Financial Services Bill (HL Bill 48)

(a) the person in respect of whom it is made, and

(b) any person to whom a copy of the decision notice was given
under section 393(4).

192N Imposition of penalties under section 192K: statement of policy

(1) 5Each regulator must prepare and issue a statement of policy with
respect to—

(a) the imposition of penalties under section 192K, and

(b) the amount of penalties under that section.

(2) A regulator’s policy in determining what the amount of a penalty
10should be must include having regard to—

(a) the seriousness of the contravention,

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

(c) whether the person on whom the penalty is to be imposed is an
15individual.

(3) A regulator 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
regulator must issue the altered or replacement statement.

(5) 20In exercising, or deciding whether to exercise, a power under section
192K(2) in the case of any particular contravention, a regulator must
have regard to any statement of policy published under this section and
in force at a time when the contravention occurred.

(6) A statement under this section must be published by the regulator
25concerned in the way appearing to the regulator to be best calculated to
bring it to the attention of the public.

(7) A regulator may charge a reasonable fee for providing a person with a
copy of the statement published under this section.

(8) A regulator must, without delay, give the Treasury a copy of any
30statement which it publishes under this section.

(9) Section 192I applies in relation to a statement under this section as it
applies in relation to a statement under section 192H.”

Recognised investment exchanges and clearing houses

27 Exemption for recognised investment exchanges and clearing houses

(1) 35Section 285 of FSMA 2000 (exemption from general prohibition for recognised
investment exchanges and recognised clearing houses) is amended as follows.

(2) In subsection (2), for paragraph (b) substitute—

“(b) which is carried on for the purposes of, or in connection with,
the provision by the exchange of services designed to facilitate
40the provision of clearing services by another person.”

(3) In subsection (3) for the words from “activity which” to the end substitute

“activity—

“(a) which is carried on for the purposes of, or in connection with,
the provision of clearing services by the clearing house, or

(b) which is carried on for the purposes of, or in connection with,
5the provision by the clearing house of services designed to
facilitate the provision of clearing services by another person.”

(4) After that subsection insert—

“(4) The Treasury may by order amend paragraph (b) of subsection (2) or
(3).”

28 10Powers in relation to recognised investment exchanges and clearing houses

(1) After section 285 of FSMA 2000 insert—

“285A Powers exercisable in relation to recognised investment exchanges
and clearing houses

(1) For the purposes of this Part, the FCA is “the appropriate regulator” in
15relation to recognised investment exchanges.

(2) For the purposes of this Part, the Bank of England is “the appropriate
regulator” in relation to recognised clearing houses.

(3) In Schedule 17A—

(a) Part 1 makes provision for a memorandum of understanding
20between the appropriate regulators and the PRA with respect to
the exercise of their functions in relation to recognised
investment exchanges and clearing houses;

(b) Part 2 applies certain provisions of this Act in relation to the
Bank of England in consequence of the conferring of functions
25on the Bank under this Part of this Act;

(c) Part 3 makes provision relating to the winding up,
administration or insolvency of UK clearing houses; and

(d) Part 4 makes provision about fees.”

(2) After Schedule 17 of FSMA 2000 insert the Schedule 17A set out in Schedule 7
30to this Act.

29 Recognition requirements: power of FCA and Bank to make rules

In section 286 of FSMA 2000 (qualification for recognition), after subsection
(4E) insert—

“(4F) Regulations under subsection (1) may confer power on the appropriate
35regulator to make rules for the purposes of the regulations or of any
specified provision made by the regulations.”

30 Additional power to direct UK clearing houses

After section 296 of FSMA 2000 insert—

“296A Additional power to direct UK clearing houses

(1) The Bank of England may direct a UK clearing house to take, or refrain
5from taking, specified action if the Bank is satisfied that it is desirable
to give the direction, having regard to the public interest in—

(a) protecting and enhancing the stability of the UK financial
system,

(b) maintaining public confidence in the stability of the UK
10financial system,

(c) maintaining the continuity of the central counterparty clearing
services provided by the clearing house, and

(d) maintaining and enhancing the financial resilience of the
clearing house.

(2) 15The direction may, in particular—

(a) specify the time for compliance with the direction,

(b) require the rules of the clearing house to be amended, and

(c) override such rules (whether generally or in their application to
a particular case).

(3) 20The direction is enforceable, on the application of the Bank, by an
injunction or, in Scotland, by an order for specific performance under
section 45 of the Court of Session Act 1988.

(4) The Bank may revoke a direction given under this section.

(5) In this section “central counterparty clearing services” has the same
25meaning as in section 155 of the Companies Act 1989 (see subsection
(3A) of that section).”

31 Recognised bodies: procedure for giving directions under s.296 etc

(1) Section 298 of FSMA 2000 (directions under section 296 and revocation orders
under section 297(2) or (2A): procedure) is amended as follows.

(2) 30In subsection (1), omit paragraphs (b) and (c) (requirements to bring notice to
attention of members of the body and other persons).

(3) In subsection (3), omit paragraphs (b) and (c) (members of the body and other
persons may make representations).

(4) For subsection (4) substitute—

“(4) 35The period for making representations is such period as is specified in
the notice (which may, in any particular case, be extended by the
appropriate regulator).”

(5) In subsection (6), omit paragraph (b) (notice of decision to members of the body
and others) and the “and” before it.

(6) 40In subsection (7), for “considers it essential” substitute “reasonably considers it
necessary”.

32 Power to take disciplinary measures against recognised bodies

After section 312D of FSMA 2000 insert—

“CHAPTER 3B Disciplinary measures

312E Public censure

(1) 5If the appropriate regulator considers that a recognised body has
contravened a relevant requirement imposed on the body, it may
publish a statement to that effect.

(2) Where the FCA is the appropriate regulator, a requirement is a
“relevant requirement” for the purposes of this Chapter if it is—

(a) 10a requirement that is imposed by or under any provision of this
Part that relates to a recognised investment exchange,

(b) a requirement that is imposed under any other provision of this
Act by the FCA that relates to a recognised investment
exchange,

(c) 15a requirement that is imposed by a qualifying EU provision
specified, or of a description specified, for the purposes of this
subsection by the Treasury by order, or

(d) a requirement that is imposed by this Act and whose
contravention constitutes an offence that the FCA has power to
20prosecute under this Act (see section 401).

(3) Where the Bank of England is the appropriate regulator, a requirement
is a “relevant requirement” for the purposes of this Chapter if it is—

(a) a requirement that is imposed by or under any provision of this
Part that relates to a recognised clearing house,

(b) 25a requirement that is imposed under any other provision of this
Act by the Bank,

(c) a requirement that is imposed by a qualifying EU provision
specified, or of a description specified, for the purposes of this
subsection by the Treasury by order, or

(d) 30a requirement that is imposed by this Act and whose
contravention constitutes an offence that the Bank has power to
prosecute under this Act (see section 401, as applied by
paragraph 31 of Schedule 17A).

312F Financial penalties

35If the appropriate regulator considers that a recognised body has
contravened a relevant requirement imposed on the body, it may
impose on the body a penalty, in respect of the contravention, of such
amount as it considers appropriate.

312G Proposal to take disciplinary measures

(1) 40If the appropriate regulator proposes—

(a) to publish a statement in respect of a recognised body under
section 312E, or

(b) to impose a penalty on a recognised body under section 312F,

it must give the body a warning notice.

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

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

312H 5Decision notice

(1) If the appropriate regulator decides—

(a) to publish a statement in respect of a recognised body under
section 312E (whether or not in the terms proposed), or

(b) to impose a penalty on a recognised body under section 312F
10(whether or not of the amount proposed),

it must give the body a decision notice.

(2) In the case of a statement, the decision notice must set out the terms of
the statement.

(3) In the case of a penalty, the decision notice must state the amount of the
15penalty.

(4) If the appropriate regulator decides—

(a) to publish a statement in respect of a recognised body under
section 312E, or

(b) to impose a penalty on a recognised body under section 312F,

20the body may refer the matter to the Tribunal.

312I Publication

After an appropriate regulator publishes a statement under section
312E, it must send a copy of the statement to—

(a) the recognised body concerned, and

(b) 25any person to whom a copy of the decision notice was given
under section 393(4).

312J Statement of policy

(1) Each appropriate regulator must prepare and issue a statement of its
policy with respect to—

(a) 30the imposition of penalties under section 312F, and

(b) the amount of penalties under that section.

(2) An appropriate regulator’s policy in determining what the amount of a
penalty should be must include having regard to—

(a) the seriousness of the contravention in question in relation to
35the nature of the requirement concerned, and

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

(3) An appropriate regulator may at any time alter or replace a statement
issued by it under this section.

(4) 40If a statement issued by an appropriate regulator under this section is
altered or replaced, the regulator must issue the altered or replaced
statement.

(5) In exercising, or deciding whether to exercise, its power under section
312F in the case of any particular contravention, an appropriate

regulator must have regard to any statement of policy published by it
under this section and in force at a time when the contravention in
question occurred.

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

(7) An appropriate regulator may charge a reasonable fee for providing a
person with a copy of the statement.

(8) An appropriate regulator must, without delay, give the Treasury a
10copy of any statement which it publishes under this section.

312K Statement of policy: procedure

(1) Before issuing a statement under section 312J, an appropriate regulator
must publish a draft of the proposed statement in the way appearing to
the regulator to be best calculated to bring it to the attention of the
15public.

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

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

(4) 20If the regulator issues the proposed statement it must publish an
account, in general terms, of—

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

(b) its response to them.

(5) 25If the statement differs from the draft published under subsection (1) in
a way which is, in the opinion of the regulator, significant, the regulator
must (in addition to complying with subsection (4)) publish details of
the difference.

(6) An appropriate regulator may charge a reasonable fee for providing a
30person with a copy of a draft published under subsection (1).

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

33 Repeal of special competition regime

In Part 18 of FSMA 2000 (recognised investment exchanges and clearing
houses)—

(a) 35omit Chapter 2 (competition scrutiny), and

(b) omit Chapter 3 (exclusion from the Competition Act 1998).

34 Sections 27 to 33: minor and consequential amendments

Schedule 8 contains—

(a) minor amendments of FSMA 2000 in connection with provision made
40by sections 27 to 33, and

(b) other amendments of that Act in consequence of that provision.

Suspension and removal of financial instruments from trading

35 Suspension and removal of financial instruments from trading

In every provision of Part 18A of FSMA 2000 (suspension and removal of
financial instruments from trading)—

(a) 5for “Authority”, in each place, substitute “FCA”, and

(b) for “Authority’s”, in each place, substitute “FCA’s”.

Discipline and enforcement

36 Discipline and enforcement

Schedule 9 contains miscellaneous amendments of FSMA 2000 relating to
10discipline and enforcement.

Financial Services Compensation Scheme

37 The Financial Services Compensation Scheme

(1) Schedule 10 contains amendments of Part 15 of FSMA 2000 (the Financial
Services Compensation Scheme).

(2) 15In section 224F(1) of that Act (power to require FSCS manager to act in relation
to other schemes: rules about the schemes), for “Authority” substitute
“regulators”.

Financial ombudsman service

38 The financial ombudsman service

20Schedule 11 contains amendments of FSMA 2000 relating to the financial
ombudsman service.

Lloyd’s

39 Lloyd’s

(1) Part 19 of FSMA 2000 (Lloyd’s) is amended as follows.

(2) 25In section 314 (Authority’s general duty)—

(a) for subsection (1) substitute—

“(1) So far as it is appropriate to do so for the purpose of advancing
one or more of its operational objectives, the FCA must keep
itself informed about—

(a) 30the way in which the Council supervises and regulates
the market at Lloyd’s, and

(b) the way in which regulated activities are being carried
on in that market.

(1A) So far as it is appropriate to do so for the purpose of advancing
its general objective or (if section 2C applies) its insurance
objective, the PRA must keep itself informed about—

(a) the way in which the Council supervises and regulates
5the market at Lloyd’s, and

(b) the way in which any PRA-regulated activities are being
carried on in that market.”,

(b) in subsection (2)—

(i) for “The Authority” substitute “Each regulator”, and

(ii) 10in paragraph (b), for “section 315” substitute “provision made
by or under this Act”, and

(c) in the heading, for “Authority’s” substitute “Regulators’”.

(3) After that section insert—

“314A The PRA’s objectives in relation to Lloyd’s etc

(1) 15This section modifies—

(a) the effect of sections 2B and 2C (the PRA’s general objective and
insurance objective), and

(b) the effect of section 3I (power of PRA to require FCA to refrain
from specified action),

20in relation to anything done, or proposed to be done, by the PRA under
or for the purposes of this Part.

(2) This section applies only if PRA-authorised persons include—

(a) the Society, or

(b) other persons who carry on regulated activities in relation to
25anything done at Lloyd’s.

(3) Section 2B(2) and (3) have effect as if references to PRA-authorised
persons (or a PRA-authorised person) were references to the Society,
and the members of the Society, taken together (and sections 2G and
2J(3) are to be read accordingly).

(4) 30Section 2C(1) has effect as if the reference to the discharge of the PRA’s
general functions so far as relating to the activity mentioned there were
a reference to the discharge of its general functions so far as relating to
the carrying on by the Society or other persons of PRA-regulated
activities in relation to anything done at Lloyd’s.

(5) 35Section 3I(4)(b) has effect as if the reference to a PRA-authorised person
were a reference to the Society, and the members of the Society, taken
together.”

(4) For section 315 substitute—

“315 The Society: regulated activities

(1) 40This section applies if an activity carried on by the Society is of a kind
specified in an order made under section 22 (regulated activities).

(2) The order may provide that the Society is not to be subject to any
requirement of this Act concerning the registered office of a body
corporate.”

(5) 45In section 316 (direction by Authority)—

(a) in subsection (1), for “the Authority” substitute “a regulator”,

(b) after that subsection insert—

“(1A) A direction under subsection (1)—

(a) may be given by the FCA only if it considers that giving
5the direction is necessary or expedient for the purpose of
advancing one or more of its operational objectives, and

(b) may be given by the PRA only if it considers that giving
the direction is necessary or expedient for the purpose of
advancing its general objective or (if section 2C applies)
10the insurance objective.

(1B) A direction under subsection (1) which applies the general
prohibition to a member of the Society, or to the members of the
Society taken together, may be given by a regulator only with
the consent of the other regulator.”,

(c) 15in subsection (4)—

(i) for “the Authority”, in both places, substitute “the regulator
concerned”, and

(ii) in paragraph (c), for “section 315” substitute “provision made
by or under this Act”,

(d) 20in subsection (9)—

(i) after “subsection (1)” insert “given by a regulator”, and

(ii) for “the Authority” substitute “the regulator”,

(e) in subsection (10), for “The Authority” substitute “A regulator who
gives a direction under subsection (1)”,

(f) 25in subsection (11)—

(i) for “The Authority” substitute “A regulator who gives a
direction under subsection (1)”, and

(ii) for “any direction which it gives under this section” substitute
“the direction”, and

(g) 30in the heading, for “Authority” substitute “a regulator”.

(6) In section 317 (the core provisions), in subsection (1), for “X” substitute “9A”.

(7) In section 318 (exercise of powers through Council)—

(a) in subsection (1), for “The Authority” substitute “A regulator”,

(b) after subsection (3) insert—

“(3A) 35A direction under subsection (1)—

(a) may be given by the FCA only if it considers that giving
the direction is necessary or expedient for the purpose of
advancing one or more of its operational objectives, and

(b) may be given by the PRA only if it considers that giving
40the direction is necessary or expedient for the purpose of
advancing its general objective or (if section 2C applies)
the insurance objective.”,

(c) in subsection (4)(b), for “the Authority” substitute “the regulator
concerned”,

(d) 45in subsection (6)(a), for “the Authority” substitute “a regulator”,

(e) in subsection (7)—

(i) after “subsection (1)” insert “given by a regulator”, and

(ii) for “the Authority” substitute “the regulator”,

(f) in subsection (8), for “The Authority” substitute “A regulator who gives
a direction under subsection (1)”, and

(g) in subsection (9)—

(i) for “The Authority” substitute “A regulator who gives a
5direction under subsection (1)”, and

(ii) for “any direction which it gives under this section” substitute
“the direction”.

(8) In section 319 (consultation)—

(a) for subsection (1) substitute—

“(1) 10Before a regulator gives a direction under section 316 or 318, it
must—

(a) in a case where section 316(1B) requires the regulator to
obtain the consent of the other regulator, obtain that
consent,

(b) 15in any other case, consult the other regulator, and

(c) after complying with paragraph (a) or (b), publish a
draft of the proposed direction.”,

(b) in subsection (2)(b), for “the Authority” substitute “the regulator”,

(c) for subsection (3) substitute—

“(3) 20Before a regulator gives the proposed direction—

(a) it must have regard to any representations made to it in
accordance with subsection (2)(b), and

(b) if it was required by subsection (1)(b) to consult the
other regulator and proposes to give a direction which
25differs from the draft published under subsection (1) in
a way which is, in the opinion of the regulator,
significant, it must again consult the other regulator.”,

(d) in subsections (4) and (5) (in both places), for “the Authority” substitute
“the regulator”,

(e) 30for subsection (6) substitute—

“(6) Subsections (1)(c) and (2) to (5) do not apply in relation to—

(a) a direction given by the FCA if it considers that the delay
involved in complying with them would be prejudicial
to the interests of consumers, as defined in section 425A,
35or

(b) a direction given by the PRA if it considers that the delay
involved in complying with them would—

(i) be prejudicial to the safety and soundness of the
Society, and the members of the Society, taken
40together, or

(ii) in a case where section 2C applies, be prejudicial
to securing the appropriate degree of protection
for policyholders.”,

(f) in subsection (7), for “the Authority” substitute “the regulator
45concerned”,

(g) in subsection (8)—

(i) for “The Authority” substitute “A regulator who publishes a
draft under subsection (1)”, and