(2) Omit subsection (5).

(3) For subsection (6) substitute—

“(6) The PRA may specify a description of function under subsection (3)(a)
only if, in relation to the carrying on of a regulated activity by a PRA-
5authorised person, it is satisfied that the function is a senior
management function as defined in section 59ZA.”

(4) After subsection (6) insert—

“(6A) If—

(a) a function of a description specified in rules made by the FCA
10under subsection (3)(a) or (b) is a controlled function in relation
to the carrying on of a regulated activity by a relevant
authorised person, and

(b) the FCA is satisfied that, in relation to the carrying on of a
regulated activity by a relevant authorised person, the function
15is a senior management function as defined in section 59ZA,

the FCA must designate the function in the rules as a senior
management function.

(6B) If a function of a description specified in rules made by the PRA under
subsection (3)(a) is a controlled function in relation to the carrying on
20of a regulated activity by a relevant authorised person, the PRA must
designate the function in the rules as a senior management function.

(6C) For the meaning of “relevant authorised person”, see section 71A.”

(5) Omit subsections (7) to (7B) and (11).

17 Senior management functions

25After section 59 of FSMA 2000 insert—

“59ZA Senior management functions

(1) This section has effect for determining whether a function is for the
purposes of section 59(6) or (6A) a senior management function.

(2) A function is a “senior management function”, in relation to the
30carrying on of a regulated activity by an authorised person, if—

(a) the function will require the person performing it to be
responsible for managing one or more aspects of the authorised
person’s affairs, so far as relating to the activity, and

(b) those aspects involve, or might involve, a risk of serious
35consequences—

(i) for the authorised person, or

(ii) for business or other interests in the United Kingdom.

(3) In subsection (2)(a) the reference to managing one or more aspects of an
authorised person’s affairs includes a reference to taking decisions, or
40participating in the taking of decisions, about how one or more aspects
of those affairs should be carried on.”

18 Statements of responsibilities

(1) Section 60 of FSMA 2000 (applications for approval) is amended as follows.

(2) After subsection (2) insert—

“(2A) If—

(a) 5the application is for the approval of a person to perform a
designated senior management function, and

(b) the authorised person concerned is a relevant authorised person
(see section 71A),

the appropriate regulator must require the application to contain, or be
10accompanied by, a statement setting out the aspects of the affairs of the
authorised person concerned which it is intended that the person will
be responsible for managing in performing the function.

(2B) A statement provided under subsection (2A) is known as a “statement
of responsibilities”.

(2C) 15In subsection (2A) “designated senior management function” means a
function designated as a senior management function under section
59(6A) or (6B).”

(3) After subsection (6) insert—

“(6A) Subsection (6) applies to references to a relevant authorised person as it
20applies to references to the authorised person concerned.”

19 Power to give approval subject to conditions or for limited period

(1) Section 61 of FSMA 2000 (determination of applications) is amended as
follows.

(2) For subsection (1) substitute—

“(1) 25The regulator to which an application for approval is made under
section 60 may grant the application only if—

(a) it is satisfied that the person in respect of whom the application
is made (“the candidate”) is a fit and proper person to perform
the function to which the application relates, or

(b) 30in a case where the application is for approval to perform a
designated senior management function in relation to the
carrying on of a regulated activity by a relevant authorised
person (a “relevant senior management application”), it is
satisfied that the condition in paragraph (a) will be met if the
35application 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”.

(4) After subsection (2A) insert—

“(2B) 40The regulator to which a relevant 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

(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) 5where 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) 10Consent 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 relevant senior management application, the reference
15in 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) 20“designated senior management function” means a function
designated as a senior management function under section
59(6A) or (6B);

(b) any reference to a relevant authorised person includes a
reference to a person who has applied for permission under
25Part 4A and will be a relevant authorised person if permission
is given.

(7) For the meaning of “relevant authorised person”, see section 71A.”

(7) In section 62 of FSMA 2000 (applications for approval: procedure and right to
refer to Tribunal)—

(a) 30in 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
application subject to conditions or for a limited period (or both)”;

(c) in subsection (4), after “the application” insert “, or to grant the
35application subject to conditions or for a limited period (or both)”.

20 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) 40an 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) 45the 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
5revised 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) 10to 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
  15designated as a senior management function under section
  59(6A) or (6B).”

21 Variation of approval

After section 63 of FSMA 2000 insert—

“63ZA Variation of senior manager’s approval at request of relevant
20authorised person

(1) Where 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) 25removing a condition, or

(c) imposing 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
30the FCA or the PRA imposed the condition concerned;

(b) in 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
35under 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) 40to 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
the 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
5the 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
section for variation of an approval as they apply to an application for
approval made under section 60—

(none) 10section 60(2) to (8),

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

(none) section 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
15the PRA for the performance of a designated senior management
function in relation to the carrying on of a regulated activity by a
relevant authorised person if 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
20of a designated senior management function in relation to the carrying
on of a regulated activity by a relevant authorised person if—

(a) either—

(i) the PRA gave the approval, or

(ii) the FCA gave the approval and the relevant authorised
25person 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.

(3) A regulator may vary an approval by—

(a) imposing a condition,

(b) 30varying a condition,

(c) removing a condition, or

(d) limiting 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) 35In this section “designated senior management function” means a
function designated as a senior management function under section
59(6A) or (6B).

(6) For the meaning of “relevant authorised person”, see section 71A.

63ZC Exercise of power under section 63ZB: procedure

(1) 40This 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
that is the case,

(b) 45on 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
specified date) only if the regulator concerned, having regard to the
5ground 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
with immediate effect, it must give each of the interested parties
10written notice.

(5) The notice must—

(a) give details of the variation,

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

(c) inform the interested parties that each of them may make
15representations 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,
and

(e) 20inform 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”),

(b) the person in respect of whom it was given (“B”), and

(c) 25the 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
parties, the regulator decides—

(a) 30to 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
parties, the regulator decides—

(a) 35not 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.

(10) A notice under subsection (8) must inform the interested parties of the
40right 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
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.”

22 Statement of policy

5After section 63ZC of FSMA 2000 (inserted by section 21 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
10for 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.

(3) 15If 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
20calculated 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.

63ZE 25Statement 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
30to 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
35designated by the FCA as a senior management function under section
59(6A) 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) 40Before issuing the proposed statement, the issuing regulator must have
regard to any representations made to it in accordance with subsection
(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) 5its 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
10subsection (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) 15This section also applies to a proposal to alter or replace a statement.”

23 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) 20The 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
25approval 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) 30in 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.”

24 Rules of conduct

(1) 35Part 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) If it appears to the FCA to be necessary or expedient for the purpose of
5advancing 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 relevant authorised persons (see
10section 71A).

(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 relevant PRA-authorised
persons.

(3) In subsection (2)—

• “relevant PRA-authorised person” means a PRA-authorised
  person that is a relevant authorised person (see section 71A),
  25and

• “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).

(4) 30Rules 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
function relating to the carrying on of activities (whether or not
regulated activities) by—

(a) 35in the case of an approved person, the person on whose
application approval was given, and

(b) in 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) 40personally 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

(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,

45and “employer” is to be read accordingly.”

25 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 relevant authorised person.

(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 a relevant authorised person, an employee
of the authorised person.

(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
a relevant authorised person,

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

(c) the senior manager was at that time responsible for the
40management of any of the authorised person’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).