Financial Services Bill (HL Bill 60)

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(2) The relevant functions of the FCA or the PRA are its functions other than its
legislative functions.

(3) The relevant functions of the Bank of England are its functions under Part 18 of
FSMA 2000 (recognised clearing houses) or under Part 5 of the Banking Act
52009 (inter-bank payment systems), other than its legislative functions.

(4) For the purposes of subsection (2), the following are the FCA’s legislative
functions—

(a) making rules under FSMA 2000;

(b) issuing codes under section 64 or 119 of FSMA 2000;

(c) 10issuing statements under—

(i) section 63C, 64, 69, 88C, 89S, 93, 124, 131J, 138N, 192H, 192N,
210 or 312J of FSMA 2000,

(ii) section 345D of FSMA 2000 (whether as a result of section 345(2)
or 345A(3) or section 249(1) of that Act), or

(iii) 15section 80 of the Financial Services Act 2012;

(d) giving directions under section 316, 318 or 328 of FSMA 2000;

(e) issuing general guidance, as defined in section 139B(5) of FSMA 2000.

(5) For the purposes of subsection (2), the following are the PRA’s legislative
functions—

(a) 20making rules under FSMA 2000;

(b) issuing codes under section 64 of FSMA 2000;

(c) issuing statements under—

(i) section 63C, 64, 69, 192H, 192N, 210 or 345D of FSMA 2000, or

(ii) section 80 of the Financial Services Act 2012;

(d) 25giving directions under section 316 or 318 of FSMA 2000;

(e) issuing guidance under section 2I of FSMA 2000.

(6) For the purposes of subsection (3), the following functions of the Bank of
England under Part 18 of FSMA 2000 are legislative functions—

(a) making rules;

(b) 30issuing statements—

(i) under section 312J, or

(ii) by virtue of the application by Schedule 17A of a provision
mentioned in subsection (5)(c)(i) of this section.

(7) For the purposes of subsection (3), the following functions of the Bank of
35England under Part 5 of the Banking Act 2009 are legislative functions—

(a) publishing principles or codes of practice under sections 188 and 189;

(b) preparing statements under section 198(3).

86 Consultation in relation to, and publication of, complaints scheme

(1) Before making the complaints scheme, the regulators must publish a draft of
40the proposed scheme in the way appearing to them to be best calculated to
bring it to the attention of the public.

(2) The draft must be accompanied by notice that representations about it may be
made to any of the regulators within a specified time.

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(3) Before making the proposed complaints scheme, the regulators must have
regard to any representations made to any of them in accordance with
subsection (2).

(4) If the regulators make the proposed complaints scheme, they must publish an
5account, in general terms, of—

(a) the representations made to any of them in accordance with subsection
(2), and

(b) their response to the representations.

(5) If the complaints scheme differs from the draft published under subsection (1)
10in a way which is, in the opinion of the regulators, significant the regulators
must (in addition to complying with subsection (4)) publish details of the
difference.

(6) The regulators must publish up-to-date details of the complaints scheme
including, in particular, details of—

(a) 15the provision made under section 87(5), and

(b) the powers which the investigator has to investigate a complaint.

(7) Those details must be published in the way appearing to the regulators to be
best calculated to bring them to the attention of the public.

(8) The regulators must notify the Treasury of the publication of details under
20subsection (6).

(9) A regulator may charge a reasonable fee for providing a person with a copy
of—

(a) a draft published under subsection (1), or

(b) details published under subsection (6).

(10) 25Subsections (1) to (5) and (9)(a) also apply to a proposal to alter or replace the
complaints scheme.

87 Investigation of complaints

(1) A regulator is not obliged to investigate in accordance with the complaints
scheme a complaint which it reasonably considers would be more
30appropriately dealt with in another way (for example by referring the matter
to the Upper Tribunal or by the institution of other legal proceedings).

(2) The complaints scheme must provide—

(a) for reference to the investigator of any complaint which a regulator is
investigating,

(b) 35for the investigator—

(i) to have the means to conduct a full investigation of the
complaint,

(ii) to report to the regulator to which the complaint relates and the
complainant on the result of the investigator’s investigation,
40and

(iii) to be able to publish the investigator’s report (or part of it) if the
investigator considers that it (or the part) ought to be brought to
the attention of the public, and

(c) for the meeting by the regulators of the expenses of the scheme.

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(3) If a regulator has decided not to investigate a complaint, it must notify the
investigator.

(4) If the investigator considers that a complaint of which the investigator has been
notified under subsection (3) ought to be investigated, the investigator may
5proceed as if the complaint had been referred to the investigator under the
complaints scheme.

(5) The complaints scheme must confer on the investigator the power to
recommend, if the investigator thinks it appropriate, that the regulator to
which a complaint relates takes either or both of the following steps—

(a) 10makes a compensatory payment to the complainant, or

(b) remedies the matter complained of.

(6) The complaints scheme must require the regulator to which a complaint
relates, in a case where the investigator—

(a) has reported that the complaint is well-founded, or

(b) 15has criticised the regulator in a report,

to inform the investigator and the complainant of the steps which it proposes
to take in response to the report.

(7) The investigator may require the regulator to which a complaint relates to
publish the whole or a specified part of the response.

(8) 20The investigator may appoint a person to conduct the investigation on the
investigator’s behalf but subject to the investigator’s direction.

(9) An officer or employee of any of the regulators may not be appointed under
subsection (8).

(10) Subsection (2) is not to be taken as preventing a regulator from making
25arrangements for the initial investigation of a complaint to be conducted by the
regulator.

88 Exemption from liability in damages

(1) Neither the investigator appointed under section 84 nor a person appointed to
conduct an investigation on the investigator’s behalf under section 87(8) is to
30be liable in damages for anything done or omitted in the discharge, or
purported discharge, of functions in relation to the investigation of a
complaint.

(2) Subsection (1) does not apply—

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

(b) 35so as to prevent an award of damages made in respect of an act or
omission on the ground that the act or omission was unlawful as a
result of section 6(1) of the Human Rights Act 1998.

Part 7 Offences relating to financial services

89 40Misleading statements

(1) Subsection (2) applies to a person (“P”) who—

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(a) makes a statement which P knows to be false or misleading in a
material respect,

(b) makes a statement which is false or misleading in a material respect,
being reckless as to whether it is, or

(c) 5dishonestly conceals any material facts whether in connection with a
statement made by P or otherwise.

(2) P commits an offence if P makes the statement or conceals the facts with the
intention of inducing, or is reckless as to whether making it or concealing them
may induce, another person (whether or not the person to whom the statement
10is made)—

(a) to enter into or offer to enter into, or to refrain from entering or offering
to enter into, a relevant agreement, or

(b) to exercise, or refrain from exercising, any rights conferred by a
relevant investment.

(3) 15In proceedings for an offence under subsection (2) brought against a person to
whom that subsection applies as a result of paragraph (a) of subsection (1), it is
a defence for the person charged (“D”) to show that the statement was made in
conformity with—

(a) price stabilising rules,

(b) 20control of information rules, or

(c) the relevant provisions of Commission Regulation (EC) No 2273/2003
of 22 December 2003 implementing Directive 2003/6/EC of the
European Parliament and of the Council as regards exemptions for
buy-back programmes and stabilisation of financial instruments.

(4) 25Subsections (1) and (2) do not apply unless—

(a) the statement is made in or from, or the facts are concealed in or from,
the United Kingdom or arrangements are made in or from the United
Kingdom for the statement to be made or the facts to be concealed,

(b) the person on whom the inducement is intended to or may have effect
30is in the United Kingdom, or

(c) the agreement is or would be entered into or the rights are or would be
exercised in the United Kingdom.

90 Misleading impressions

(1) A person (“P”) who does any act or engages in any course of conduct which
35creates a false or misleading impression as to the market in or the price or value
of any relevant investments commits an offence if—

(a) P intends to create the impression, and

(b) the case falls within subsection (2) or (3) (or both).

(2) The case falls within this subsection if P intends, by creating the impression, to
40induce another person to acquire, dispose of, subscribe for or underwrite the
investments or to refrain from doing so or to exercise or refrain from exercising
any rights conferred by the investments.

(3) The case falls within this subsection if—

(a) P knows that the impression is false or misleading or is reckless as to
45whether it is, and

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(b) P intends by creating the impression to produce any of the results in
subsection (4) or is aware that creating the impression is likely to
produce any of the results in that subsection.

(4) Those results are—

(a) 5the making of a gain for P or another, or

(b) the causing of loss to another person or the exposing of another person
to the risk of loss.

(5) References in subsection (4) to gain or loss are to be read in accordance with
subsections (6) to (8).

(6) 10“Gain” and “loss”—

(a) extend only to gain or loss in money or other property of any kind;

(b) include such gain or loss whether temporary or permanent.

(7) “Gain” includes a gain by keeping what one has, as well as a gain by getting
what one does not have.

(8) 15“Loss” includes a loss by not getting what one might get, as well as a loss by
parting with what one has.

(9) In proceedings brought against any person (“D”) for an offence under
subsection (1) it is a defence for D to show—

(a) to the extent that the offence results from subsection (2), that D
20reasonably believed that D’s conduct would not create an impression
that was false or misleading as to the matters mentioned in subsection
(1),

(b) that D acted or engaged in the conduct—

(i) for the purpose of stabilising the price of investments, and

(ii) 25in conformity with price stabilising rules,

(c) that D acted or engaged in the conduct in conformity with control of
information rules, or

(d) that D acted or engaged in the conduct in conformity with the relevant
provisions of Commission Regulation (EC) No 2273/2003 of 22
30December 2003 implementing Directive 2003/6/EC of the European
Parliament and of the Council as regards exemptions for buy-back
programmes and stabilisation of financial instruments.

(10) This section does not apply unless—

(a) the act is done, or the course of conduct is engaged in, in the United
35Kingdom, or

(b) the false or misleading impression is created there.

91 Misleading statements etc in relation to benchmarks

(1) A person (“A”) who makes to another person (“B”) a false or misleading
statement commits an offence if—

(a) 40A makes the statement in the course of arrangements for the setting of
a relevant benchmark,

(b) A intends that the statement should be used by B for the purpose of the
setting of a relevant benchmark, and

(c) A knows that the statement is false or misleading or is reckless as to
45whether it is.

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(2) A person (“C”) who does any act or engages in any course of conduct which
creates a false or misleading impression as to the price or value of any
investment or as to the interest rate appropriate to any transaction commits an
offence if—

(a) 5C intends to create the impression,

(b) the impression may affect the setting of a relevant benchmark,

(c) C knows that the impression is false or misleading or is reckless as to
whether it is, and

(d) C knows that the impression may affect the setting of a relevant
10benchmark.

(3) In proceedings for an offence under subsection (1), it is a defence for the person
charged (“D”) to show that the statement was made in conformity with—

(a) price stabilising rules,

(b) control of information rules, or

(c) 15the relevant provisions of Commission Regulation (EC) No 2273/2003
of 22 December 2003 implementing Directive 2003/6/EC of the
European Parliament and of the Council as regards exemptions for
buy-back programmes and stabilisation of financial instruments.

(4) In proceedings brought against any person (“D”) for an offence under
20subsection (2) it is a defence for D to show—

(a) that D acted or engaged in the conduct—

(i) for the purpose of stabilising the price of investments, and

(ii) in conformity with price stabilising rules,

(b) that D acted or engaged in the conduct in conformity with control of
25information rules, or

(c) that D acted or engaged in the conduct in conformity with the relevant
provisions of Commission Regulation (EC) No 2273/2003 of 22
December 2003 implementing Directive 2003/6/EC of the European
Parliament and of the Council as regards exemptions for buy-back
30programmes and stabilisation of financial instruments.

(5) Subsection (1) does not apply unless the statement is made in or from the
United Kingdom or to a person in the United Kingdom.

(6) Subsection (2) does not apply unless—

(a) the act is done, or the course of conduct is engaged in, in the United
35Kingdom, or

(b) the false or misleading impression is created there.

92 Penalties

(1) A person guilty of an offence under this Part is liable—

(a) on summary conviction, to imprisonment for a term not exceeding the
40applicable maximum term or a fine not exceeding the statutory
maximum, or both;

(b) on conviction on indictment, to imprisonment for a term not exceeding
7 years or a fine, or both.

(2) For the purpose of subsection (1)(a) “the applicable maximum term” is—

(a) 45in England and Wales, 12 months (or 6 months, if the offence was
committed before the commencement of section 154(1) of the Criminal
Justice Act 2003);

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(b) in Scotland, 12 months;

(c) in Northern Ireland, 6 months.

93 Interpretation of Part 7

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

(2) 5“Investment” includes any asset, right or interest.

(3) “Relevant agreement” means an agreement—

(a) the entering into or performance of which by either party constitutes an
activity of a kind specified in an order made by the Treasury, and

(b) which relates to a relevant investment.

(4) 10“Relevant benchmark” means a benchmark of a kind specified in an order
made by the Treasury.

(5) “Relevant investment” means an investment of a kind specified in an order
made by the Treasury.

(6) Schedule 2 to FSMA 2000 (except paragraphs 25 and 26) applies for the
15purposes of subsections (3) and (5) with references to section 22 of that Act
being read as references to each of those subsections.

(7) Nothing in Schedule 2 to FSMA 2000, as applied by subsection (6), limits the
power conferred by subsection (3) or (5).

(8) “Price stabilising rules” and “control of information rules” have the same
20meaning as in FSMA 2000.

(9) In this section “benchmark” has the meaning given in section 22(6) of FSMA
2000.

94 Affirmative procedure for certain orders

(1) This section applies to the first order made under section 93.

(2) 25This section also applies to any subsequent order made under that section
which contains a statement by the Treasury that the effect of the proposed
order would include one or more of the following—

(a) that an activity which is not specified for the purposes of subsection
(3)(a) of that section would become one so specified,

(b) 30that an investment which is not a relevant investment would become a
relevant investment;

(c) that a benchmark which is not a relevant benchmark would become a
relevant benchmark.

(3) A statutory instrument containing (alone or with other provisions) an order to
35which this section applies may not be made unless a draft of the instrument has
been laid before Parliament and approved by a resolution of each House.

95 Consequential repeal

Section 397 of FSMA 2000 (which relates to misleading statements and
practices and is superseded by the provisions of this Part) is repealed.

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Part 8 Amendments of Banking Act 2009

Special resolution regime and bank administration

96 Objectives and conditions

(1) 5The Banking Act 2009 is amended as follows.

(2) In section 3 (interpretation: other expressions), after “this Part—” insert—

  • “client assets” means assets which an institution has undertaken
    to hold for a client (whether or not on trust, and whether or not
    the undertaking has been complied with),.

(3) 10In section 4 (special resolution objectives), after subsection (8) insert—

(8A) Objective 6, which applies in any case in which client assets may be
affected, is to protect those assets.

(8B) Objective 7 is to minimise adverse effects on institutions (such as
investment exchanges and clearing houses) that support the operation
15of financial markets.

(4) In section 8(2) (Condition A: private sector purchaser and bridge bank)—

(a) in paragraph (b) for “the banking systems of the United Kingdom, or”
substitute “those systems,”, and

(b) after paragraph (c) insert , or

(d) 20the protection of any client assets that may be affected.

(5) In section 47 (restriction of partial transfers), for subsection (3) substitute—

(3) Provision under subsection (2) may, in particular, refer to—

(a) particular classes of deposit;

(b) particular classes of client assets.

(6) 25In the Table in section 261 (index of defined terms), after the entry relating to
“central counterparty clearing services”, insert—

Client assets (Part 1) 3.

97 Private sector purchasers

(1) The Banking Act 2009 is amended as follows.

(2) 30After section 26 insert—

26A Private sector purchaser: reverse share transfer

(1) This section applies where the Bank of England has made a share
transfer instrument in accordance with section 11(2) (“the original
instrument”) providing for the transfer of securities issued by a bank to
35a person (“the original transferee”).

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(2) The Bank of England may make one or more private sector reverse
share transfer instruments in respect of securities issued by the bank
and held by the original transferee.

(3) A private sector reverse share transfer instrument is a share transfer
5instrument which—

(a) provides for transfer to the transferor under the original
instrument;

(b) makes other provision for the purposes of, or in connection
with, the transfer of securities which are, could be or could have
10been transferred under paragraph (a).

(4) The Bank of England must not make a private sector reverse share
transfer instrument without the written consent of the original
transferee.

(5) Sections 7, 8 and 50 do not apply to a private sector reverse share
15transfer instrument (but it is to be treated in the same way as any other
share transfer instrument for all other purposes including for the
purposes of the application of a power under this Part).

(6) Before making a private sector reverse share transfer instrument the
Bank of England must consult—

(a) 20the PRA,

(b) the FCA, and

(c) the Treasury.

(7) Section 26 applies where the Bank of England has made a private sector
reverse share transfer instrument.

(3) 25In section 29 (reverse share transfer)—

(a) in subsection (3) for the words from “securities”, in the second place, to
the end substitute “securities issued by the bank and held by a
transferee under the onward share transfer order (“the onward
transferee”).”, and

(b) 30after subsection (4) insert—

(4A) The Treasury must not make a reverse share transfer order
under subsection (3) unless—

(a) the onward transferee is—

(i) a company wholly owned by the Bank of
35England,

(ii) a company wholly owned by the Treasury, or

(iii) a nominee of the Treasury, or

(b) the reverse share transfer order is made with the written
consent of the onward transferee.

(4) 40In section 31 (bridge bank: reverse share transfer)—

(a) in subsection (1) omit the words from “providing for” to the end,

(b) in subsection (2) for “person within subsection (1)(a) to (c)” substitute
“transferee under the original instrument”,

(c) after subsection (3) insert—

(3A) 45The Bank of England must not make a bridge bank reverse
share transfer instrument unless—

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(a) the transferee under the original instrument is—

(i) a company wholly owned by the Bank of
England,

(ii) a company wholly owned by the Treasury, or

(iii) 5a nominee of the Treasury, or

(b) the bridge bank reverse share transfer instrument is
made with the written consent of the transferee under
the original instrument.

(5) After section 42 insert—

42A 10Private sector purchaser: reverse property transfer

(1) This section applies where the Bank of England has made a property
transfer instrument in accordance with section 11(2) (“the original
instrument”) providing for the transfer of property, rights or liabilities
of a bank to a person (“the original transferee”).

(2) 15The Bank of England may make one or more private sector reverse
property transfer instruments in respect of property, rights or liabilities
of the original transferee.

(3) A private sector reverse property transfer instrument is a property
transfer instrument which—

(a) 20provides for transfer to the transferor under the original
instrument;

(b) makes other provision for the purposes of, or in connection
with, the transfer of property, rights or liabilities that are, could
be or could have been transferred under paragraph (a) (whether
25the transfer has been or is to be effected by that instrument or
otherwise).

(4) The Bank of England must not make a private sector reverse property
transfer instrument without the written consent of the original
transferee.

(5) 30Sections 7, 8 and 50 do not apply to a private sector reverse property
transfer instrument (but it is to be treated in the same way as any other
property transfer instrument for all other purposes including for the
purposes of the application of a power under this Part).

(6) Before making a private sector reverse property transfer instrument the
35Bank of England must consult—

(a) the PRA,

(b) the FCA, and

(c) the Treasury.

(7) Section 42 applies where the Bank of England has made a private sector
40reverse property transfer instrument.

(6) In section 44 (reverse property transfer)—

(a) in subsection (3) for “of a transferee” to the end substitute “of a
transferee under the onward property transfer instrument (“the
onward transferee”).”,