Financial Services Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Financial Services Bill

Financial Services Bill
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(a)
a market in the United Kingdom or another EEA State, and
(b)
one or more markets in a country or territory, or countries or
territories, anywhere else in the world,

short selling rules may apply in relation to trading on both or all
markets.
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(8)
In any case where—
(a)
a financial instrument (“instrument A”) is admitted to trading
on a market in the United Kingdom or another EEA State,
(b)
another financial instrument (“instrument B”) is admitted to
trading on one or more markets in a country or territory, or
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countries or territories, anywhere else in the world, and
(c)
the price or value of instrument A depends on the price or value
of instrument B (or vice versa),

short selling rules may apply in relation to trading on both or all
markets.
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(9)
In subsection (4)(a) “regulated market” has the meaning given by
Article 4.1(14) of the markets in financial instruments directive.
(10)
References in this section to a market in a country or territory are to a
market situated or operating in the country or territory.
131D
Short selling rules: procedure in urgent cases
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(1)
The Authority may make short selling rules (and may subsequently
amend those rules) without complying with section 155 (consultation
in relation to proposed rules) if it considers that it is necessary to do so,
in order to—
(a)
maintain confidence in the UK financial system; or
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(b)
protect the stability of the UK financial system.
(2)
Any rules made by virtue of subsection (1) (“emergency rules”) cease to
have effect at the end of the period of three months beginning with the
day on which the rules are made (“the relevant day”); but this is subject
as follows.
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(3)
The Authority may direct that emergency rules are to cease to have
effect at the end of a period (not exceeding six months beginning with
the relevant day) specified in the direction.
(4)
A direction under subsection (3) may be made only if, immediately
before the end of the period mentioned in subsection (2), the Authority
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considers that it is necessary to do so, in order to—
(a)
maintain confidence in the UK financial system; or
(b)
protect the stability of the UK financial system.
(5)
Such a direction must be published by the Authority in the way
appearing to the Authority to be best calculated to bring it to the
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attention of the public.
(6)
Nothing in subsection (2) or (3) prevents the Authority from revoking
emergency rules before the end of the periods referred to there.

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Power to require information
131E
Power to require information
(1)
The Authority may, by notice in writing, require a person (“P”)—
(a)
to provide specified information or information of a specified
description; or
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(b)
to produce specified documents or documents of a specified
description.
(2)
This section applies only to information and documents that the
Authority reasonably requires for the purpose of determining whether
P, or a person connected with P, has contravened any provision of short
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selling rules.
(3)
Information or documents required under this section must be
provided or produced—
(a)
before the end of such reasonable period as may be specified;
and
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(b)
at such place as may be specified.
(4)
The Authority may require any information provided under this
section to be provided in such form as it may reasonably require.
(5)
The Authority may require—
(a)
any information provided, whether in a document or otherwise,
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to be verified in such manner as it may reasonably require; or
(b)
any document produced to be authenticated in such manner as
it may reasonably require.
(6)
In this section “specified” means specified in the notice.
(7)
For the purposes of this section a person is connected with another
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person (“P”) if the person is or has at any relevant time been—
(a)
a member of P’s group;
(b)
a controller of P;
(c)
any other member of a partnership of which P is a member; or
(d)
in relation to P, a person mentioned in Part 1 of Schedule 15
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(reading references in that Part to the authorised person as
references to P).
Breach of short selling rules etc
131F
Power to impose penalty or issue censure
(1)
This section applies if the Authority is satisfied that a person has
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contravened—
(a)
any provision of short selling rules; or
(b)
any requirement imposed on the person under section 131E.
(2)
The Authority may impose a penalty of such amount as it considers
appropriate on—
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(a)
the person who contravened the provision or requirement; or
(b)
any person who was knowingly concerned in the
contravention.

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(3)
It may, instead of imposing a penalty on a person, publish a statement
censuring the person.
(4)
The Authority may not take action against a person under this section
after the end of the limitation period unless, before the end of that
period, it has given a warning notice to the person under section 131G.
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(5)
“The limitation period” means the period of four years beginning with
the first day on which the Authority knew of the contravention.
(6)
For this purpose the Authority is to be treated as knowing of a
contravention if it has information from which the contravention can
reasonably be inferred.
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131G
Procedure and right to refer to Tribunal
(1)
If the Authority proposes to take action against a person under section
131F, it must give the person a warning notice.
(2)
A warning notice about a proposal to impose a penalty must state the
amount of the penalty.
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(3)
A warning notice about a proposal to publish a statement must set out
the terms of the statement.
(4)
If the Authority decides to take action against a person under section
131F, it must give the person a decision notice.
(5)
A decision notice about the imposition of a penalty must state the
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amount of the penalty.
(6)
A decision notice about the publication of a statement must set out the
terms of the statement.
(7)
If the Authority decides to take action against a person under section
131F, the person may refer the matter to the Tribunal.
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131H
Duty on publication of statement
After a statement under section 131F(3) is published, the Authority
must send a copy of the statement to—
(a)
the person in respect of whom it is made; and
(b)
any person to whom a copy of the decision notice was given
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under section 393(4).
131I
Imposition of penalties under section 131F: statement of policy
(1)
The Authority must prepare and issue a statement of its policy with
respect to—
(a)
the imposition of penalties under section 131F; and
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(b)
the amount of penalties under that section.
(2)
The Authority’s policy in determining what the amount of a penalty
should be must include having regard to—
(a)
the seriousness of the contravention;
(b)
the extent to which the contravention was deliberate or reckless;
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and
(c)
whether the person on whom the penalty is to be imposed is an
individual.

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(3)
The Authority may at any time alter or replace a statement issued
under this section.
(4)
If a statement issued under this section is altered or replaced, the
Authority must issue the altered or replaced statement.
(5)
The Authority must, without delay, give the Treasury a copy of any
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statement which it publishes under this section.
(6)
A statement issued under this section must be published by the
Authority in the way appearing to the Authority to be best calculated
to bring it to the attention of the public.
(7)
The Authority may charge a reasonable fee for providing a person with
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a copy of the statement.
(8)
In exercising, or deciding whether to exercise, a power under section
131F in the case of any particular contravention, the Authority must
have regard to any statement of policy published under this section and
in force at a time when the contravention occurred.
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131J
Statement of policy: procedure
(1)
Before issuing a statement under section 131I, the Authority must
publish a draft of the proposed statement in the way appearing to the
Authority to be best calculated to bring it to the attention of the public.
(2)
The draft must be accompanied by notice that representations about the
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proposal may be made to the Authority within a specified time.
(3)
Before issuing the proposed statement, the Authority must have regard
to any representations made to it in accordance with subsection (2).
(4)
If the Authority issues the proposed statement it must publish an
account, in general terms, of—
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(a)
the representations made to it in accordance with subsection (2);
and
(b)
its response to them.
(5)
If the statement differs from the draft published under subsection (1) in
a way which is, in the opinion of the Authority, significant, the
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Authority must (in addition to complying with subsection (4)) publish
details of the difference.
(6)
The Authority may charge a reasonable fee for providing a person with
a copy of a draft published under subsection (1).
(7)
This section also applies to a proposal to alter or replace a statement.”
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FSA’s disciplinary powers
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Suspending permission to carry on regulated activities etc
In Part 14 of the Financial Services and Markets Act 2000 (disciplinary

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measures), after section 206 insert—
“206A
  Suspending permission to carry on regulated activities etc
(1)
If the Authority considers that an authorised person has contravened a
relevant requirement imposed on the person, it may—
(a)
suspend, for such period as it considers appropriate, any
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permission which the person has to carry on a regulated
activity; or
(b)
impose, for such period as it considers appropriate, such
limitations or other restrictions in relation to the carrying on of
a regulated activity by the person as it considers appropriate.
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(2)
In subsection (1)—
“permission” means any permission that the authorised person
has, whether given (or treated as given) by the Authority or
conferred by any provision of this Act;
“relevant requirement” means a requirement imposed—
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(a)
by or under this Act; or
(b)
by any directly applicable Community regulation made
under the markets in financial instruments directive.
(3)
The period for which a suspension or restriction is to have effect may
not exceed 12 months.
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(4)
A suspension may relate only to the carrying on of an activity in
specified circumstances.
(5)
A restriction may, in particular, be imposed so as to require the person
concerned to take, or refrain from taking, specified action.
(6)
The Authority may—
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(a)
withdraw a suspension or restriction; or
(b)
vary a suspension or restriction so as to reduce the period for
which it has effect or otherwise to limit its effect.
(7)
The power under this section may (but need not) be exercised so as to
have effect in relation to all the regulated activities that the person
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concerned carries on.
(8)
Any one or more of the powers under—
(a)
subsection (1)(a) and (b) of this section, and
(b)
sections 205 and 206,

may be exercised in relation to the same contravention.”
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Removal of restriction on imposing a penalty and cancelling authorisation
In section 206 of the Financial Services and Markets Act 2000 (financial
penalties), omit subsection (2) (which prevents the FSA from imposing a
penalty under that section as well as withdrawing a person’s authorisation
under section 33).
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