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Financial Services Bill (HL Bill 48)

Financial Services BillPage 250

312G or 312H as they apply in relation to such a notice given by
the FCA under that section.

Offences

30 Section 398 (misleading the FCA: residual cases) applies to
5information given to the Bank in purported compliance with—

(a) a requirement that is imposed by or under any provision of
Part 18 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; or

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

31 (1) Section 401 (proceedings for an offence) applies to the Bank as if
15for the purposes of subsections (2)(a) and (3)(a) of that section the
Bank were an appropriate regulator in respect of each of the
following offences—

(a) an offence under section 177(3) where the investigation is
being, or is likely to be, conducted on behalf of the Bank;

(b) 20an offence under section 177(4) where the requirement is
imposed by the Bank;

(c) an offence under section 177(6) where the warrant is issued
as a result of information on oath given by the Bank or a
person appointed by it to conduct an investigation on its
25behalf;

(d) an offence under section 398(1) where the information was
given to the Bank.

(2) Section 401(3B) has effect subject to the provision made by this
paragraph (so that the FCA is not the appropriate regulator for the
30purposes of subsections (2)(a) and (3)(a) in respect of the above
offences).

Records

32 Paragraph 17 of Schedule 1ZB (records) applies in relation to the
recording of decisions made by the Bank in the exercise of its
35functions relating to recognised clearing houses.

Annual report

33 Paragraph 19 of Schedule 1ZB (annual report by PRA) applies in
relation to the Bank, but—

(a) as if for paragraphs (a) to (g) of sub-paragraph (1) there
40were substituted—

(a) the discharge of its functions relating to recognised
clearing houses,

(b) the extent to which, in its opinion, in discharging
those functions its financial stability objective has
45been met,, and

(b) as if sub-paragraph (3) were omitted.

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Part 3 Winding up, administration or insolvency of UK clearing houses

Notice to Bank of England of preliminary steps

34 (1) An application for an administration order in respect of a UK
5clearing house may not be determined unless the conditions
below are satisfied.

(2) A petition for a winding up order in respect of a UK clearing house
may not be determined unless the conditions below are satisfied.

(3) A resolution for voluntary winding up of a UK clearing house may
10not be made unless the conditions below are satisfied.

(4) An administrator of a UK clearing house may not be appointed
unless the conditions below are satisfied.

(5) Condition 1 is that the Bank of England has been notified—

(a) by the applicant for an administration order, that the
15application has been made,

(b) by the petitioner for a winding up order, that the petition
has been presented,

(c) by the UK clearing house, that a resolution for voluntary
winding up may be made, or

(d) 20by the person proposing to appoint an administrator, of
the proposed appointment.

(6) Condition 2 is that a copy of the notice complying with Condition
1 has been filed (in Scotland, lodged) with the court (and made
available for public inspection by the court).

(7) 25Condition 3 is that—

(a) the period of 2 weeks, beginning with the day on which the
notice is received, has ended, or

(b) the Bank of England has informed the person who gave the
notice that—

(i) 30it has no objection to the order, resolution or
appointment being made, and

(ii) it does not intend to exercise a stabilisation power
under Part 1 of the Banking Act 2009.

(8) Arranging for the giving of notice in order to satisfy Condition 1
35can be a step with a view to minimising the potential loss to a UK
clearing house’s creditors for the purpose of section 214 of the
Insolvency Act 1986 (wrongful trading).

(9) In this paragraph “the court” means—

(a) in England and Wales, the High Court,

(b) 40in Scotland, the Court of Session, and

(c) in Northern Ireland, the High Court.

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Power to give directions to insolvency practitioner

35 (1) This paragraph applies where a person has been appointed to act
as an insolvency practitioner (within the meaning of section 388 of
the Insolvency Act 1986 or Article 3 of the Insolvency (Northern
5Ireland) Order 1989) in relation to a company which is, or has
been, a UK clearing house.

(2) The Bank of England may give directions to the person if satisfied
that it is desirable to give the directions, having regard to the
public interest in—

(a) 10protecting and enhancing the stability of the UK financial
system,

(b) protecting and enhancing public confidence in the stability
of the UK financial system, and

(c) maintaining the continuity of central counterparty clearing
15services.

(3) Before giving directions the Bank of England must consult—

(a) the Treasury,

(b) (if the clearing house is a PRA-authorised person) the PRA,
and

(c) 20the FCA.

(4) Directions are enforceable, on an application by the Bank of
England, by an injunction or, in Scotland, by an order for specific
performance under section 45 of the Court of Session Act 1988.

(5) A person is not liable for damages in respect of action or inaction
25in accordance with directions.

(6) The immunity does not extend to action or inaction—

(a) in bad faith, or

(b) in contravention of section 6(1) of the Human Rights Act
1998.

(7) 30In this paragraph “central counterparty clearing services” has the
same meaning as in section 155 of the Companies Act 1989 (see
subsection (3A) of that section).

Part 4 Fees

36 (1) 35The Bank of England may, in connection with the discharge of any
of its qualifying functions, require recognised clearing houses to
pay fees to the Bank.

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

(a) its functions under or as a result of this Part of this Act, and

(b) 40its functions under or as a result of a qualifying EU
provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
order.

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(3) The power of the Bank to set fees includes power to set fees for the
purpose of meeting expenses incurred by it or the FCA—

(a) in preparation for the exercise of functions by the Bank
under this Part of this Act, or

(b) 5for the purpose of facilitating the exercise by the Bank of
those functions or otherwise in connection with their
exercise by it.

(4) It is irrelevant when the expenses were incurred (and, in
particular, it is irrelevant if expenses were incurred by the FCA at
10a time when it was known as the Financial Services Authority).

37 Any fee which is owed to the Bank under paragraph 36 may be
recovered as a debt due to the Bank.

Section 34

SCHEDULE 8 Sections 27 to 33: minor and consequential amendments

1 15FSMA 2000 is amended as follows.

2 (1) Section 286 (qualification for recognition) is amended as follows.

(2) In subsection (1)(a), for “the Authority” substitute “the appropriate
regulator”.

(3) In subsections (4A), (4C) and (6), for “the Authority” substitute “the FCA”.

3 (1) 20Section 287 (application by an investment exchange) is amended as follows.

(2) In subsections (1) and (2) for “the Authority”, in each place, substitute “the
FCA”.

(3) In subsection (3)—

(a) in paragraph (a), after “provision” insert “by another person”,

(b) 25in paragraph (b), for “clearing services” substitute “services falling
within section 285(2)(b)”, and

(c) in paragraphs (d) and (e), for “the Authority” substitute “the FCA”.

4 (1) Section 288 (application by a clearing house) is amended as follows.

(2) In subsection (1), for “the Authority” substitute “the Bank of England”.

(3) 30In subsection (2)—

(a) in the opening words, for “the Authority” substitute “the Bank of
England”, and

(b) in paragraph (d), for “the Authority” substitute “the Bank”.

(4) In subsection (3)(b), after “clearing services” insert “or services falling within
35section 285(3)(b)”.

5 In section 289 (applications: supplementary), in subsections (1), (2) (in both
places) and (3), for “the Authority” substitute “the appropriate regulator”.

6 (1) Section 290 (recognition orders) is amended as follows.

(2) In subsection (1)—

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

(b) for “the Authority”, in the second place, substitute “the regulator
concerned”.

(3) 5In subsection (1B), for “the Authority” substitute “the FCA”.

(4) Omit subsection (2).

(5) In subsection (3), for “the Authority” substitute “the appropriate regulator”.

(6) Omit subsection (6).

7 (1) Section 290A (refusal of recognition on ground of excessive regulatory
10provision) is amended as follows.

(2) In subsection (1)—

(a) for “The Authority must” substitute “The appropriate regulator
must”,

(b) for “the Authority that” substitute “it that”,

(c) 15omit the “or” following paragraph (a), and

(d) at the end of paragraph (b) insert or

(c) the provision by the applicant of services falling
within section 285(2)(b) or (3)(b),.

(3) In subsection (3), for “Authority” substitute “appropriate regulator”.

8 20In section 292 (overseas investment exchanges and overseas clearing house),
in subsections (2), (3)(c) and (d), (4) and (5)(c), for “the Authority” substitute
“the appropriate regulator”.

9 In section 292A (publication of information by recognised investment
exchange), in subsections (1), (3), (5) and (6), for “Authority” substitute
25“FCA”.

10 (1) Section 293 (notification requirements) is amended as follows.

(2) In subsections (1) to (3) and (5), for “Authority” substitute “appropriate
regulator”.

(3) In subsection (6)—

(a) 30in paragraph (a), after “provision” insert “by another person”,

(b) in paragraph (b), for “clearing services” substitute “services falling
within section 285(2)(b)”, and

(c) for “the Authority” substitute “the FCA and the Bank of England”.

(4) In subsection (7)—

(a) 35in paragraph (a), after “clearing services” insert “or services falling
within section 285(3)(b)”,

(b) in paragraph (b), after “clearing services” insert “or services falling
within section 285(3)(b)”, and

(c) for “the Authority” substitute “the Bank of England and the FCA”.

(5) 40In subsection (9), for “the Authority’s” substitute “the appropriate
regulator’s”.

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11 For section 293A substitute—

293A   Information: compliance with EU requirements

The appropriate regulator may require a recognised body to give the
appropriate regulator such information as the appropriate regulator
5reasonably requires in order to satisfy itself that the body is
complying with any qualifying EU provision that is specified, or of a
description specified, for the purposes of this section by the Treasury
by order.

12 In section 294 (modification or waiver of rules), in subsections (1), (2), (4) and
10(6), for “Authority” substitute “appropriate regulator”.

13 (1) Section 295 (notification: overseas investment exchanges and overseas
clearing houses) is amended as follows.

(2) In subsection (1), for “the Authority” substitute “the appropriate regulator”.

(3) In subsection (2), for the words from “likely” to the end substitute “likely to
15affect the appropriate regulator’s assessment of whether it is satisfied as to
the requirements set out in section 292(3)”.

(4) In subsection (3), for “the Authority” substitute “the appropriate regulator”.

(5) Omit subsection (4).

14 (1) Section 296 (power to give directions) is amended as follows.

(2) 20In subsection (1), for “the Authority” substitute “the appropriate regulator”.

(3) In subsection (1A)—

(a) for the words from “in the case of a recognised body which is a
recognised investment” to “the body” substitute “if it appears to the
appropriate regulator that a recognised body”, and

(b) 25for the words from “directly applicable” to the end substitute
“directly applicable EU regulation specified (or of a description
specified) in an order made by the Treasury”.

(4) In subsection (2), for “The Authority” substitute “The regulator concerned”.

(5) In subsection (2A)—

(a) 30in the opening words, for “a recognised investment exchange other
than an overseas investment exchange” substitute “a recognised
body other than an overseas investment exchange or overseas
clearing house”,

(b) in paragraph (a)—

(i) 35for “the Authority”, in both places, substitute “the regulator
concerned”, and

(ii) for “the exchange” substitute “the body”, and

(c) in paragraph (b), for “the exchange” substitute “the body”.

(6) In subsection (3), for “the Authority” substitute “the regulator concerned”.

(7) 40In subsection (4), for “the Authority” substitute “an appropriate regulator”.

(8) In the heading, for “Authority’s” substitute “Appropriate regulator’s”.

15 (1) Section 297 (revoking recognition) is amended as follows.

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(2) In subsections (1) and (2), for “the Authority” substitute “the appropriate
regulator”.

(3) In subsection (2A)—

(a) in the opening words—

(i) 5for “the Authority” substitute “the appropriate regulator”,
and

(ii) omit “which is a recognised investment exchange”,

(b) in paragraphs (a) and (b), after “exchange” insert “or (as the case may
be) of a clearing house”, and

(c) 10in paragraph (c), for the words from “directly applicable” to the end
substitute “directly applicable EU regulation specified (or of a
description specified) in an order made by the Treasury”.

(4) In subsection (2C), at the end insert “or overseas clearing house”.

(5) In subsections (5) and (6), for “the Authority” substitute “the appropriate
15regulator”.

16 In section 298 (directions and revocation: procedure)—

(a) in subsections (1), (6) and (7), after “section 296” insert “or 296A”, and

(b) in subsections (1), (2)(a), (3), (5), (6), (7) (in both places) and (8), for
“the Authority” substitute “the appropriate regulator”.

17 20In section 299 (complaints about recognised bodies), in subsections (1) and
(2), for “Authority” substitute “appropriate regulator”.

18 In section 300A (power to disallow excessive regulatory provision)—

(a) in subsection (1), for the words from “with” to the end substitute
“with—

(a) 25its business as an investment exchange,

(b) the provision by it of clearing services, or

(c) the provision by it of services falling within section
285(2)(b) or (3)(b)., and

(b) in subsections (2) (in both places) and (4), and in the heading, for
30“Authority” substitute “appropriate regulator”.

19 In section 300B (duty to notify proposal to make regulatory provision) for
“Authority” (in each place) substitute “appropriate regulator”.

20 In section 300C (restriction on making provision before Authority decides
whether to act), in subsections (1), (2)(a), (3) (in both places), (4)(a) and (b),
35and in the heading, for “Authority” substitute “appropriate regulator”.

21 (1) Section 300D (consideration by Authority whether to disallow proposed
provision) is amended as follows.

(2) In subsections (1) to (4) and (5)(a) and (b), for “Authority” substitute
“appropriate regulator”.

(3) 40In subsection (6)—

(a) in the opening words, for “the Authority” substitute “the appropriate
regulator”,

(b) in paragraph (b)—

(i) for “the Authority’s” substitute “the appropriate
45regulator’s”, and

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

(c) in paragraph (c)(i) and (ii), for “the Authority” substitute “the
appropriate regulator”.

(4) In the heading, for “Authority” substitute “appropriate regulator”.

22 (1) 5Section 301 (supervision of certain contracts) is amended as follows.

(2) In subsection (2), for “the Authority” substitute “the Bank of England”.

(3) In subsection (3)—

(a) for “the Authority”, in the first place, substitute “the FCA or the Bank
of England”, and

(b) 10for “the Authority”, in the second place, substitute “the Bank”.

(4) In subsections (4)(a), (6)(a), (7) and (9), for “Authority” substitute “Bank of
England”.

23 In section 301A (obligation to notify the Authority: acquisitions of control),
in subsections (1) and (2), and in the heading, for “the Authority” substitute
15“the FCA”.

24 In section 301B (requirements for s.301A notices), in subsections (1) to (3), for
“Authority” substitute “FCA”.

25 In section 301C (acknowledgement of receipt), in subsections (1) and (2), for
“Authority” substitute “FCA”.

26 20In section 301F (assessment: general), in subsections (1) to (3), for
“Authority” substitute “FCA”.

27 (1) Section 301G (assessment: procedure) is amended as follows.

(2) In subsections (1) (in both places) and (2) to (5), for “Authority” substitute
“FCA”.

(3) 25In subsection (6), for “the Authority’s” substitute “the FCA’s”.

28 In section 301H (duration of approval), in subsections (1), (2) and (3) (in both
places), for “the Authority” substitute “the FCA”.

29 In section 301I (objections by the Authority), in subsections (1) to (5), and in
the heading, for “Authority” substitute “FCA”.

30 30In section 301J (restriction notices), in subsections (1), (2)(b), (3) and (7), for
“Authority” substitute “FCA”.

31 In section 301K (order for sale of shares), in subsection (1), for “the
Authority” substitute “the FCA”.

32 (1) Section 301L (offences under Chapter) is amended as follows.

(2) 35In subsections (1) and (2) (in both places), for “the Authority” substitute “the
FCA”.

(3) In subsection (4), for “the Authority’s” substitute “the FCA’s”.

(4) In subsections (5) and (9), for “the Authority” substitute “the FCA”.

33 In section 312A (exercise of passport rights by EEA market operator), in
40subsection (1)(b), for “the Authority” substitute “the FCA”.

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34 In section 312B (removal of passport rights from EEA market operator), in
subsections (1) (in each place), (3), (4)(b), (5), (6), (7)(a) and (b), (8)(b), (9) to
(11), (12) (in both places) and (13) (in the first place), for “Authority”
substitute “FCA”.

35 5In section 312C (exercise of passport rights by recognised investment
exchange), in subsections (2) to (6), for “Authority” substitute “FCA”.

36 (1) Section 313 (interpretation) is amended as follows.

(2) In subsection (1), at the end insert—

  • UK clearing house” means a clearing house—

    (a)

    10which has its head office or its registered office (or
    both) in the United Kingdom,

    (b)

    which provides central counterparty clearing
    services, and

    (c)

    in relation to which a recognition order is in force.

(3) 15In subsection (4), after “clearing services” insert “or services falling within
section 285(3)(b)”.

37 In section 392 (warning and decisions notices: application of provisions
relating to third party rights and access to evidence)—

(a) in paragraph (a), after “section 280(1),” insert “section 312G(1),”, and

(b) 20in paragraph (b), after “section 280(2),” insert “section 312H(1),”.

38 In section 412A (approval and monitoring of trade-matching and reporting
systems), in subsections (1), (2), (4), (5) (in both places), (6) (in both places)
and (7), for “Authority” substitute “FCA”.

39 In section 412B (procedure for approval and suspension or withdrawal of
25approval), in subsections (1) to (6), (7) (in both places), (8) and (9), for
“Authority” substitute “FCA”.

Section 36

SCHEDULE 9 Discipline and enforcement

Part 1 30Introductory

1 FSMA 2000 is amended as follows.

Part 2 Authorised persons acting without permission

2 (1) Section 20 (authorised persons acting without permission) is amended as
35follows.

(2) In subsection (1)—

(a) in the opening words, after “an authorised person” insert “other than
a PRA-authorised person”,

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(b) for paragraph (a) substitute—

(a) given to that person under Part 4A, or, and

(c) in the words after paragraph (b), for “Authority” substitute “ FCA”.

(3) After that subsection insert—

(1A) 5If a PRA-authorised person carries on a regulated activity in the
United Kingdom, or purports to do so, otherwise than in accordance
with permission given to the person under Part 4A or resulting from
any other provision of this Act, the person is to be taken to have
contravened—

(a) 10a requirement imposed by the FCA, and

(b) a requirement imposed by the PRA.

(4) In subsection (2), for “The contravention” substitute “A contravention
within subsection (1) or (1A)”.

(5) In subsection (3), for “the contravention”, in the first place, substitute “a
15contravention within subsection (1) or (1A)”.

Part 3 Market abuse

3 (1) In the provisions of Part 8 (market abuse) mentioned in sub-paragraph (2),
for “Authority” or “Authority’s”, in each place, substitute “FCA” or “FCA’s”.

(2) 20The provisions are: sections 119, 120 (including the heading), 121 to 130A
and 131A.

(3) In section 121 (codes: procedure), for subsection (10) substitute—

(10) Cost benefit analysis” means—

(a) an analysis of the costs together with an analysis of the
25benefits that will arise—

(i) if the proposed code is issued, or

(ii) if subsection (5)(b) applies, from the code that has
been issued, and

(b) subject to subsection (10A), an estimate of those costs and of
30those benefits.

(10A) If, in the opinion of the FCA—

(a) the costs or benefits referred to in subsection (10) cannot
reasonably be estimated, or

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

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

Part 4 Disciplinary measures

4 In Part 14 (disciplinary measures), before section 205 insert—

204A 40 Meaning of “relevant requirement” and “appropriate regulator”

(1) The following definitions apply for the purposes of this Part.