
benefits.

(8) 30If, in the opinion of the FCA—

(a) the costs or benefits referred to in subsection (7) cannot
reasonably be estimated, or

(b) it is not reasonably practicable to produce an estimate,

the cost benefit analysis need not estimate them, but must include a
35statement of the FCA’s opinion and an explanation of it.

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

(10) Subsection (1)(a) does not apply to rules made by the FCA in relation to
recognised investment exchanges under Part 18.

(11) 40This section is subject to section 138L.

138J Consultation by the PRA

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

(a) consult the FCA, and

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

(2) The draft must be accompanied by—

(a) 5a cost benefit analysis,

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

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

(d) an explanation of the PRA’s reasons for believing that making
the proposed rules is compatible with its duties under—

(i) 10section 2B(1) or, as the case requires, section 2C(1) or
2D(3), and

(ii) section 2H, and

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

(3) 15Before making the proposed rules, the PRA must have regard to any
representations made to it in accordance with subsection (2)(e).

(4) If the PRA makes the proposed rules, it must publish an account, in
general terms, of—

(a) the representations made to it in accordance with subsection
20(2)(e), and

(b) its response to them.

(5) If the rules differ from the draft published under subsection (1)(b) in a
way which is, in the opinion of the PRA, significant the PRA must
publish—

(a) 25details of the difference (in addition to complying with
subsection (4)) together with a cost benefit analysis, and

(b) any statement prepared under section 138K(4).

(6) The requirements to carry out a cost benefit analysis under this section
do not apply in relation to rules made under—

(a) 30section 136(2);

(b) subsection (1) of section 213 as a result of subsection (4) of that
section;

(c) section 234;

(d) paragraph 29 of Schedule 1ZB;

(e) 35paragraph 12 of Schedule 1A.

(7) “Cost benefit analysis” means—

(a) an analysis of the costs together with an analysis of the benefits
that will arise—

(i) if the proposed rules are made, or

(ii) 40if subsection (5) applies, from the rules that have been
made, and

(b) subject to subsection (8), an estimate of those costs and of those
benefits.

(8) If, in the opinion of the PRA—

(a) 45the costs or benefits referred to in subsection (7) cannot
reasonably be estimated, or

(b) it is not reasonably practicable to produce an estimate,

the cost benefit analysis need not estimate them, but must include a
statement of the PRA’s opinion and an explanation of it.

(9) The PRA may charge a reasonable fee for providing a person with a
copy of a draft published under subsection (1)(b).

(10) 5This section is subject to section 138L.

138K Consultation: mutual societies

(1) Subsection (2) applies where a regulator proposes to make a rule (“the
proposed rule”) which would apply both to—

(a) authorised persons which are mutual societies, and

(b) 10other authorised persons.

(2) The regulator must prepare a statement setting out—

(a) its opinion whether or not the impact of the proposed rule on
persons within subsection (1)(a) will be significantly different
from its impact on persons within subsection (1)(b), and

(b) 15if so, details of the difference.

(3) Subsection (4) applies where a regulator makes a rule which—

(a) applies both to—

(i) authorised persons which are mutual societies, and

(ii) other authorised persons, and

(b) 20differs from the draft of the proposed rule published under
section 138I(1)(b) or section 138J(1)(b) (as the case may be).

(4) The regulator must prepare a statement setting out—

(a) its opinion whether or not the impact of the rule is significantly
different from the impact of the proposed rule on—

(i) 25the persons within subsection (3)(a)(i), and

(ii) those persons as compared with persons within
subsection (3)(a)(ii), and

(b) if so, details of the difference.

(5) A “mutual society” is—

(a) 30a building society within the meaning of the Building Societies
Act 1986;

(b) a friendly society within the meaning of the Friendly Societies
Act 1992;

(c) a registered society within the meaning of the Industrial and
35Provident Societies Act 1965;

(d) an EEA mutual society.

(6) An “EEA mutual society” is—

(a) a body which is a European Cooperative Society for the
purposes of Council Regulation (EC) No 1435/2003 (statute for
40a European Cooperative Society);

(b) a body which is established as a cooperative under the law of an
EEA state as mentioned in that Regulation;

(c) a body which is a cooperative or mutual undertaking of such
description as the Treasury specify by order and which is
45established or operates in accordance with the laws of an EEA
state.

138L Consultation: general exemptions

(1) Sections 138I(1)(b) and (2) to (5) and 138K do not apply in relation to
rules made by the FCA if the FCA considers that the delay involved in
complying with them would be prejudicial to the interests of
5consumers, as defined in section 425A.

(2) Sections 138J(1)(b) and (2) to (5) and 138K do not apply in relation to
rules made by the PRA if the PRA considers that the delay involved in
complying with them would—

(a) be prejudicial to the safety and soundness of PRA-authorised
10persons, or

(b) in a case where section 2C applies, be prejudicial to securing the
appropriate degree of protection for policy holders.

(3) The exception in subsection (1) does not apply in relation to rules made
by the FCA under section 131B (short selling rules).

(4) 15The provisions listed in subsection (5) do not apply if the regulator
concerned considers that, making the appropriate comparison—

(a) there will be no increase in costs, or

(b) there will be an increase in costs but that increase will be of
minimal significance.

(5) 20Those provisions are—

(a) subsections (2)(a) and (5)(a) of section 138I;

(b) subsections (2)(a) and (5)(a) of section 138J.

(6) The “appropriate comparison” means—

(a) in relation to section 138I(2)(a) or 138J(2)(a), a comparison
25between the overall position if the rules are made and the
overall position if the rules are not made;

(b) in relation to section 138I(5)(a) or 138J(5)(a), a comparison
between the overall position after the making of the rules and
the overall position before they were made.

138M 30Consultation: exemptions for temporary product intervention rules

(1) Sections 138I(1)(b) and (2) to (5) and 138K do not apply in relation to
product intervention rules made by the FCA if it considers that it is
necessary or expedient not to comply with them for the purpose of
advancing—

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

(b) if an order under section 137C(1)(b) is in force, the integrity
objective.

(2) Any rules made as a result of subsection (1) (“temporary product
40intervention rules”) are to cease to have effect at the end of the period
specified in the rules.

(3) The longest period that may be specified is the period of 12 months
beginning with the day on which the rules come into force.

(4) Nothing in subsection (2) prevents the FCA from revoking temporary
45product intervention rules before the end of the period mentioned
there.

(5) If the FCA has made temporary product intervention rules (“the initial
rules”), it may not make further temporary product intervention rules
containing the same, or substantially the same, provision as that
contained in the initial rules until the prohibited period has ended.

(6) 5“The prohibited period” means the period of 12 months beginning with
the day on which the period mentioned in subsection (2) ends (whether
or not the initial rules have been revoked before the end of the period
mentioned there).

138N Temporary product intervention rules: statement of policy

(1) 10The FCA must prepare and issue a statement of its policy with respect
to the making of temporary product intervention rules.

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

(3) If a statement issued under this section is altered or replaced, the FCA
15must issue the altered or replaced statement.

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

(5) A statement issued under this section must be published by the FCA in
the way appearing to the FCA to be best calculated to bring it to the
20attention of the public.

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

138O Statement of policy under section 138N: procedure

(1) Before issuing a statement under section 138N, the FCA must publish a
25draft 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) 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
30any representations made to it in accordance with subsection (2).

(4) If 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) 35its response to them.

(5) If 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) 40The FCA may charge a reasonable fee for providing a person with a
copy of a draft published under subsection (1).

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

CHAPTER 3 Guidance

139A Power of the FCA to give guidance

(1) The FCA may give guidance consisting of such information and advice
as it considers appropriate—

(a) 5with respect to the operation of specified parts of this Act and of
any rules made by the FCA;

(b) with respect to any other matter relating to functions of the
FCA;

(c) with respect to any other matters about which it appears to the
10FCA to be desirable to give information or advice.

(2) The FCA may give financial or other assistance to persons giving
information or advice of a kind which the FCA could give under this
section.

(3) Subsection (5) applies where the FCA proposes to give guidance to
15FCA-regulated persons generally, or to a class of FCA-regulated
persons, in relation to rules to which those persons are subject.

(4) Subsection (5) also applies in relation to guidance which the FCA
proposes to give to persons generally, or to a class of person, in relation
to rules under section 131B (short selling rules) to which those persons
20are subject.

(5) Where this subsection applies, subsections (1), (2)(e) and (3) of section
138I (consultation) apply to the proposed guidance as they apply to
proposed rules, unless the FCA considers that the delay in complying
with those provisions would be prejudicial to the interests of
25consumers.

(6) The FCA may—

(a) publish its guidance,

(b) offer copies of its published guidance for sale at a reasonable
price, and

(c) 30if it gives guidance in response to a request made by any person,
make a reasonable charge for that guidance.

(7) In this Chapter, references to guidance made by the FCA include
references to any recommendations made by the FCA to FCA-
regulated persons generally, or to any class of FCA-regulated person.

(8) 35“Consumers” has the meaning given in section 1G.

(9) “FCA-regulated person” means—

(a) an authorised person, or

(b) any person who is otherwise subject to rules made by the FCA.

139B Notification of FCA guidance to the Treasury

(1) 40On giving any general guidance, the FCA must give written notice to
the Treasury without delay.

(2) If the FCA alters any of its guidance, it must give written notice to the
Treasury without delay.

(3) The notice under subsection (2) must include details of the alteration.

(4) If the FCA revokes any of its general guidance, it must give written
notice to the Treasury without delay.

(5) “General guidance” means guidance given by the FCA under section
5139A which is—

(a) given to persons generally, to FCA-regulated persons generally
or to a class of FCA-regulated person,

(b) intended to have continuing effect, and

(c) given in writing or other legible form.

(6) 10“FCA-regulated person” has the same meaning as in section 139A.

CHAPTER 4 Competition scrutiny

140A Interpretation

(1) In this Chapter—

• “market in the United Kingdom” includes—

  (a)

  15so far as it operates in the United Kingdom or a part of
  the United Kingdom, any market which operates there
  and in another country or territory or in a part of another
  country or territory, and

  (b)

  any market which operates only in a part of the United
  20Kingdom;

• “the OFT” means the Office of Fair Trading;

• “practices”, in relation to each regulator, means practices adopted
  by that regulator in the exercise of functions under this Act;

• “regulating provisions” means—

  (a)

  25in relation to the FCA, any—

  (i)

  rules of the FCA;

  (ii)

  general guidance (as defined by section 139B(5));

  (iii)

  statement issued by the FCA under section 64;

  (iv)

  code issued by the FCA under section 64 or 119;

  (b)

  30in relation to the PRA, any—

  (i)

  rules of the PRA;

  (ii)

  statement issued by the PRA under section 64;

  (iii)

  code issued by the PRA under section 64.

(2) In this Chapter each of the Competition Commission and the OFT is “a
35competition authority”.

(3) For the purposes of this Chapter, any reference to a feature of a market
in the United Kingdom for goods or services is to be read as a reference
to—

(a) the structure of the market concerned or any aspect of that
40structure,

(b) any conduct (whether or not in the market concerned) of one or
more than one person who supplies or acquires goods or
services in the market concerned, or

(c) any conduct relating to the market concerned of customers of
any person who supplies or acquires goods or services.

(4) In subsection (3) “conduct” includes any failure to act (whether or not
intentional) and any other unintentional conduct.

140B 5Advice about effect of regulating provision or practice

(1) In this Chapter, any reference to the giving of “section 140B advice” to
a regulator is to be read in accordance with this section.

(2) The OFT gives “section 140B advice” to a regulator if—

(a) it gives advice to the regulator under section 7 of the Enterprise
10Act 2002 (provision of competition advice to Ministers etc.), and

(b) the advice states that in the opinion of the OFT one or more of
the things mentioned in subsection (4) may cause, or contribute
to, the effect mentioned in subsection (5), or might be expected
to do so in the future.

(3) 15The Competition Commission gives “section 140B advice” to a
regulator if a report published by it under section 136 of the Enterprise
Act 2002 (investigations and reports on market investigation reference)
contains—

(a) a decision that one or more of the things mentioned in
20subsection (4) may cause, or contribute to, the effect mentioned
in subsection (5), and

(b) a recommendation that any action should be taken by that
regulator.

(4) Those things are—

(a) 25a regulating provision or practice of the regulator,

(b) two or more regulating provisions or practices (of that regulator
or of both regulators) taken together,

(c) a particular combination of regulating provision or practices (of
that regulator or of both regulators), or

(d) 30a feature, or combination of features, of a market in the United
Kingdom that could be dealt with by regulating provision or
practices (of that regulator or of both regulators).

(5) That effect is the prevention, restriction or distortion of competition in
connection with the supply or acquisition of any goods or services in
35the United Kingdom or a part of the United Kingdom.

140C Consultation with regulator

Before giving section 140B advice, a competition authority must consult
the regulator to which the advice is to be given.

140D Investigation powers of OFT

40Where the OFT is deciding whether to exercise its power under section
7 of the Enterprise Act 2002 to give advice which, if given, would be
section 140B advice, section 174 of that Act has effect as if—

(a) in subsection (1), for the words from “make a reference” to the
end there were substituted “give advice which would for the
45purposes of Chapter 4 of Part 9A of the Financial Services and
Markets Act 2000 be section 140B advice”, and

(b) in subsection (2), for “make such a reference” there were
substituted “give such advice”.

140E Publication by OFT of section 140B advice

The OFT must publish in such manner as it thinks fit any section 140B
5advice given by it to either regulator.

140F Duty of Competition Commission to send report to regulator

(1) Where the publication of a report of the Competition Commission
under section 142 of the Enterprise Act 2002 constitutes the giving of
section 140B advice to either regulator, the Commission must give a
10copy of the report to that regulator.

(2) The day on which the copy is given is the day on which the regulator is
to be taken to receive the section 140B advice.

140G Duty of regulator to publish response

(1) A regulator must, within 90 days after the day on which it receives
15section 140B advice, publish a response stating how it proposes to deal
with the advice and in particular—

(a) whether it has decided to take any action, or to take no action,
in response to the advice,

(b) if it has decided to take action, what action it proposes to take,
20and

(c) its reasons for its proposals.

(2) Publication is to be in such manner as the regulator thinks fit.

140H Role of the Treasury

(1) This section applies where—

(a) 25a competition authority has given section 140B advice and the
regulator has published a response under section 140G, and

(b) the competition authority remains of the opinion that one or
more of the things mentioned in section 140B(4) may cause or
contribute to, the effect mentioned in section 140B(5).

(2) 30The competition authority may refer the section 140B advice to the
Treasury by sending the Treasury—

(a) a copy of the section 140B advice and of the response, and

(b) a request to consider the advice and the response.

(3) In referring the section 140B advice, the competition authority may give
35advice to the Treasury as to what action, if any, ought to be taken by the
regulator.

(4) If section 140B advice is referred to them, the Treasury may give a
direction to the regulator to which the advice was given requiring the
regulator to take such action as may be specified in the direction.

(5) 40In considering whether to give a direction and, if so, what action to
specify, the Treasury must have regard to—

(a) any advice the competition authority has given under
subsection (3),

(b) any action which the section 140B advice suggests that the
regulator should take, and

(c) the response of the regulator to the section 140B advice.

(6) The direction may not require the regulator to do anything that it has
5no power to do, but the existence of the direction is relevant to the
exercise of any discretion conferred on the regulator.

(7) Before giving a direction under this section, the Treasury must consult
the regulator to which it is to be given.

(8) If the Treasury give a direction under this section they must—

(a) 10publish in such manner as they think fit a statement giving
details of the direction and of their reasons for giving it, and

(b) lay a copy of the statement before Parliament.

CHAPTER 5 Power to make consequential amendments

141A Power to make consequential amendments of references to rules etc.

(1) 15This section applies if—

(a) a provision of primary or subordinate legislation (whenever
passed or made) contains a reference (however expressed) to
rules of either regulator or to guidance of the FCA,

(b) it appears to the Treasury or the Secretary of State that the
20reference requires amendment in consequence of the exercise
by that regulator of its power under this Part to make, alter or
revoke its rules or the exercise by the FCA of its power to make,
alter or revoke its guidance.

(2) The Treasury or the Secretary of State may by order make such
25amendment of the legislation referred to in subsection (1)(a) as appears
to them to be necessary or expedient in consequence of the exercise by
the regulator of the power mentioned in subsection (1)(b).

(3) The power conferred by subsection (2) includes power—

(a) to replace a reference to the rules of one regulator with a
30reference to the rules of the other regulator or to the rules of
both regulators;

(b) to replace a reference to the rules of both regulators with a
reference to the rules of one regulator.

(4) In subsection (1)(a) “subordinate legislation” does not include rules of
35either regulator.”

(2) In section 391 of FSMA 2000 (publication), after subsection (5) insert—

“(5A) Subsection (5) does not apply in relation to a notice given in accordance
with section 137Q(5) or (8)(a) (but see section 137Q(11)).”

(3) In section 395 of FSMA 2000 (procedures in relation to giving of supervisory
40notices etc), in subsection (13), after paragraph (bb) insert—

“(bba) section 137Q(5) or (8)(a);”.

(4) Omit Schedule 14 to FSMA 2000 (role of the Competition Commission).