Financial Services (Banking Reform) Bill

House of Lords

Session 2013 - 14
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Financial Services (Banking Reform) Bill

Financial Services (Banking Reform) Bill
Part 4 — Conduct of persons working in financial services sector
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condition in paragraph (a) will be met if the application is
granted subject to one or more conditions (as to which, see
subsection (2B)).”
(3)
In subsection (2), for “deciding that question” substitute “determining the
application”.
5
(4)
After subsection (2A) insert—
“(2B)
The regulator to which a bank-related senior management application
is made under section 60 may in particular—
(a)
grant the application subject to any conditions that the regulator
considers appropriate, and
10
(b)
grant the application so as to give approval only for a limited
period.
(2C)
A regulator may exercise the power under paragraph (a) or (b) of
subsection (2B) only if—
(a)
where the regulator is the FCA, it appears to the FCA that it is
15
desirable to do so in order to advance one or more of its
operational objectives, and
(b)
where the regulator is the PRA, it appears to the PRA that it is
desirable to do so in order to advance any of its objectives.
(2D)
Consent given by the FCA for the granting of the application may be
20
conditional on the manner in which the PRA exercises its power under
subsection (2B).”
(5)
After subsection (3) insert—
“(3ZA)
In the case of a bank-related senior management application, the
reference in subsection (3)(a) to granting the application is a reference
25
to granting it without imposing conditions or limiting the period for
which the approval has effect.”
(6)
After subsection (5) insert—
“(6)
In this section—
(a)
“designated senior management function” means a function
30
designated as a senior management function under section
59(6B) or (6C);
(b)
any reference to a bank includes a reference to a person who has
applied for permission under Part 4A and will be a bank if
permission is given.”
35
(7)
In section 62 of FSMA 2000 (applications for approval: procedure and right to
refer to Tribunal)—
(a)
in subsection (2), after “the application” insert “, or to grant the
application subject to conditions or for a limited period (or both)”;
(b)
in subsection (3), after “the application” insert “, or to grant the
40
application subject to conditions or for a limited period (or both)”;
(c)
in subsection (4), after “the application” insert “, or to grant the
application subject to conditions or for a limited period (or both)”.

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18
Changes in responsibilities of senior managers
After section 62 of FSMA 2000 insert—
“62A
Changes in responsibilities of senior managers
(1)
This section applies where—
(a)
an authorised person has made an application to the
5
appropriate regulator for approval under section 59 for a person
to perform a designated senior management function,
(b)
the application contained, or was accompanied by, a statement
of responsibilities under section 60(2A), and
(c)
the application has been granted.
10
(2)
If, since the granting of the application, there has been any significant
change in the aspects of the authorised person’s affairs which the
person is responsible for managing in performing the function, the
authorised person must provide the appropriate regulator with a
revised statement of responsibilities.
15
(3)
The appropriate regulator may require the authorised person—
(a)
to provide information which the person is required to give
under this section in such form as the appropriate regulator
may direct, or
(b)
to verify such information in such a way as the appropriate
20
regulator may direct.
(4)
In this section—
“the appropriate regulator” has the same meaning as in section 60;
“designated senior management function” means a function
designated as a senior management function under section
25
59(6B) or (6C).”
19
Variation of approval
After section 63 of FSMA 2000 insert—
“63ZA
Variation of senior manager’s approval at request of bank
(1)
Where an application for approval under section 59 is granted subject
30
to conditions, the authorised person concerned may apply to the
appropriate regulator to vary the approval by—
(a)
varying a condition,
(b)
removing a condition, or
(c)
imposing a new condition.
35
(2)
“The appropriate regulator”—
(a)
in the case of an application for variation of an approval in a
way described in subsection (1)(a) or (b), means whichever of
the FCA or the PRA imposed the condition concerned;
(b)
in the case of an application for variation of an approval in the
40
way described in subsection (1)(c), means the regulator who
gave the approval.
(3)
The PRA must consult the FCA before determining an application
under this section, unless the application relates to the variation or

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removal of a condition which was imposed by the PRA in exercise of its
power under section 63ZB.
(4)
The regulator to which an application is made under this section must,
before the end of the period for consideration, determine whether—
(a)
to grant the application; or
5
(b)
to give a warning notice under section 62(2).
(5)
“The period for consideration” means the period of 3 months beginning
with the date on which the regulator receives the application.
(6)
The FCA may refuse an application under this section if it appears to
the FCA that it is desirable to do so in order to advance one or more of
10
its operational objectives.
(7)
The PRA may refuse an application under this section if it appears to
the PRA that it is desirable to do so in order to advance any of its
objectives.
(8)
The following provisions apply to an application made under this
15
section for variation of an approval as they apply to an application for
approval made under section 60—

section 60(2) to (8),

section 61(4) and (5),

section 62.
20
63ZB
Variation of senior manager’s approval on initiative of regulator
(1)
The FCA may vary an approval under section 59 given by the FCA or
the PRA for the performance of a designated senior management
function in relation to the carrying on of a regulated activity by a bank
if the FCA considers that it is desirable to do so in order to advance one
25
or more of its operational objectives.
(2)
The PRA may vary an approval under section 59 for the performance
of a designated senior management function in relation to the carrying
on of a regulated activity by a bank if—
(a)
either—
30
(i)
the PRA gave the approval, or
(ii)
the FCA gave the approval and the bank is a PRA-
authorised person, and
(b)
the PRA considers that it is desirable to do so in order to
advance any of its objectives.
35
(3)
A regulator may vary an approval by—
(a)
imposing a condition,
(b)
varying a condition,
(c)
removing a condition, or
(d)
limiting the period for which the approval is to have effect.
40
(4)
Before one regulator varies an approval given by the other regulator, it
must consult the other regulator.
(5)
In this section “designated senior management function” means a
function designated as a senior management function under section
59(6B) or (6C).
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63ZC
Exercise of power under section 63ZB: procedure
(1)
This section applies to an exercise, by either regulator, of the power to
vary an approval under section 63ZB.
(2)
A variation takes effect—
(a)
immediately, if the notice given under subsection (4) states that
5
that is the case,
(b)
on such date as is specified in the notice, or
(c)
if no date is specified in the notice, when the matter to which the
notice relates is no longer open to review.
(3)
A variation may be expressed to take effect immediately (or on a
10
specified date) only if the regulator concerned, having regard to the
ground on which it is exercising the power to vary, reasonably
considers that it is necessary for the variation to take effect immediately
(or on that date).
(4)
If either regulator proposes to vary an approval or varies an approval
15
with immediate effect, it must give each of the interested parties
written notice.
(5)
The notice must—
(a)
give details of the variation,
(b)
state the regulator’s reasons for the variation,
20
(c)
inform the interested parties that each of them may make
representations to the regulator within such period as may be
specified in the notice (whether or not any of the interested
parties has referred the matter to the Tribunal),
(d)
inform the interested parties of when the variation takes effect,
25
and
(e)
inform the interested parties of the right of each of them to refer
the matter to the Tribunal.
(6)
“The interested parties”, in relation to an approval, are—
(a)
the person on whose application it was given (“A”),
30
(b)
the person in respect of whom it was given (“B”), and
(c)
the person by whom B’s services are retained, if not A.
(7)
The regulator giving the notice may extend the period allowed under
the notice for making representations.
(8)
If having considered the representations made by the interested
35
parties, the regulator decides—
(a)
to vary the approval, or
(b)
if the variation has taken effect, not to rescind it,

it must give each of the interested parties written notice.
(9)
If having considered the representations made by the interested
40
parties, the regulator decides—
(a)
not to vary the approval,
(b)
to vary the approval in a different way, or
(c)
if the variation has taken effect, to rescind it,

it must give each of the interested parties written notice.
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(10)
A notice under subsection (8) must inform the interested parties of the
right of each of them to refer the matter to the Tribunal.
(11)
A notice under subsection (9)(b) must comply with subsection (5).
(12)
If a notice informs the interested parties of the right to refer a matter to
the Tribunal, it must give an indication of the procedure on such a
5
reference.
(13)
For the purposes of subsection (2)(c), whether a matter is open to
review is to be determined in accordance with section 391(8).
(14)
“Approval” means an approval under section 59.”
20
Statement of policy
10
After section 63ZC of FSMA 2000 (inserted by section 19 above) insert—
“63ZD
Statement of policy relating to conditional approval and variation
(1)
Each regulator must prepare and issue a statement of its policy with
respect to—
(a)
its giving of approval under section 59 subject to conditions or
15
for a limited period only, and
(b)
its variation under section 63ZA or 63ZB of an approval given
under section 59.
(2)
A regulator may at any time alter or replace a statement issued by it
under this section.
20
(3)
If a statement issued under this section is altered or replaced by a
regulator, the regulator must issue the altered or replacement
statement.
(4)
A statement issued under this section must be published by the
regulator concerned in the way appearing to the regulator to be best
25
calculated to bring it to the attention of the public.
(5)
A regulator may charge a reasonable fee for providing a person with a
copy of a statement published under this section.
(6)
A regulator must, without delay, give the Treasury a copy of any
statement which it publishes under this section.
30
63ZE
Statement of policy: procedure
(1)
Before issuing a statement of policy under section 63ZD, a regulator
(“the issuing regulator”) must—
(a)
consult the other regulator, and
(b)
publish a draft of the proposed statement in the way appearing
35
to the issuing regulator to be best calculated to bring it to the
attention of the public.
(2)
The duty of the FCA to consult the PRA under subsection (1)(a) applies
only in so far as the statement of policy applies to persons whose
approval under section 59 relates to the performance of a function
40
designated by the FCA as a senior management function under section
59(6B) in relation to the carrying on by PRA-authorised persons of
regulated activities.

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(3)
The draft must be accompanied by notice that representations about the
proposal may be made to the issuing regulator within a specified time.
(4)
Before issuing the proposed statement, the issuing regulator must have
regard to any representations made to it in accordance with subsection
(3).
5
(5)
If the issuing regulator issues the proposed statement it must publish
an account, in general terms, of—
(a)
the representations made to it in accordance with subsection (3),
and
(b)
its response to them.
10
(6)
If the statement differs from the draft published under subsection (1) in
a way which is in the opinion of the issuing regulator significant, the
issuing regulator—
(a)
must before issuing it carry out any consultation required by
subsection (1)(a), and
15
(b)
must (in addition to complying with subsection (5)) publish
details of the difference.
(7)
The issuing regulator may charge a reasonable fee for providing a
person with a draft published under subsection (1)(b).
(8)
This section also applies to a proposal to alter or replace a statement.”
20
21
Extension of limitation periods for imposing sanctions
(1)
Section 63A of FSMA 2000 (power to impose penalties) is amended as follows.
(2)
In subsection (4), for “period of three years” substitute “relevant period”.
(3)
After subsection (5A) insert—
“(5B)
“The relevant period” is—
25
(a)
in relation to the performance of a controlled function without
approval before the day on which this subsection comes into
force, the period of 3 years, and
(b)
in relation to the performance of a controlled function without
approval on or after that day, the period of 6 years.”
30
(4)
Section 66 of FSMA 2000 (disciplinary powers) is amended as follows.
(5)
In subsection (4), for “period of three years” substitute “relevant period”.
(6)
After subsection (5) insert—
“(5ZA)
“The relevant period” is—
(a)
in relation to misconduct which occurs before the day on which
35
this subsection comes into force, the period of 3 years, and
(b)
in relation to misconduct which occurs on or after that day, the
period of 6 years.”
22
Rules of conduct
(1)
Part 5 of FSMA 2000 (performance of regulated activities) is amended as
40
follows.

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(2)
Omit sections 64 and 65 (and the italic cross-heading preceding them).
(3)
Before section 66 insert—
“Conduct of approved persons and others
64A
Rules of conduct
(1)
If it appears to the FCA to be necessary or expedient for the purpose of
5
advancing one or more of its operational objectives, the FCA may make
rules about the conduct of the following persons—
(a)
persons in relation to whom either regulator has given its
approval under section 59;
(b)
persons who are employees of banks.
10
(2)
If it appears to the PRA to be necessary or expedient for the purpose of
advancing any of its objectives, the PRA may make rules about the
conduct of the following persons—
(a)
persons in relation to whom it has given its approval under
section 59;
15
(b)
persons in relation to whom the FCA has given its approval
under section 59 in respect of the performance by them of a
relevant senior management function in relation to the carrying
on by a PRA-authorised person of a regulated activity;
(c)
persons who are employees of PRA-authorised banks.
20
(3)
In subsection (2)—
“PRA-authorised bank” means a bank that is a PRA-authorised
person, and
“relevant senior management function” means a function which
the PRA is satisfied is a senior management function as defined
25
in section 59ZA (whether or not the function has been
designated as such by the FCA).
(4)
Rules made under this section must relate to the conduct of persons in
relation to the performance by them of qualifying functions.
(5)
In subsection (4) “qualifying function”, in relation to a person, means a
30
function relating to the carrying on of activities (whether or not
regulated activities) by—
(a)
in the case of an approved person, the person on whose
application approval was given, and
(b)
in any other case, the person’s employer.
35
(6)
In this section any reference to an employee of a person (“P”) includes
a reference to a person who—
(a)
personally provides, or is under an obligation personally to
provide, services to P under an arrangement made between P
and the person providing the services or another person, and
40
(b)
is subject to (or to the right of) supervision, direction or control
by P as to the manner in which those services are provided,

and “employer” is to be read accordingly.”