Financial Services Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Financial Services Bill

Financial Services Bill
1

A
Bill
To
Make provision amending the Financial Services and Markets Act 2000
(including provision about financial education) and other provision about
financial services and markets; and to make provision for the administration
of court funds by the Director of Savings.
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—
Council for Financial Stability
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Council for Financial Stability
(1)
There is to be a Council for Financial Stability consisting of—
(a)
the Chancellor of the Exchequer,
(b)
the chair of the FSA, and
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(c)
the Governor of the Bank of England.
(2)
The Chancellor of the Exchequer is to be the chair of the Council.
(3)
The Council must—
(a)
keep under review matters affecting the stability of the UK financial
system, and
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(b)
co-ordinate any action taken, or to be taken, by the relevant authorities
for the purpose of protecting or enhancing the stability of that system.
(4)
Among other things, the duty under subsection (3) requires the Council to—
(a)
keep under review the impact (if any) on the stability of the UK
financial system of events or circumstances outside the United
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Kingdom (as well as in the United Kingdom), and
(b)
co-ordinate any action taken by the relevant authorities to promote
international financial regulation and supervision where the action is
taken for the purpose of protecting or enhancing the stability of the UK
financial system.
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(5)
The Treasury may prepare a statement containing further provision with
respect to the exercise by the Council of its functions.
(6)
The statement may—
(a)
specify particular objectives to be met by the Council in exercising its
functions,
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(b)
specify matters to which the Council must have regard in exercising its
functions,
(c)
make provision about the procedure of the Council, and
(d)
include any other provision that the Treasury consider would facilitate
the effective exercise by the Council of its functions.
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(7)
The Treasury must keep the statement under review.
(8)
Before preparing (or revising) the statement, the Treasury must consult—
(a)
the FSA, and
(b)
the Bank of England.
(9)
As soon as reasonably practicable after preparing (or revising) the statement,
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the Treasury must lay a copy before Parliament.
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Proceedings of the Council
(1)
The Council must meet in each quarter of each calendar year to consider
strategic issues relating to its functions under section 1(3).
(2)
Where the FSA or the Bank of England publishes a report setting out its
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opinion of the risks to the stability of the UK financial system, the Council must
consider the report at the Council’s next quarterly meeting.
(3)
Where the Treasury prepares a draft report under section 3, the Council must
consider the draft at the Council’s next quarterly meeting.
(4)
The Council must publish minutes of each of its quarterly meetings.
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(5)
Subsection (4) does not apply to—
(a)
minutes of any proceedings relating to matters which are commercially
confidential,
(b)
minutes of any proceedings relating to any action to be taken by any of
the relevant authorities the purpose of which may be impeded or
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frustrated by publication, or
(c)
anything which, if published, might pose a threat to the stability of the
UK financial system.
(6)
In addition to its quarterly meetings, the Council may meet at other times.
(7)
If a member of the Council is unable to take part in any of its proceedings, the
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member may appoint someone else to represent the interests of the member in
the proceedings.
(8)
In the case of an appointment by the Chancellor of the Exchequer, the person
appointed is also to act as the chair of the Council.
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Annual report
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(1)
At least once a year, the Treasury must prepare a report on—

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(a)
the activities which the Council has carried on during the period
covered by the report, and
(b)
any matters which, in the opinion of the Treasury, had special
significance for the stability of the UK financial system in that period.
(2)
The Treasury must lay a copy of the report, or a copy of the report with the
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omissions mentioned in subsection (3), before Parliament.
(3)
The copy of the annual report laid before Parliament may omit—
(a)
anything in the report relating to matters which are commercially
confidential,
(b)
anything in the report relating to any action to be taken by any of the
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relevant authorities the purpose of which may be impeded or
frustrated by being included in the report laid before Parliament, or
(c)
anything which, if included in the report laid before Parliament, might
pose a threat to the stability of the UK financial system.
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Definitions
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In sections 1 to 3 and this section—
“the Council” means the Council for Financial Stability,
“the FSA” means the Financial Services Authority,
“international financial regulation and supervision” means—
(a)
the regulation and supervision by an international body or
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organisation of the financial systems operating in different
countries or territories, and
(b)
the regulation and supervision by an authority in a particular
country or territory of the financial system operating in that
country or territory,
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“the relevant authorities” means—
(a)
the Treasury,
(b)
the FSA, and
(c)
the Bank of England, and
“the UK financial system” means the financial system operating in the
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United Kingdom.
Objectives of FSA etc
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Financial stability objective
(1)
The Financial Services and Markets Act 2000 is amended as follows.
(2)
In section 2(2) (the FSA’s regulatory objectives), after paragraph (a) insert—
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“(ab)
financial stability;”.
(3)
After section 3 insert—
“3A
Financial stability
(1)
The financial stability objective is: contributing to the protection and
enhancement of the stability of the UK financial system.
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(2)
In considering that objective the Authority must have regard to—

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(a)
the economic and fiscal consequences for the United Kingdom
of instability of the UK financial system;
(b)
the effects (if any) on the growth of the economy of the United
Kingdom of anything done for the purpose of meeting that
objective; and
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(c)
the impact (if any) on the stability of the UK financial system of
events or circumstances outside the United Kingdom (as well as
in the United Kingdom).
(3)
The Authority must, consulting the Treasury, determine and review its
strategy in relation to the financial stability objective.”
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Enhancing public understanding of financial matters etc
(1)
The Financial Services and Markets Act 2000 is amended as follows.
(2)
In section 2(2) (the FSA’s regulatory objectives), omit paragraph (b) (which
provides that public awareness is one of those objectives).
(3)
Omit section 4 (public awareness).
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(4)
After section 6 insert—
“Enhancing public understanding of financial matters etc
6A
Enhancing public understanding of financial matters etc
(1)
The Authority must establish a body corporate (“the consumer
financial education body”) whose function (“the consumer financial
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education function”) is to enhance—
(a)
the understanding and knowledge of members of the public of
financial matters (including the UK financial system); and
(b)
the ability of members of the public to manage their own
financial affairs.
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(2)
The consumer financial education function includes, in particular—
(a)
promoting awareness of the benefits of financial planning;
(b)
promoting awareness of the financial advantages and
disadvantages in relation to the supply of particular kinds of
goods or services;
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(c)
promoting awareness of the benefits and risks associated with
different kinds of financial dealing (which includes informing
the Authority and other bodies of those benefits and risks);
(d)
the publication of educational materials or the carrying out of
other educational activities; and
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(e)
the provision of information and advice to members of the
public.
(3)
Schedule 1A makes further provision about the consumer financial
education body.”
(5)
After Schedule 1 insert the Schedule 1A set out in Schedule 1 to this Act.
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(6)
If members of staff of the FSA are transferred to the consumer financial
education body, the transfer is to be regarded for the purposes of TUPE as a
relevant transfer, whether or not it would otherwise be so regarded.

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(7)
In subsection (6)—
“the consumer financial education body” has the same meaning as in
section 6A of the Financial Services and Markets Act 2000,
“the FSA” means the Financial Services Authority, and
“TUPE” means the Transfer of Undertakings (Protection of Employment)
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Regulations 2006.
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Meeting FSA’s regulatory objectives
(1)
The Financial Services and Markets Act 2000 is amended as follows.
(2)
In section 44(3) (refusal of application by authorised person to vary or cancel
its Part IV permission), for the words from “to it—” to the end substitute “to it
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that it is desirable to refuse the application in order to meet any of its regulatory
objectives.”
(3)
In section 45 (variation or cancellation of Part IV permissions: FSA’s own-
initiative power)—
(a)
in subsection (1), for paragraph (c) substitute—
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“(c)
it is desirable to exercise the power in order to meet any
of its regulatory objectives.”, and
(b)
after that subsection insert—
“(1A)
For the purposes of subsection (1)(c) it does not matter whether
there is a relationship between the authorised person and the
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persons whose interests will be protected by the exercise of the
power under this section.”
(4)
In section 138(1) and (1A) (general rule-making power), for “protecting the
interests of consumers” substitute “meeting any of its regulatory objectives”.
(5)
In section 194 (general grounds on which power of intervention is
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exercisable)—
(a)
in subsection (1), for paragraph (c) substitute—
“(c)
it is desirable to exercise the power in order to meet any
of its regulatory objectives.”, and
(b)
after that subsection insert—
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“(1A)
For the purposes of subsection (1)(c) it does not matter whether
there is a relationship between the incoming firm and the
persons whose interests will be protected by the exercise of the
power of intervention.”
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Promotion of international regulation and supervision
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In the Financial Services and Markets Act 2000, after section 6A (which is

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inserted by section 6(4) above) insert—
“International regulation and supervision
6B
Duty of Authority to promote international regulation and
supervision
(1)
The Authority must take such steps to promote international financial
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regulation and supervision as it considers are best calculated to meet its
financial stability objective.
(2)
Those steps are to include representing the interests of the United
Kingdom when participating in discussions relating to international
financial regulation and supervision.
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(3)
In discharging the duty under subsection (1) the Authority must have
regard to—
(a)
any principles appearing to it to represent principles of best
practice in relation to international financial regulation and
supervision; and
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(b)
the desirability of maintaining the competitive position of the
United Kingdom in respect of financial services and markets.
(4)
“International financial regulation and supervision” means—
(a)
the regulation and supervision by an international body or
organisation of the financial systems operating in different
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countries or territories; and
(b)
the regulation and supervision by an authority in a particular
country or territory of the financial system operating in that
country or territory.
(5)
“Financial system” includes—
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(a)
financial markets and exchanges;
(b)
activities that would be regulated activities if carried on in the
United Kingdom; and
(c)
other activities connected with financial markets and
exchanges.”
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Remuneration of executives of authorised persons
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Executives’ remuneration reports
(1)
The Treasury may make provision by regulations about the preparation,
approval and disclosure of executives’ remuneration reports.
(2)
An executives’ remuneration report is a report containing information about—
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(a)
the remuneration of relevant executives of an authorised person, or
(b)
anything connected with the remuneration of relevant executives of an
authorised person.
(3)
The following are relevant executives of an authorised person—
(a)
officers of the authorised person,
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(b)
employees of the authorised person who fall within a prescribed
description, and

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(c)
other individuals who have a prescribed connection with the
authorised person.
(4)
The individuals who may fall within subsection (3)(c) include any description
of—
(a)
individuals who provide services, or whose services are provided
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(directly or indirectly), to the authorised person, or
(b)
individuals who are officers or employees of a member of the same
group as the authorised person.
(5)
Regulations under this section may apply in relation to a prescribed
description of authorised person.
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(6)
The first regulations under this section are subject to affirmative resolution
procedure.
(7)
Any subsequent regulations under this section that—
(a)
require additional matter to be contained in an executives’
remuneration report, or
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(b)
otherwise render the requirements imposed as a result of this section
more onerous,

are subject to affirmative resolution procedure.
(8)
All other regulations under this section are subject to negative resolution
procedure.
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Executives’ remuneration reports: supplementary
(1)
Regulations under section 9 may, in particular, make provision as to—
(a)
the information that must be contained in an executives’ remuneration
report,
(b)
how information is to be set out in the report, and
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(c)
what is to be the auditable part of the report.
(2)
The information that may be required to be contained in an executives’
remuneration report includes—
(a)
information corresponding to information that could be required by
regulations under section 421 of the Companies Act 2006 to be
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contained in a directors’ remuneration report, and
(b)
information comparing the remuneration of relevant executives of an
authorised person with the remuneration of employees of the
authorised person who fall within a prescribed description.
(3)
Regulations under section 9 may, in particular, make provision —
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(a)
for the filing of executives’ remuneration reports with the registrar of
companies for any part of the United Kingdom or with the FSA, and
(b)
for the publication by the FSA of reports filed with it.
(4)
Regulations under section 9 may apply any provision made by or under the
Companies Act 2006 relating to directors’ remuneration reports, subject to
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such exceptions, adaptations and modifications as the Treasury consider
appropriate.
(5)
The provisions that may be applied include provisions creating offences; but
the regulations may not impose a liability for an offence which is more onerous
than the liability for the offence under the applied provision.
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