Financial Services Bill (HL Bill 60)

(ii) omit “which is a recognised investment exchange”,

(b) in paragraphs (a) and (b), after “exchange” insert “or (as the case may
be) of a clearing house”, and

(c) in paragraph (c), for the words from “directly applicable” to the end
5substitute “directly applicable EU regulation specified (or of a
description specified) in an order made by the Treasury”.

(4) In subsection (2C), at the end insert “or overseas clearing house”.

(5) In subsections (5) and (6), for “the Authority” substitute “the appropriate
regulator”.

16 10In section 298 (directions and revocation: procedure)—

(a) in subsections (1), (6) and (7), after “section 296” insert “or 296A”, and

(b) in subsections (1), (2)(a), (3), (5), (6), (7) (in both places) and (8), for
“the Authority” substitute “the appropriate regulator”.

17 In section 299 (complaints about recognised bodies), in subsections (1) and
15(2), for “Authority” substitute “appropriate regulator”.

18 In section 300A (power to disallow excessive regulatory provision)—

(a) in subsection (1), for the words from “with” to the end substitute
“with—

“(a) its business as an investment exchange,

(b) 20the provision by it of clearing services, or

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

(b) in subsections (2) (in both places) and (4), and in the heading, for
“Authority” substitute “appropriate regulator”.

19 25In section 300B (duty to notify proposal to make regulatory provision) for
“Authority” (in each place) substitute “appropriate regulator”.

20 In section 300C (restriction on making provision before Authority decides
whether to act), in subsections (1), (2)(a), (3) (in both places), (4)(a) and (b),
and in the heading, for “Authority” substitute “appropriate regulator”.

21 (1) 30Section 300D (consideration by Authority whether to disallow proposed
provision) is amended as follows.

(2) In subsections (1) to (4) and (5)(a) and (b), for “Authority” substitute
“appropriate regulator”.

(3) In subsection (6)—

(a) 35in the opening words, for “the Authority” substitute “the appropriate
regulator”,

(b) in paragraph (b)—

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

(ii) 40for “the Authority” substitute “the regulator concerned”, and

(c) in paragraph (c)(i) and (ii), for “the Authority” substitute “the
appropriate regulator”.

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

22 (1) Section 301 (supervision of certain contracts) is amended as follows.

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

(3) In subsection (3)—

(a) for “the Authority”, in the first place, substitute “the FCA or the Bank
of England”, and

(b) 5for “the Authority”, in the second place, substitute “the Bank”.

(4) In subsections (4)(a), (6)(a), (7) and (9), for “Authority” substitute “Bank of
England”.

23 In section 301A (obligation to notify the Authority: acquisitions of control),
in subsections (1) and (2), and in the heading, for “the Authority” substitute
10“the FCA”.

24 In section 301B (requirements for s.301A notices), in subsections (1) to (3), for
“Authority” substitute “FCA”.

25 In section 301C (acknowledgement of receipt), in subsections (1) and (2), for
“Authority” substitute “FCA”.

26 15In section 301F (assessment: general), in subsections (1) to (3), for
“Authority” substitute “FCA”.

27 (1) Section 301G (assessment: procedure) is amended as follows.

(2) In subsections (1) (in both places) and (2) to (5), for “Authority” substitute
“FCA”.

(3) 20In subsection (6), for “the Authority’s” substitute “the FCA’s”.

28 In section 301H (duration of approval), in subsections (1), (2) and (3) (in both
places), for “the Authority” substitute “the FCA”.

29 In section 301I (objections by the Authority), in subsections (1) to (5), and in
the heading, for “Authority” substitute “FCA”.

30 25In section 301J (restriction notices), in subsections (1), (2)(b), (3) and (7), for
“Authority” substitute “FCA”.

31 In section 301K (order for sale of shares), in subsection (1), for “the
Authority” substitute “the FCA”.

32 (1) Section 301L (offences under Chapter) is amended as follows.

(2) 30In subsections (1) and (2) (in both places), for “the Authority” substitute “the
FCA”.

(3) In subsection (4), for “the Authority’s” substitute “the FCA’s”.

(4) In subsections (5) and (9), for “the Authority” substitute “the FCA”.

33 In section 312A (exercise of passport rights by EEA market operator), in
35subsection (1)(b), for “the Authority” substitute “the FCA”.

34 In section 312B (removal of passport rights from EEA market operator), in
subsections (1) (in each place), (3), (4)(b), (5), (6), (7)(a) and (b), (8)(b), (9) to
(11), (12) (in both places) and (13) (in the first place), for “Authority”
substitute “FCA”.

35 40In section 312C (exercise of passport rights by recognised investment
exchange), in subsections (2) to (6), for “Authority” substitute “FCA”.

36 (1) Section 313 (interpretation) is amended as follows.

(2) In subsection (1)—

(a) after the definition of “applicant” insert—

• ““central counterparty clearing services” has the same
  5meaning as in section 155 of the Companies Act 1989
  (see subsection (3A) of that section);”, and

(b) at the end insert—

• ““UK clearing house” means a clearing house—

  (a)

  which has its head office or its registered
  10office (or both) in the United Kingdom,

  (b)

  which provides central counterparty clearing
  services, and

  (c)

  in relation to which a recognition order is in
  force.”

(3) 15In subsection (4), after “clearing services” insert “or services falling within
section 285(3)(b)”.

37 In section 392 (warning and decisions notices: application of provisions
relating to third party rights and access to evidence)—

(a) in paragraph (a), after “section 280(1),” insert “section 312G(1),”, and

(b) 20in paragraph (b), after “section 280(2),” insert “section 312H(1),”.

38 In section 412A (approval and monitoring of trade-matching and reporting
systems), in subsections (1), (2), (4), (5) (in both places), (6) (in both places)
and (7), for “Authority” substitute “FCA”.

39 In section 412B (procedure for approval and suspension or withdrawal of
25approval), in subsections (1) to (6), (7) (in both places), (8) and (9), for
“Authority” substitute “FCA”.

Section 37

SCHEDULE 9 Discipline and enforcement

Part 1 30Introductory

1 FSMA 2000 is amended as follows.

Part 2 Authorised persons acting without permission

2 (1) Section 20 (authorised persons acting without permission) is amended as
35follows.

(2) In subsection (1)—

(a) in the opening words, after “an authorised person” insert “other than
a PRA-authorised person”,

(b) for paragraph (a) substitute—

“(a) given to that person under Part 4A, or”, and

(c) in the words after paragraph (b), for “Authority” substitute “ FCA”.

(3) After that subsection insert—

“(1A) 5If a PRA-authorised person carries on a regulated activity in the
United Kingdom, or purports to do so, otherwise than in accordance
with permission given to the person under Part 4A or resulting from
any other provision of this Act, the person is to be taken to have
contravened—

(a) 10a requirement imposed by the FCA, and

(b) a requirement imposed by the PRA.”

(4) For subsection (2) substitute—

“(2) A contravention within subsection (1) or (1A)—

(a) does not, except as provided by section 23(1A), make a
15person guilty of an offence,

(b) does not, except as provided by section 26A, make any
transaction void or unenforceable, and

(c) does not, except as provided by subsection (3), give rise to
any right of action for breach of statutory duty.”

(5) 20In subsection (3), for “the contravention”, in the first place, substitute “a
contravention within subsection (1) or (1A)”.

(6) After subsection (3) insert—

“(4) Subsections (1) and (1A) are subject to section 39(1D).

(5) References in this Act to an authorised person acting in
25contravention of this section are references to the person acting in a
way that results in a contravention within subsection (1) or (1A).”

3 (1) Section 23 (contravention of the general prohibition) is amended as follows.

(2) After subsection (1) insert—

“(1A) An authorised person (“A”) is guilty of an offence if A carries on a
30credit-related regulated activity in the United Kingdom, or purports
to do so, otherwise than in accordance with permission—

(a) given to that person under Part 4A, or

(b) resulting from any other provision of this Act.

(1B) In this Act “credit-related regulated activity” means a regulated
35activity of a kind designated by the Treasury by order.

(1C) The Treasury may designate a regulated activity under subsection
(1B) only if the activity involves a person—

(a) entering into or administering an agreement under which the
person provides another person with credit,

(b) 40exercising or being able to exercise the rights of the lender
under an agreement under which another person provides a
third party with credit, or

(c) taking steps to procure payment of debts due under an
agreement under which another person is provided with
credit.

(1D) But a regulated activity may not be designated under subsection (1B)
5if the agreement in question is one under which the obligation of the
borrower is secured on land.

(1E) “Credit” includes any cash loan or other financial accommodation.

(1F) A person guilty of an offence under subsection (1A) is liable—

(a) on summary conviction, to imprisonment for a term not
10exceeding the applicable maximum term or a fine not
exceeding the statutory maximum, or both;

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

(1G) The “applicable maximum term” is—

(a) 15in 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);

(b) in Scotland, 12 months;

(c) in Northern Ireland, 6 months.”

(3) 20After subsection (3) insert—

“(4) Subsection (1A) is subject to section 39(1D).

(5) No proceedings may be brought against a person in respect of an
offence under subsection (1A) in a case where either regulator has
taken action under section 205, 206 or 206A in relation to the alleged
25contravention within section 20(1) or (1A).”

(4) In the heading to the section, at the end insert “or section 20(1) or (1A)”.

4 After section 23 insert—

“23A Parliamentary control in relation to certain orders under section 23

(1) This section applies to the first order made under section 23(1B).

(2) 30This section also applies to any subsequent order made under section
23(1B) which contains a statement by the Treasury that, in their
opinion, the effect (or one of the effects) of the proposed order would
be that an activity would become a credit-related regulated activity.

(3) An order to which this section applies may not be made unless a
35draft of the order has been laid before Parliament and approved by a
resolution of each House.”

5 After section 26 insert—

“26A Agreements relating to credit

(1) An agreement that is made by an authorised person in contravention
40of section 20 is unenforceable against the other party if the agreement
is entered into in the course of carrying on a credit-related regulated
activity involving matters falling within section 23(1C)(a).

(2) The other party is entitled to recover—

(a) any money or other property paid or transferred by that
party under the agreement, and

(b) compensation for any loss sustained by that party as a result
of having parted with it.

(3) 5In subsections (1) and (2) “agreement” means an agreement—

(a) which is made after this section comes into force, and

(b) the making or performance of which constitutes, or is part of,
the credit-related regulated activity.

(4) If the administration of an agreement involves the carrying on of a
10credit-related regulated activity, the agreement may not be enforced
by a person for the time being exercising the rights of the lender
under the agreement unless that person has permission, given under
Part 4A or resulting from any other provision of this Act, in relation
to that activity.

(5) 15If the taking of steps to procure payment of debts due under an
agreement involves the carrying on of a credit-related regulated
activity, the agreement may not be enforced by a person for the time
being exercising the rights of the lender under the agreement unless
the agreement is enforced in accordance with permission—

(a) 20given under Part 4A to the person enforcing the agreement,
or

(b) resulting from any other provision of this Act.”

6 In section 27 (agreements made through unauthorised persons) for
subsection (1) substitute—

“(1) 25This section applies to an agreement that—

(a) is made by an authorised person (“the provider”) in the
course of carrying on a regulated activity,

(b) is not made in contravention of the general prohibition,

(c) if it relates to a credit-related regulated activity, is not made
30in contravention of section 20, and

(d) is made in consequence of something said or done by another
person (“the third party”) in the course of—

(i) a regulated activity carried on by the third party in
contravention of the general prohibition, or

(ii) 35a credit-related regulated activity carried on by the
third party in contravention of section 20.

(1A) The agreement is unenforceable against the other party.”

7 In section 28 (agreements made unenforceable by section 26 or 27)—

(a) at the end of subsection (1) insert “, other than an agreement entered
40into in the course of carrying on a credit-related regulated activity”,

(b) in the heading to the section, at the end insert “: general cases”.

8 After section 28 insert—

“28A Credit-related agreements made unenforceable by section 26, 26A or
27

(1) 45This section applies to an agreement that—

(a) is entered into in the course of carrying on a credit-related
regulated activity, and

(b) is unenforceable because of section 26, 26A or 27.

(2) The amount of compensation recoverable as a result of that section
5is—

(a) the amount agreed by the parties, or

(b) on the application of either party, the amount specified in a
written notice given by the FCA to the applicant.

(3) If on application by the relevant firm the FCA is satisfied that it is just
10and equitable in the circumstances of the case, it may by written
notice to the applicant allow—

(a) the agreement to be enforced, or

(b) money paid or property transferred under the agreement to
be retained.

(4) 15In considering whether to allow the agreement to be enforced or (as
the case may be) the money or property paid or transferred under the
agreement to be retained the FCA must—

(a) if the case arises as a result of section 26 or 26A, have regard
to the issue mentioned in subsection (5), or

(b) 20if the case arises as a result of section 27, have regard to the
issue mentioned in subsection (6).

(5) The issue is whether the relevant firm reasonably believed that by
making the agreement the relevant firm was neither contravening
the general prohibition nor contravening section 20.

(6) 25The issue is whether the provider knew that the third party was (in
carrying on the credit-related regulated activity) either contravening
the general prohibition or contravening section 20.

(7) An application to the FCA under this section by the relevant firm
may relate to specified agreements or to agreements of a specified
30description or made at a specified time.

(8) “The relevant firm” means—

(a) in a case falling within section 26, the person in breach of the
general prohibition;

(b) in a case falling within section 26A or 27, the authorised
35person concerned.

(9) If the FCA thinks fit, it may when acting under subsection (2)(b) or
(3)—

(a) limit the determination in its notice to specified agreements,
or agreements of a specified description or made at a
40specified time;

(b) make the determination in its notice conditional on the doing
of specified acts by the applicant.

28B Decisions under section 28A: procedure

(1) A notice under section 28A(2)(b) or (3) must—

(a) 45give the FCA’s reasons for its determination, and

(b) give an indication of—

(i) the right to have the matter referred to the Tribunal
that is conferred by subsection (3), and

(ii) the procedure on such a reference.

(2) The FCA must, so far as it is reasonably practicable to do so, give a
5copy of the notice to any other person who appears to it to be affected
by the determination to which the notice relates.

(3) A person who is aggrieved by the determination of an application
under section 28A(2)(b) or (3) may refer the matter to the Tribunal.”

Part 3 10Market abuse

9 (1) In the provisions of Part 8 (market abuse) mentioned in sub-paragraph (2),
for “Authority” or “Authority’s”, in each place, substitute “FCA” or “FCA’s”.

(2) The provisions are: sections 119, 120 (including the heading), 121 to 130A
and 131A.

(3) 15In section 121 (codes: procedure), for subsection (10) substitute—

“(10) Cost benefit analysis” means—

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

(i) if the proposed code is issued, or

(ii) 20if subsection (5)(b) applies, from the code that has
been issued, and

(b) subject to subsection (10A), an estimate of those costs and of
those benefits.

(10A) If, in the opinion of the FCA—

(a) 25the costs or benefits referred to in subsection (10) cannot
reasonably be estimated, or

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

the cost benefit analysis need not estimate them, but must include a
statement of the FCA’s opinion and an explanation of it.”

(4) 30In section 130 (guidance), in subsection (1)(b), for “section 397 of this Act”
substitute “Part 7 of the Financial Services Act 2012”.

Part 4 Disciplinary measures

10 In Part 14 (disciplinary measures), before section 205 insert—

“204A 35 Meaning of “relevant requirement” and “appropriate regulator”

(1) The following definitions apply for the purposes of this Part.

(2) “Relevant requirement” means a requirement imposed—

(a) by or under this Act, or

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

(3) The PRA is “the appropriate regulator” in the case of a contravention
of—

(a) a requirement that is imposed under any provision of this Act
by the PRA,

(b) 5a requirement under section 56(6) where the authorised
person concerned is a PRA-authorised person and the
prohibition order concerned is made by the PRA,

(c) a requirement under section 59(1) or (2) where the authorised
person concerned is a PRA-authorised person and the
10approval concerned falls to be given by the PRA.

(4) In the case of a contravention of a requirement that is imposed by a
qualifying EU provision, “the appropriate regulator” for the purpose
of any provision of this Part is whichever of the PRA or the FCA (or
both) is specified by the Treasury by order in relation to the
15qualifying EU provision for the purposes of that provision of this
Part.

(5) In the case of a contravention of a requirement where the
contravention constitutes an offence, the “appropriate regulator” is
whichever of the PRA or the FCA has power to prosecute the offence
20(see section 401).

(6) The FCA is “the appropriate regulator” in the case of a contravention
of any other requirement imposed by or under this Act.

(7) The Treasury may by order amend the provisions defining “the
appropriate regulator”.”

11 25In section 205 (public censure)—

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

(b) for the words from “a requirement” to “may” substitute “a relevant
requirement imposed on the person, it may”.

12 (1) 30Section 206 (financial penalties) is amended as follows.

(2) In subsection (1)—

(a) for “Authority” substitute “appropriate regulator”, and

(b) for the words from “a requirement” to “auctioning regulation”
substitute “a relevant requirement imposed on the person,”.

(3) 35In subsection (3), for “Authority” substitute “regulator that imposed the
penalty”.

13 (1) Section 206A (suspending permission to carry on regulated activities etc.) is
amended as follows.

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

(3) 40After that subsection insert—

“(1A) The power conferred by subsection (1) is also exercisable by the FCA
if it considers that an authorised person has contravened a
requirement imposed on the person by—

(a) the Payment Services Regulations 2009, or

(b) 45the Electronic Money Regulations 2011.”

(4) In subsection (2)—

(a) in the definition of “permission”, for “the Authority” substitute “the
FCA or the PRA”, and

(b) omit the definition of “relevant requirement”.

(5) 5In subsection (6), for “Authority” substitute “appropriate regulator”.

14 In section 207(1) (proposal to take disciplinary measures), for “the
Authority” substitute “a regulator”.

15 In section 208(1) and (4) (decision notice), for “the Authority”, in each place,
substitute “a regulator”.

16 10In section 209 (publication), for “the Authority” substitute “the regulator
concerned”.

17 (1) Section 210 (statements of policy) is amended as follows.

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

(3) After subsection (1) insert—

“(1A) 15Each regulator’s policy with respect to the imposition of penalties,
suspensions or restrictions under this Part must include policy with
respect to their imposition in relation to conduct which constitutes or
may constitute an offence by virtue of section 23(1A) (authorised
persons carrying on credit-related regulated activities otherwise
20than in accordance with permission).”

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

(5) In subsection (3)—

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

(b) after “issued” insert “by it”.

(6) 25In subsection (4), for “replaced, the Authority” substitute “replaced by a
regulator, the regulator”.

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

(8) In subsection (6)—

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

(b) 30for “Authority”, in both places, substitute “regulator”.

(9) In subsection (7)—

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

(b) after “published” insert “by it”.

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

18 (1) 35Section 211 (statements of policy: procedure) is amended as follows.

(2) In subsection (1)—

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

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

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

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