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Financial Services Bill (HL Bill 60)

Financial Services BillPage 290

Part 8 Co-operation

41 After section 415A insert—

Consultation

415B 5Consultation in relation to taking certain enforcement action

(1) The FCA must consult the PRA before taking a qualifying step in
relation to a person who—

(a) is a PRA-authorised person, or

(b) has a qualifying relationship with a PRA-authorised person.

(2) 10The PRA must consult the FCA before taking a qualifying step.

(3) In this section any reference to the taking of a qualifying step is a
reference to—

(a) the giving of a warning notice or decision notice under
section 63B (performance of controlled functions without
15approval),

(b) the giving of a warning notice or decision notice under
section 67 (disciplinary powers in relation to approved
person),

(c) the giving of a warning notice under section 126 or a decision
20notice under section 127 (market abuse),

(d) the giving of a warning notice or decision notice under
section 131H (short selling),

(e) the giving of a warning notice under section 207 or a decision
notice under section 208 (breaches of requirements imposed
25by or under Act etc.),

(f) the giving of a warning notice under section 312G or a
decision notice under section 312H (recognised bodies),

(g) the making of an application to the court under section
380, 381, 382 or 383 (injunctions or restitution), or

(h) 30the giving of a warning notice under section 385 or a decision
notice under section 386 (power of FCA or PRA to require
restitution).

(4) A person has a qualifying relationship with a PRA-authorised
person (“A”) for the purposes of this section if—

(a) 35the person is a member of A’s immediate group, or

(b) in the case of a qualifying step within subsection (3)(a) or (b),
the person performs a significant-influence function under
an arrangement entered into by A, or by a contractor of A, in
relation to the carrying on by A of a regulated activity.

40“Significant-influence function” and “arrangement” have the same
meanings as in section 59.

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Section 38

SCHEDULE 10 The Financial Services Compensation Scheme

1 Part 15 of FSMA 2000 (the Financial Services Compensation Scheme) is
amended as follows.

2 (1) 5Section 212 (the scheme manager) is amended as follows.

(2) For subsections (1) and (2) substitute—

(1) The scheme manager” means the body corporate established by the
Financial Services Authority under this section as originally enacted.

(2) The regulators must take such steps as are necessary to ensure that
10the scheme manager is, at all times, capable of exercising the
functions conferred on it by or under this Part or Part 15A.

(3) In subsections (4) and (5) for “Authority” substitute “regulators”.

(4) In subsection (7), omit “board members,”.

3 (1) Section 213 (the compensation scheme) is amended as follows.

(2) 15In each place, for “Authority” substitute “regulators”.

(3) In subsection (1)—

(a) after “rules” insert “made in accordance with an order under
subsection (1A)”, and

(b) for the words from “cases where” to the end substitute “cases
20where—

(a) relevant persons are unable, or likely to be unable, to
satisfy claims against them, or

(b) persons who have assumed responsibility for
liabilities arising from acts or omissions of relevant
25persons (“successors”) are unable, or likely to be
unable, to satisfy claims against the successors that
are based on those acts or omissions.

(4) After subsection (1) insert—

(1A) The Treasury must by order specify—

(a) 30the cases in which the FCA may, or may not, make rules
under subsection (1), and

(b) the cases in which the PRA may, or may not, make rules
under that subsection.

(5) In subsection (2), after “rules” insert “(taken together)”.

(6) 35In subsection (9)(a), after “against him” insert “, or against a successor falling
within subsection (1)(b),”.

4 In section 214 (general provisions of the scheme), in subsection (1), after
paragraph (a) insert—

(aa) as to the circumstances in which a successor falling within
40section 213(1)(b) is to be taken (for the purposes of the
scheme) to be unable, or likely to be unable, to satisfy claims
against the successor that are based on the acts or omissions
of a relevant person;.

Financial Services BillPage 292

5 In section 215 (rights of the scheme in insolvency), for “Authority”, in each
place, substitute “regulators”.

6 In section 217 (insurers in financial difficulties), in subsection (5), for
“Authority” substitute “either regulator or both regulators”.

7 5After section 217 insert—

Relationship with the regulators

217A Co-operation

(1) Each regulator and the scheme manager must take such steps as they
consider appropriate to co-operate with each other in the exercise of
10their functions under this Part and Part 15A.

(2) Each regulator and the scheme manager must prepare and maintain
a memorandum describing how that regulator and the scheme
manager intend to comply with subsection (1).

(3) The scheme manager must ensure that the memoranda as currently
15in force are published in the way appearing to it to be best calculated
to bring them to the attention of the public.

8 For the italic heading before section 218 substitute “Annual plan and report”.

9 Before section 218 insert—

217B Annual plan

(1) 20The scheme manager must in respect of each of its financial years
prepare an annual plan.

(2) The plan must be prepared before the start of the financial year.

(3) An annual plan in respect of a financial year must make provision
about the use of the resources of the scheme manager.

(4) 25The plan may include material relating to periods longer than the
financial year in question.

(5) Before preparing an annual plan, the scheme manager must consult
such persons (if any) as the scheme manager considers appropriate.

(6) The scheme manager must publish each annual plan in the way it
30considers appropriate.

10 (1) Section 218 (annual report) is amended as follows.

(2) In subsections (1) and (2)(b), for “Authority” substitute “regulators”.

(3) At the end insert—

(4) The Treasury may—

(a) 35require the scheme manager 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 such provision of that Act is to apply to the
scheme manager with such modifications as are specified in
40the direction.

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(5) Compliance with any requirement under subsection (4)(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.

(6) Proceedings under subsection (5) may be brought only by the
5Treasury.

11 After section 218 insert—

218ZA Audit of accounts

(1) The scheme manager must send a copy of its annual accounts to the
Comptroller and Auditor General and the Treasury as soon as is
10reasonably practicable.

(2) The Comptroller and Auditor General must—

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

(b) send a copy of the certified accounts and the report to the
15Treasury.

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

(4) The scheme manager must send a copy of the certified accounts and
the report to the regulators.

(5) 20Except as provided by section 218(4), the scheme manager is exempt
from the requirements of Part 16 of the Companies Act 2006 (audit),
and its balance sheet must contain a statement to that effect.

(6) In this section “annual accounts” has the meaning given by section
471 of the Companies Act 2006.

12 (1) 25Section 218A (power to require information) is amended as follows.

(2) In subsection (1)—

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

(b) for “the Authority”, in the second and third place, substitute “that
30regulator”.

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

(4) In subsection (5), for “Authority’s” substitute “regulator’s”.

(5) In the heading, for “Authority’s” substitute “Regulators’”.

13 In section 221 (powers of court), in subsection (2), after “director or” insert
35“other”.

14 In section 222 (statutory immunity), in subsection (1), omit “board
member,”.

15 In section 224 (scheme manager’s power to inspect documents), in
subsection (1), after “relevant person,” insert “or a successor falling within
40section 213(1)(b),”.

Financial Services BillPage 294

Section 39

SCHEDULE 11 The financial ombudsman service

1 In section 226 (compulsory jurisdiction), in subsection (3)(a), for “Authority”
substitute “FCA”.

2 5In section 226A (consumer credit jurisdiction), in subsection (7), for
“Authority” substitute “FCA”.

3 In section 227 (voluntary jurisdiction), in subsection (6), for “Authority’s”
substitute “FCA’s”.

4 (1) Section 228 (determination under the compulsory and consumer credit
10jurisdiction) is amended as follows.

(2) In subsection (4), in paragraph (c), omit “in writing”.

(3) After subsection (6) insert—

(6A) But the complainant is not to be treated as having rejected the
determination by virtue of subsection (6) if—

(a) 15the complainant notifies the ombudsman after the specified
date of the complainant’s acceptance of the determination,

(b) the complainant has not previously notified the ombudsman
of the complainant’s rejection of the determination, and

(c) the ombudsman is satisfied that such conditions as may be
20prescribed by rules made by the scheme operator for the
purposes of this section are satisfied.

(4) After subsection (7) insert—

(7A) Where a determination is rejected by virtue of subsection (6), the
notification under subsection (7) must contain a general description
25of the effect of subsection (6A).

5 In section 229 (awards), in subsection (4), for “Authority” substitute “FCA”.

6 In section 230 (costs), in subsection (2), for “Authority” substitute “FCA”.

7 After section 230 insert—

230A Reports of determinations

(1) 30The scheme operator must publish a report of any determination
made under this Part.

(2) But if the ombudsman who makes the determination informs the
scheme operator that, in the ombudsman’s opinion, it is
inappropriate to publish a report of that determination (or any part
35of it) the scheme operator must not publish a report of that
determination (or that part).

(3) Unless the complainant agrees, a report of a determination published
by the scheme operator may not include the name of the
complainant, or particulars which, in the opinion of the scheme
40operator, are likely to identify the complainant.

(4) The scheme operator may charge a reasonable fee for providing a
person with a copy of a report.

Financial Services BillPage 295

8 In section 232 (powers of court), in subsection (2), after “director or” insert
“other”.

9 After section 232 insert—

232A Scheme operator’s duty to provide information to FCA

5If the scheme operator considers that it has information that, in its
opinion, would or might be of assistance to the FCA in advancing
one or more of the FCA’s operational objectives, it must disclose that
information to the FCA.

10 In section 234 (industry funding), in subsection (1), for “Authority”
10substitute “FCA”.

11 In section 234A (funding by consumer credit licensees), in subsection (1), for
“Authority” substitute “FCA”.

12 After section 234A insert—

Successors to businesses

234B 15Transfers of liability

(1) This section applies where a person (the “successor”) has assumed a
liability (including a contingent one) of a person (the “predecessor”)
who was, or (apart from this section) would have been, the
respondent in respect of a complaint falling to be dealt with under
20the ombudsman scheme.

(2) The complaint may (but need not) be dealt with under this Part as if
the successor were the respondent.

13 Schedule 17 (the ombudsman scheme) is amended as follows.

14 For paragraph 2 (and the italic heading before it) substitute—

25

Duty of FCA

2 The FCA must take such steps as are necessary to ensure that the
body corporate established by the Financial Services Authority
under this Schedule as originally enacted is, at all times, capable of
30exercising the functions conferred on the scheme operator by or
under this Act.

15 In paragraph 3 (constitution)—

(a) for “Authority”, in each place, substitute “FCA”, and

(b) in sub-paragraph (4), after “9” insert “, 9A”.

16 35After paragraph 3 insert—

Relationship with FCA

3A (1) The scheme operator and the FCA must each take such steps as it
considers appropriate to co-operate with the other in the exercise
40of their functions under this Part.

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(2) The scheme operator and the FCA must prepare and maintain a
memorandum describing how they intend to comply with sub-
paragraph (1).

(3) The scheme operator must ensure that the memorandum as
5currently in force is published in the way appearing to the scheme
operator to be best calculated to bring it to the attention of the
public.

17 In paragraph 6 (status), in sub-paragraph (2), omit “board members,”.

18 In paragraph 7 (annual reports)—

(a) 10for “Authority”, in each place, substitute “FCA”, and

(b) at the end insert—

(5) The Treasury may—

(a) require the scheme operator to comply with any
provisions of the Companies Act 2006 about accounts and
15their 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 scheme operator with such
modifications as are specified in the direction, whether or
not the provision would otherwise apply to the scheme
20manager.

(6) Compliance with any requirement under sub-paragraph (5)(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.

(7) Proceedings under sub-paragraph (6) may be brought only by the
25Treasury.

19 After paragraph 7 insert—

Audit of accounts

7A (1) The scheme operator must send a copy of its annual accounts to
the Comptroller and Auditor General as soon as is reasonably
30practicable.

(2) The 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
35Treasury.

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

(4) The scheme operator must send a copy of the certified accounts
and the report to the FCA.

(5) 40Except as provided by paragraph 7(5), the scheme operator is
exempt from the requirements of Part 16 of the Companies Act
2006 (audit), and its balance sheet must contain a statement to that
effect.

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

20 For the italic heading before paragraph 8 substitute “Information, advice and
guidance
”.

21 5In paragraph 8 (guidance), for “guidance consisting of such information and
advice” substitute “such information, guidance or advice”.

22 In paragraph 9 (budget), for “Authority”, in each place, substitute “FCA”.

23 After paragraph 9 insert—

Annual plan

9A (1) 10The scheme operator must in respect of each of its financial years
prepare an annual plan.

(2) The plan must be prepared before the start of the financial year.

(3) An annual plan in respect of a financial year must make provision
about the use of the resources of the scheme operator.

(4) 15The plan may include material relating to periods longer than the
financial year in question.

(5) Before preparing an annual plan, the scheme operator must
consult such persons (if any) as the scheme operator considers
appropriate.

(6) 20The scheme operator must publish each annual plan in the way it
considers appropriate.

24 In paragraph 13 (procedural rules)—

(a) for “Authority”, in each place, substitute “FCA”,

(b) for “Authority’s”, in each place, (including the italic heading),
25substitute “FCA’s”, and

(c) in sub-paragraph (4)(b), for “Part X” substitute “Part 9A”.

25 In paragraph 14 (scheme operator’s rules)—

(a) in sub-paragraph (2), after paragraph (f) insert—

(fa) allow the correction of any clerical mistake in the
30written statement of a determination made by an
ombudsman;

(fb) provide that any irregularity arising from a failure
to comply with any provisions of the scheme rules
does not of itself render a determination void;”,
35and

(b) in sub-paragraph (7), for “Authority” substitute “FCA”.

26 In paragraph 16B (procedure for complaints etc), in sub-paragraph (1), after
paragraph (d) insert—

(e) may provide that an ombudsman may correct any clerical
40mistake in a determination made by that ombudsman;

(f) provide that any irregularity arising from a failure to
comply with any provisions of the consumer credit rules
does not of itself render a determination void.

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27 In paragraph 16E (consumer credit rules), for “Authority”, in each place,
substitute “FCA”.

28 In paragraph 18 (terms of reference), for “Authority”, in each place,
substitute “FCA”.

29 5In paragraph 19 (delegation), in sub-paragraph (3), for “Authority”
substitute “FCA”.

30 In paragraph 20 (voluntary jurisdiction rules: procedure), for “Authority”, in
each place, substitute “FCA”.

Section 41

SCHEDULE 12 10Amendments of Parts 11 and 23 of FSMA 2000

Part 1 Part 11 of FSMA 2000: information gathering and investigations

1 (1) Section 165 (power to require information) is amended as follows.

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

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

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

(5) In subsections (5) and (6) for “The Authority”, in each place, substitute “The
regulator in question”.

(6) In subsection (7), for the words from “exercised” to the end substitute
20“exercised—

(a) by either regulator, to impose requirements on a person who is
connected with an authorised person;

(b) by the FCA, to impose requirements on an operator, trustee or
depositary of a scheme recognised under section 270 or 272 who is
25not an authorised person;

(c) by the FCA, to impose requirements on a recognised investment
exchange;

(d) by the FCA, to impose requirements on a person who is connected
with a recognised investment exchange.”

(7) 30In subsection (9)—

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

(b) for “the Authority’s” substitute “that regulator’s”, and

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

(8) 35In subsection (11)—

(a) in the opening words, for “an authorised person” substitute “another
person”, and

(b) in paragraph (d), at the end insert “(reading references in that Part to
the authorised person as references to A)”.

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(9) In the heading, for “Authority’s” substitute “Regulators’”.

2 In section 165A (power to require information relevant to financial
stability)—

(a) for “Authority”, in each place, substitute “PRA”, and

(b) 5in the heading, for “Authority’s” substitute “PRA’s”.

3 In section 165B (safeguards relating to section 165A)—

(a) for “Authority”, in each place, substitute “PRA”, and

(b) for “Authority’s”, in each place, substitute “PRA’s”.

4 In section 165C (orders under section 165A(2)(d)) for subsection (1)
10substitute—

(1) The Treasury may make an order under section 165A(2)(d) only if
either or both of the following conditions is met in relation to the
provision made by the order.

(1A) Condition A is that the Treasury consider that—

(a) 15the activities carried on by the prescribed person or persons
of the prescribed description, or the way in which those
activities (or any part of them) are carried on, or

(b) any failure to carry on those activities (or any part of them),

pose, or would be likely to pose, a serious threat to the stability of the
20UK financial system.

(1B) Condition B is that the provision implements all or part of a
recommendation made by the Financial Policy Committee of the
Bank of England under section 9P of the Bank of England Act 1998.

5 For section 166 (reports by skilled persons) substitute—

166 25Reports by skilled persons

(1) This section applies where either regulator has required or could
require a person to whom subsection (2) applies (“the person
concerned”) to provide information or produce documents with
respect to any matter (“the matter concerned”).

(2) 30This subsection applies to—

(a) an authorised person (“A”),

(b) any other member of A’s group,

(c) a partnership of which A is a member, or

(d) a person who has at any relevant time been a person falling
35within paragraph (a), (b) or (c),

who is, or was at the relevant time, carrying on a business.

(3) The regulator mentioned in subsection (1) may either—

(a) by notice in writing given to the person concerned, require
the person concerned to provide the regulator with a report
40on the matter concerned, or

(b) itself appoint a person to provide the regulator with a report
on the matter concerned.

(4) When acting under subsection (3)(a), the regulator may require the
report to be in such form as may be specified in the notice.