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
5application”.

(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
10considers appropriate, and

(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) 15where the regulator is the FCA, it appears to the FCA that it is
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) 20Consent given by the FCA for the granting of the application may be
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
25reference in subsection (3)(a) to granting the application is a reference
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) 30“designated senior management function” means a function
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
35permission is given.”

(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) 40in subsection (3), after “the application” insert “, or to grant the
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)”.

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) 5an authorised person has made an application to the
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) 10the application has been granted.

(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
15revised statement of responsibilities.

(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) 20to verify such information in such a way as the appropriate
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
  25designated as a senior management function under section
  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) 30Where an application for approval under section 59 is granted subject
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) 35imposing a new condition.

(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) 40in the case of an application for variation of an approval in the
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

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) 5to grant the application; or

(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
10the FCA that it is desirable to do so in order to advance one or more of
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) 15The following provisions apply to an application made under this
section for variation of an approval as they apply to an application for
approval made under section 60—

(none) section 60(2) to (8),

(none) section 61(4) and (5),

(none) 20section 62.

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
25if the FCA considers that it is desirable to do so in order to advance one
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) 30either—

(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
35advance any of its objectives.

(3) A regulator may vary an approval by—

(a) imposing a condition,

(b) varying a condition,

(c) removing a condition, or

(d) 40limiting the period for which the approval is to have effect.

(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
4559(6B) or (6C).

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) 5immediately, if the notice given under subsection (4) states that
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) 10A variation may be expressed to take effect immediately (or on a
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) 15If either regulator proposes to vary an approval or varies an approval
with immediate effect, it must give each of the interested parties
written notice.

(5) The notice must—

(a) give details of the variation,

(b) 20state the regulator’s reasons for the variation,

(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) 25inform the interested parties of when the variation takes effect,
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) 30the person on whose application it was given (“A”),

(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) 35If having considered the representations made by the interested
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) 40If having considered the representations made by the interested
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,

45it must give each of the interested parties written notice.

(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
5the Tribunal, it must give an indication of the procedure on such a
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 10Statement of policy

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) 15its giving of approval under section 59 subject to conditions or
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
20under this section.

(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
25regulator concerned in the way appearing to the regulator to be best
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
30statement which it publishes under this section.

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) 35publish a draft of the proposed statement in the way appearing
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
40approval under section 59 relates to the performance of a function
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.

(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
5(3).

(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) 10its response to them.

(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
15subsection (1)(a), and

(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) 20This section also applies to a proposal to alter or replace a statement.”

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) 25The relevant period” is—

(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
30approval on or after that day, the period of 6 years.”

(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) 35in relation to misconduct which occurs before the day on which
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) 40Part 5 of FSMA 2000 (performance of regulated activities) is amended as
follows.

(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) 5If it appears to the FCA to be necessary or expedient for the purpose of
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) 10persons who are employees of banks.

(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
15section 59;

(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) 20persons who are employees of PRA-authorised banks.

(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
  25the PRA is satisfied is a senior management function as defined
  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) 30In subsection (4) “qualifying function”, in relation to a person, means a
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) 35in any other case, the person’s employer.

(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
40and the person providing the services or another person, and

(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.”

23 Definition of “misconduct”

(1) In section 66 of FSMA 2000 (disciplinary powers)—

(a) after subsection (1) insert—

“(1A) For provision about when a person is guilty of misconduct for
5the purposes of action by a regulator—

(a) see section 66A, in the case of action by the FCA, and

(b) see section 66B, in the case of action by the PRA.”;

(b) omit subsections (2), (2A), (6) and (7).

(2) After that section insert—

“66A 10Misconduct: action by the FCA

(1) For the purposes of action by the FCA under section 66, a person is
guilty of misconduct if any of conditions A to C is met in relation to the
person.

(2) Condition A is that—

(a) 15the person has at any time failed to comply with rules made by
the FCA under section 64A, and

(b) at that time the person was—

(i) an approved person, or

(ii) an employee of a bank.

(3) 20Condition B is that—

(a) the person has at any time been knowingly concerned in a
contravention of a relevant requirement by an authorised
person, and

(b) at that time the person was—

(i) 25an approved person in relation to the authorised person,
or

(ii) in the case of an authorised person that is a bank, an
employee of the bank.

(4) In this section “relevant requirement” means a requirement—

(a) 30imposed by or under this Act, or

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

(5) Condition C is that—

(a) 35the person has at any time been a senior manager in relation to
an authorised person that is a bank,

(b) there has at that time been (or continued to be) a contravention
of a relevant requirement by the bank, and

(c) the senior manager was at that time responsible for the
40management of any of the bank’s activities in relation to which
the contravention occurred.

(6) But a person (“P”) is not guilty of misconduct by virtue of subsection (5)
if P satisfies the FCA that P had taken such steps as a person in P’s
position could reasonably be expected to take to avoid the
45contravention occurring (or continuing).

(7) For the purposes of subsection (5)—

• “senior manager”, in relation to an authorised person that is a
  bank, means a person who has approval under section 59 to
  perform a designated senior management function in relation to
  5the carrying on by the bank of a regulated activity;

• “designated senior management function” means a function
  designated as a senior management function under section
  59(6B) or (6C).

(8) In this section—

• 10“approved person”—

  (a)

  means a person in relation to whom an approval is given
  under section 59, and

  (b)

  in relation to an authorised person, means a person in
  relation to whom such approval is given on the
  15application of the authorised person;

• “employee”, in relation to a person, has the same meaning as in
  section 64A.

66B Misconduct: action by the PRA

(1) For the purposes of action by the PRA under section 66, a person is
20guilty of misconduct if any of conditions A to C is met in relation to the
person.

(2) Condition A is that—

(a) the person has at any time failed to comply with rules made by
the PRA under section 64A, and

(b) 25at that time the person was—

(i) an approved person, or

(ii) an employee of a PRA-authorised bank.

(3) Condition B is that—

(a) the person has at any time been knowingly concerned in a
30contravention of a relevant requirement by a PRA-authorised
person, and

(b) at that time the person was—

(i) an approved person in respect of the performance of a
relevant senior management function in relation to the
35carrying on by the PRA-authorised person of a
regulated activity, or

(ii) in the case of an authorised person that is a bank, an
employee of the bank.

(4) In this section “relevant requirement” means a requirement—

(a) 40imposed by or under this Act, or

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

(5) Condition C is that—

(a) 45the person has at any time been a senior manager in relation to
a PRA-authorised bank,

(b) there has at that time been (or continued to be) a contravention
of a relevant requirement by the bank, and

(c) the senior manager was at that time responsible for the
management of any of the bank’s activities in relation to which
5the contravention occurred.

(6) But a person (“P”) is not guilty of misconduct by virtue of subsection (5)
if P satisfies the PRA that P had taken such steps as a person in P’s
position could reasonably be expected to take to avoid the
contravention occurring (or continuing).

(7) 10For the purposes of subsection (5)—

• “senior manager”, in relation to an authorised person that is a
  bank, means a person who has approval under section 59 to
  perform a designated senior management function in relation to
  the carrying on by the bank of a regulated activity;

• 15“designated senior management function” means a function
  designated as a senior management function under section
  59(6B) or (6C).

(8) In this section—

• “approved person”—

  (a)

  20means a person in relation to whom—

  (i)

  the PRA has given its approval under section 59,
  or

  (ii)

  the FCA has given its approval under section 59
  in respect of the performance by the person of a
  25relevant senior management function in relation
  to the carrying on by a PRA-authorised person of
  a regulated activity, and

  (b)

  in relation to an authorised person, means a person in
  relation to whom approval under section 59 is given on
  30the application of the authorised person;

• “employee”, in relation to a person, has the same meaning as in
  section 64A;

• “PRA-authorised bank” means a bank that is a PRA-authorised
  person;

• 35“relevant senior management function” means a function which
  the PRA is satisfied is a senior management function as defined
  in section 59ZA (whether or not the function has been
  designated as such by the FCA).”

24 Meaning of “bank”

40In Part 5 of FSMA 2000 (performance of regulated activities), after section 71
insert—

““Bank”

71A Meaning of “bank”

(1) In this Part “bank” means a UK institution which has permission under
45Part 4A to carry on the regulated activity of accepting deposits.

(2) But “bank” does not include an insurer.