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Financial Services Bill (HL Bill 48)

Financial Services BillPage 240

(5) Subsection (6) applies where the appropriate regulator is the FCA
and either—

(a) the transferee is a PRA-authorised person, or

(b) the authorised person concerned or the transferee has as a
5member of its immediate group a PRA-authorised person.

(6) The FCA must consult the PRA before—

(a) nominating or approving a person under subsection (2)(b), or

(b) approving a form under subsection (3).

4 (1) Section 110 (right to participate in proceedings) is amended as follows.

(2) 10The existing provision becomes subsection (1).

(3) For paragraph (a) of that subsection substitute—

(a) the FCA,

(aa) in the case of a scheme falling within subsection (2), the PRA,
and.

(4) 15After that subsection insert—

(2) A scheme falls within this subsection if—

(a) the authorised person concerned or the transferee is a PRA-
authorised person, or

(b) the authorised person concerned or the transferee has as a
20member of its immediate group a PRA-authorised person.

5 In section 112 (effect of order sanctioning business transfer scheme), in
subsections (10) and (11), for “Authority” substitute “appropriate regulator”.

6 After section 112 insert—

112ZA Duty of regulator to provide copy of order

(1) 25Where the PRA receives under section 112(10) a copy of an order it
must, without delay, give a copy of it to the FCA.

(2) Where the FCA receives under section 112(10) a copy of an order it
must, without delay, give a copy of it to the PRA if the order relates
to a scheme in respect of which—

(a) 30the transferee is a PRA-authorised person, or

(b) the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.

7 (1) Section 113 (appointment of actuary) is amended as follows.

(2) In subsection (2)—

(a) 35for “the Authority”, in the first place, substitute “either regulator”,
and

(b) for “Authority”, in the second place, substitute “regulator which
made the application”.

(3)
After that subsection insert—

(3) 40An application under subsection (2) may be made by the PRA only
if—

(a) the authorised person concerned or the transferee is a PRA-
authorised person, or

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(b) the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.

8 In section 115 (certificates for purposes of insurance business transfers
overseas), for “Authority” substitute “appropriate regulator”.

9 5Schedule 12 to FSMA (transfer schemes: certificates) is amended as follows.

10 In paragraph 1, for “the Authority”, in each place, substitute “the
appropriate regulator”.

11 (1) Paragraph 2 is amended as follows.

(2) In the following places, for “Authority” substitute “appropriate regulator”—

(a) 10sub-paragraph (1)(b);

(b) in the first place in sub-paragraph (3).

(3) In sub-paragraph (3), after “transferred” insert “certification”.

(4) In sub-paragraph (6)(c), for “, the Authority” substitute

(i) the PRA, if the transferee is a PRA-authorised
15person with a Part 4A permission or with
permission under Schedule 4;

(ii) the FCA, if the transferee is a person with a Part 4A
permission or with permission under Schedule 4
but is not a PRA-authorised person.

12 20In paragraph 3, for “Authority” substitute “appropriate regulator”.

13 In paragraph 4, for “Authority”, in the first place, substitute “appropriate
regulator”.

14 In paragraph 5, for “Authority”, in the first place, substitute “appropriate
regulator”.

15 25In paragraph 5A, for “the Authority” substitute “the appropriate regulator”.

16 In paragraph 8(2)—

(a) for paragraph (a) substitute—

(a) if the transferee is a PRA-authorised person with a
Part 4A permission or with permission under
30Schedule 4, the PRA;

(aa) if the transferee is a person with Part 4A permission
or with permission under Schedule 4 but is not a
PRA-authorised person, the FCA;, and

(b) in paragraph (c), after “(a)” insert “, (aa)”.

17 35In paragraph 9, for “Authority” substitute “appropriate regulator”.

18 (1) Paragraph 9A is amended as follows.

(2) The existing provision becomes sub-paragraph (1).

(3) In that sub-paragraph, for “Authority” substitute “relevant regulator”.

(4) After that sub-paragraph insert—

(2) 40In this paragraph the “relevant regulator” means—

(a) if the transferee is a PRA-authorised person, the PRA;

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(b) in any other case, the FCA.

19 (1) Paragraph 10 is amended as follows.

(2) In sub-paragraph (2), for “Authority” substitute “FCA or the PRA”.

(3) In sub-paragraph (5), for “Authority” substitute “regulator which supervises
5the transferee’s margin of solvency”.

(4) In sub-paragraph (6), for “Authority” substitute “FCA or the PRA”.

Section 28

SCHEDULE 7 Application of provisions of FSMA 2000 to Bank of England etc

This is the Schedule 17A to be inserted in FSMA 2000 after Schedule 17—

Section 285A

Schedule 17A 10Further provision in relation to exercise of Part 18 functions by Bank
of England

Part 1 Co-operation between appropriate regulators

Memorandum of understanding between appropriate regulators and PRA

1 (1) 15The appropriate regulators must prepare and maintain a
memorandum describing how they intend to work together in
exercising their functions in relation to persons who are
recognised bodies.

(2) The memorandum must in particular make provision about—

(a) 20the need for each party when exercising a function in
relation to any person (“A”) who is a recognised body, or
any member of A’s group, to have regard to the exercise
(or possible exercise) of any function by the other party in
relation to A or any member of A’s group;

(b) 25the role of each party in cases where they are both
exercising functions in relation to the same persons;

(c) the obtaining and disclosure of information;

(d) the co-ordination by the parties of the exercise of their
powers to appoint competent persons under Part 11
30(information gathering and investigations) to conduct
investigations on their behalf.

(3) In this paragraph any reference to a function is to any function
whether conferred by or under any provision of this Part of this
Act or any other provision of this Act or otherwise.

2 (1) 35The appropriate regulators and the PRA must prepare and
maintain a memorandum describing how they intend to work
together in exercising their functions in relation to persons who
are recognised bodies and who—

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(a) are PRA-authorised persons; or

(b) are members of a group of which a member is a PRA-
authorised person.

(2) The memorandum must in particular make provision about—

(a) 5the need for each party when exercising a function in
relation to any person (“A”) who is a recognised body, or
any member of A’s group, to have regard to the exercise
(or possible exercise) of any function by the other party in
relation to A or any member of A’s group;

(b) 10the role of each party in cases where they are both
exercising functions in relation to the same persons;

(c) the obtaining and disclosure of information;

(d) the co-ordination by the parties of the exercise of their
powers to appoint competent persons under Part 11
15(information gathering and investigations) to conduct
investigations on their behalf.

(3) In this paragraph any reference to a function is to any function
whether conferred by or under any provision of this Part of this
Act or any other provision of this Act or otherwise.

3 20The parties to a memorandum under paragraph 1 or 2 must
review the memorandum at least once in each calendar year.

4 The parties to a memorandum under paragraph 1 or 2 must give
the Treasury a copy of the memorandum and any revised
memorandum.

5 25The Treasury must lay before Parliament a copy of any document
received by them under paragraph 4.

6 The parties to a memorandum under paragraph 1 or 2 must ensure
that the memorandum as currently in force is published in the way
appearing to them to be best calculated to bring it to the attention
30of the public.

Notification by FCA of action in relation to recognised clearing houses

7 The FCA must notify the Bank of England of any direction given
by it under section 128 to a recognised clearing house (market
abuse: suspension of investigations).

8 35The FCA must notify the Bank of England of any requirement
imposed by it under section 313A on a recognised clearing house
(power to require suspension or removal of financial instruments
from trading).

Part 2 40Application of provisions of this Act in relation to Bank of England

Introduction

9 (1) The provisions of this Act mentioned in this Part of this Schedule
are to apply in relation to the Bank of England in accordance with
the provision made by this Part of this Schedule.

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(2) In any case where sub-paragraph (1) applies—

(a) any reference in this Act to the FCA or the PRA which is
contained in, or relates to, any of those provisions
(however expressed) is to be read as a reference to the
5Bank; and

(b) this Act has effect with any other necessary modifications.

Rules

10 (1) The following provisions of Part 9A of this Act are to apply in
relation to rules made by the Bank under any provision made by
10or under this Act—

(a) section 137R (general supplementary powers);

(b) sections 138A and 138B (modification or waiver of rules),
but with the omission of subsection (4)(b) of section 138A
and subsection (4) of section 138B;

(c) 15section 138C (evidential provisions);

(d) section 138D (actions for damages), but with the omission
of subsection (2);

(e) section 138E (limits on effect of contravening rules);

(f) section 138F (notification of rules);

(g) 20section 138G (rule-making instruments);

(h) section 138H (verification of rules);

(i) section 138J (consultation), but with the omission of
subsections (1)(a), (2)(c) and (5)(b); and

(j) section 138L (consultation: general exemptions), but with
25the omission of subsections (1) and (3).

(2) Any reference in any of those provisions to an authorised person
is to be read as a reference to a recognised clearing house.

(3) Section 138J(2)(d) has effect in relation to rules proposed to be
made by the Bank as if the reference to the compatibility of the
30proposed rules with the provisions mentioned in section
138J(2)(d) were a reference to their compatibility with the Bank’s
financial stability objective.

(4) Section 138L(2) has effect as if for paragraphs (a) and (b) there
were substituted “be prejudicial to financial stability”.

35Information gathering and investigations

11 (1) The powers conferred by section 165(1) and (3) (power to require
information) are exercisable by the Bank or (as the case may be) its
officers to impose requirements on—

(a) a recognised clearing house;

(b) 40a person who for the purposes of section 165 is connected
with a recognised clearing house.

(2) The information or documents that the Bank may require to be
provided or produced are limited to—

(a) information or documents reasonably required in
45connection with the exercise by the Bank of functions
conferred on it by or under this Part of this Act;

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(b) information or documents reasonably required in
connection with the exercise by the Bank of any of its other
functions in pursuance of its financial stability objective;
and

(c) 5information or documents which the Bank reasonably
considers may enable or assist the FCA in discharging
functions conferred on the FCA by or under this Act.

(3) In consequence of the provision made by sub-paragraph (2),
section 165(4) is not to apply in relation to section 165(1) and (3) as
10applied by this paragraph.

12 The power conferred by section 166 (reports by skilled person) is
exercisable by the Bank as if references in that section to an
authorised person were to a recognised clearing house.

13 (1) The powers conferred by section 167 (appointment of persons to
15carry out general investigations) are exercisable by the Bank as if
references in that section to an authorised person were to any
recognised clearing house other than an overseas clearing house.

(2) In addition to the powers conferred by section 171, a person
conducting an investigation under section 167 as a result of this
20paragraph is to have the powers conferred by sections 172 and 173
(and for this purpose the references in those sections to an
investigator are to be read accordingly).

14 (1) The power conferred by section 168(5) (appointment of persons to
carry out investigations in particular cases) is exercisable by the
25Bank.

(2) That power is exercisable if it appears to the Bank that there are
circumstances suggesting that—

(a) a clearing house may be guilty of an offence under section
398(1) or an offence under prescribed regulations relating
30to money laundering;

(b) a clearing house may have contravened a rule made by the
Bank under this Part of this Act;

(c) a clearing house may have contravened the recognition
requirements;

(d) 35a clearing house may have contravened any qualifying EU
provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
order;

(e) a clearing house may have breached the general
40prohibition.

(3) In addition to the powers conferred by section 171, a person
conducting an investigation under section 168(5) as a result of this
paragraph is to have the powers conferred by sections 172 and 173
(and for this purpose the references in those sections to an
45investigator are to be read accordingly).

15 An overseas regulator may, in accordance with section 169,
request the Bank to exercise the power conferred by section 165 (as
applied by paragraph 11 of this Schedule).

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16 The power to give information under section 176(1) (entry of
premises under warrant) is exercisable by the Bank, or an
investigator appointed by the Bank, as if the reference to the
second set of conditions were omitted.

5Powers in relation to parent undertakings

17 (1) The following provisions of Part 12A of this Act are to apply in
relation to the Bank—

(a) section 192C (power to direct qualifying parent
undertaking);

(b) 10section 192D (requirements that may be imposed);

(c) section 192E (direction: procedure);

(d) section 192G (references to Tribunal);

(e) section 192H (statement of policy);

(f) section 192I (statement of policy: procedure);

(g) 15section 192J (rules requiring provision of information);

(h) sections 192K to 192N (enforcement).

(2) For the purposes of those provisions section 192B (meaning of
“qualifying parent undertaking”) is to apply as if the reference in
subsection (1) to a qualifying authorised person or recognised UK
20investment exchange were a reference to a recognised clearing
house other than an overseas clearing house.

(3) Section 192C has effect as if—

(a) the reference in subsection (2) to the regulation of one or
more qualifying authorised persons or recognised
25investment exchanges in pursuance of any of the
regulator’s objectives were a reference to the regulation of
one or more recognised clearing houses,

(b) subsections (3) and (4) were omitted, and

(c) the reference in subsection (5)(a) to authorised persons or
30recognised investment exchanges were a reference to
recognised clearing houses.

(4) Section 192E has effect as if the reference in subsection (1) to an
authorised person or recognised investment exchange were a
reference to a recognised clearing house.

(5) 35Section 192I has effect as if the reference in subsection (1)(a) to the
other regulator and the Bank were a reference to the FCA and the
PRA.

(6) Before the Bank gives a notice under section 192E(1) or (8)(b)—

(a) if the notice relates to the parent undertaking of an
40authorised person or recognised investment exchange, the
Bank must consult the FCA, and

(b) if the notice relates to the parent undertaking of a PRA-
authorised person, the Bank must also consult the PRA.

Auditors

18 (1) 45Section 342 (information given by auditor to a regulator) applies
in relation to a relevant auditor as if—

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(a) the references in that section to a recognised investment
exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
which is also an authorised person or recognised
5investment exchange, the references to a regulator
included the Bank, and

(c) in the case of an auditor of a recognised clearing house not
falling within paragraph (b), the references to a regulator
were to the Bank.

(2) 10A “relevant auditor” is a person who is, or has been, an auditor of
a recognised clearing house appointed under or as a result of a
statutory provision.

19 (1) Section 343 (information given by auditor: person with close links)
applies in relation to a relevant auditor as if—

(a) 15the references in that section to a recognised investment
exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
which is an authorised person or which is a recognised
investment exchange, the references to a regulator
20included the Bank, and

(c) in the case of an auditor of a recognised clearing house not
falling within paragraph (b), the references to a regulator
were to the Bank.

(2) A “relevant auditor” is a person who—

(a) 25is, or has been, an auditor of a recognised clearing house
appointed under or as a result of a statutory provision, and

(b) is, or has been, an auditor of a person who has close links
with the recognised clearing house.

20 Section 344 (duty of auditor resigning to give notice) applies to an
30auditor to whom section 342 applies (whether by virtue of
paragraph 18 or otherwise) as if—

(a) the references in that section to a recognised investment
exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
35which is neither an authorised person nor a recognised
investment exchange, the reference in the definition of “the
appropriate regulator” to the FCA were a reference to the
Bank,

(c) in the case of an auditor of a recognised clearing house
40which is a PRA-authorised person, the reference in the
definition of “the appropriate regulator” to the PRA were
a reference to the PRA and the Bank,

(d) in the case, not falling within paragraph (c), of an auditor
of a recognised clearing house which is an authorised
45person or which is a recognised investment exchange, the
reference in the definition of “the appropriate regulator” to
the FCA were a reference to the FCA and the Bank.

21 Sections 345A to 345E apply to auditors to whom section 342
applies only by virtue of paragraph 18 as if—

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(a) the references in those sections to an auditor or actuary to
whom section 342 applies were to an auditor to whom
section 342 applies by virtue of paragraph 18,

(b) the references in those sections to a PRA-authorised person
5were to a recognised clearing house,

(c) in a case where the Bank disqualifies a person from being
an auditor of a recognised clearing house that is also a
recognised investment exchange, section 345A(5)(a)
required the Bank to notify the FCA, and

(d) 10the references in sections 345D and 345E to a regulator
included the Bank.

Public record and disclosure of information

22 Section 347 (record of authorised persons, recognised investment
exchanges, etc), so far as it relates to recognised investment
15exchanges, applies in relation to the Bank as if references in that
section to a recognised investment exchange were to a recognised
clearing house.

23 Sections 348 to 350 and 353 (disclosure of information) apply in
relation to information received by the Bank for the purposes of,
20or in the discharge of, any of its functions relating to recognised
clearing houses.

Insolvency

24 (1) The following provisions of Part 24 of this Act are to apply in
relation to the Bank—

(a) 25section 356 (powers to participate in proceedings:
company voluntary arrangements);

(b) section 358 (powers to participate in proceedings: trust
deeds for creditors in Scotland);

(c) section 359 (administration order);

(d) 30section 362 (powers to participate in administration
proceedings);

(e) section 362A (consent to appointment of administrator);

(f) section 363 (powers to participate in proceedings:
receivership);

(g) 35section 365 (powers to participate in proceedings:
voluntary winding-up);

(h) section 367 (winding-up petitions);

(i) section 371 (powers to participate in proceedings:
winding-up).

(2) 40Those provisions are to apply as if any reference to an authorised
person or recognised UK investment exchange were a reference to
a recognised clearing house.

25 In the case of any regulated activity which is carried on for the
purposes of, or in connection with, the provision of clearing
45services, the reference to the FCA in section 375(1) is to be read as
including a reference to the Bank.

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Injunctions and restitution

26 (1) The power to make an application under section 380(1), (2) or (3)
(injunctions) is exercisable by the Bank.

(2) For the purposes of the application, any reference in that section to
5a relevant requirement is to—

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

(b) a requirement that is imposed under any other provision
10of this Act by the Bank;

(c) a requirement that is imposed by any qualifying EU
provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
order; or

(d) 15a 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).

27 (1) The power to make an application under section 382(1) (restitution
20order) is exercisable by the Bank.

(2) For the purposes of the application, any reference in that section to
a relevant requirement is to be read in accordance with paragraph
26(2) of this Schedule.

28 (1) The power conferred by section 384(5) (power of FCA to require
25restitution order) is exercisable by the Bank.

(2) That power is exercisable if the Bank is satisfied that a recognised
clearing house has contravened a relevant requirement, or been
knowingly concerned in the contravention of a relevant
requirement, and—

(a) 30that profits have accrued to the recognised clearing house
as a result of the contravention; or

(b) that one or more persons have suffered loss or been
otherwise adversely affected as a result of the
contravention.

(3) 35For the purposes of that power, “relevant requirement” is to be
read in accordance with paragraph 26(2) of this Schedule.

(4) Where this paragraph applies, section 384(5) and (6) are to have
effect as if—

(a) any reference to the person concerned were a reference to
40the recognised clearing house; and

(b) any reference to subsection (1) were a reference to sub-
paragraph (2) of this paragraph.

Notices

29 The provisions of Part 26 of this Act (notices) apply in relation to a
45warning or decision notice given by the Bank under section 192L,