Financial Services Bill (HL Bill 60)

(c) if no date is specified in the notice, when the matter to which the
notice relates is no longer open to review.

(4) A direction may be expressed to take effect immediately (or on a
specified date) only if the regulator reasonably considers that it is
5necessary for the direction to take effect immediately (or on that date).

(5) The notice under subsection (1) must—

(a) give details of the direction,

(b) state the regulator’s reasons for the direction and for its
determination as to when the direction takes effect,

(c) 10inform the notified person that the person may make
representations to the regulator within such period as may be
specified in the notice (whether or not the notified person has
referred the matter to the Tribunal), and

(d) inform the notified person of the person’s right to refer the
15matter to the Tribunal.

(6) The regulator may extend the period allowed under the notice for
making representations.

(7) If, having considered any representations made by any notified person,
the regulator decides—

(a) 20to give the direction proposed, or

(b) if the direction has been given, not to revoke the direction,

it must give each of the notified persons written notice.

(8) If, having considered any representations made by any notified person,
the regulator decides—

(a) 25not to give the direction proposed,

(b) to give a different direction, or

(c) to revoke a direction which has effect,

it must give each of the notified persons written notice.

(9) A notice given under subsection (7) must inform the notified person of
30the person’s right to refer the matter to the Tribunal.

(10) A notice under subsection (8)(b) must comply with subsection (5).

(11) If a notice informs the notified person of the person’s right to refer a
matter to the Tribunal, it must give an indication of the procedure on
such a reference.

(12) 35For the purposes of subsection (3)(c), whether a matter is open to
review is to be determined in accordance with section 391(8).

192F Consultation between regulators

(1) Before the PRA gives a notice under section 192E(1) or (8)(b), it must
consult the FCA.

(2) 40Before the FCA gives a notice under section 192E(1) or (8)(b) in relation
to the parent undertaking of a PRA-authorised person, the FCA must
consult the PRA.

(3) Before either regulator gives a notice under section 192E(1) or (8)(b) in
relation to the parent undertaking of a recognised clearing house, the
45regulator must consult the Bank of England.

192G References to Tribunal

(1) A notified person who is aggrieved by the exercise by either regulator
of its powers in relation to directions under section 192C may refer the
matter to the Tribunal.

(2) 5“Notified person” is to be read in accordance with subsection (2) of
section 192E, except that it includes a person to whom a notice under
subsection (1) of that section ought to have been given.

192H Statement of policy: directions under section 192C

(1) Each regulator must prepare and issue a statement of policy with
10respect to the giving of directions under section 192C.

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

(4) 15In exercising or deciding whether to exercise its power under section
192C in any particular case, a regulator must have regard to any
statement published under this section and for the time being in force.

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

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

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

192I 25Statement of policy relating to directions: procedure

(1) Before issuing a statement of policy under section 192H, a regulator
(“the issuing regulator”) must—

(a) consult the other regulator and the Bank of England, and

(b) publish a draft of the proposed statement in the way appearing
30to the issuing regulator 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 issuing regulator within a specified time.

(3) Before issuing the proposed statement, the issuing regulator must have
35regard to any representations made to it in accordance with subsection
(2).

(4) If the issuing 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),
40and

(b) its response to them.

(5) If the statement differs from the draft published under subsection (2) in
a way which is, in the opinion of the issuing regulator, significant, the
issuing regulator—

(a) must before issuing it consult the other regulator again, and

(b) must (in addition to complying with subsection (4)), publish
details of the difference.

(6) The issuing regulator may charge a reasonable fee for providing a
5person with a draft published under subsection (1)(b).

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

Rules requiring provision of information by parent undertakings

192J Rules requiring provision of information by parent undertakings

(1) The appropriate regulator may make rules requiring qualifying parent
10undertakings—

(a) to provide to the regulator information of a specified
description;

(b) to produce to the regulator documents of a specified
description.

(2) 15The rules may only specify a description of information or documents
that is relevant to the exercise by the regulator of its functions.

(3) The rules may make provision—

(a) as to the time within which information must be provided or
documents produced;

(b) 20about the form in which any information is to provided;

(c) about the place where any documents are to be produced;

(d) requiring information provided to be verified in a specified
manner;

(e) requiring documents produced to be authenticated in a
25specified manner.

(4) “The appropriate regulator” means—

(a) in relation to the parent undertaking of a qualifying authorised
person who is a PRA-authorised person, the FCA or the PRA;

(b) in any other case, the FCA.

30Failure to comply with direction or breach of rules

192K Power to impose penalty or issue censure

(1) This section applies if a regulator is satisfied that a person who is or has
been a qualifying parent undertaking (“P”) has contravened—

(a) a requirement of a direction given to P by that regulator under
35section 192C, or

(b) a provision of rules made by that regulator under section 192J.

(2) The regulator may impose a penalty of such amount as it considers
appropriate on—

(a) P, or

(b) 40any person who was knowingly concerned in the
contravention.

(3) The regulator may, instead of imposing a penalty on a person, publish
a statement censuring the person.

(4) The regulator may not take action against a person under this section
after the end of the limitation period unless, before the end of that
5period, it has given a warning notice to the person under section 192L.

(5) “The limitation period” means the period of 3 years beginning with the
first day on which the regulator knew of the contravention.

(6) For this purpose a regulator is to be treated as knowing of a
contravention if it has information from which the contravention can
10reasonably be inferred.

192L Procedure and right to refer to Tribunal

(1) If a regulator proposes to take action against a person under section
192K, it must give the person a warning notice.

(2) A warning notice about a proposal to impose a penalty must state the
15amount of the penalty.

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

(4) If the regulator decides to take action against a person under section
192K, it must give the person a decision notice.

(5) 20A decision notice about the imposition of a penalty must state the
amount of the penalty.

(6) A decision notice about the publication of a statement must set out the
terms of the statement.

(7) If the regulator decides to take action against a person under section
25192K, the person may refer the matter to the Tribunal.

192M Duty on publication of statement

After a statement under section 192K(3) is published, the regulator
must send a copy of the statement to—

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

(b) 30any 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) Each regulator must prepare and issue a statement of policy with
respect to—

(a) 35the 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
should be must include having regard to—

(a) the seriousness of the contravention,

(b) 40the extent to which the contravention was deliberate or reckless,
and

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

(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) 5In 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
10concerned 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
15statement 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

28 Exemption for recognised investment exchanges and clearing houses

(1) 20Section 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
25the 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) 30which is carried on for the purposes of, or in connection with,
the 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
35(3).”

29 Powers 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) 40For the purposes of this Part, the FCA is “the appropriate regulator” in
relation 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
5between 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
10on 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
15to this Act.

30 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
20regulator to make rules for the purposes of the regulations or of any
specified provision made by the regulations.”

31 Additional power to direct UK clearing houses

After section 296 of FSMA 2000 insert—

“296A Additional power to direct UK clearing houses

(1) 25The Bank of England may direct a UK clearing house to take, or refrain
from 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) 30maintaining public confidence in the stability of the UK
financial 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
35clearing house.

(2) The 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
40a particular case).

(3) The 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.”

32 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) In subsection (1), omit paragraphs (b) and (c) (requirements to bring notice to
5attention 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) The period for making representations is such period as is specified in
10the 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) In subsection (7), for “considers it essential” substitute “reasonably considers it
15necessary”.

33 Power to take disciplinary measures against recognised bodies

After section 312D of FSMA 2000 insert—

“CHAPTER 3B Disciplinary measures

312E Public censure

(1) 20If 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) 25a 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) 30a 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
35prosecute 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) 40a 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) a requirement that is imposed by this Act and whose
5contravention 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

If the appropriate regulator considers that a recognised body has
10contravened 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) If the appropriate regulator proposes—

(a) 15to 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
20the terms of the statement.

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

312H Decision notice

(1) If the appropriate regulator decides—

(a) 25to 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
(whether or not of the amount proposed),

it must give the body a decision notice.

(2) 30In 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
penalty.

(4) If the appropriate regulator decides—

(a) 35to 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,

the body may refer the matter to the Tribunal.

312I Publication

40After 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) any 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) the imposition of penalties under section 312F, and

(b) 5the 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
the nature of the requirement concerned, and

(b) 10the 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) If a statement issued by an appropriate regulator under this section is
15altered 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
20under 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
be 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) 25An 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
copy of any statement which it publishes under this section.

312K Statement of policy: procedure

(1) 30Before 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
public.

(2) The draft must be accompanied by notice that representations about the
35proposal 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) If the regulator issues the proposed statement it must publish an
account, in general terms, of—

(a) 40the representations made to it in accordance with subsection (2),
and

(b) its 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 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
person with a copy of a draft published under subsection (1).

(7) 5This section also applies to a proposal to alter or replace a statement.”

34 Repeal of special competition regime

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

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

(b) 10omit Chapter 3 (exclusion from the Competition Act 1998).

35 Sections 28 to 34: minor and consequential amendments

Schedule 8 contains—

(a) minor amendments of FSMA 2000 in connection with provision made
by sections 28 to 34, and

(b) 15other amendments of that Act in consequence of that provision.

Suspension and removal of financial instruments from trading

36 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) 20for “Authority”, in each place, substitute “FCA”, and

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

Discipline and enforcement

37 Discipline and enforcement

(1) Schedule 9 contains miscellaneous amendments of FSMA 2000 relating to
25discipline and enforcement.

(2) If the Treasury consider that it is in the public interest to do so, the Treasury
may by order—

(a) amend section 391 of FSMA 2000 by substituting for subsections (1) to
(1ZB) the following—

“(1) 30Neither the regulator giving a warning notice nor a person to
whom it is given or copied may publish the notice or any details
concerning it.”, and

(b) repeal section 395(1)(d) and (2)(b) and (c) of that Act.