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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(2)
The rules may in particular—
(a)
make provision about applications for collective proceedings orders,
(b)
set out the criteria to be applied by the court when deciding whether to
make a collective proceedings order (or the terms of such an order),
(c)
provide that in specified circumstances a person is to be treated as
5
having opted-out or a person who has opted-in is to be treated as not
having opted-in,
(d)
make provision about the appointment by the court of a person to act
as the representative (in place of a person authorised by a collective
proceedings order or appointed by virtue of this paragraph),
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(e)
make provision about the appointment by the court of a person to
represent the interests of any group of represented persons in relation
to any issue in the proceedings,
(f)
make provision enabling the court to authorise a person to act, on an
opt-in basis or an opt-out basis, on behalf of persons against whom
15
claims in the proceedings are (or are to be) made,
(g)
make provision about the determination of issues on an individual
basis (rather than on a collective basis),
(h)
make provision about evidence,
(i)
make provision about counterclaims,
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(j)
make provision about costs incurred in connection with collective
proceedings,
(k)
make provision about appeals from judgments given, and orders made,
in collective proceedings (including provision restricting rights of
appeal),
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(l)
make provision about the compromise of claims made in collective
proceedings (including provision about the approval of any
compromise by the court), and
(m)
make provision about the giving of notices (including provision about
the consequences of failing to give a notice of a specified description).
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(3)
Rules made by virtue of subsection (2)(g) may disapply (or modify the
application of)—
(a)
section 20 (judgments and orders in collective proceedings), and
(b)
any regulations under section 22(1) made by virtue of section 22(2)(f)
(damages).
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(4)
The provision that may be made by virtue of subsection (2)(i) includes—
(a)
provision as to the kinds of counterclaim that may be brought and the
circumstances in which counterclaims may be brought,
(b)
provision enabling the court to authorise any person appointed by
virtue of subsection (2)(f) or any other person to bring a counterclaim
40
on behalf of other persons,
(c)
provision enabling the court to authorise the representative or another
person to act, in relation to a counterclaim, on behalf of represented
persons, and
(d)
provision conferring on represented persons a right to opt-out of
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collective proceedings where a counterclaim is brought.

The circumstances referred to in paragraph (a) include obtaining permission
from the court for the bringing of the counterclaim.
(5)
The provision that may be made by virtue of subsection (2)(j) includes—

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(a)
provision about costs incurred in connection with holding and dealing
with any payment of damages, including in particular costs incurred in
determining whether to make payments to represented persons (and, if
so, the amount of such payments), and
(b)
provision requiring any specified costs to be met out of any payment of
5
damages.
(6)
The rules must secure that any notice required under them to be given to
persons is given—
(a)
in accordance with any direction of the court, or
(b)
if there is no such direction, in a way that is appropriate for bringing it
10
to the attention of those persons.
(7)
“Specified” means specified by the rules.
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Definitions
(1)
The following provisions apply for the purposes of sections 18 to 24 and this
section.
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(2)
“The court” means—
(a)
the High Court or county court, or
(b)
in Scotland, the Court of Session.
(3)
“FSMA 2000” means the Financial Services and Markets Act 2000.
(4)
“Limitation provision” means any provision of—
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(a)
the Limitation Act 1980,
(b)
the Prescription and Limitation (Scotland) Act 1973, or
(c)
the Limitation (Northern Ireland) Order 1989,

or any provision corresponding to, or which has a similar effect to, any such
provision.
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(5)
“The Ombudsman scheme operator” means the scheme operator as defined by
section 225(2) of FSMA 2000 (Ombudsman scheme).
(6)
“The represented persons”, in relation to collective proceedings, means the
persons on whose behalf the proceedings are brought; and “represented
person” means any of them.
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(7)
In Scotland—
(a)
any reference to costs is to be read as a reference to expenses, and
(b)
any reference to a stay of proceedings is to be read as a reference to a
sist of proceedings.
Other measures to protect consumers
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26
Consumer redress schemes
(1)
In the Financial Services and Markets Act 2000, for section 404 (and the italic

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cross-heading before it) substitute—
“Consumer redress schemes
404
Consumer redress schemes
(1)
This section applies if—
(a)
it appears to the Authority that there may have been a
5
widespread or regular failure by relevant firms to comply with
requirements applicable to the carrying on by them of any
activity;
(b)
it appears to it that, as a result, consumers have suffered (or may
suffer) loss or damage in respect of which, if they brought legal
10
proceedings, a remedy or relief would be available in the
proceedings; and
(c)
it considers that it is desirable to make rules for the purpose of
securing that redress is made to the consumers in respect of the
failure (having regard to other ways in which consumers may
15
obtain redress).
(2)
“Relevant firms” means—
(a)
authorised persons; or
(b)
payment service providers.
(3)
The Authority may make rules requiring each relevant firm (or each
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relevant firm of a specified description) which has carried on the
activity on or after the specified date to establish and operate a
consumer redress scheme.
(4)
A “consumer redress scheme” is a scheme under which the firm is
required to take one or more of the following steps in relation to the
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activity.
(5)
The firm must first investigate whether, on or after the specified date, it
has failed to comply with the requirements mentioned in subsection
(1)(a) that are applicable to the carrying on by it of the activity.
(6)
The next step is for the firm to determine whether the failure has caused
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(or may cause) loss or damage to consumers.
(7)
If the firm determines that the failure has caused (or may cause) loss or
damage to consumers, it must then—
(a)
determine what the redress should be in respect of the failure;
and
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(b)
make the redress to the consumers.
(8)
A relevant firm is required to take the above steps in relation to any
particular consumer even if, after the rules are made, a defence of
limitation becomes available to the firm in respect of the loss or damage
in question.
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(9)
Before making rules under this section, the Authority must consult the
scheme operator of the ombudsman scheme.
(10)
For the meaning of consumers, see section 404D.

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404A
Rules under s.404: supplementary
(1)
Rules under section 404 may make provision—
(a)
specifying the activities and requirements in relation to which
relevant firms are to carry out investigations under consumer
redress schemes;
5
(b)
setting out, in relation to any specified description of case,
examples of things done, or omitted to be done, that are to be
regarded as constituting a failure to comply with a requirement;
(c)
setting out, in relation to any specified description of case,
matters to be taken into account, or steps to be taken, by
10
relevant firms for the purpose of—
(i)
assessing evidence as to a failure to comply with a
requirement; or
(ii)
determining whether such a failure has caused (or may
cause) loss or damage to consumers;
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(d)
as to the kinds of redress that are, or are not, to be made to
consumers in specified descriptions of case and the way in
which redress is to be determined in specified descriptions of
case;
(e)
as to the things that relevant firms are, or are not, to do in
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establishing and operating consumer redress schemes;
(f)
securing that relevant firms are not required to investigate
anything occurring after a specified date;
(g)
specifying the times by which anything required to be done
under any consumer redress scheme is to be done;
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(h)
requiring relevant firms to provide information to the
Authority;
(i)
authorising one or more competent persons to do anything for
the purposes of, or in connection with, the establishment or
operation of any consumer redress scheme;
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(j)
for the nomination or approval by the Authority of persons
authorised under paragraph (i);
(k)
as to the circumstances in which, instead of a relevant firm, the
Authority (or one or more competent persons acting on the
Authority’s behalf) may carry out the investigation and take the
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other relevant steps under any consumer redress scheme;
(l)
as to the powers to be available to those carrying out an
investigation by virtue of paragraph (k);
(m)
as to the enforcement of any redress (for example, in the case of
a money award, as a debt owed by a relevant firm).
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(2)
The only examples that may be set out in the rules as a result of
subsection (1)(b) are examples of things done, or omitted to be done,
that have been, or would be, held by a court or tribunal to constitute a
failure to comply with a requirement.
(3)
Matters may not be set out in the rules as a result of subsection (1)(c) if
45
they have not been, or would not be, taken into account by a court or
tribunal for the purpose mentioned there.
(4)
The Authority must exercise the power conferred as a result of
subsection (1)(d) so as to secure that, in relation to any description of

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case, the only kinds of redress to be made are those which it considers
to be just in relation to that description of case.
(5)
In acting under subsection (4), the Authority must have regard (among
other things) to the nature and extent of the losses or damage in
question.
5
(6)
The provision that may be made under subsection (1)(h) includes
provision applying (with or without modifications)—
(a)
any provision of section 165; or
(b)
any provision of Part 11 relating to that section.
(7)
The reference in subsection (1)(k) to the other relevant steps under any
10
consumer redress scheme is a reference to the Authority making the
determinations mentioned in section 404(6) and (7) (with the firm still
required to make the redress).
(8)
If the rules include provision under subsection (1)(k), they must also
include provision for—
15
(a)
giving warning and decision notices, and
(b)
conferring rights on relevant firms to refer matters to the
Tribunal,

in relation to any determination mentioned in section 404(6) and (7)
made by the Authority.
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(9)
Nothing in this section is to be taken as limiting the power conferred by
section 404.
404B
Complaints to the ombudsman scheme
(1)
If—
(a)
a consumer makes a complaint under the ombudsman scheme
25
in respect of an act or omission of a relevant firm, and
(b)
at the time the complaint is made, the subject-matter of the
complaint falls to be dealt with (or has been dealt with) under a
consumer redress scheme,

the way in which the complaint is to be determined by the ombudsman
30
is to be as mentioned in subsection (4).
(2)
If a consumer—
(a)
is not satisfied with a determination made by a relevant firm
under a consumer redress scheme, or
(b)
considers that a relevant firm has failed to make a
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determination in accordance with a consumer redress scheme,

the consumer may, in respect of that determination or failure, make a
complaint under the ombudsman scheme.
(3)
A complaint mentioned in subsection (1) or (2) is referred to in the
following provisions of this section as a “relevant complaint”.
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(4)
A relevant complaint is to be determined by reference to what, in the
opinion of the ombudsman, the determination under the consumer
redress scheme should be or should have been (subject to subsection
(5)).
(5)
If, in determining a relevant complaint, the ombudsman determines
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that the firm should make (or should have made) a payment of an

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amount to the consumer, the amount awarded by the ombudsman (a
“money award”) must not exceed the monetary limit (within the
meaning of section 229).
(6)
But the ombudsman may recommend that the firm pay a larger
amount.
5
(7)
A money award—
(a)
may specify the date by which the amount awarded is to be
paid;
(b)
may provide for interest to be payable, at a rate specified in the
award, on any amount which is not paid by that date; and
10
(c)
is enforceable by the consumer in accordance with Part 3 or 3A
of Schedule 17 (as the case may be).
(8)
If, in determining a relevant complaint, the ombudsman determines
that the firm should take (or should have taken) particular action in
relation to the consumer, the ombudsman may direct the firm to take
15
that action.
(9)
Compliance with a direction under subsection (8) is enforceable, on the
application of the consumer, by an injunction or, in Scotland, by an
order for specific performance under section 45 of the Court of Session
Act 1988.
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(10)
In consequence of the provision made by this section, sections 228(2)
and 229 do not apply in relation to relevant complaints; but all other
provision made by or under Part 16 applies in relation to those
complaints.
(11)
The compulsory jurisdiction of the ombudsman scheme is to include
25
the jurisdiction resulting from this section.
(12)
Nothing in subsection (1) is to be taken as requiring the ombudsman to
determine a complaint in any case where (apart from that subsection)
the complaint would not fall to be determined (whether as a result of
rules made under Schedule 17 or otherwise).
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(13)
Nothing in subsection (2) is to be taken as conferring an entitlement on
a person who, for the purposes of the ombudsman scheme, is not an
eligible complainant in relation to the subject-matter of the
determination mentioned there.
404C
Enforcement
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The following provisions—
(a)
Part 14 (disciplinary measures), and
(b)
so much of this Act as relates to any provision of that Part,
(which apply only in relation to authorised persons) are also to apply
in relation to relevant firms which are not (or are no longer) authorised
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persons.
404D
Meaning of “consumers”
(1)
For the purposes of sections 404 to 404B “consumers” means persons
who—
(a)
have used, or may have contemplated using, any of the services
45
within subsection (2); or

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(b)
have relevant rights or interests in relation to any of the services
within that subsection.
(2)
The services within this subsection are services provided by—
(a)
authorised persons in carrying on regulated activities;
(b)
authorised persons in carrying on a consumer credit business in
5
connection with the accepting of deposits;
(c)
authorised persons in communicating, or approving the
communication by others of, invitations or inducements to
engage in investment activity;
(d)
authorised persons who are investment firms, or credit
10
institutions, in providing relevant ancillary services;
(e)
persons acting as appointed representatives; or
(f)
payment service providers in providing payment services.
(3)
A person (“P”) has a “relevant right or interest” in relation to any
services within subsection (2) if P has a right or interest—
15
(a)
which is derived from, or is otherwise attributable to, the use of
the services by others; or
(b)
which may be adversely affected by the use of the services by
persons acting on P’s behalf or in a fiduciary capacity in relation
to P.
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(4)
If a person is providing a service within subsection (2) as a trustee, the
persons who have been, or may have been, beneficiaries of the trust are
to be treated as persons who have used, or may have contemplated
using, the service.
(5)
A person who deals with another person (“B”) in the course of B
25
providing a service within subsection (2) is to be treated as using the
service.
(6)
In this section—
“accepting”, in relation to deposits, includes agreeing to accept;
“consumer credit business” has the same meaning as in the
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Consumer Credit Act 1974 (see section 189(1));
“credit institution” has the meaning given by section 138(1B);
“engage in investment activity” has the meaning given by section
21;
“payment services” has the same meaning as in the Payment
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Services Regulations 2009;
“payment service provider” means a person who is a payment
service provider for the purposes of those regulations as a result
of falling within any of paragraphs (a) to (e) of the definition in
regulation 2(1);
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“relevant ancillary services” has the meaning given by section
138(1C).
404E
Other definitions etc
(1)
For the purposes of sections 404 to 404B—
“redress” includes—
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(a)
interest; and