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Financial Services Bill (HL Bill 60)

Financial Services BillPage 250

of section 2J(1)(a) as part of the PRA’s rule-making functions
(where the power is exercisable by the PRA).

(9) In subsection (12)—

(a) for “The Authority” substitute “A regulator”, and

(b) 5after “published” insert “by it”.

(10) For subsection (13) substitute—

(13) Any expression which is used both in this section and section 59 has
the same meaning in this section as in that section.

13 (1) Section 65 (statements and codes: procedure) is amended as follows.

(2) 10For subsection (1) substitute—

(1) Before a regulator issues a statement or code under section 64, it
must—

(a) consult the other regulator; and

(b) after doing so, publish a draft of the statement or code in the
15way appearing to it to be best calculated to bring the
statement or code to the attention of the public.

(1A) The duty of the FCA to consult the PRA under subsection (1)(a)
applies only in so far as the statement or code applies to persons in
relation to whom approval is given under section 59 in respect of the
20performance by them of significant-influence functions (within the
meaning of that section) in relation to the carrying on by PRA-
authorised persons of regulated activities.

(3) In subsection (2)(b), for “the Authority” substitute “the regulator publishing
the draft”.

(4) 25In subsection (3)—

(a) for “issuing” substitute “a regulator issues”, and

(b) for “the Authority” substitute “it”.

(5) In subsection (4), for “the Authority” substitute “a regulator”.

(6) In subsection (5)—

(a) 30for “the Authority”, in the first place, substitute “the regulator
issuing the statement or code”, and

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

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

(8) For subsection (7) substitute—

(7) 35Subsections (1)(b) and (2) to (6) do not apply in relation to—

(a) a statement or code issued by the FCA if it considers that the
delay involved in complying with them would be prejudicial
to the interests of consumers, as defined in section 425A; or

(b) a statement or code issued by the PRA if it considers that the
40delay involved in complying with them would—

(i) be prejudicial to the safety and soundness of PRA-
authorised persons, or

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(ii) in a case where section 2C applies, be prejudicial to
securing the appropriate degree of protection for
policyholders.

(9) In subsection (9)—

(a) 5for “The Authority” substitute “A regulator”, and

(b) after “published” insert “by it”.

(10) For subsection (11) substitute—

(11) Cost benefit analysis” means—

(a) an analysis of the costs together with an analysis of the
10benefits that will arise—

(i) if the proposed statement or code is issued, or

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

(b) subject to subsection (11A), an estimate of those costs and of
15those benefits.

(11A) If, in the opinion of the regulator concerned—

(a) the costs or benefits referred to in subsection (11) cannot
reasonably be estimated, or

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

20the cost benefit analysis need not estimate them, but must include a
statement of the opinion of the regulator concerned and an
explanation of it.

14 (1) Section 66 (disciplinary powers) is amended as follows.

(2) In subsection (1)—

(a) 25in the opening words—

(i) for “The Authority” substitute “A regulator”, and

(ii) after “this section” insert “(whether or not it has given its
approval in relation to the person)”, and

(b) in paragraphs (a) and (b), for “ Authority” substitute “ regulator”.

(3) 30For subsection (2) substitute—

(2) For the purposes of action by the FCA, a person is guilty of
misconduct if, while an approved person—

(a) the person has failed to comply with a statement of principle
issued by the FCA under section 64, or

(b) 35the person has been knowingly concerned in a contravention
by the relevant authorised person of a requirement imposed
on that authorised person—

(i) by or under this Act, or

(ii) by any qualifying EU provision specified, or of a
40description specified, for the purposes of this
subsection by the Treasury by order.

(2A) For the purposes of action by the PRA, a person is guilty of
misconduct if, while an approved person in respect of the
performance of a significant-influence function in relation to the
45carrying on by a PRA-authorised person of a regulated activity—

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(a) the person has failed to comply with a statement of principle
issued by the PRA under section 64, or

(b) the person has been knowingly concerned in a contravention
by the relevant authorised person of a requirement imposed
5on that authorised person—

(i) by or under this Act, or

(ii) by any qualifying EU provision specified, or of a
description specified, for the purposes of this
subsection by the Treasury by order.

(4) 10In subsection (3), for “Authority” substitute “regulator”.

(5) In subsection (3D), for “The Authority” substitute “The regulator taking
action under this section”.

(6) In subsection (4)—

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

(b) 15for “the Authority”, in the second place, substitute “the regulator”.

(7) In subsection (5)(a), for “the Authority” substitute “a regulator”.

(8) For subsection (6) substitute—

(6) Approved person” means a person in relation to whom an approval
is given under that section.

15 (1) 20Section 67 (disciplinary measures: procedure and right to refer to Tribunal)
is amended as follows.

(2) In subsections (1) and (4), for “the Authority” substitute “a regulator”.

(3) In subsection (7)—

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

(b) 25for “the Authority”, in the second place, substitute “the regulator”.

(4) In subsection (9)—

(a) for “an approved person (“A”),” substitute “a person (“A”) in relation
to whom approval has been given,”, and

(b) omit the second sentence.

16 30In section 68 (publication), for “the Authority” substitute “the regulator
publishing it”.

17 (1) Section 69 (statement of policy) is amended as follows.

(2) In subsection (1), for “The Authority must” substitute “Each regulator must”.

(3) In subsection (2), for “The Authority’s” substitute “A regulator’s”.

(4) 35In subsection (3)—

(a) for “The Authority” substitute “A regulator”, and

(b) after “issued” insert “by it”.

(5) In subsection (4), for “replaced, the Authority” substitute “replaced by a
regulator, the regulator”.

(6) 40In subsection (5), for “The Authority” substitute “A regulator”.

(7) In subsection (6)—

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(a) after “section” insert “by a regulator”, and

(b) for “the Authority”, in both places, substitute “the regulator”.

(8) In subsection (7), for “Authority” substitute “regulator”.

(9) In subsection (8)—

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

(b) after “published” insert “by it”.

18 (1) Section 70 (statements of policy: procedure) is amended as follows.

(2) In subsection (1)—

(a) for “issuing” substitute “a regulator issues”, and

(b) 10for “Authority”, in both places, substitute “regulator”.

(3) In subsections (2), (3), (4) and (5) (in both places), for “Authority” substitute
“regulator”.

(4) In subsection (6)—

(a) for “The Authority” substitute “A regulator”, and

(b) 15after “published” insert “by it”.

Section 22

SCHEDULE 6 Control of business transfers

1 Part 7 of FSMA 2000 is amended as follows.

2 Before section 104 insert—

103A 20 Meaning of “the appropriate regulator”

(1) In this Part “the appropriate regulator” means—

(a) in relation to a scheme in respect of which the authorised
person concerned is a PRA-authorised person, the PRA;

(b) in any other case, the FCA.

(2) 25In this Part, “the authorised person concerned”—

(a) in the case of an insurance business transfer scheme, is to be
read in accordance with section 105(2);

(b) in the case of a banking business transfer scheme, is to be read
in accordance with section 106(2);

(c) 30in the case of a reclaim fund business transfer scheme, means
the reclaim fund to whose business the scheme relates.

3 (1) Section 109 (scheme reports) is amended as follows.

(2) For “Authority”, in each place, substitute “appropriate regulator”.

(3) After subsection (3) insert—

(4) 35Where the appropriate regulator is the PRA, it must consult the FCA
before—

(a) nominating or approving a person under subsection (2)(b), or

(b) approving a form under subsection (3).

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(5) Subsection (6) applies where the appropriate regulator is the FCA
and either—

(a) the transferee is a PRA-authorised person, or

(b) the authorised person concerned or the transferee has as a
5member of its immediate group a PRA-authorised person.

(6) The FCA must consult the PRA before—

(a) nominating or approving a person under subsection (2)(b), or

(b) approving a form under subsection (3).

4 (1) Section 110 (right to participate in proceedings) is amended as follows.

(2) 10The existing provision becomes subsection (1).

(3) For paragraph (a) of that subsection substitute—

(a) the FCA,

(aa) in the case of a scheme falling within subsection (2), the PRA,
and.

(4) 15After that subsection insert—

(2) A scheme falls within this subsection if—

(a) the authorised person concerned or the transferee is a PRA-
authorised person, or

(b) the authorised person concerned or the transferee has as a
20member of its immediate group a PRA-authorised person.

5 In section 112 (effect of order sanctioning business transfer scheme), in
subsections (10) and (11), for “Authority” substitute “appropriate regulator”.

6 After section 112 insert—

112ZA Duty of regulator to provide copy of order

(1) 25Where the PRA receives under section 112(10) a copy of an order it
must, without delay, give a copy of it to the FCA.

(2) Where the FCA receives under section 112(10) a copy of an order it
must, without delay, give a copy of it to the PRA if the order relates
to a scheme in respect of which—

(a) 30the transferee is a PRA-authorised person, or

(b) the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.

7 (1) Section 113 (appointment of actuary) is amended as follows.

(2) In subsection (2)—

(a) 35for “the Authority”, in the first place, substitute “either regulator”,
and

(b) for “Authority”, in the second place, substitute “regulator which
made the application”.

(3)
After that subsection insert—

(3) 40An application under subsection (2) may be made by the PRA only
if—

(a) the authorised person concerned or the transferee is a PRA-
authorised person, or

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(b) the authorised person concerned or the transferee has as a
member of its immediate group a PRA-authorised person.

8 In section 115 (certificates for purposes of insurance business transfers
overseas), for “Authority” substitute “appropriate regulator”.

9 5Schedule 12 to FSMA (transfer schemes: certificates) is amended as follows.

10 In paragraph 1, for “the Authority”, in each place, substitute “the
appropriate regulator”.

11 (1) Paragraph 2 is amended as follows.

(2) In the following places, for “Authority” substitute “appropriate regulator”—

(a) 10sub-paragraph (1)(b);

(b) in the first place in sub-paragraph (3).

(3) In sub-paragraph (3), after “transferred” insert “certification”.

(4) In sub-paragraph (6)(c), for “, the Authority” substitute

(i) the PRA, if the transferee is a PRA-authorised
15person with a Part 4A permission or with
permission under Schedule 4;

(ii) the FCA, if the transferee is a person with a Part 4A
permission or with permission under Schedule 4
but is not a PRA-authorised person.

12 20In paragraph 3, for “Authority” substitute “appropriate regulator”.

13 In paragraph 4, for “Authority”, in the first place, substitute “appropriate
regulator”.

14 In paragraph 5, for “Authority”, in the first place, substitute “appropriate
regulator”.

15 25In paragraph 5A, for “the Authority” substitute “the appropriate regulator”.

16 In paragraph 8(2)—

(a) for paragraph (a) substitute—

(a) if the transferee is a PRA-authorised person with a
Part 4A permission or with permission under
30Schedule 4, the PRA;

(aa) if the transferee is a person with Part 4A permission
or with permission under Schedule 4 but is not a
PRA-authorised person, the FCA;, and

(b) in paragraph (c), after “(a)” insert “, (aa)”.

17 35In paragraph 9, for “Authority” substitute “appropriate regulator”.

18 (1) Paragraph 9A is amended as follows.

(2) The existing provision becomes sub-paragraph (1).

(3) In that sub-paragraph, for “Authority” substitute “relevant regulator”.

(4) After that sub-paragraph insert—

(2) 40In this paragraph the “relevant regulator” means—

(a) if the transferee is a PRA-authorised person, the PRA;

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(b) in any other case, the FCA.

19 (1) Paragraph 10 is amended as follows.

(2) In sub-paragraph (2), for “Authority” substitute “FCA or the PRA”.

(3) In sub-paragraph (5), for “Authority” substitute “regulator which supervises
5the transferee’s margin of solvency”.

(4) In sub-paragraph (6), for “Authority” substitute “FCA or the PRA”.

Section 29

SCHEDULE 7 Application of provisions of FSMA 2000 to Bank of England etc

This is the Schedule 17A to be inserted in FSMA 2000 after Schedule 17—

Section 285A

Schedule 17A 10Further provision in relation to exercise of Part 18 functions by Bank
of England

Part 1 Co-operation between appropriate regulators

Memorandum of understanding between appropriate regulators and PRA

1 (1) 15The appropriate regulators must prepare and maintain a
memorandum describing how they intend to work together in
exercising their functions in relation to persons who are
recognised bodies.

(2) The memorandum must in particular make provision about—

(a) 20the need for each party when exercising a function in
relation to any person (“A”) who is a recognised body, or
any member of A’s group, to have regard to the exercise
(or possible exercise) of any function by the other party in
relation to A or any member of A’s group;

(b) 25the role of each party in cases where they are both
exercising functions in relation to the same persons;

(c) the obtaining and disclosure of information;

(d) the co-ordination by the parties of the exercise of their
powers to appoint competent persons under Part 11
30(information gathering and investigations) to conduct
investigations on their behalf.

(3) In this paragraph any reference to a function is to any function
whether conferred by or under any provision of this Part of this
Act or any other provision of this Act or otherwise.

2 (1) 35The appropriate regulators and the PRA must prepare and
maintain a memorandum describing how they intend to work
together in exercising their functions in relation to persons who
are recognised bodies and who—

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(a) are PRA-authorised persons; or

(b) are members of a group of which a member is a PRA-
authorised person.

(2) The memorandum must in particular make provision about—

(a) 5the need for each party when exercising a function in
relation to any person (“A”) who is a recognised body, or
any member of A’s group, to have regard to the exercise
(or possible exercise) of any function by the other party in
relation to A or any member of A’s group;

(b) 10the role of each party in cases where they are both
exercising functions in relation to the same persons;

(c) the obtaining and disclosure of information;

(d) the co-ordination by the parties of the exercise of their
powers to appoint competent persons under Part 11
15(information gathering and investigations) to conduct
investigations on their behalf.

(3) In this paragraph any reference to a function is to any function
whether conferred by or under any provision of this Part of this
Act or any other provision of this Act or otherwise.

3 20The parties to a memorandum under paragraph 1 or 2 must
review the memorandum at least once in each calendar year.

4 The parties to a memorandum under paragraph 1 or 2 must give
the Treasury a copy of the memorandum and any revised
memorandum.

5 25The Treasury must lay before Parliament a copy of any document
received by them under paragraph 4.

6 The parties to a memorandum under paragraph 1 or 2 must ensure
that the memorandum as currently in force is published in the way
appearing to them to be best calculated to bring it to the attention
30of the public.

Notification by FCA of action in relation to recognised clearing houses

7 The FCA must notify the Bank of England of any direction given
by it under section 128 to a recognised clearing house (market
abuse: suspension of investigations).

8 35The FCA must notify the Bank of England of any requirement
imposed by it under section 313A on a recognised clearing house
(power to require suspension or removal of financial instruments
from trading).

Part 2 40Application of provisions of this Act in relation to Bank of England

Introduction

9 (1) The provisions of this Act mentioned in this Part of this Schedule
are to apply in relation to the Bank of England in accordance with
the provision made by this Part of this Schedule.

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(2) In any case where sub-paragraph (1) applies—

(a) any reference in this Act to the FCA or the PRA which is
contained in, or relates to, any of those provisions
(however expressed) is to be read as a reference to the
5Bank; and

(b) this Act has effect with any other necessary modifications.

Rules

10 (1) The following provisions of Part 9A of this Act are to apply in
relation to rules made by the Bank under any provision made by
10or under this Act—

(a) section 137S (general supplementary powers);

(b) sections 138A and 138B (modification or waiver of rules),
but with the omission of subsection (4)(b) of section 138A
and subsection (4) of section 138B;

(c) 15section 138C (evidential provisions);

(d) section 138D (actions for damages), but with the omission
of subsection (2);

(e) section 138E (limits on effect of contravening rules);

(f) section 138F (notification of rules);

(g) 20section 138G (rule-making instruments);

(h) section 138H (verification of rules);

(i) section 138J (consultation), but with the omission of
subsections (1)(a), (2)(c) and (5)(b); and

(j) section 138L (consultation: general exemptions), but with
25the omission of subsections (1) and (3).

(2) Any reference in any of those provisions to an authorised person
is to be read as a reference to a recognised clearing house.

(3) Section 138J(2)(d) has effect in relation to rules proposed to be
made by the Bank as if the reference to the compatibility of the
30proposed rules with the provisions mentioned in section
138J(2)(d) were a reference to their compatibility with the Bank’s
financial stability objective.

(4) Section 138L(2) has effect as if for paragraphs (a) and (b) there
were substituted “be prejudicial to financial stability”.

35Information gathering and investigations

11 (1) The powers conferred by section 165(1) and (3) (power to require
information) are exercisable by the Bank or (as the case may be) its
officers to impose requirements on—

(a) a recognised clearing house;

(b) 40a person who for the purposes of section 165 is connected
with a recognised clearing house.

(2) The information or documents that the Bank may require to be
provided or produced are limited to—

(a) information or documents reasonably required in
45connection with the exercise by the Bank of functions
conferred on it by or under this Part of this Act;

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(b) information or documents reasonably required in
connection with the exercise by the Bank of any of its other
functions in pursuance of its financial stability objective;
and

(c) 5information or documents which the Bank reasonably
considers may enable or assist the FCA in discharging
functions conferred on the FCA by or under this Act.

(3) In consequence of the provision made by sub-paragraph (2),
section 165(4) is not to apply in relation to section 165(1) and (3) as
10applied by this paragraph.

12 The power conferred by section 166 (reports by skilled person) is
exercisable by the Bank as if references in that section to an
authorised person were to a recognised clearing house.

13 (1) The powers conferred by section 167 (appointment of persons to
15carry out general investigations) are exercisable by the Bank as if
references in that section to an authorised person were to any
recognised clearing house other than an overseas clearing house.

(2) In addition to the powers conferred by section 171, a person
conducting an investigation under section 167 as a result of this
20paragraph is to have the powers conferred by sections 172 and 173
(and for this purpose the references in those sections to an
investigator are to be read accordingly).

14 (1) The power conferred by section 168(5) (appointment of persons to
carry out investigations in particular cases) is exercisable by the
25Bank.

(2) That power is exercisable if it appears to the Bank that there are
circumstances suggesting that—

(a) a clearing house may be guilty of an offence under section
398(1) or an offence under prescribed regulations relating
30to money laundering;

(b) a clearing house may have contravened a rule made by the
Bank under this Part of this Act;

(c) a clearing house may have contravened the recognition
requirements;

(d) 35a clearing house may have contravened any qualifying EU
provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
order;

(e) a clearing house may have breached the general
40prohibition.

(3) In addition to the powers conferred by section 171, a person
conducting an investigation under section 168(5) as a result of this
paragraph is to have the powers conferred by sections 172 and 173
(and for this purpose the references in those sections to an
45investigator are to be read accordingly).

15 An overseas regulator may, in accordance with section 169,
request the Bank to exercise the power conferred by section 165 (as
applied by paragraph 11 of this Schedule).