Company Law Reform Bill [HL] (595-601)

House of Commons

Session 2005 - 06
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Company Law Reform Bill [HL] (595-601)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 43 — Transparency obligations and related matters
595

(6)
In relation to an issuer whose home state is a member state other than
the United Kingdom, any reference to an applicable transparency
obligation must be read subject to section 100A(2).
89J
Power to suspend or prohibit trading of securities
(1)
This section applies to securities admitted to trading on a regulated
5
market situated or operating in the United Kingdom.
(2)
If the competent authority has reasonable grounds for suspecting that
an applicable transparency obligation has been infringed by the issuer,
it may require the market operator to suspend trading in the securities
for a period not exceeding 10 days.
10
(3)
If the competent authority has reasonable grounds for suspecting that
an applicable transparency obligation has been infringed—
(a)
by an issuer whose home state is not the United Kingdom, or
(b)
by voteholders of an issuer whose home state is the United
Kingdom,
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it may require the market operator to prohibit trading in the securities.
(4)
If the competent authority finds that an applicable transparency
obligation has been infringed, it may require the market operator to
prohibit trading in the securities.
(5)
In this section “transparency obligation” means an obligation under—
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(a)
a provision contained in transparency rules, or
(b)
any other provision made in accordance with the transparency
obligations directive.
(6)
In relation to an issuer whose home state is a member state other than
the United Kingdom, any reference to an applicable transparency
25
obligation must be read subject to section 100A(2).
89K
Procedure under section 89J
(1)
A requirement under section 89J takes effect—
(a)
immediately, if the notice under subsection (2) states that that is
the case;
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(b)
in any other case, on such date as may be specified in the notice.
(2)
If the competent authority—
(a)
proposes to exercise the powers in section 89J in relation to a
person, or
(b)
exercises any of those powers in relation to a person with
35
immediate effect,

it must give that person written notice.
(3)
The notice must—
(a)
give details of the competent authority’s action or proposed
action;
40
(b)
state the competent authority’s reasons for taking the action in
question and choosing the date on which it took effect or takes
effect;
(c)
inform the recipient that he may make representations to the
competent authority within such period as may be specified by
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 43 — Transparency obligations and related matters
596

the notice (whether or not he had referred the matter to the
Tribunal);
(d)
inform him of the date on which the action took effect or takes
effect;
(e)
inform him of his right to refer the matter to the Tribunal (see
5
section 89L) and give an indication of the procedure on such a
reference.
(4)
The competent authority may extend the period within which
representations may be made to it.
(5)
If, having considered any representations made to it, the competent
10
authority decides to maintain, vary or revoke its earlier decision, it
must give written notice to that effect to the person mentioned in
subsection (2).
89L
Right to refer matters to the Tribunal
A person—
15
(a)
to whom a decision notice is given under section 89I (public
censure), or
(b)
to whom a notice is given under section 89K (procedure in
connection with suspension or prohibition of trading),
may refer the matter to the Tribunal.”.
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Other matters
1233
Corporate governance rules
In Part 6 of the Financial Services and Markets Act 2000 (c. 8), after the sections
inserted by section 1232 above insert—
“Corporate governance
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89M
Corporate governance rules
(1)
The competent authority may make rules (“corporate governance
rules”)—
(a)
for the purpose of implementing, enabling the implementation
of or dealing with matters arising out of or related to, any
30
Community obligation relating to the corporate governance of
issuers who have requested or approved admission of their
securities to trading on a regulated market;
(b)
about corporate governance in relation to such issuers for the
purpose of implementing, or dealing with matters arising out of
35
or related to, any Community obligation.
(2)
“Corporate governance”, in relation to an issuer, includes—
(a)
the nature, constitution or functions of the organs of the issuer;
(b)
the manner in which organs of the issuer conduct themselves;
(c)
the requirements imposed on organs of the issuer;
40
(d)
the relationship between the different organs of the issuer;
(e)
the relationship between the organs of the issuer and the
members of the issuer or holders of the issuer’s securities.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 43 — Transparency obligations and related matters
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(3)
The burdens and restrictions imposed by rules under this section on
foreign-traded issuers must not be greater than the burdens and
restrictions imposed on UK-traded issuers by—
(a)
rules under this section, and
(b)
listing rules.
5
(4)
For this purpose—
“foreign-traded issuer” means an issuer who has requested or
approved admission of the issuer’s securities to trading on a
regulated market situated or operating outside the United
Kingdom;
10
“UK-traded issuer” means an issuer who has requested or
approved admission of the issuer’s securities to trading on a
regulated market situated or operating in the United Kingdom.
(5)
This section is without prejudice to any other power conferred by this
Part to make Part 6 rules.”.
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1234
Liability for false or misleading statements in certain publications
In Part 6 of the Financial Services and Markets Act 2000 (c. 8), after section 90
insert—
“90A
Compensation for statements in certain publications
(1)
The publications to which this section applies are any reports and
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statements published in response to a requirement imposed by a
provision implementing Article 4, 5 or 6 of the transparency obligations
directive.
(2)
The issuer of securities traded on a regulated UK market is liable to pay
compensation to a person who has—
25
(a)
acquired such securities issued by it, and
(b)
suffered loss in respect of them as a result of—
(i)
any untrue or misleading statement in a publication to
which this section applies, or
(ii)
the omission from any such publication of any matter
30
required to be included in it.
(3)
The issuer is so liable only if a person discharging managerial
responsibilities within the issuer in relation to the publication—
(a)
knew the statement to be untrue or misleading or was reckless
as to whether it was untrue or misleading, or
35
(b)
knew the omission to be dishonest concealment of a material
fact.
(4)
A loss is not regarded as suffered as a result of the statement or
omission in the publication unless the person suffering it acquired the
relevant securities—
40
(a)
in reliance on the information in the publication, and
(b)
at a time when, and in circumstances in which, it was
reasonable for him to rely on that information.
(5)
Except as mentioned in subsection (7)—

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 43 — Transparency obligations and related matters
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(a)
the issuer is not subject to any other liability than that provided
for by this section in respect of loss suffered as a result of
reliance by any person on—
(i)
an untrue or misleading statement in a publication to
which this section applies, or
5
(ii)
the omission from any such publication of any matter
required to be included in it, and
(b)
a person other than the issuer is not subject to any liability, other
than to the issuer, in respect of any such loss.
(6)
Any reference in subsection (5) to a person being subject to a liability
10
includes a reference to another person being entitled as against him to
be granted any civil remedy or to rescind or repudiate an agreement.
(7)
This section does not affect—
(a)
the powers conferred by section 382 and 384 (powers of the
court to make a restitution order and of the Authority to require
15
restitution);
(b)
liability for a civil penalty;
(c)
liability for a criminal offence.
(8)
For the purposes of this section—
(a)
the following are persons “discharging managerial
20
responsibilities” in relation to a publication—
(i)
any director of the issuer (or person occupying the
position of director, by whatever name called),
(ii)
in the case of an issuer whose affairs are managed by its
members, any member of the issuer,
25
(iii)
any senior executive of the issuer having responsibilities
in relation to the publication;
(b)
“regulated UK market” means a regulated market situated or
operating in the United Kingdom;
(c)
references to the acquisition by a person of securities include his
30
contracting to acquire them or any interest in them.”.
1235
Exercise of powers where UK is host member state
In Part 6 of the Financial Services and Markets Act 2000 (c. 8), after section 100
insert—
“100A
   Exercise of powers where UK is host member state
35
(1)
This section applies to the exercise by the competent authority of any
power under this Part exercisable in case of infringement of—
(a)
a provision of prospectus rules or any other provision made in
accordance with the prospectus directive, or
(b)
a provision of transparency rules or any other provision made
40
in accordance with the transparency obligations directive,

in relation to an issuer whose home state is a member state other than
the United Kingdom.
(2)
The competent authority may act in such a case only in respect of the
infringement of a provision required by the relevant directive.
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
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Any reference to an applicable provision or applicable transparency
obligation shall be read accordingly.
(3)
If the authority finds that there has been such an infringement, it must
give a notice to that effect to the competent authority of the person’s
home state requesting it—
5
(a)
to take all appropriate measures for the purpose of ensuring
that the person remedies the situation that has given rise to the
notice, and
(b)
to inform the authority of the measures it proposes to take or
has taken or the reasons for not taking such measures.
10
(4)
The authority may not act further unless satisfied—
(a)
that the competent authority of the person’s home state has
failed or refused to take measures for the purpose mentioned in
subsection (3)(a), or
(b)
that the measures taken by that authority have proved
15
inadequate for that purpose.

This does not affect exercise of the powers under section 87K(2), 87L(2)
or (3) or 89J(2) or (3) (powers to protect market).
(5)
If the authority is so satisfied, it must, after informing the competent
authority of the person’s home state, take all appropriate measures to
20
protect investors.
(6)
In such a case the authority must inform the Commission informed of
the measures at the earliest opportunity.”.
1236
Transparency obligations and related matters: minor and consequential
amendments
25
(1)
Schedule 15 to this Act makes minor and consequential amendments in
connection with the provision made by this Part.
(2)
In that Schedule-
Part 1 contains amendments of the Financial Services and Markets Act
2000 (c. 8);
30
Part 2 contains amendments of the Companies (Audit, Investigations and
Community Enterprise) Act 2004 (c. 27).
1237
Corporate governance regulations
(1)
The Secretary of State may make regulations—
(a)
for the purpose of implementing, enabling the implementation of or
35
dealing with matters arising out of or related to, any Community
obligation relating to the corporate governance of issuers who have
requested or approved admission of their securities to trading on a
regulated market;
(b)
about corporate governance in relation to such issuers for the purpose
40
of implementing, or dealing with matters arising out of or related to,
any Community obligation.
(2)
“Corporate governance”, in relation to an issuer, includes—
(a)
the nature, constitution or functions of the organs of the issuer;
(b)
the manner in which organs of the issuer conduct themselves;
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
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(c)
the requirements imposed on organs of the issuer;
(d)
the relationship between different organs of the issuer;
(e)
the relationship between the organs of the issuer and the members of
the issuer or holders of the issuer’s securities.
(3)
The regulations may—
5
(a)
make provision by reference to any specified code on corporate
governance that may be issued from time to time by a specified body;
(b)
create new criminal offences (subject to subsection (4));
(c)
make provision excluding liability in damages in respect of things done
or omitted for the purposes of, or in connection with, the carrying on,
10
or purported carrying on, of any specified activities.

“Specified” here means specified in the regulations.
(4)
The regulations may not create a criminal offence punishable by a greater
penalty than—
(a)
on indictment, a fine;
15
(b)
on summary conviction, a fine not exceeding the statutory maximum or
(if calculated on a daily basis) £100 a day.
(5)
Regulations under this section are subject to negative resolution procedure.
(6)
In this section “issuer”, “securities” and “regulated market” have the same
meaning as in Part 6 of the Financial Services and Markets Act 2000 (c. 8).
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Part 44
Miscellaneous provisions
Regulation of actuaries etc
1238
Grants to bodies concerned with actuarial standards etc
(1)
Section 16 of the Companies (Audit, Investigations and Community
25
Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting
standards etc) is amended as follows.
(2)
In subsection (2) (matters carried on by bodies eligible for grants) for
paragraph (l) substitute—
“(l)
issuing standards to be applied in actuarial work;
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(m)
issuing standards in respect of matters to be contained in
reports or other communications required to be produced or
made by actuaries or in accordance with standards within
paragraph (l);
(n)
investigating departures from standards within paragraph (l)
35
or (m);
(o)
taking steps to secure compliance with standards within
paragraph (l) or (m);
(p)
carrying out investigations into public interest cases arising in
connection with the performance of actuarial functions by
40
members of professional actuarial bodies;
(q)
holding disciplinary hearings relating to members of
professional actuarial bodies following the conclusion of
investigations within paragraph (p);

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
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(r)
deciding whether (and, if so, what) disciplinary action should
be taken against members of professional actuarial bodies to
whom hearings within paragraph (q) related;
(s)
supervising the exercise by professional actuarial bodies of
regulatory functions in relation to their members;
5
(t)
overseeing or directing any of the matters mentioned above.”.
(3)
In subsection (5) (definitions) at the appropriate places insert—
““professional actuarial body” means—
(a)
the Institute of Actuaries, or
(b)
the Faculty of Actuaries in Scotland,
10
and the “members” of a professional actuarial body include
persons who, although not members of the body, are subject to
its rules in performing actuarial functions;”
““regulatory functions”, in relation to professional actuarial
bodies, means any of the following—
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(a)
investigatory or disciplinary functions exercised by
such bodies in relation to the performance by their
members of actuarial functions,
(b)
the setting by such bodies of standards in relation to the
performance by their members of actuarial functions,
20
and
(c)
the determining by such bodies of requirements in
relation to the education and training of their
members;”.
1239
Levy to pay expenses of bodies concerned with actuarial standards etc
25
(1)
Section 17 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (c. 27) (levy to pay expenses of bodies concerned with
accounting standards etc) is amended in accordance with subsections (2) to (5).
(2)
In subsection (3)(a) after “to which” insert “, or persons within subsection (3A)
to whom,”.
30
(3)
After subsection (3) insert—
“(3A)
The following persons are within this subsection—
(a)
the administrators of a public service pension scheme (within
the meaning of section 1 of the Pension Schemes Act 1993);
(b)
the trustees or managers of an occupational or personal pension
35
scheme (within the meaning of that section).”.
(4)
After subsection (4)(b) insert—
“(c)
make different provision for different cases.”.
(5)
After subsection (12) insert—
“(13)
If a draft of any regulations to which subsection (10) applies would,
40
apart from this subsection, be treated for the purposes of the standing
orders of either House of Parliament as a hybrid instrument, it is to
proceed in that House as if it were not such an instrument.”.
(6)
The above amendments have effect in relation to any exercise of the power to
make regulations under section 17 of the Companies (Audit, Investigations
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