Financial Services (Banking Reform) Bill (HL Bill 62)

Section 28

SCHEDULE 3 Consequential amendments relating to Part

4

Financial Services and Markets Act 2000

1 (1) 5Section 59 of FSMA 2000 (approval for particular arrangements) is amended
as follows.

(2) In subsection (1), for the words from “the appropriate regulator” to the end
substitute “that person is acting in accordance with an approval given by the
appropriate regulator under this section.”

(3) 10In subsection (2), for the words from “the appropriate regulator” to the end
substitute “that person is acting in accordance with an approval given by the
appropriate regulator under this section.”

2 (1) Section 59A of FSMA 2000 (specifying functions as controlled functions:
supplementary) is amended as follows.

(2) 15In subsection (1)(a) and (b), for “significant-influence” substitute “senior
management”.

(3) After subsection (3) insert—

“(3A) Senior management function” has the meaning given by section
59ZA.”

3 (1) 20Section 63 of FSMA 2000 (withdrawal of approval) is amended as follows.

(2) In subsection (1A)(a), for “significant-influence function” substitute
“relevant senior management function”.

(3) For subsection (1B) substitute—

“(1B) In subsection (1A) “relevant senior management function” means a
25function 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).”

4 In section 63A of FSMA 2000 (power to impose penalties), in subsection (2),
for paragraph (b) substitute—

“(b) 30P, when performing the function, is not acting in accordance
with an approval given under section 59.”

5 (1) Section 66 of FSMA 2000 (disciplinary powers) is amended as follows.

(2) In subsection (3), for paragraph (ab) (and the “or” following it) substitute—

“(ab) impose, for such period as it considers appropriate, any
35conditions in relation to any such approval which it considers
appropriate;

(ac) limit the period for which any such approval is to have
effect;”.

(3) In subsection (3A), for “restriction” substitute “condition”.

(4) 40In subsection (3B), for “or restriction” substitute “, condition or limitation”.

(5) In subsection (3C), for “restriction” substitute “condition”.

(6) In subsection (3D)—

(a) in paragraph (a), for “or restriction” substitute “, condition or
limitation”,

(b) omit the “or” at the end of paragraph (a),

(c) 5in paragraph (b), for “restriction” substitute “condition”, and

(d) after that paragraph insert—

“(c) vary a limitation so as to increase the period for which
the approval is to have effect.”

(7) In subsection (9), for “restriction” substitute “condition”.

6 (1) 10Section 67 of FSMA 2000 (disciplinary measures: procedure and right to
refer to Tribunal) is amended as follows.

(2) In subsection (1), for “or (ab)” substitute “, (ab) or (ac)”.

(3) In subsection (2A), for “restriction” (in both places) substitute “condition”.

(4) After subsection (2A) insert—

“(2B) 15A warning notice about a proposal to limit the period for which an
approval is to have effect must state the length of that period.”

(5) In subsection (4), for “or (ab)” substitute “, (ab) or (ac)”.

(6) In subsection (5A), for “restriction” (in both places) substitute “condition”.

(7) After subsection (5A) insert—

“(5B) 20A decision notice about limiting the period for which an approval is
to have effect must state the length of that period.”

(8) In subsection (7), for “or (ab)” substitute “, (ab) or (ac)”.

7 In section 69 of FSMA 2000 (statement of policy), in subsection (1)—

(a) in paragraph (a), for “or restrictions” substitute “, conditions or
25limitations”;

(b) omit the “and” at the end of paragraph (b);

(c) in paragraph (c), for “restrictions” substitute “conditions”;

(d) at the end of paragraph (c) insert “; and

(d) the period for which approvals under section 59 are to
30have effect as a result of a limitation under section
66.”

8 In section 138A of FSMA 2000 (modification or waiver of rules), in
subsection (2), before paragraph (a) insert—

“(za) rules made by either regulator under section 64A (rules of
35conduct);”.

9 In section 138D of FSMA 2000 (actions for damages), in subsection (5), before
paragraph (a) insert—

“(za) rules under section 64A (rules of conduct);”.

10 In section 140A of FSMA 2000 (interpretation), in the definition of
40“regulating provisions”—

(a) in paragraph (a)—

(i) omit sub-paragraph (iii), and

(ii) in sub-paragraph (iv), omit “64 or”;

(b) in paragraph (b), omit sub-paragraphs (ii) and (iii).

11 In section 347 of FSMA 2000 (the record of authorised persons etc.), in
subsection (2)(g), in sub-paragraphs (ii) and (iii), for “relevant authorised
person” substitute “authorised person concerned”.

12 5In section 387 of FSMA 2000 (warning notices), in subsection (1A), for “or
55I(8)” substitute “, 55I(8) or 61(2D)”.

13 In section 388 of FSMA 2000 (decision notices), in subsection (1A), for “or
55I(8)” substitute “, 55I(8) or 61(2D)”.

14 In section 395 of FSMA 2000 (supervisory notices), in subsection (13), after
10paragraph (a) insert—

“(aa) 63ZC(4), (8) or (9)(b);”.

15 (1) Section 415B of FSMA 2000 (consultation in relation to taking certain
enforcement action) is amended as follows.

(2) In subsection (4)—

(a) 15in paragraph (b), for “significant-influence” substitute “relevant
senior management”, and

(b) omit the definitions appearing after that paragraph.

(3) After subsection (4) insert—

“(5) In subsection (4)—

• 20“arrangement” has the same meaning as in section 59;

• “relevant senior management function” means a function which
  the FCA is satisfied is a senior management function as
  defined in section 59ZA (whether or not it has been
  designated as such under section 59(6A) or (6B)).”

16 25In Schedule 1ZA to FSMA 2000 (the Financial Conduct Authority), in
paragraph 8(3)—

(a) in paragraph (b), omit “64 or”;

(b) in paragraph (c)(i)—

(i) after “section” insert “63ZD,”, and

(ii) 30omit “64,”.

17 In Schedule 1ZB to FSMA 2000 (the Prudential Regulation Authority), in
paragraph 16(3)—

(a) omit paragraph (b);

(b) in paragraph (c)(i)—

(i) 35 after “section” insert “63ZD,”, and

(ii) omit “64,”.

Financial Services Act 2012

18 In section 14 of the Financial Services Act 2012, omit subsection (4).

19 (1) Section 85 of the Financial Services Act 2012 (relevant functions in relation
40to complaints scheme) is amended as follows.

(2) In subsection (4)—

(a) in paragraph (b), omit “64 or”;

(b) in paragraph (c)(i)—

(i) after “section” insert “63ZD,”, and

(ii) omit “64,”.

(3) In subsection (5)—

(a) omit paragraph (b);

(b) 5in paragraph (c)(i)—

(i) after “section” insert “63ZD,”, and

(ii) omit “64,”.

Section 33

SCHEDULE 4 The Payment Systems Regulator

10Introductory

1 In this Schedule—

(a) “the Regulator” means the Payment Systems Regulator;

(b) references to the functions of the Regulator are to functions conferred
on it by or under this Part.

15Constitution

2 (1) The constitution of the Regulator must provide for it to have a board whose
members are the directors of the Regulator.

(2) The board is to consist of the following members—

(a) a member to chair it, appointed by the FCA with the approval of the
20Treasury;

(b) a member to be the Managing Director, appointed by the FCA with
the approval of the Treasury;

(c) one or more other members appointed by the FCA.

(3) The persons who may be appointed under sub-paragraph (2) include
25persons who are members of the FCA’s governing body.

(4) A person may be appointed under sub-paragraph (2) only if the person has
knowledge or experience which is likely to be relevant to the exercise by the
Regulator of its functions.

(5) A person appointed under sub-paragraph (2)(a) or (b) is liable to removal
30from office by the FCA (acting with the approval of the Treasury).

(6) A person appointed under sub-paragraph (2)(c) is liable to removal from
office by the FCA.

Status

3 (1) The Regulator is not to be regarded as exercising functions on behalf of the
35Crown.

(2) The officers and staff of the Regulator are not to be regarded as Crown
servants.

Budget

4 (1) The Regulator must adopt an annual budget which has been approved by
the FCA.

(2) The budget must be adopted—

(a) 5in the case of the Regulator’s first financial year, as soon as
reasonably practicable after it is established, and

(b) in the case of each subsequent financial year, before the start of the
financial year.

(3) The Regulator may, with the approval of the FCA, vary the budget for a
10financial year at any time after its adoption.

(4) Before adopting or varying a budget, the Regulator must consult—

(a) the Treasury, and

(b) such other persons (if any) as the Regulator considers appropriate.

(5) The Regulator must publish each budget, and each variation of a budget, in
15the way it considers appropriate.

Arrangements for discharging functions

5 (1) The Regulator may make arrangements for any of its functions to be
discharged by—

(a) a committee, sub-committee, officer or member of staff of the
20Regulator;

(b) an officer or member of staff of the FCA.

This is subject to sub-paragraphs (2) to (4).

(2) In exercising any functions within sub-paragraph (3), the Regulator must act
through its board.

(3) 25The functions referred to in sub-paragraph (2) are—

(a) giving general directions under section 47;

(b) imposing generally-imposed requirements under section 48.

(4) The function of issuing general guidance may not be discharged by an
officer or member of staff of the Regulator or of the FCA.

30Annual plan

6 (1) The Regulator must in respect of each of its financial years prepare an annual
plan which has been approved by the FCA.

(2) The plan must be prepared—

(a) in the case of the Regulator’s first financial year, as soon as
35reasonably practicable after it is established, and

(b) in the case of each subsequent financial year, before the start of the
financial year.

(3) The Regulator may, with the approval of the FCA, vary the plan in respect
of a financial year at any time after its preparation.

(4) 40An annual plan in respect of a financial year must set out—

(a) the aims of the Regulator for the year,

(b) how the extent to which each of those aims is met is to be determined,

(c) the relative priorities of each of those aims, and

(d) how its resources are to be allocated among the activities to be
carried on in connection with the discharge of its functions.

(5) 5In sub-paragraph (4) references to aims for a financial year include aims for
a longer period that includes that year.

(6) Before preparing or varying an annual plan, the Regulator must consult—

(a) the Treasury, and

(b) such other persons (if any) as the Regulator considers appropriate.

(7) 10The Regulator must publish each annual plan, and each variation of an
annual plan, in the way it considers appropriate.

Annual report

7 (1) At least once a year, the Regulator must make a report to the FCA in relation
to the discharge of its functions.

(2) 15The report must—

(a) set out the extent to which the Regulator has met its aims and
priorities for the period covered by the report,

(b) set out the extent to which the Regulator has advanced its payment
systems objectives,

(c) 20include a copy of its latest accounts, and

(d) comply with any requirement specified in rules made by the FCA.

(3) The Regulator must publish each report in the way it considers appropriate.

(4) Nothing in this paragraph requires the Regulator to make a report at any
time in the period of 12 months beginning with its establishment.

(5) 25The Treasury may—

(a) require the Regulator to comply with any provision of the
Companies Act 2006 about accounts and their audit which would not
otherwise apply to it, or

(b) direct that any provision of that Act about accounts and their audit
30is to apply to the Regulator with such modifications as are specified
in the direction, whether or not the provision would otherwise apply
to it.

(6) Compliance with any requirement under sub-paragraph (5)(a) or (b) is
enforceable by injunction or, in Scotland, an order for specific performance
35under section 45 of the Court of Session Act 1988.

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

(8) The FCA’s power to make rules under sub-paragraph (2)(d) is to be treated
as if it were a power of the FCA to make rules under FSMA 2000 (and rules
made under sub-paragraph (2)(d) are to be treated accordingly).

40Audit of accounts

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

(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 Treasury.

(3) 5The Treasury must lay the copy of the certified accounts and the report
before Parliament.

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

(5) Except as provided for by paragraph 7(5), the Regulator is exempt from the
10requirements of Part 16 of the Companies Act 2006 (audit) and its balance
sheet must contain a statement to that effect.

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

Funding

9 (1) 15For the purposes mentioned in sub-paragraph (2) the FCA may make rules
requiring participants in regulated payment systems to pay to the FCA
specified amounts or amounts calculated in a specified way.

(2) The purposes are—

(a) meeting the relevant costs (see sub-paragraph (3)), and

(b) 20enabling the Regulator to maintain adequate reserves.

(3) In this paragraph “the relevant costs” means—

(a) the expenses incurred, or expected to be incurred, by the Regulator
in connection with the discharge of its functions,

(b) the expenses incurred by the FCA in establishing the Regulator,

(c) 25any other expenses incurred by the FCA in connection with the
discharge of its functions under this Part, and

(d) any expenses incurred, or expected to be incurred, by the FCA in
connection with the discharge of the Regulator’s functions by an
officer or member of staff of the FCA under arrangements made
30under paragraph 5.

For the purposes of paragraph (b) it does not matter when the expenses were
incurred.

(4) Before making any rules under sub-paragraph (1) the FCA must consult the
Treasury.

(5) 35The amounts to be paid under the rules may include a component to cover
the expenses of the FCA in collecting the payments (“collection costs”).

(6) The FCA must pay to the Regulator the amounts that it receives under the
rules, apart from the following amounts (which it may keep)—

(a) amounts in respect of expenses falling within sub-paragraph (3)(b) to
40(d);

(b) amounts in respect of its collection costs.

(7) In this paragraph “specified” means specified in the rules.

(8) The FCA’s power to make rules under this paragraph is to be treated as if it
were a power of the FCA to make rules under FSMA 2000 (and rules made
under this paragraph are to be treated accordingly).

(9) But the requirements to carry out a cost benefit analysis under section 138I
5of FSMA 2000 do not apply in relation to rules made under this paragraph.

Penalty receipts

10 (1) The Regulator must in respect of each of its financial years pay to the
Treasury its penalty receipts after deducting its enforcement costs.

(2) The Regulator’s “penalty receipts” in respect of a financial year are any
10amounts received by it during the year by way of penalties imposed under
section 66.

(3) The Regulator’s “enforcement costs” in respect of a financial year are the
expenses incurred by it during the year in connection with—

(a) the exercise, or consideration of the possible exercise, of any of its
15enforcement powers in particular cases, or

(b) the recovery of penalties imposed under section 66.

(4) For the purposes of sub-paragraph (3) the Regulator’s enforcement powers
are—

(a) its powers under sections 65 to 68;

(b) 20its powers under any other enactment specified by the Treasury by
order;

(c) its powers in relation to the investigation of relevant offences;

(d) its powers in England and Wales or Northern Ireland in relation to
the prosecution of relevant offences.

(5) 25In sub-paragraph (4) “relevant offences” means—

(a) offences under this Part;

(b) any other offences specified by the Treasury by order.

(6) The Treasury may give directions to the Regulator as to how it is to comply
with its duty under sub-paragraph (1).

(7) 30The directions may in particular—

(a) specify descriptions of expenditure that are, or are not, to be
regarded as incurred in connection with either of the matters
mentioned in sub-paragraph (3),

(b) relate to the calculation and timing of the deduction in respect of the
35Regulator’s enforcement costs, and

(c) specify the time when any payment is required to be made to the
Treasury.

(8) The directions may also require the Regulator to provide the Treasury at
specified times with specified information relating to—

(a) 40penalties that the Regulator has imposed under section 66, or

(b) the Regulator’s enforcement costs.

(9) The Treasury must pay into the Consolidated Fund any sums received by
them under this paragraph.

11 (1) The Regulator must prepare and operate a scheme (“the financial penalty
scheme”) for ensuring that the amounts that, as a result of the deduction for
which paragraph 10(1) provides, are retained by the Regulator in respect of
amounts paid to it by way of penalties imposed under section 66 are applied
5for the benefit of participants in regulated payment systems.

(2) The financial penalty scheme may, in particular, make different provision
with respect to different classes of participant.

(3) The financial penalty scheme must ensure that those who have become
liable to pay a penalty to the Regulator in any financial year do not receive
10any benefit under the scheme in the following financial year.

(4) Up-to-date details of the financial penalty scheme must be set out in a
document (the “scheme details”).

12 (1) The scheme details must be published by the Regulator in the way
appearing to it to be best calculated to bring them to the attention of the
15public.

(2) Before making the financial penalty scheme, the Regulator must publish a
draft of the proposed scheme in the way appearing to the Regulator to be
best calculated to bring it to the attention of the public.

(3) The draft must be accompanied by notice that representations about the
20proposals may be made to the Regulator within a specified time.

(4) Before making the scheme, the Regulator must have regard to any
representations made to it in accordance with sub-paragraph (3).

(5) If the Regulator makes the proposed scheme, it must publish an account, in
general terms, of—

(a) 25the representations made to it in accordance with sub-paragraph (3),
and

(b) its response to them.

(6) If the scheme differs from the draft published under sub-paragraph (2) in a
way which is, in the opinion of the Regulator, significant, the Regulator must
30(in addition to complying with sub-paragraph (5)) publish details of the
difference.

(7) The Regulator must, without delay, give the Treasury a copy of any scheme
details published by it.

(8) The Regulator may charge a reasonable fee for providing a person with a
35copy of—

(a) a draft published under sub-paragraph (2);

(b) scheme details.

(9) Sub-paragraphs (2) to (6) and (8)(a) also apply to a proposal to alter or
replace the financial penalty scheme.

40Records

13 The Regulator must maintain satisfactory arrangements for—

(a) recording decisions made in the exercise of its functions, and

(b) the safe-keeping of those records which it considers ought to be
preserved.

Exemption from liability in damages

14 (1) None of the following is to be liable in damages for anything done or
omitted in the discharge, or purported discharge, of the Regulator’s
functions—

(a) 5the Regulator;

(b) any person (“P”) who is, or is acting as, an officer or member of staff
of the Regulator;

(c) any person who could be held vicariously liable for things done or
omitted by P, but only in so far as the liability relates to P’s conduct.

(2) 10If the Regulator has made arrangements under paragraph 5 for any of its
functions to be discharged by an officer or member of staff of the FCA,
references in sub-paragraph (1) to a person who is an officer or member of
staff of the Regulator include references to the officer or member of staff of
the FCA.

(3) 15Anything done or omitted by a person mentioned in sub-paragraph (1)(b) or
(c) while acting, or purporting to act, as a result of an appointment under
section 75 or 76 is to be taken for the purposes of sub-paragraph (1) to have
been done or omitted in the discharge or (as the case may be) purported
discharge of the Regulator’s functions.

(4) 20Sub-paragraph (1) does not apply—

(a) if the act or omission is shown to have been in bad faith, or

(b) so as to prevent an award of damages made in respect of an act or
omission on the ground that the act or omission was unlawful as a
result of section 6(1) of the Human Rights Act 1998.

25Freedom of information

15 In Part 6 of Schedule 1 to the Freedom of Information Act 2000 (public
authorities to which Act applies), at the appropriate place insert—

• “The Payment Systems Regulator established under section 33
  of the Financial Services (Banking Reform) Act 2013.”

30Equality

16 In Part 1 of Schedule 19 to the Equality Act 2010 (public authorities: general),
under the heading “Industry, business, finance etc.”, at the appropriate place
insert—

• “The Payment Systems Regulator established under section 33
  35of the Financial Services (Banking Reform) Act 2013.”

Section 72

SCHEDULE 5 Procedure for appeals to the CMA

Functions of CMA to be discharged by group

1 Except where specified otherwise in this Schedule, the functions of the CMA
40with respect to an appeal are to be carried out on behalf of the CMA by a