Financial Services and Markets Bill - continued        House of Commons
PART XVII, RECOGNISED INVESTMENT EXCHANGES AND CLEARING HOUSES - continued
Other matters - continued

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  CHAPTER II
  COMPETITION SCRUTINY
Interpretation.     272. - (1) In this Chapter and Chapter III-
 
 
    "regulatory provisions" means-
 
      (a) the rules of an investment exchange or a clearing house;
 
      (b) any guidance issued by an investment exchange or clearing house;
 
      (c) in the case of an investment exchange, the arrangements and particulars described in section 258(3);
 
      (d) in the case of a clearing house, the arrangements and particulars described in section 259(3);
 
    "trading practice" means a practice of persons who are subject to the rules made by a recognised investment exchange or a recognised clearing house-
 
      (a) which relates to business in respect of which those persons are subject to the rules of the investment exchange or clearing house; and
 
      (b) which is required or contemplated by those rules or by guidance issued by the investment exchange or clearing house or which is otherwise attributable to the conduct of the investment exchange or clearing house.
      (2) For the purposes of this Chapter, any regulatory provision, practice or trading practice has a significant anti-competitive effect if it has, or is intended or likely to have, to any significant extent, the effect of preventing, restricting or distorting competition.
 
      (3) For the purposes of this Chapter the following are permitted purposes-
 
 
    (a) protecting investors;
 
    (b) detecting money laundering;
 
    (c) preventing money laundering;
 
    (d) ensuring compliance with an international obligation of the United Kingdom.
      (4) In determining under this Chapter whether any guidance has, or is likely to have, a particular effect, it may be assumed that persons to whom it is addressed will act in accordance with it.
 
Examination of rules and guidance.     273. - (1) The Authority may not make a recognition order without the approval of the Treasury.
 
      (2) The Treasury may not give their approval unless they are satisfied that-
 
 
    (a) the applicant's regulatory provisions do not have a significant anti-competitive effect or, if they do have such an effect, have an anti-competitive effect which is no greater than is necessary for a permitted purpose;
 
    (b) the adoption or enforcement of the regulatory provisions is not likely to amount to an abuse of a dominant position on the part of the applicant; and
 
    (c) that the regulatory provisions do not require or contemplate conduct or trading practices which amount, or are likely to amount, to an abuse of a dominant position.
      (3) In deciding whether to give their approval, the Treasury must have regard to any report prepared by the Director under section 275.
 
      (4) If the Director reports that the regulatory provisions in question do not have a significant anti-competitive effect, the Treasury may not withhold their approval under this section.
 
Continuing scrutiny.     274. - (1) The Treasury may give a remedial direction in relation to a recognised body if it appears to them that-
 
 
    (a) any of the regulatory provisions of the body,
 
    (b) any practices of the body, or
 
    (c) any trading practices,

have a significant anti-competitive effect which is greater than is necessary for a permitted purpose.
      (2) The Treasury may also give a remedial direction in relation to a recognised body if it appears to them that-
 
 
    (a) the body's regulatory provisions,
 
    (b) any of the body's practices, or
 
    (c) any trading practice,

amount to an abuse of a dominant position.
      (3) A "remedial direction" is a direction requiring the Authority-
 
 
    (a) to exercise its powers under section 268(2) to revoke the recognition order for the body concerned; or
 
    (b) to exercise its powers under section 267 with a view to securing that-
 
      (i) the significant anti-competitive effect of the body's regulatory provisions or any of the practices referred to in subsection (1) is no greater than is necessary for a permitted purpose; or
 
      (ii) any person engaging in conduct amounting to an abuse of a dominant position ceases the conduct concerned.
      (4) The Treasury may give a remedial direction only if they have received a report from the Director under subsection (3), (4) or (7) of section 276.
 
Initial report by Director General of Fair Trading.     275. - (1) The Authority must send to the Treasury and to the Director-
 
 
    (a) a copy of any regulatory provisions with which it is provided on an application for recognition under section 258 or 259; and
 
    (b) any other information with which it is provided in connection with the application.
      (2) The Director must report to the Treasury on whether-
 
 
    (a) any of the regulatory provisions of which copies are sent to him under subsection (1) have a significant anti-competitive effect;
 
    (b) the adoption or enforcement of the regulatory provisions is likely to amount to an abuse of a dominant position on the part of the applicant; or
 
    (c) the regulatory provisions require or contemplate conduct or trading practices which amount, or are likely to amount, to an abuse of a dominant position.
      (3) If the Director's conclusion is that one or more provisions have a significant anti-competitive effect, he must give details of what the effect is, or is likely to be.
 
      (4) If the Director's conclusion is that-
 
 
    (a) the adoption or enforcement of the regulatory provisions is likely to amount to an abuse of a dominant position on the part of the applicant, or
 
    (b) one or more provisions require or contemplate conduct or trading practices which amount, or are likely to amount to, an abuse of a dominant position,

he must state his reasons for that conclusion.
Further reports by Director General of Fair Trading.     276. - (1) The Authority must send to the Treasury and to the Director copies of any notice received by it under section 264(5) together with such information as the Authority considers will assist the Director in carrying out his functions under subsections (2) to (4) of this section.
 
      (2) The Director must keep under review-
 
 
    (a) the regulatory provisions of recognised bodies;
 
    (b) the matters specified in any notices of which copies are sent to him under this section; and
 
    (c) any matters which are contained in an annual report provided by an overseas investment exchange or an overseas clearing house under section 266.
      (3) If at any time the Director considers that-
 
 
    (a) any regulatory provisions or any such matters as are mentioned in subsection (2)(b) (taken alone or together), or
 
    (b) any such matters as are mentioned in subsection (2)(c),

have a significant anti-competitive effect, he must report that to the Treasury.
      (4) If at any time the Director considers that-
 
 
    (a) a recognised body's regulatory provisions, or
 
    (b) any such matters as are mentioned in subsection (2)(b) or (c),

amount to an abuse of a dominant position, he must report that to the Treasury.
      (5) The Director may report to the Treasury that a matter of the kind mentioned in subsection (2)(b) does not in his opinion have a significant anti-competitive effect or amount to an abuse of a dominant position.
 
      (6) The Director may at any time consider whether any practices of a recognised body or trading practices of a person subject to the rules of such a body-
 
 
    (a) have a significant anti-competitive effect and, if so, what the effect is or is likely to be;
 
    (b) amount to an abuse of a dominant position.
      (7) If the Director considers that any such practices-
 
 
    (a) have such an effect, or
 
    (b) amount to an abuse of a dominant position,

he must make a report to the Treasury.
Reports: supplementary.     277. - (1) A report under subsection (3) or (7)(a) of section 276 must give details of the anti-competitive effect or likely anti-competitive effect.
 
      (2) A report under subsection (4) or (7)(b) of that section must state the reasons for the Director's conclusion that any of the matters mentioned in subsection (4) or (6) of that section amount to an abuse of a dominant position.
 
      (3) If the Director thinks fit, he may publish any report made by him under section 276(5).
 
      (4) The Treasury must publish any report made to them by the Director under section 276(3), (4) or (7).
 
      (5) A report which is published under subsection (3) or (4) must, so far as is practicable, exclude any matter which relates to the affairs of a particular person (other than the investment exchange or clearing house concerned) the publication of which, in the opinion of the Director or the Treasury, would or might seriously and prejudicially affect the interests of that person.
 
Investigations by Director General of Fair Trading.     278. - (1) For the purpose of investigating any matter with a view to its consideration under section 275 or 276, the Director may exercise the powers conferred on him by this section.
 
      (2) The Director may by notice in writing require any person to produce to him or to a person appointed by him for the purpose, at a time and place specified in the notice, any document which-
 
 
    (a) is specified or described in the notice;
 
    (b) is a document in that person's custody or under his control; and
 
    (c) relates to any matter relevant to the investigation.
      (3) The Director may by notice in writing-
 
 
    (a) require any person carrying on any business to provide him with such information as may be specified or described in the notice; and
 
    (b) specify the time within which, and the manner and form in which, any such information is to be provided.
      (4) No person may be required under this section to produce or disclose a privileged communication.
 
      (5) If a person ("the defaulter") refuses, or otherwise fails, to comply with a notice under this section, the Director may certify that fact in writing to the court and the court may enquire into the case.
 
      (6) If, after hearing any witness who may be produced against or on behalf of the defaulter and any statement which may be offered in defence, the court is satisfied that the defaulter did not have a reasonable excuse for refusing or otherwise failing to comply with the notice, the court may punish the defaulter as if he had been in contempt of court.
 
      (7) In this section, "the court" means-
 
 
    (a) the High Court; and
 
    (b) in relation to Scotland, the Court of Session.
Procedure on exercise of certain powers by Treasury.     279. The Treasury may not refuse their approval under section 273 or give a remedial direction unless they-
 
 
    (a) have taken such steps as they consider appropriate to allow the exchange or clearing house concerned, and any other person appearing to the Treasury to be affected, an opportunity to make representations-
 
      (i) about any report made by the Director under section 275 or 276;
 
      (ii) as to whether, and if so how, the Treasury should exercise their powers under section 273 or 274; and
 
    (b) have had regard to any such representations.
 
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Prepared 18 November 1999