Financial Services Bill (HL Bill 48)

(2) Compliance with any requirement under sub-paragraph (1)(a) or
(b) is enforceable by injunction or, in Scotland, an order for specific
performance under section 45 of the Court of Session Act 1988.

(3) Proceedings under sub-paragraph (2) may be brought only by the
5Treasury.

15 (1) The FCA must send a copy of its annual accounts to the
Comptroller and Auditor General as soon as is reasonably
practicable.

(2) The Comptroller and Auditor General must—

(a) 10examine, certify and report on accounts received under
this paragraph, and

(b) send a copy of the certified accounts and the report to the
Treasury.

(3) The Treasury must lay the copy of the certified accounts and the
15report before Parliament.

(4) Except as provided by paragraph 14(1), the FCA is exempt from
the requirements of Part 16 of the Companies Act 2006 (audit), and
its balance sheet must contain a statement to that effect.

(5) In this paragraph “annual accounts” has the meaning given in
20section 471 of the Companies Act 2006.

Part 2 Status

Status

16 In relation to any of its functions—

(a) 25the FCA is not to be regarded as acting on behalf of the
Crown, and

(b) its members, officers and staff are not to be regarded as
Crown servants.

Exemption from requirement for use of “limited” in name of FCA

17 30The FCA is to continue to be exempt from the requirements of the
Companies Act 2006 relating to the use of “limited” as part of its
name.

18 If the Secretary of State is satisfied that any action taken by the
FCA makes it inappropriate for the exemption given by paragraph
3517 to continue, the Secretary of State may, after consulting the
Treasury, give a direction removing it.

Part 3 Penalties and fees

Penalties

19 (1) In determining its policy with respect to the amounts of penalties
5to be imposed by it under this Act, the FCA must take no account
of the expenses which it incurs, or expects to incur, in discharging
its functions.

(2) The FCA must prepare and operate a scheme (“the financial
penalty scheme”) for ensuring that—

(a) 10the amounts paid to it by way of penalties imposed under
this Act (other than Part 6 or 18) are applied for the benefit
of authorised persons, and

(b) the amounts paid to it by way of penalties imposed under
Part 6 of this Act are applied for the benefit of—

(i) 15issuers of securities admitted to the official list, and

(ii) issuers who have requested or approved the
admission of financial instruments to trading on a
regulated market.

(3) The financial penalty scheme may, in particular, make different
20provision with respect to different classes of authorised person or
issuer.

(4) Up-to-date details of the financial penalty scheme must be set out
in a document (“the scheme details”).

20 (1) The scheme details must be published by the FCA in the way
25appearing to it to be best calculated to bring them to the attention
of the public.

(2) Before making the financial penalty scheme, the FCA must
publish a draft of the proposed scheme in the way appearing to the
FCA to be best calculated to bring it to the attention of the public.

(3) 30The draft must be accompanied by notice that representations
about the proposals may be made to the FCA within a specified
time.

(4) Before making the scheme, the FCA must have regard to any
representations made to it in accordance with sub-paragraph (3).

(5) 35If the FCA makes the proposed scheme, it must publish an
account, in general terms, of—

(a) the representations made to it in accordance with sub-
paragraph (3), and

(b) its response to them.

(6) 40If the scheme differs from the draft published under sub-
paragraph (2) in a way which is, in the opinion of the FCA,
significant, the FCA must (in addition to complying with sub-
paragraph (5)) publish details of the difference.

(7) The FCA must, without delay, give the Treasury a copy of any
scheme details published by it.

(8) The FCA may charge a reasonable fee for providing a person with
a copy of—

(a) 5a draft published under sub-paragraph (2);

(b) scheme details.

(9) Sub-paragraphs (2) to (6) and (8)(a) also apply to a proposal to
alter or replace the financial penalty scheme.

Fees

21 (1) 10The FCA may make rules providing for the payment to it of such
fees, in connection with the discharge of any of its qualifying
functions, as it considers will (taking account of its expected
income from fees and charges provided for by any other provision
of this Act) enable it—

(a) 15to meet expenses incurred in carrying out its functions or
for any incidental purpose,

(b) to repay the principal of, and pay any interest on, any
relevant borrowing and to meet relevant commencement
expenses, and

(c) 20to maintain adequate reserves.

(2) The “qualifying functions” of the FCA are—

(a) its functions under or as a result of this Act or any of the
other Acts mentioned in section 1A(6), and

(b) its functions under or as a result of a qualifying EU
25provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
order.

(3) In sub-paragraph (1)(b)—

• “relevant borrowing” means any money borrowed by the
  30FCA which has been used for the purpose of meeting
  expenses incurred in relation to its assumption of
  functions under this Act, and

• “relevant commencement expenses” means expenses
  incurred by the FCA—

  (a)

  35in preparation for the exercise of functions by the
  FCA under this Act, or

  (b)

  for the purpose of facilitating the exercise by the FCA
  of those functions or otherwise in connection with
  their exercise by it.

(4) 40Neither section 1A(6)(d) nor the definition of “functions” in
paragraph 1 applies for the purposes of sub-paragraph (2).

(5) For the purposes of sub-paragraph (3) it is irrelevant when the
borrowing of the money, the incurring of the expenses or the
assumption of functions took place (and, in particular, it is
45irrelevant if any of those things were done at a time when the FCA
was known as the Financial Services Authority).

(6) In the case of rules made under Part 6 of this Act, the rules may, in
particular, require the payment of fees in respect of—

(a) the continued inclusion of securities or persons in any list
or register required to be kept by the FCA as a result of any
5provision made by or under that Part,

(b) access to any list or register within paragraph (a), and

(c) the continued admission of financial instruments to
trading on a regulated market.

(7) In fixing the amount of any fee which is to be payable to the FCA,
10no account is to be taken of any sums which the FCA receives, or
expects to receive, by way of penalties imposed by it under this
Act.

(8) Any fee which is owed to the FCA under any provision made by
or under this Act may be recovered as a debt due to the FCA.

15Services for which fees may not be charged

22 The power conferred by paragraph 21 may not be used to
require—

(a) a fee to be paid in respect of the discharge of any of the
FCA’s functions under paragraph 13, 14, 19 or 20 of
20Schedule 3, or

(b) a fee to be paid by any person whose application for
approval under section 59 has been granted.

Part 4 Miscellaneous

25Exemption from liability in damages

23 (1) None of the following is to be liable in damages for anything done
or omitted in the discharge, or purported discharge, of the FCA’s
functions—

(a) the FCA;

(b) 30any person (“P”) who is, or is acting as, a member, officer
or member of staff of the FCA;

(c) any person who could be held vicariously liable for things
done or omitted by P, but only in so far as the liability
relates to P’s conduct.

(2) 35Sub-paragraph (1) does not apply—

(a) if the act or omission is shown to have been in bad faith, or

(b) so as to prevent an award of damages made in respect of
an act or omission on the ground that the act or omission
was unlawful as a result of section 6(1) of the Human
40Rights Act 1998.

Accredited financial investigators

24 For the purposes of this Act anything done by an accredited
financial investigator within the meaning of the Proceeds of Crime
Act 2002 who—

(a) 5is, or is acting as, an officer of, or member of the staff of, the
FCA, or

(b) is appointed by the FCA under section 97, 167 or 168 to
conduct an investigation,

is to be treated as done in the exercise or discharge of a function of
10the FCA.

Amounts required by rules to be paid to the FCA

25 Any amount (other than a fee) which is required by rules to be
paid to the FCA may be recovered as a debt due to the FCA.

Section 2A

Schedule 1ZA The Prudential Regulation Authority

15Part 1 General

Interpretation

1 In this Schedule—

• “the Bank” means the Bank of England;

• 20“functions”, in relation to the PRA, means functions
  conferred on the PRA by or under any provision of this Act
  (see section 2A(6) which affects the meaning of references
  to such functions).

Constitution

2 25The constitution of the PRA must provide—

(a) for the Governor of the Bank to be the chair of the PRA,

(b) for the Bank’s Deputy Governor for prudential regulation
to be the chief executive of the PRA, and

(c) for the PRA to have a governing body.

3 30The governing body must consist of —

(a) the chair,

(b) the chief executive,

(c) the Bank’s Deputy Governor for financial stability,

(d) the chief executive of the FCA, and

(e) 35other members (in this Schedule referred to as “appointed
members”).

4 The validity of any act of the PRA is not affected—

(a) by any vacancy resulting from a vacancy in the office of
Governor of the Bank, Deputy Governor of the Bank for

prudential regulation, Deputy Governor of the Bank for
financial stability, or chief executive of the FCA, or

(b) by a defect in the appointment of a person—

(i) to any of those offices, or

(ii) 5as an appointed member.

5 The chief executive of the FCA must not take part in any
discussion by or decision of the PRA which relates to—

(a) the exercise of the PRA’s functions in relation to a
particular person, or

(b) 10a decision not to exercise those functions.

Appointed members of governing body

6 The appointed members must be appointed by the Bank with the
approval of the Treasury.

7 Paragraphs 8 to 12 apply to the exercise by the Bank of its power
15to appoint appointed members.

8 The Bank must secure that the majority of the members of the
governing body of the PRA are non-executive members.

9 For the purposes of paragraph 8, and for the purposes of the
PRA’s duty in section 3C (duty to follow principles of good
20governance) none of the following is a non-executive member—

(a) the members referred to in paragraph 3(a), (b) and (c), and

(b) a member who is an employee of the PRA or of the Bank.

10 The Bank must have regard to generally accepted principles of
good practice relating to the making of public appointments.

11 (1) 25Before appointing a person as an appointed member, the Bank
must consider whether the person has any financial or other
interests that could have a material effect on the extent of the
functions as member that it would be proper for the person to
discharge.

(2) 30The terms on which an appointed member (“M”) is appointed
must be such as—

(a) to secure that M is not subject to direction by the Bank,

(b) to require M not to act in accordance with the directions of
any other person, and

(c) 35to prohibit M from acquiring any financial or other
interests that have a material effect on the extent of the
functions as member that it would be proper for M to
discharge.

(3) If M is an employee of the PRA, M’s interest as employee is to be
40disregarded for the purposes of sub-paragraphs (1) and (2)(c) and
paragraph 14.

12 An employee of the FCA is disqualified for appointment as an
appointed member.

13 The PRA must pay to the Bank the amount of any expenses
incurred by the Bank in connection with the appointment of
appointed members.

14 The Bank may, with the approval of the Treasury, remove an
5appointed member from office—

(a) on the grounds of incapacity or serious misconduct, or

(b) on the grounds that in all the circumstances the member’s
financial or other interests are such as to have a material
effect on the extent of the functions as member that it
10would be proper for the person to discharge.

Terms of service

15 (1) The terms of service of the members of the governing body are to
be determined by the Oversight Committee of the Bank.

(2) The PRA must pay to the members of its governing body such
15remuneration as may be determined by that Committee.

Arrangements for discharging functions

16 (1) The PRA may make arrangements for any of its functions to be
discharged by a committee, sub-committee, officer or member of
staff of the PRA, but subject to the following provision.

(2) 20In exercising its legislative functions or its functions under section
2E (strategy), the PRA must act through its governing body.

(3) For that purpose, the following are the PRA’s legislative
functions—

(a) making rules;

(b) 25issuing codes under section 64;

(c) issuing statements under—

(i) section 63C, 64, 69, 192H, 192N, 210 or 345D, or

(ii) section 79 of the Financial Services Act 2012;

(d) giving directions under section 316 or 318;

(e) 30issuing guidance under section 2I.

Records

17 The PRA must maintain satisfactory arrangements for—

(a) recording decisions made in the exercise of its functions,
and

(b) 35the safe-keeping of those records which it considers ought
to be preserved.

Budget

18 (1) The PRA must, for each of its financial years, adopt an annual
budget which has been approved by the Bank.

(2) 40The budget must be adopted before the start of the financial year
to which it relates, except that the first budget must be adopted as

soon as reasonably practicable after the coming into force of this
paragraph.

(3) The PRA may, with the approval of the Bank, vary the budget for
a financial year at any time after its adoption.

(4) 5The PRA must publish each budget, and each variation of a
budget, in such manner as the PRA thinks fit.

Annual report

19 (1) At least once a year the PRA must make a report to the Treasury
on—

(a) 10the discharge of its functions,

(b) the extent to which, in its opinion, its objectives have been
advanced,

(c) how it has complied with sections 2L and 2M,

(d) its consideration of the principles in section 3B,

(e) 15how it has complied with section 3D,

(f) any direction given under section 3I during the period to
which the report relates,

(g) how it has complied with section 354B(1) so far as relating
to co-operation with persons outside the United Kingdom,
20and

(h) such other matters as the Treasury may from time to time
direct.

(2) Sub-paragraph (1) does not require the inclusion in the report of
any information whose publication would in the opinion of the
25PRA be against the public interest.

(3) The report must be accompanied by—

(a) a statement of the remuneration of the members of the
governing body of the PRA during the period to which the
report relates, and

(b) 30such other reports or information, prepared by such
persons, as the Treasury may from time to time direct.

(4) The Treasury must lay before Parliament a copy of each report
received by them under this paragraph.

Consultation about annual report

20 (1) 35In relation to each report made under paragraph 19, the PRA must
publish at the same time as the report an invitation to members of
the public to make representations to the PRA, within the 3
months beginning with the date of publication—

(a) about the report,

(b) 40about the way in which the PRA has discharged, or failed
to discharge, its functions during the period to which the
report relates, and

(c) about the extent to which, in their opinion, the PRA’s
objectives have been advanced and the PRA has
45considered the regulatory principles in section 3B.

(2) The invitation must be published in the way appearing to it to be
best calculated to bring the invitation to the attention of the public.

Report on consultation

21 (1) The PRA must publish a report about its consultation in
5accordance with paragraph 20.

(2) The report must contain an account, in general terms, of any
representations received in pursuance of the invitation published
under that paragraph.

(3) The report must be published not later than 4 months after the
10date on which the report under paragraph 19 was published.

Accounts and audit

22 (1) The Treasury may—

(a) require the PRA to comply with any provisions of the
Companies Act 2006 about accounts and their audit which
15would not otherwise apply to it, or

(b) direct that any provision of that Act about accounts and
their audit is to apply to the PRA with such modifications
as are specified in the direction, whether or not the
provision would otherwise apply to the PRA.

(2) 20Compliance with any requirement under sub-paragraph (1)(a) or
(b) is enforceable by injunction or, in Scotland, an order for specific
performance under section 45 of the Court of Session Act 1988.

(3) Proceedings under sub-paragraph (2) may be brought only by the
Treasury.

23 (1) 25The PRA must send a copy of its annual accounts to the
Comptroller and Auditor General as soon as is reasonably
practicable.

(2) The Comptroller and Auditor General must—

(a) examine, certify and report on accounts received under
30this paragraph, and

(b) send a copy of the certified accounts and the report to the
Treasury.

(3) The Treasury must lay the copy of the certified accounts and the
report before Parliament.

(4) 35The PRA must send a copy of the certified accounts and the report
to the Bank.

(5) Except as provided by paragraph 22(1), the PRA is exempt from
the requirements of Part 16 of the Companies Act 2006 (audit), and
its balance sheet must contain a statement to that effect.

(6) 40In this paragraph “annual accounts” has the meaning given in
section 471 of the Companies Act 2006.

Part 2 Status

Status

24 In relation to any of its functions—

(a) 5the PRA is not to be regarded as acting on behalf of the
Crown, and

(b) its members, officers and staff are not to be regarded as
Crown servants.

Exemption from requirement for use of “limited” in name of PRA

25 10The PRA is to be exempt from the requirements of the Companies
Act 2006 relating to the use of “limited” as part of its name.

26 If the Secretary of State is satisfied that any action taken by the
PRA makes it inappropriate for the exemption given by paragraph
25 to continue, the Secretary of State may, after consulting the
15Treasury, give a direction removing it.

Part 3 Penalties and fees

Penalties

27 (1) In determining its policy with respect to the amounts of penalties
20to be imposed by it under this Act, the PRA must take no account
of the expenses which it incurs, or expects to incur, in discharging
its functions.

(2) The PRA must prepare and operate a scheme (“the financial
penalty scheme”) for ensuring that the amounts paid to the PRA
25by way of penalties imposed under this Act are applied for the
benefit of authorised persons.

(3) The financial penalty scheme may, in particular, make different
provision with respect to different classes of authorised person.

(4) Up-to-date details of the financial penalty scheme must be set out
30in a document (“the scheme details”).

28 (1) The scheme details must be published by the PRA in the way
appearing to it to be best calculated to bring them to the attention
of the public.

(2) Before making the financial penalty scheme, the PRA must
35publish a draft of the proposed scheme in the way appearing to the
PRA to be best calculated to bring it to the attention of the public.

(3) The draft must be accompanied by notice that representations
about the proposals may be made to the PRA within a specified
time.