Financial Services Bill (HL Bill 60)

(4) Publication under this section is to be in such manner as the FCA
thinks fit.

Annual report

11 (1) At least once a year the FCA must make a report to the Treasury
5on—

(a) the discharge of its functions,

(b) the extent to which, in its opinion, its operational
objectives have been advanced,

(c) the extent to which, in its opinion, it has acted compatibly
10with its strategic objective,

(d) how, in its opinion, it has complied with the duty in section
1B(4),

(e) its consideration of the matter mentioned in section
1B(5)(b),

(f) 15its consideration of the principles in section 3B,

(g) how it has complied with section 3D,

(h) any direction received under section 3I or 3J during the
period to which the report relates,

(i) how it has complied with section 354A(1) so far as relating
20to co-operation with persons outside the United Kingdom,
and

(j) such other matters as the Treasury may from time to time
direct.

(2) Sub-paragraph (1) does not require the inclusion in the report of
25any information whose publication would in the opinion of the
FCA be against the public interest.

(3) The report must be accompanied by—

(a) a statement of the remuneration of the appointed members
of the governing body of the FCA during the period to
30which the report relates, and

(b) such other reports or information, prepared by such
persons, as the Treasury may from time to time direct.

(4) The Treasury must lay before Parliament a copy of each report
received by them under this paragraph.

35Annual public meeting

12 (1) Not later than 3 months after making a report under paragraph 11,
the FCA must hold a public meeting (“the annual meeting”) for the
purposes of enabling that report to be considered.

(2) The FCA must organise the annual meeting so as to allow—

(a) 40a general discussion of the contents of the report which is
being considered, and

(b) a reasonable opportunity for those attending the meeting
to put questions to the FCA about the way in which it
discharged, or failed to discharge, its functions during the
45period to which the report relates.

(3) But otherwise the annual meeting is to be organised and
conducted in such a way as the FCA considers appropriate.

(4) The FCA must give reasonable notice of its annual meeting.

(5) That notice must—

(a) 5give details of the time and place at which the meeting is to
be held,

(b) set out the proposed agenda for the meeting,

(c) indicate the proposed duration of the meeting,

(d) give details of the FCA’s arrangements for enabling
10persons to attend, and

(e) be published by the FCA in the way appearing to it to be
best calculated to bring the notice to the attention of the
public.

(6) If the FCA proposes to alter any of the arrangements which have
15been included in the notice given under sub-paragraph (5), it
must—

(a) give reasonable notice of the alteration, and

(b) publish that notice in the way appearing to the FCA to be
best calculated to bring it to the attention of the public.

20Report of annual meeting

13 Not later than one month after its annual meeting, the FCA must
publish a report of the proceedings of the meeting.

Accounts and audit

14 (1) The Treasury may—

(a) 25require the FCA to comply with any provisions of the
Companies Act 2006 about accounts and their audit which
would not otherwise apply to it, or

(b) direct that any provision of that Act about accounts and
their audit is to apply to the FCA with such modifications
30as are specified in the direction, whether or not the
provision would otherwise apply to the FCA.

(2) Compliance with any requirement under sub-paragraph (1)(a) or
(b) is enforceable by injunction or, in Scotland, an order for specific
performance under section 45 of the Court of Session Act 1988.

(3) 35Proceedings under sub-paragraph (2) may be brought only by the
Treasury.

15 (1) The FCA must send a copy of its annual accounts to the
Comptroller and Auditor General as soon as is reasonably
practicable.

(2) 40The Comptroller and Auditor General must—

(a) examine, certify and report on accounts received under
this paragraph, and

(b) send a copy of the certified accounts and the report to the
Treasury.

(3) The Treasury must lay the copy of the certified accounts and the
report before Parliament.

(4) Except as provided by paragraph 14(1), the FCA is exempt from
the requirements of Part 16 of the Companies Act 2006 (audit), and
5its balance sheet must contain a statement to that effect.

(5) In this paragraph “annual accounts” has the meaning given in
section 471 of the Companies Act 2006.

Part 2 Status

10Status

16 In relation to any of its functions—

(a) the FCA is not to be regarded as acting on behalf of the
Crown, and

(b) its members, officers and staff are not to be regarded as
15Crown servants.

Exemption from requirement for use of “limited” in name of FCA

17 The FCA is to continue to be exempt from the requirements of the
Companies Act 2006 relating to the use of “limited” as part of its
name.

18 20If the Secretary of State is satisfied that any action taken by the
FCA makes it inappropriate for the exemption given by paragraph
17 to continue, the Secretary of State may, after consulting the
Treasury, give a direction removing it.

Part 3 25Penalties and fees

Penalties

19 In determining its policy with respect to the amounts of penalties
to be imposed by it under this Act, the FCA must take no account
of the expenses which it incurs, or expects to incur, in discharging
30its functions.

20 (1) The FCA must in respect of each of its financial years pay to the
Treasury its penalty receipts after deducting its enforcement costs.

(2) The FCA’s “penalty receipts” in respect of a financial year are any
amounts received by it during the year by way of penalties
35imposed under this Act.

(3) The FCA’s “enforcement costs” in respect of a financial year are
the expenses incurred by it during the year in connection with—

(a) the exercise, or consideration of the possible exercise, of
any of its enforcement powers in particular cases, or

(b) 40the recovery of penalties imposed under this Act.

(4) For this purpose the FCA’s enforcement powers are—

(a) its powers under any of the provisions mentioned in
section 133(7A),

(b) its powers under section 56 (prohibition orders),

(c) 5its powers under Part 25 of this Act (injunctions and
restitution),

(d) its powers under any other enactment specified by the
Treasury by order,

(e) its powers in relation to the investigation of relevant
10offences, and

(f) its powers in England and Wales or Northern Ireland in
relation to the prosecution of relevant offences.

(5) “Relevant offences” are—

(a) offences under FSMA 2000,

(b) 15offences under subordinate legislation made under that
Act,

(c) offences falling within section 402(1) of that Act,

(d) offences under Part 7 of the Financial Services Act 2012,
and

(e) 20any other offences specified by the Treasury by order.

(6) The Treasury may give directions to the FCA as to how the FCA is
to comply with its duty under sub-paragraph (1).

(7) The directions may in particular—

(a) specify descriptions of expenditure that are, or are not, to
25be regarded as incurred in connection with either of the
matters mentioned in sub-paragraph (3),

(b) relate to the calculation and timing of the deduction in
respect of the FCA’s enforcement costs, and

(c) specify the time when any payment is required to be made
30to the Treasury.

(8) The directions may also require the FCA to provide the Treasury
at specified times with specified information relating to—

(a) penalties that the FCA has imposed under this Act, or

(b) the FCA’s enforcement costs.

(9) 35The Treasury must pay into the Consolidated Fund any sums
received by them under this paragraph.

21 (1) The FCA must prepare and operate a scheme (“the financial
penalty scheme”) for ensuring that the amounts that, as a result of
the deduction for which paragraph 20(1) provides, are retained by
40the FCA in respect of amounts paid to it by way of penalties
imposed under this Act are applied for the benefit of regulated
persons.

(2) “Regulated persons” means—

(a) authorised persons,

(b) 45recognised investment exchanges,

(c) issuers of securities admitted to the official list, and

(d) issuers who have requested or approved the admission of
financial instruments to trading on a regulated market.

(3) The financial penalty scheme may, in particular, make different
provision with respect to different classes of regulated person.

(4) 5The financial penalty scheme must ensure that those who have
become liable to pay a penalty to the FCA in any financial year of
the FCA do not receive any benefit under the scheme in the
following financial year.

(5) Up-to-date details of the financial penalty scheme must be set out
10in a document (“the scheme details”).

22 (1) The scheme details must be published by the FCA in the way
appearing to it to be best calculated to bring them to the attention
of the public.

(2) Before making the financial penalty scheme, the FCA must
15publish a draft of the proposed scheme in the way appearing to the
FCA to be best calculated to bring it to the attention of the public.

(3) The draft must be accompanied by notice that representations
about the proposals may be made to the FCA within a specified
time.

(4) 20Before making the scheme, the FCA must have regard to any
representations made to it in accordance with sub-paragraph (3).

(5) If the FCA makes the proposed scheme, it must publish an
account, in general terms, of—

(a) the representations made to it in accordance with sub-
25paragraph (3), and

(b) its response to them.

(6) If the scheme differs from the draft published under sub-
paragraph (2) in a way which is, in the opinion of the FCA,
significant, the FCA must (in addition to complying with sub-
30paragraph (5)) publish details of the difference.

(7) The FCA must, without delay, give the Treasury a copy of any
scheme details published by it.

(8) The FCA may charge a reasonable fee for providing a person with
a copy of—

(a) 35a draft published under sub-paragraph (2);

(b) scheme details.

(9) Sub-paragraphs (2) to (6) and (8)(a) also apply to a proposal to
alter or replace the financial penalty scheme.

Fees

23 (1) 40The FCA may make rules providing for the payment to it of such
fees, in connection with the discharge of any of its qualifying
functions, as it considers will (taking account of its expected
income from fees and charges provided for by any other provision
of this Act) enable it—

(a) to meet expenses incurred in carrying out its functions or
for any incidental purpose,

(b) to repay the principal of, and pay any interest on, any
relevant borrowing and to meet relevant commencement
5expenses, and

(c) to maintain adequate reserves.

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

(a) its functions under or as a result of this Act or any of the
other Acts mentioned in section 1A(6), and

(b) 10its 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.

(3) In sub-paragraph (1)(b)—

• 15“relevant borrowing” means any money borrowed by the
  FCA which has been used for the purpose of meeting
  expenses incurred in relation to its assumption of
  functions under this Act, and

• “relevant commencement expenses” means expenses
  20incurred by the FCA—

  (a)

  in preparation for the exercise of functions by the
  FCA under this Act, or

  (b)

  for the purpose of facilitating the exercise by the FCA
  of those functions or otherwise in connection with
  25their exercise by it.

(4) Neither section 1A(6)(d) nor the definition of “functions” in
paragraph 1 applies for the purposes of sub-paragraph (2).

(5) For the purposes of sub-paragraph (3) it is irrelevant when the
borrowing of the money, the incurring of the expenses or the
30assumption of functions took place (and, in particular, it is
irrelevant if any of those things were done at a time when the FCA
was known as the Financial Services Authority).

(6) In the case of rules made under Part 6 of this Act, the rules may, in
particular, require the payment of fees in respect of—

(a) 35the continued inclusion of securities or persons in any list
or register required to be kept by the FCA as a result of any
provision made by or under that Part,

(b) access to any list or register within paragraph (a), and

(c) the continued admission of financial instruments to
40trading on a regulated market.

(7) In fixing the amount of any fee which is to be payable to the FCA,
no account is to be taken of any sums which the FCA receives, or
expects to receive, by way of penalties imposed by it under this
Act.

(8) 45Any fee which is owed to the FCA under any provision made by
or under this Act may be recovered as a debt due to the FCA.

Services for which fees may not be charged

24 The power conferred by paragraph 23 may not be used to
require—

(a) a fee to be paid in respect of the discharge of any of the
5FCA’s functions under paragraph 13, 14, 19 or 20 of
Schedule 3, or

(b) a fee to be paid by any person whose application for
approval under section 59 has been granted.

Part 4 10Miscellaneous

Exemption from liability in damages

25 (1) None of the following is to be liable in damages for anything done
or omitted in the discharge, or purported discharge, of the FCA’s
functions—

(a) 15the FCA;

(b) any person (“P”) who is, or is acting as, a member, officer
or member of staff of the FCA;

(c) any person who could be held vicariously liable for things
done or omitted by P, but only in so far as the liability
20relates to P’s conduct.

(2) Anything done or omitted by a person mentioned in sub-
paragraph (1)(a) or (b) while acting, or purporting to act, as a
result of an appointment under any of sections 166 to 169 is to be
taken for the purposes of sub-paragraph (1) to have been done or
25omitted in the discharge, or as the case may be purported
discharge, of the FCA’s functions.

(3) Sub-paragraph (1) does not apply—

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

(b) so as to prevent an award of damages made in respect of
30an 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.

Accredited financial investigators

26 For the purposes of this Act anything done by an accredited
35financial investigator within the meaning of the Proceeds of Crime
Act 2002 who—

(a) is, or is acting as, an officer of, or member of the staff of, the
FCA, or

(b) is appointed by the FCA under section 97, 167 or 168 to
40conduct an investigation,

is to be treated as done in the exercise or discharge of a function of
the FCA.

Amounts required by rules to be paid to the FCA

27 Any amount (other than a fee) which is required by rules to be
paid to the FCA may be recovered as a debt due to the FCA.

Section 2A

Schedule 1ZA The Prudential Regulation Authority

5Part 1 General

Interpretation

1 In this Schedule—

• “the Bank” means the Bank of England;

• 10“functions”, in relation to the PRA, means functions
  conferred on the PRA by or under any provision of this Act
  (see section 2A(6) which affects the meaning of references
  to such functions).

Constitution

2 15The constitution of the PRA must provide—

(a) for the Governor of the Bank to be the chair of the PRA,

(b) for the Bank’s Deputy Governor for prudential regulation
to be the chief executive of the PRA, and

(c) for the PRA to have a governing body.

3 20The governing body must consist of —

(a) the chair,

(b) the chief executive,

(c) the Bank’s Deputy Governor for financial stability,

(d) the chief executive of the FCA, and

(e) 25other members (in this Schedule referred to as “appointed
members”).

4 The validity of any act of the PRA is not affected—

(a) by any vacancy resulting from a vacancy in the office of
Governor of the Bank, Deputy Governor of the Bank for
30prudential regulation, Deputy Governor of the Bank for
financial stability, or chief executive of the FCA, or

(b) by a defect in the appointment of a person—

(i) to any of those offices, or

(ii) as an appointed member.

5 35The chief executive of the FCA must not take part in any
discussion by or decision of the PRA which relates to—

(a) the exercise of the PRA’s functions in relation to a
particular person, or

(b) a decision not to exercise those functions.

Appointed members of governing body

6 The appointed members must be appointed by the Bank with the
approval of the Treasury.

7 Paragraphs 8 to 12 apply to the exercise by the Bank of its power
5to appoint appointed members.

8 The Bank must secure that the majority of the members of the
governing body of the PRA are non-executive members.

9 For the purposes of paragraph 8, and for the purposes of the
PRA’s duty in section 3C (duty to follow principles of good
10governance) none of the following is a non-executive member—

(a) the members referred to in paragraph 3(a), (b) and (c), and

(b) a member who is an employee of the PRA or of the Bank.

10 The Bank must have regard to generally accepted principles of
good practice relating to the making of public appointments.

11 (1) 15Before appointing a person as an appointed member, the Bank
must consider whether the person has any financial or other
interests that could have a material effect on the extent of the
functions as member that it would be proper for the person to
discharge.

(2) 20The terms on which an appointed member (“M”) is appointed
must be such as—

(a) to secure that M is not subject to direction by the Bank,

(b) to require M not to act in accordance with the directions of
any other person, and

(c) 25to prohibit M from acquiring any financial or other
interests that have a material effect on the extent of the
functions as member that it would be proper for M to
discharge.

(3) If M is an employee of the PRA, M’s interest as employee is to be
30disregarded for the purposes of sub-paragraphs (1) and (2)(c) and
paragraph 14.

12 An employee of the FCA is disqualified for appointment as an
appointed member.

13 The PRA must pay to the Bank the amount of any expenses
35incurred by the Bank in connection with the appointment of
appointed members.

14 The Bank may, with the approval of the Treasury, remove an
appointed member from office—

(a) on the grounds of incapacity or serious misconduct, or

(b) 40on the grounds that in all the circumstances the member’s
financial or other interests are such as to have a material
effect on the extent of the functions as member that it
would be proper for the person to discharge.

Terms of service

15 (1) The terms of service of the members of the governing body are to
be determined by the Oversight Committee of the Bank.

(2) The PRA must pay to the members of its governing body such
5remuneration as may be determined by that Committee.

Arrangements for discharging functions

16 (1) The PRA may make arrangements for any of its functions to be
discharged by a committee, sub-committee, officer or member of
staff of the PRA, but subject to the following provision.

(2) 10In exercising its legislative functions or its functions under section
2E (strategy), the PRA must act through its governing body.

(3) For that purpose, the following are the PRA’s legislative
functions—

(a) making rules;

(b) 15issuing codes under section 64;

(c) issuing statements under—

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

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

(d) giving directions under section 316 or 318;

(e) 20issuing guidance under section 2I.

Records

17 The PRA must maintain satisfactory arrangements for—

(a) recording decisions made in the exercise of its functions,
and

(b) 25the safe-keeping of those records which it considers ought
to be preserved.

Budget

18 (1) The PRA must, for each of its financial years, adopt an annual
budget which has been approved by the Bank.

(2) 30The budget must be adopted before the start of the financial year
to which it relates, except that the first budget must be adopted as
soon as reasonably practicable after the coming into force of this
paragraph.

(3) The PRA may, with the approval of the Bank, vary the budget for
35a financial year at any time after its adoption.

(4) The PRA must publish each budget, and each variation of a
budget, in such manner as the PRA thinks fit.

Annual report

19 (1) At least once a year the PRA must make a report to the Treasury
40on—