Financial Services Bill (HL Bill 60)

16 The power to give information under section 176(1) (entry of
premises under warrant) is exercisable by the Bank, or an
investigator appointed by the Bank, as if the reference to the
second set of conditions were omitted.

5Powers in relation to parent undertakings

17 (1) The following provisions of Part 12A of this Act are to apply in
relation to the Bank—

(a) section 192C (power to direct qualifying parent
undertaking);

(b) 10section 192D (requirements that may be imposed);

(c) section 192E (direction: procedure);

(d) section 192G (references to Tribunal);

(e) section 192H (statement of policy);

(f) section 192I (statement of policy: procedure);

(g) 15section 192J (rules requiring provision of information);

(h) sections 192K to 192N (enforcement).

(2) For the purposes of those provisions section 192B (meaning of
“qualifying parent undertaking”) is to apply as if the reference in
subsection (1) to a qualifying authorised person or recognised UK
20investment exchange were a reference to a recognised clearing
house other than an overseas clearing house.

(3) Section 192C has effect as if—

(a) the general condition in subsection (2) were that the Bank
considers that it is desirable to give the direction for the
25purpose of the effective regulation of one or more
recognised clearing houses in the group of the qualifying
parent undertaking,

(b) subsections (3) and (4) were omitted, and

(c) the reference in subsection (5)(a) to authorised persons or
30recognised investment exchanges were a reference to
recognised clearing houses.

(4) Section 192E has effect as if the reference in subsection (1) to an
authorised person or recognised investment exchange were a
reference to a recognised clearing house.

(5) 35Section 192I has effect as if the reference in subsection (1)(a) to the
other regulator and the Bank were a reference to the FCA and the
PRA.

(6) Before the Bank gives a notice under section 192E(1) or (8)(b)—

(a) if the notice relates to the parent undertaking of an
40authorised person or recognised investment exchange, the
Bank must consult the FCA, and

(b) if the notice relates to the parent undertaking of a PRA-
authorised person, the Bank must also consult the PRA.

Auditors

18 (1) 45Section 342 (information given by auditor to a regulator) applies
in relation to a relevant auditor as if—

(a) the references in that section to a recognised investment
exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
which is also an authorised person or recognised
5investment exchange, the references to a regulator
included the Bank, and

(c) in the case of an auditor of a recognised clearing house not
falling within paragraph (b), the references to a regulator
were to the Bank.

(2) 10A “relevant auditor” is a person who is, or has been, an auditor of
a recognised clearing house appointed under or as a result of a
statutory provision.

19 (1) Section 343 (information given by auditor: person with close links)
applies in relation to a relevant auditor as if—

(a) 15the references in that section to a recognised investment
exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
which is an authorised person or which is a recognised
investment exchange, the references to a regulator
20included the Bank, and

(c) in the case of an auditor of a recognised clearing house not
falling within paragraph (b), the references to a regulator
were to the Bank.

(2) A “relevant auditor” is a person who—

(a) 25is, or has been, an auditor of a recognised clearing house
appointed under or as a result of a statutory provision, and

(b) is, or has been, an auditor of a person who has close links
with the recognised clearing house.

20 Section 344 (duty of auditor resigning to give notice) applies to an
30auditor to whom section 342 applies (whether by virtue of
paragraph 18 or otherwise) as if—

(a) the references in that section to a recognised investment
exchange were to a recognised clearing house,

(b) in the case of an auditor of a recognised clearing house
35which is neither an authorised person nor a recognised
investment exchange, the reference in the definition of “the
appropriate regulator” to the FCA were a reference to the
Bank,

(c) in the case of an auditor of a recognised clearing house
40which is a PRA-authorised person, the reference in the
definition of “the appropriate regulator” to the PRA were
a reference to the PRA and the Bank,

(d) in the case, not falling within paragraph (c), of an auditor
of a recognised clearing house which is an authorised
45person or which is a recognised investment exchange, the
reference in the definition of “the appropriate regulator” to
the FCA were a reference to the FCA and the Bank.

21 Sections 345A to 345E apply to auditors to whom section 342
applies only by virtue of paragraph 18 as if—

(a) the references in those sections to an auditor or actuary to
whom section 342 applies were to an auditor to whom
section 342 applies by virtue of paragraph 18,

(b) the references in those sections to a PRA-authorised person
5were to a recognised clearing house,

(c) in a case where the Bank disqualifies a person from being
an auditor of a recognised clearing house that is also a
recognised investment exchange, section 345A(5)(a)
required the Bank to notify the FCA, and

(d) 10the references in sections 345D and 345E to a regulator
included the Bank.

Public record and disclosure of information

22 Section 347 (record of authorised persons, recognised investment
exchanges, etc), so far as it relates to recognised investment
15exchanges, applies in relation to the Bank as if references in that
section to a recognised investment exchange were to a recognised
clearing house.

23 Sections 348 to 350 and 353 (disclosure of information) apply in
relation to information received by the Bank for the purposes of,
20or in the discharge of, any of its functions relating to recognised
clearing houses.

Insolvency

24 (1) The following provisions of Part 24 of this Act are to apply in
relation to the Bank—

(a) 25section 356 (powers to participate in proceedings:
company voluntary arrangements);

(b) section 358 (powers to participate in proceedings: trust
deeds for creditors in Scotland);

(c) section 359 (administration order);

(d) 30section 362 (powers to participate in administration
proceedings);

(e) section 362A (consent to appointment of administrator);

(f) section 363 (powers to participate in proceedings:
receivership);

(g) 35section 365 (powers to participate in proceedings:
voluntary winding-up);

(h) section 367 (winding-up petitions);

(i) section 371 (powers to participate in proceedings:
winding-up).

(2) 40Those provisions are to apply as if any reference to an authorised
person or recognised UK investment exchange were a reference to
a recognised clearing house.

25 In the case of any regulated activity which is carried on for the
purposes of, or in connection with, the provision of clearing
45services, the reference to the FCA in section 375(1) is to be read as
including a reference to the Bank.

Injunctions and restitution

26 (1) The power to make an application under section 380(1), (2) or (3)
(injunctions) is exercisable by the Bank.

(2) For the purposes of the application, any reference in that section to
5a relevant requirement is to—

(a) a requirement that is imposed by or under any provision of
this Part of this Act that relates to a recognised clearing
house;

(b) a requirement that is imposed under any other provision
10of this Act by the Bank;

(c) a requirement that is imposed by any qualifying EU
provision that is specified, or of a description specified, for
the purposes of this sub-paragraph by the Treasury by
order; or

(d) 15a requirement that is imposed by this Act and whose
contravention constitutes an offence that the Bank has
power to prosecute under this Act (see section 401, as
applied by paragraph 31).

27 (1) The power to make an application under section 382(1) (restitution
20order) is exercisable by the Bank.

(2) For the purposes of the application, any reference in that section to
a relevant requirement is to be read in accordance with paragraph
26(2) of this Schedule.

28 (1) The power conferred by section 384(5) (power of FCA to require
25restitution order) is exercisable by the Bank.

(2) That power is exercisable if the Bank is satisfied that a recognised
clearing house has contravened a relevant requirement, or been
knowingly concerned in the contravention of a relevant
requirement, and—

(a) 30that profits have accrued to the recognised clearing house
as a result of the contravention; or

(b) that one or more persons have suffered loss or been
otherwise adversely affected as a result of the
contravention.

(3) 35For the purposes of that power, “relevant requirement” is to be
read in accordance with paragraph 26(2) of this Schedule.

(4) Where this paragraph applies, section 384(5) and (6) are to have
effect as if—

(a) any reference to the person concerned were a reference to
40the recognised clearing house; and

(b) any reference to subsection (1) were a reference to sub-
paragraph (2) of this paragraph.

Notices

29 The provisions of Part 26 of this Act (notices) apply in relation to a
45warning or decision notice given by the Bank under section 192L,

312G or 312H as they apply in relation to such a notice given by
the FCA under that section.

Offences

30 Section 398 (misleading the FCA: residual cases) applies to
5information given to the Bank in purported compliance with—

(a) a requirement that is imposed by or under any provision of
Part 18 of this Act that relates to a recognised clearing
house;

(b) a requirement that is imposed under any other provision
10of this Act by the Bank; or

(c) a requirement that is imposed by any qualifying EU
provision specified, or of a description specified, for the
purposes of this paragraph by the Treasury by order.

31 (1) Section 401 (proceedings for an offence) applies to the Bank as if
15for the purposes of subsections (2)(a) and (3)(a) of that section the
Bank were an appropriate regulator in respect of each of the
following offences—

(a) an offence under section 177(3) where the investigation is
being, or is likely to be, conducted on behalf of the Bank;

(b) 20an offence under section 177(4) where the requirement is
imposed by the Bank;

(c) an offence under section 177(6) where the warrant is issued
as a result of information on oath given by the Bank or a
person appointed by it to conduct an investigation on its
25behalf;

(d) an offence under section 398(1) where the information was
given to the Bank.

(2) Section 401(3B) has effect subject to the provision made by this
paragraph (so that the FCA is not the appropriate regulator for the
30purposes of subsections (2)(a) and (3)(a) in respect of the above
offences).

Records

32 Paragraph 17 of Schedule 1ZB (records) applies in relation to the
recording of decisions made by the Bank in the exercise of its
35functions relating to recognised clearing houses.

Annual report

33 Paragraph 19 of Schedule 1ZB (annual report by PRA) applies in
relation to the Bank, but—

(a) as if for paragraphs (a) to (f) of sub-paragraph (1) there
40were substituted—

“(a) the discharge of its functions relating to recognised
clearing houses,

(b) the extent to which, in its opinion, in discharging
those functions its financial stability objective has
45been met,”, and

(b) as if sub-paragraph (3) were omitted.

Part 3 Winding up, administration or insolvency of UK clearing houses

Notice to Bank of England of preliminary steps

34 (1) An application for an administration order in respect of a UK
5clearing house may not be determined unless the conditions
below are satisfied.

(2) A petition for a winding up order in respect of a UK clearing house
may not be determined unless the conditions below are satisfied.

(3) A resolution for voluntary winding up of a UK clearing house may
10not be made unless the conditions below are satisfied.

(4) An administrator of a UK clearing house may not be appointed
unless the conditions below are satisfied.

(5) Condition 1 is that the Bank of England has been notified—

(a) by the applicant for an administration order, that the
15application has been made,

(b) by the petitioner for a winding up order, that the petition
has been presented,

(c) by the UK clearing house, that a resolution for voluntary
winding up may be made, or

(d) 20by the person proposing to appoint an administrator, of
the proposed appointment.

(6) Condition 2 is that a copy of the notice complying with Condition
1 has been filed (in Scotland, lodged) with the court (and made
available for public inspection by the court).

(7) 25Condition 3 is that—

(a) the period of 2 weeks, beginning with the day on which the
notice is received, has ended, or

(b) the Bank of England has informed the person who gave the
notice that—

(i) 30it has no objection to the order, resolution or
appointment being made, and

(ii) it does not intend to exercise a stabilisation power
under Part 1 of the Banking Act 2009.

(8) Arranging for the giving of notice in order to satisfy Condition 1
35can be a step with a view to minimising the potential loss to a UK
clearing house’s creditors for the purpose of section 214 of the
Insolvency Act 1986 (wrongful trading).

(9) In this paragraph “the court” means—

(a) in England and Wales, the High Court,

(b) 40in Scotland, the Court of Session, and

(c) in Northern Ireland, the High Court.

Power to give directions to insolvency practitioner

35 (1) This paragraph applies where a person has been appointed to act
as an insolvency practitioner (within the meaning of section 388 of
the Insolvency Act 1986 or Article 3 of the Insolvency (Northern
5Ireland) Order 1989) in relation to a company which is, or has
been, a UK clearing house.

(2) The Bank of England may give directions to the person if satisfied
that it is desirable to give the directions, having regard to the
public interest in—

(a) 10protecting and enhancing the stability of the UK financial
system,

(b) protecting and enhancing public confidence in the stability
of the UK financial system, and

(c) maintaining the continuity of central counterparty clearing
15services.

(3) Before giving directions the Bank of England must consult—

(a) the Treasury,

(b) (if the clearing house is a PRA-authorised person) the PRA,
and

(c) 20the FCA.

(4) Directions are enforceable, on an application by the Bank of
England, by an injunction or, in Scotland, by an order for specific
performance under section 45 of the Court of Session Act 1988.

(5) A person is not liable for damages in respect of action or inaction
25in accordance with directions.

(6) The immunity does not extend to action or inaction—

(a) in bad faith, or

(b) in contravention of section 6(1) of the Human Rights Act
1998.

30Part 4 Fees

36 (1) The Bank of England may, in connection with the discharge of any
of its qualifying functions, require recognised clearing houses to
pay fees to the Bank.

(2) 35The “qualifying functions” of the Bank are—

(a) its functions under or as a result of this Part of this Act, and

(b) its 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
40order.

(3) The power of the Bank to set fees includes power to set fees for the
purpose of meeting expenses incurred by it or the FCA—

(a) in preparation for the exercise of functions by the Bank
under this Part of this Act, or

(b) for the purpose of facilitating the exercise by the Bank of
those functions or otherwise in connection with their
exercise by it.

(4) It is irrelevant when the expenses were incurred (and, in
5particular, it is irrelevant if expenses were incurred by the FCA at
a time when it was known as the Financial Services Authority).

37 Any fee which is owed to the Bank under paragraph 36 may be
recovered as a debt due to the Bank.”

Section 35

SCHEDULE 8 10Sections 28 to 34: minor and consequential amendments

1 FSMA 2000 is amended as follows.

2 (1) Section 286 (qualification for recognition) is amended as follows.

(2) In subsection (1)(a), for “the Authority” substitute “the appropriate
regulator”.

(3) 15In subsections (4A), (4C) and (6), for “the Authority” substitute “the FCA”.

3 (1) Section 287 (application by an investment exchange) is amended as follows.

(2) In subsections (1) and (2) for “the Authority”, in each place, substitute “the
FCA”.

(3) In subsection (3)—

(a) 20in paragraph (a), after “provision” insert “by another person”,

(b) in paragraph (b), for “clearing services” substitute “services falling
within section 285(2)(b)”, and

(c) in paragraphs (d) and (e), for “the Authority” substitute “the FCA”.

4 (1) Section 288 (application by a clearing house) is amended as follows.

(2) 25In subsection (1), for “the Authority” substitute “the Bank of England”.

(3) In subsection (2)—

(a) in the opening words, for “the Authority” substitute “the Bank of
England”, and

(b) in paragraph (d), for “the Authority” substitute “the Bank”.

(4) 30In subsection (3)(b), after “clearing services” insert “or services falling within
section 285(3)(b)”.

5 In section 289 (applications: supplementary), in subsections (1), (2) (in both
places) and (3), for “the Authority” substitute “the appropriate regulator”.

6 (1) Section 290 (recognition orders) is amended as follows.

(2) 35In subsection (1)—

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

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

(3) In subsection (1B), for “the Authority” substitute “the FCA”.

(4) Omit subsection (2).

(5) In subsection (3), for “the Authority” substitute “the appropriate regulator”.

(6) Omit subsection (6).

7 (1) 5Section 290A (refusal of recognition on ground of excessive regulatory
provision) is amended as follows.

(2) In subsection (1)—

(a) for “The Authority must” substitute “The appropriate regulator
must”,

(b) 10for “the Authority that” substitute “it that”,

(c) omit the “or” following paragraph (a), and

(d) at the end of paragraph (b) insert “or

(c) the provision by the applicant of services falling
within section 285(2)(b) or (3)(b),”.

(3) 15In subsection (3), for “Authority” substitute “appropriate regulator”.

8 In section 292 (overseas investment exchanges and overseas clearing house),
in subsections (2), (3)(c) and (d), (4) and (5)(c), for “the Authority” substitute
“the appropriate regulator”.

9 In section 292A (publication of information by recognised investment
20exchange), in subsections (1), (3), (5) and (6), for “Authority” substitute
“FCA”.

10 (1) Section 293 (notification requirements) is amended as follows.

(2) In subsections (1) to (3) and (5), for “Authority” substitute “appropriate
regulator”.

(3) 25In subsection (6)—

(a) in paragraph (a), after “provision” insert “by another person”,

(b) in paragraph (b), for “clearing services” substitute “services falling
within section 285(2)(b)”, and

(c) for “the Authority” substitute “the FCA and the Bank of England”.

(4) 30In subsection (7)—

(a) in paragraph (a), after “clearing services” insert “or services falling
within section 285(3)(b)”,

(b) in paragraph (b), after “clearing services” insert “or services falling
within section 285(3)(b)”, and

(c) 35for “the Authority” substitute “the Bank of England and the FCA”.

(5) In subsection (9), for “the Authority’s” substitute “the appropriate
regulator’s”.

11 For section 293A substitute—

293A   Information: compliance with EU requirements

40The appropriate regulator may require a recognised body to give the
appropriate regulator such information as the appropriate regulator
reasonably requires in order to satisfy itself that the body is
complying with any qualifying EU provision that is specified, or of a

description specified, for the purposes of this section by the Treasury
by order.”

12 In section 294 (modification or waiver of rules), in subsections (1), (2), (4) and
(6), for “Authority” substitute “appropriate regulator”.

13 (1) 5Section 295 (notification: overseas investment exchanges and overseas
clearing houses) is amended as follows.

(2) In subsection (1), for “the Authority” substitute “the appropriate regulator”.

(3) In subsection (2), for the words from “likely” to the end substitute “likely to
affect the appropriate regulator’s assessment of whether it is satisfied as to
10the requirements set out in section 292(3)”.

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

(5) Omit subsection (4).

14 (1) Section 296 (power to give directions) is amended as follows.

(2) In subsection (1), for “the Authority” substitute “the appropriate regulator”.

(3) 15In subsection (1A)—

(a) for the words from “in the case of a recognised body which is a
recognised investment” to “the body” substitute “if it appears to the
appropriate regulator that a recognised body”, and

(b) for the words from “directly applicable” to the end substitute
20“directly applicable EU regulation specified (or of a description
specified) in an order made by the Treasury”.

(4) In subsection (2), for “The Authority” substitute “The regulator concerned”.

(5) In subsection (2A)—

(a) in the opening words, for “a recognised investment exchange other
25than an overseas investment exchange” substitute “a recognised
body other than an overseas investment exchange or overseas
clearing house”,

(b) in paragraph (a)—

(i) for “the Authority”, in both places, substitute “the regulator
30concerned”, and

(ii) for “the exchange” substitute “the body”, and

(c) in paragraph (b), for “the exchange” substitute “the body”.

(6) In subsection (3), for “the Authority” substitute “the regulator concerned”.

(7) In subsection (4), for “the Authority” substitute “an appropriate regulator”.

(8) 35In the heading, for “Authority’s” substitute “Appropriate regulator’s”.

15 (1) Section 297 (revoking recognition) is amended as follows.

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

(3) In subsection (2A)—

(a) 40in the opening words—

(i) for “the Authority” substitute “the appropriate regulator”,
and