Financial Services Bill (HL Bill 60)

(b) for there to be a committee for the purposes of the co-ordination
mentioned in subsection (1);

(c) for that committee to include representatives of the UK authorities and
to be chaired by a representative of the Treasury;

(d) 5about the procedures to be followed by the UK authorities in agreeing
consistent objectives in relation to matters that materially affect 2 or
more of them;

(e) about how the UK authorities will consult each other about the
discharge of their relevant functions relating to international
10organisations.

(6) The memorandum need not make provision about co-ordination between the
FCA and the PRA in relation to membership of, or relations with, the European
Supervisory Authorities (as to which, see section 3E of FSMA 2000).

(7) The UK authorities may, with the agreement of a body exercising functions
15relating to the stability of the UK financial system or the regulation of financial
services, include in the memorandum provisions relating to co-operation
between any of them and that body in relation to membership of, or relations
with, the European Supervisory Authorities, EU institutions and other
international organisations.

(8) 20The Treasury must—

(a) lay before Parliament a copy of the memorandum and any revised
memorandum, and

(b) publish the memorandum as currently in force in such manner as they
think fit.

67 25Interpretation of Part 4

(1) This section has effect for the interpretation of this Part.

(2) “Public funds notification” is to be read in accordance with section 58(2).

(3) “Financial assistance” includes giving guarantees or indemnities and any other
kind of financial assistance (actual or contingent).

(4) 30The Treasury may by order provide that a specified activity or transaction, or
class of activity or transaction, is to be or not to be treated as financial assistance
for the purposes of this Part; and subsection (3) is subject to this subsection.

(5) “Qualifying financial assistance” is to be read in accordance with section 60(5).

Part 5 35Inquiries and investigations

Inquiries

68 Cases in which Treasury may arrange independent inquiries

(1) This section applies in two cases.

(2) The first case is where it appears to the Treasury that—

(a) 40events have occurred in relation to—

(i) a collective investment scheme,

(ii) a person who is, or was at the time of the events, carrying on a
regulated activity (whether or not as an authorised person), or

(iii) listed securities or an issuer of listed securities,

which posed or could have posed a serious threat to the stability of the
5UK financial system or caused or risked causing significant damage to
the interests of consumers, and

(b) those events might not have occurred, or the threat or damage might
have been reduced, but for a serious failure in—

(i) the system established by FSMA 2000, or by any previous
10statutory provision, for the regulation of such schemes, or of
such persons and their activities, or the listing of securities, or

(ii) the operation of that system.

(3) The second case is where it appears to the Treasury that—

(a) events have occurred in relation to a recognised clearing house or a
15recognised inter-bank payment system which—

(i) posed or could have posed a serious threat to the stability of or
confidence in the UK financial system, or

(ii) caused or risked causing significant damage to business or
other interests throughout the United Kingdom, and

(b) 20those events might not have occurred, or the threat or damage might
have been reduced, but for a serious failure in—

(i) the system established by Part 18 of FSMA 2000, or by any
previous statutory provision, for the regulation of clearing
houses,

(ii) 25the system established by Part 5 of the Banking Act 2009 for the
regulation of inter-bank payment systems, or

(iii) the operation of either of those systems.

(4) If the Treasury consider that it is in the public interest that there should be an
independent inquiry into the events and the circumstances surrounding them,
30they may arrange for an inquiry to be held under section 69.

(5) In this section—

• “event” does not include any event occurring before 1 December 2001 (but
  no such limitation applies to the reference in subsection (4) to
  surrounding circumstances);

• 35“recognised inter-bank payment system” means an inter-bank payment
  system, as defined by section 182 of the Banking Act 2009, that is a
  recognised system for the purposes of Part 5 of that Act.

69 Power to appoint person to hold an inquiry

(1) If the Treasury decide to arrange for an inquiry to be held under this section,
40they may appoint such person as they consider appropriate to hold the inquiry.

(2) The Treasury may, by a direction to the appointed person, control—

(a) the scope of the inquiry;

(b) the period during which the inquiry is to be held;

(c) the conduct of the inquiry;

(d) 45the making of reports.

(3) A direction may, in particular—

(a) confine the inquiry to particular matters;

(b) extend the inquiry to additional matters;

(c) require the appointed person to postpone the start of, or suspend, an
5inquiry until a specified time or until a further direction;

(d) require the appointed person to discontinue the inquiry or to take only
such steps as are specified in the direction;

(e) require the appointed person to make such interim reports as are so
specified.

70 10Powers of appointed person and procedure

(1) The person appointed to hold an inquiry under section 69 (“A”) may—

(a) obtain such information from such persons and in such manner as A
thinks fit,

(b) make such inquiries as A thinks fit, and

(c) 15determine the procedure to be followed in connection with the inquiry.

(2) A may require any person who, in A’s opinion, is able to provide any
information, or produce any document, which is relevant to the inquiry to
provide any such information or produce any such document.

(3) For the purposes of an inquiry, A has the same powers as the court in respect
20of the attendance and examination of witnesses (including the examination of
witnesses abroad) and in respect of the production of documents.

(4) “The court” means—

(a) the High Court, or

(b) in Scotland, the Court of Session.

71 25Conclusion of inquiry

(1) On completion of an inquiry under section 69, the person holding the inquiry
must make a written report to the Treasury—

(a) setting out the result of the inquiry, and

(b) making such recommendations (if any) as the person considers
30appropriate.

(2) Any expenses reasonably incurred in holding an inquiry under section 69 are
to be met by the Treasury out of money provided by Parliament.

72 Obstruction and contempt

(1) If a person (“P”)—

(a) 35fails to comply with a requirement imposed on P by a person holding
an inquiry under section 69, or

(b) otherwise obstructs such an inquiry,

the person holding the inquiry may certify the matter to the High Court (or, in
Scotland, the Court of Session).

(2) 40The court may enquire into the matter.

(3) If, after hearing—

(a) any witnesses who may be produced against or on behalf of P, and

(b) any statement made by or on behalf of P,

the court is satisfied that P would have been in contempt of court if the inquiry
had been proceedings before the court, it may deal with P as if P were in
contempt.

5Investigations

73 Duty of FCA to investigate and report on possible regulatory failure

(1) Subsection (3) applies where it appears to the FCA that—

(a) events have occurred in relation to a regulated person or collective
investment scheme which—

(i) 10indicated a significant failure to secure an appropriate degree of
protection for consumers,

(ii) had or could have had a significant adverse effect on the
integrity of the UK financial system, as defined by section 1D of
FSMA 2000 (the integrity objective), or

(iii) 15had or could have had a significant adverse effect on effective
competition in the interests of consumers in the markets for the
services described in paragraphs (a) and (b) of section 1E(1) of
FSMA 2000 (the competition objective), and

(b) those events might not have occurred, or the failure or adverse effect
20might have been reduced, but for a serious failure in—

(i) the system established by FSMA 2000 for the regulation of
authorised persons and their activities, for the listing of
securities or for the regulation of collective investment schemes,
so far as it relates to the functions of the FCA, or

(ii) 25the operation of that system, so far as it relates to those
functions.

(2) Subsection (3) also applies where the Treasury direct the FCA that it appears to
the Treasury that the conditions in subsection (1) are met in relation to
specified events.

(3) 30The FCA must carry out an investigation into the events and the circumstances
surrounding them and report to the Treasury on the result of the investigation.

(4) Subsection (3) does not apply by virtue of subsection (1) if the Treasury direct
the FCA that it is not required to carry out an investigation into the events
concerned.

(5) 35“Regulated person” means—

(a) an authorised person,

(b) a recognised investment exchange,

(c) any other person lawfully carrying on a regulated activity,

(d) a person carrying on business in contravention of the general
40prohibition in section 19 of FSMA 2000, or

(e) an issuer of listed securities.

74 Duty of PRA to investigate and report on possible regulatory failure

(1) Subsection (4) applies where it appears to the PRA that—

(a) relevant public expenditure has been incurred in respect of a PRA-
authorised person, and

(b) that expenditure might not have been incurred but for a serious failure
in—

(i) 5the system established by FSMA 2000 for the regulation of PRA-
authorised persons and their activities, so far as it relates to the
functions of the PRA, or

(ii) the operation of that system, so far as it relates to those
functions.

(2) 10Subsection (4) also applies where it appears to the PRA that—

(a) events have occurred which—

(i) had or could have had a significant adverse effect on the safety
or soundness of one or more PRA-authorised persons, or

(ii) if the effecting and carrying out of contracts of insurance is a
15PRA-regulated activity for the purposes of FSMA 2000, related
to a PRA-authorised person carrying on that activity and
indicated a significant failure to secure an appropriate degree of
protection for policyholders, and

(b) those events might not have occurred, or the adverse effect or failure
20might have been reduced, but for a serious failure in—

(i) the system established by FSMA 2000 for the regulation of PRA-
authorised persons and their activities, so far as it relates to the
functions of the PRA, or

(ii) the operation of that system, so far as it relates to those
25functions.

(3) Subsection (4) also applies where the Treasury direct the PRA that it appears to
the Treasury—

(a) that the conditions in subsection (1)(a) and (b) are met in relation to a
specified person, or

(b) 30that the conditions in subsection (2)(a) and (b) are met in relation to
specified events.

(4) The PRA must—

(a) carry out an investigation into—

(i) the events that gave rise to the incurring of the public
35expenditure mentioned in subsection (1)(a) and the
circumstances surrounding them, or

(ii) the events mentioned in subsection (2)(a) and the circumstances
surrounding them, and

(b) report to the Treasury on the result of the investigation.

(5) 40Subsection (4) does not apply by virtue of subsection (1) if the Treasury direct
the PRA that it is not required to carry out an investigation into the events
concerned.

75 Interpretation of section 74

(1) This section has effect for the interpretation of section 74.

(2) 45“Policyholder” has the same meaning as in FSMA 2000.

(3) Relevant public expenditure has been incurred in respect of a PRA-authorised
person (“P”) in each of the following cases (but no others)—

(a) where the Treasury or the Secretary of State have provided financial
assistance to or in respect of P for the purposes of resolving or reducing
5a threat to the stability of the UK financial system;

(b) where the Treasury have incurred expenditure in connection with the
exercise by the Treasury, the Secretary of State or the Bank of England
of any power under Parts 1 to 3 of the Banking Act 2009 in relation to P;

(c) where the scheme manager of the Financial Services Compensation
10Scheme has received a loan from the National Loans Fund, or financial
assistance from the Treasury, for the purpose of funding expenses
incurred or expected to be incurred under the Financial Services
Compensation Scheme by reason of events relating to P.

(4) In subsection (3)(a) and (c) “financial assistance” includes giving guarantees or
15indemnities and any other kind of financial assistance (actual or contingent),
but does not include the giving by the Treasury of an indemnity or guarantee
in respect of the provision of financial assistance by the Bank of England.

(5) The Treasury may by order made by statutory instrument provide that a
specified activity or transaction, or class of activity or transaction, is to be or is
20not to be treated as financial assistance for the purposes of subsection (3)(a),
and subsection (4) is subject to this subsection.

76 Modification of section 74 in relation to Lloyd’s

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

(a) the Society, or

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

(2) Section 74 has effect as if—

(a) in subsection (1)(a) (and section 75(3)), the reference to a PRA-
authorised person included a reference to a member of the Society,

(b) 30in subsection (2)(a)(i), the reference to one or more PRA-authorised
persons included a reference to the Society, and the members of the
Society, taken together, and

(c) in subsection (2)(a)(ii), the reference to a PRA-authorised person
carrying on the activity of effecting and carrying out contracts of
35insurance included a reference to—

(i) the Society, or

(ii) any other person who carries on PRA-regulated activities in
relation to anything done at Lloyd’s.

(3) In this section—

(a) 40“PRA-regulated activity” is to be read in accordance with section 22A
of FSMA 2000, and

(b) terms which are defined in Lloyd’s Act 1982 have the same meaning as
in that Act.

77 Power of Treasury to require FCA or PRA to undertake investigation

(1) 45This section applies where—

(a) the Treasury consider that it is in the public interest that either
regulator should undertake an investigation into any relevant events,
and

(b) it does not appear to the Treasury that the regulator has undertaken or
5is undertaking an investigation (under this Part or otherwise) into those
events.

(2) The Treasury must give the regulator a direction specifying the relevant events
and requiring the regulator to undertake an investigation into those events and
the circumstances surrounding them and to report to the Treasury on the result
10of the investigation.

(3) “Relevant events” means events that have occurred in relation to—

(a) a collective investment scheme,

(b) a person who is, or was at the time of the events, carrying on a regulated
activity (whether or not as an authorised person), or

(c) 15listed securities or an issuer of listed securities.

(4) “Relevant events” do not include any events occurring before 1 December 2001
(but no such limitation applies to the reference in subsection (2) to surrounding
circumstances).

78 Conduct of investigation

(1) 20Where a regulator is required by section 73 or 74 or under section 77 to carry
out an investigation, it is for the regulator to decide how it is to be carried out,
but this is subject to the following provisions.

(2) In carrying out such an investigation, the regulator must have regard to the
desirability of minimising any adverse effect that the carrying out of the
25investigation may have on the exercise by the regulator of any of its other
functions.

(3) The regulator may postpone the start of, or suspend, an investigation if it
considers it necessary to do so to avoid a material adverse effect on the exercise
by it of any of its other functions.

(4) 30The regulator must notify the Treasury if it postpones the start of, or suspends,
an investigation under subsection (3), and the notification must specify when
the investigation will begin or resume.

(5) The Treasury may, by a direction to the regulator, control—

(a) the scope of the investigation;

(b) 35the period during which the investigation is to be carried out;

(c) the conduct of the investigation;

(d) the making of reports.

(6) A direction may, in particular—

(a) confine the investigation to particular matters;

(b) 40extend the investigation to additional matters;

(c) require the regulator to postpone the start of, or suspend, an
investigation until a specified time or until a further direction;

(d) where a notification has been received under subsection (3), require the
regulator to begin or resume the investigation immediately or at a
45specified time;

(e) require the regulator to discontinue the investigation or to take only
such steps as are specified in the direction;

(f) require the regulator to make such interim reports as are so specified.

(7) In exercising the power conferred on them by this section, the Treasury must
5have regard to the desirability of minimising any adverse effect that the
carrying out of the investigation may have on the exercise by the regulator of
any of its other functions.

79 Conclusion of investigation

On completion of an investigation required by section 73 or 74 or under section
1077, the regulator must make a written report to the Treasury—

(a) setting out the result of the investigation,

(b) setting out the lessons (if any) that the regulator considers that it should
learn from the investigation, and

(c) making such recommendations (if any) as the regulator considers
15appropriate.

80 Statements of policy

(1) Each regulator must prepare and issue a statement of its policy with respect to
the exercise of its functions under sections 73 to 79 (“the relevant sections”)
and, in particular—

(a) 20the matters it will take into account in determining whether the
conditions which give rise to its duty to carry out an investigation
under section 73 or 74 (as the case may be) are met, and

(b) how it will carry out investigations under the relevant sections.

(2) A regulator may at any time alter or replace a statement issued by it under this
25section.

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

(4) A regulator must obtain the consent of the Treasury before issuing a statement
under this section.

(5) 30A statement issued under this section by a regulator 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.

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

(7) 35In exercising, or deciding whether to exercise, its functions under the relevant
sections a regulator must have regard to any statement published by it under
this section and for the time being in force.

(8) A regulator may charge a reasonable fee for providing a person with a copy of
a statement issued by it.

81 40Publication of directions

(1) This section applies to a direction given by the Treasury under any of the
following provisions—

(a) section 73(4);

(b) section 74(5);

(c) section 78(5).

(2) As soon as practicable after giving the direction, the Treasury must—

(a) 5lay before Parliament a copy of the direction, and

(b) publish the direction in such manner as the Treasury think fit.

(3) Subsection (2) does not apply where the Treasury consider that publication of
the direction would be against the public interest.

Publication of reports

82 10Publication of reports of inquiries and investigations

(1) This section applies where a report is made to the Treasury under section 71 or
79.

(2) Subject to subsection (3), the Treasury must publish the report in full.

(3) The Treasury may withhold material in the report from publication to such
15extent—

(a) as is required by any statutory provision, enforceable EU obligation or
rule of law, or

(b) as the Treasury consider to be necessary in the public interest, having
regard in particular to the matters mentioned in subsection (4).

(4) 20Those matters are—

(a) the extent to which withholding material might inhibit the allaying of
public concern;

(b) the risk of harm or damage that could be avoided or reduced by
withholding any material;

(c) 25any conditions of confidentiality subject to which any person acquired
information that was given to the inquiry or used in the investigation.

(5) In subsection (4)(b) “harm or damage” includes in particular—

(a) damage to national security or international relations;

(b) damage to the economic interests of the United Kingdom or a part of
30the United Kingdom;

(c) damage caused by disclosure of commercially sensitive information.

(6) The Treasury must lay before Parliament whatever is published under
subsection (2).

(7) If the Treasury receive a report under section 71 or 79, but withhold all or part
35of the material in the report from publication, they must publish and lay before
Parliament a statement of their reasons for not publishing the report in full.

(8) Publication under subsection (2) or (7) is to be in such manner as the Treasury
think fit.

(9) References to a report under section 71 or 79 include references to an interim
40report required under section 69 or 78.

Supplementary

83 Interpretation and supplementary provision

(1) In this Part—

• “authorised person” has the same meaning as in FSMA 2000;

• 5“collective investment scheme” has the same meaning as in FSMA 2000;

• “consumer” has the meaning given in section 1G of FSMA 2000;

• “listed securities” means anything which has been admitted to the official
  list under Part 6 of FSMA 2000;

• “PRA-authorised person” has the same meaning as in FSMA 2000;

• 10“recognised clearing house” has the same meaning as in FSMA 2000;

• “recognised investment exchange” has the same meaning as in FSMA
  2000;

• “regulated activity” has the same meaning as in FSMA 2000;

• “regulator” means the FCA or the PRA.

(2) 15A direction by the Treasury under this Part must be given in writing.

Part 6 Investigation of complaints against regulators

84 Arrangements for the investigation of complaints

(1) The regulators must—

(a) 20make arrangements (“the complaints scheme”) for the investigation of
complaints arising in connection with the exercise of, or failure to
exercise, any of their relevant functions (see section 85), and

(b) appoint an independent person (“the investigator”) to be responsible
for the conduct of investigations in accordance with the complaints
25scheme.

(2) For the purposes of this Part “the regulators” are the FCA, the PRA and the
Bank of England, and references to a regulator are to be read accordingly.

(3) The complaints scheme must be designed so that, as far as reasonably
practicable, complaints are investigated quickly.

(4) 30The Treasury’s approval is required for the appointment or dismissal of the
investigator.

(5) The terms and conditions on which the investigator is appointed must be such
as, in the opinion of the regulators, are reasonably designed to secure—

(a) that the investigator will be free at all times to act independently of the
35regulators, and

(b) that complaints will be investigated under the complaints scheme
without favouring the regulators.

85 Relevant functions in relation to complaints scheme

(1) This section has effect for the interpretation of the reference in section 84(1)(a)
40to the relevant functions of the regulators.