Financial Services Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Financial Services Bill

Financial Services Bill
34

(b)
a remedy or relief which could not be awarded in legal
proceedings;
“specified” means specified in rules made under section 404.
(2)
In determining for the purposes of those sections whether an
authorised person has failed to comply with a requirement, anything
5
which an appointed representative has done or omitted as respects
business for which the authorised person has accepted responsibility is
to be treated as having been done or omitted by the authorised person.
(3)
References in those sections to the failure by a relevant firm to comply
with a requirement applicable to the carrying on by it of any activity
10
include anything done, or omitted to be done, by it in carrying on the
activity—
(a)
which is in breach of a duty or other obligation, prohibition or
restriction; or
(b)
which otherwise gives rise to the availability of a remedy or
15
relief in legal proceedings.
(4)
It does not matter whether—
(a)
the duty or other obligation, prohibition or restriction, or
(b)
the remedy or relief,

arises as a result of any provision made by or under this or any other
20
Act, a rule of law or otherwise.
(5)
References in sections 404 to 404B to a relevant firm include—
(a)
a person who was at any time a relevant firm but has
subsequently ceased to be one; and
(b)
a person who has assumed a liability (including a contingent
25
one) incurred by a relevant firm in respect of a failure by the
firm to comply with a requirement applicable to the carrying on
by it of any activity.
(6)
References in those sections to the carrying on of an activity by a
relevant firm are, accordingly, to be read in that case with the
30
appropriate modifications.
(7)
If the Authority varies a permission or authorisation of a person so as
to impose requirements on the person to establish and operate a
scheme which corresponds to, or is similar to, a consumer redress
scheme, the provision that may be included in the permission or
35
authorisation as varied includes—
(a)
provision imposing requirements on the person corresponding
to those that could be included in rules made under section 404;
and
(b)
provision corresponding to section 404B.
40
(8)
In subsection (7) the reference to the variation of a permission or
authorisation by the Authority is a reference to—
(a)
the variation under section 44 or 45 of a Part IV permission; or
(b)
the variation under regulation 8 or 11 of the Payment Services
Regulations 2009 of an authorisation under those regulations.
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404F
Power to widen the scope of consumer redress schemes
(1)
The Treasury may by order amend the definition of “relevant firms” in
section 404 or the definition of “consumers” in section 404D (or both).
(2)
An order under this section may make consequential amendments of
any provision of sections 404 to 404E.”
5
(2)
This section has effect in relation to failures occurring before the
commencement of this section (as well as in relation to failures occurring at or
after the commencement of this section).
27
Restrictions on provision of credit card cheques
(1)
The Consumer Credit Act 1974 (“the CCA 1974”) is amended as follows.
10
(2)
After section 51 insert—
“51A
Restrictions on provision of credit card cheques
(1)
A person who provides credit card cheques otherwise than in
accordance with this section commits an offence.
(2)
Credit card cheques may be provided only to a person who has asked
15
for them.
(3)
They may be provided only on a single occasion in respect of each
request that is made.
(4)
The number of cheques provided in respect of a request must not
exceed three (or, if less, the number requested).
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(5)
Where a single request is made for the provision of credit card cheques
in connection with more than one credit-token agreement, subsections
(3) and (4) apply as if a separate request had been made in relation to
each agreement.
(6)
Where more than one request for the provision of cheques is made in
25
the same document or at the same time—
(a)
they may be provided in respect of only one of the requests, but
(b)
if the requests relate to more than one credit-token agreement,
in relation to each agreement they may be provided only in
respect of one of the requests made in relation to that
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agreement.
(7)
“Credit card cheque” means a cheque (whether or not drawn on a
banker) which, whenever used, will result in the provision of credit
under a credit-token agreement.
(8)
Accordingly, “credit card cheque” does not include a cheque to be used
35
only in connection with a current account.
51B
Section 51A: exemption for business
(1)
Section 51A does not apply to credit card cheques provided in
connection with a credit-token agreement that is entered into by the
debtor wholly or predominantly for the purposes of a business carried
40
on, or intended to be carried on, by the debtor.

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(2)
If a credit-token agreement includes a declaration made by the debtor
to the effect that the agreement is entered into as mentioned in
subsection (1), the agreement is treated for the purposes of that
subsection as having been so entered into.
(3)
Subsection (2) does not apply if, when the agreement is entered into—
5
(a)
the creditor, or
(b)
any person who has acted on behalf of the creditor in
connection with the entering into of the agreement,

knows, or has reasonable cause to suspect, that the agreement is not
entered into as mentioned in subsection (1).
10
(4)
The Secretary of State may by order make provision about the form,
content and signing of declarations for the purposes of subsection (2).
(5)
Where an agreement has two or more creditors, references in
subsection (3) to the creditor are to any one or more of them.”
(3)
In Schedule 1 (prosecution and punishment of offences), after the entry relating
15
to section 51(1) insert—

“51A(1)
Breach of restrictions
(a) Summarily.
The statutory maximum.

on provision of credit
(b) On indictment.
A fine.”

card cheques.

(4)
An offence under section 51A of the CCA 1974 is to be treated for the purposes
20
of Part 3 of the Regulatory Enforcement and Sanctions Act 2008 (civil
sanctions) as contained in the CCA 1974 immediately before the day on which
that Act of 2008 was passed.
Financial Services Compensation Scheme
28
Contribution to costs of special resolution regime
25
(1)
In the Financial Services and Markets Act 2000, for section 214B substitute—
“214B
Contribution to costs of special resolution regime
(1)
This section applies if—
(a)
a stabilisation power under Part 1 of the Banking Act 2009 has
been exercised in respect of a bank, building society or credit
30
union within the meaning of that Part (“the institution”); and
(b)
the Treasury think that the institution was or was likely to have
been, or but for the exercise of the power would have become,
unable to satisfy claims against it.
(2)
The Treasury may require the scheme manager to make payments (to
35
the Treasury or any other person) in respect of expenses of a prescribed
description incurred (by the Treasury or that person) in connection
with the exercise of the power.
(3)
Subsection (2) is subject to section 214C (limit on amount of special
resolution regime payments).
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(4)
In subsection (2) “expenses” includes interest at a specified rate on the
difference, at any time, between—
(a)
the total amount of expenses (including interest) incurred at or
before that time; and
(b)
the total amount recovered, or received from the scheme
5
manager, in respect of the institution, at or before that time,
by—
(i)
the Treasury; and
(ii)
any other person who has incurred expenses in
connection with the exercise of the power that are of a
10
description prescribed under subsection (2).
(5)
Any payment made by the scheme manager under subsection (2) is to
be treated for the purposes of this Part as an expense under the
compensation scheme.
(6)
In this section and section 214C “specified rate” means a rate specified
15
by the Treasury.
(7)
Different rates may be specified under different provisions or for
different periods.
(8)
A rate may be specified by reference to a rate set (from time to time) by
any person.
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214C
Limit on amount of special resolution regime payments
(1)
The total amount of special resolution regime payments required to be
made in respect of a person (“the institution”) may not exceed—
(a)
notional net expenditure (see subsection (3)), minus
(b)
actual net expenditure (see subsection (4)).
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(2)
A “special resolution regime payment” is—
(a)
a payment under section 214B(2); or
(b)
a payment required to be made by the scheme manager by
virtue of section 61 of the Banking Act 2009 (special resolution
regime: compensation).
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(3)
Notional net expenditure is—
(a)
the total amount of expenses that would have been incurred
under the compensation scheme in respect of the institution if
the stabilisation power had not been exercised and the
institution had been unable to satisfy claims against it, minus
35
(b)
the total amount that would have been likely, at the time when
the power was exercised, to be recovered by the scheme
manager in respect of the institution in those circumstances.
(4)
Actual net expenditure is—
(a)
the total amount of expenses (other than special resolution
40
regime payments) actually incurred by the scheme manager in
respect of the institution, minus
(b)
the total amount actually recovered by the scheme manager in
respect of the institution.
(5)
In subsection (3)(a) “expenses” includes interest at a specified rate on
45
the difference, at any time, between—

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(a)
the total amount of expenses (including interest) that would
have been incurred as mentioned in subsection (3)(a) at or
before that time; and
(b)
the total amount that would have been likely to have been
recovered as mentioned in subsection (3)(b) at or before that
5
time.
(6)
In subsection (4)(a) “expenses” includes interest at a specified rate on
the difference, at any time, between—
(a)
the total amount of expenses (including special resolution
regime payments and interest) actually incurred by the scheme
10
manager in respect of the institution at or before that time; and
(b)
the total amount actually recovered by the scheme manager in
respect of the institution at or before that time.
(7)
In paragraph (b) of subsections (3) to (6) references to amounts
recovered (or likely to have been recovered) by the scheme manager do
15
not include any levy received (or likely to have been received) by it.
214D
Contributions under section 214B: supplementary
(1)
This section supplements sections 214B and 214C.
(2)
The scheme manager must determine—
(a)
the amounts of expenses (other than interest) that would have
20
been incurred as mentioned in section 214C(3)(a); and
(b)
the time or times at which those amounts would have been
likely to have been incurred.
(3)
The Treasury, or a person designated by the Treasury, must in
accordance with regulations appoint a person (“the valuer”) to
25
determine—
(a)
the amounts that would have been likely, at the time when the
stabilisation power was exercised, to be recovered as mentioned
in section 214C(3)(b); and
(b)
the time or times at which those amounts would have been
30
likely to be recovered.

The person appointed under this subsection may be the person
appointed as valuer under section 54 of the Banking Act 2009 in respect
of the exercise of the stabilisation power.
(4)
Regulations may enable the Treasury to specify principles to be applied
35
by—
(a)
the scheme manager when exercising functions under
subsection (2); or
(b)
the valuer when exercising functions under subsection (3).
(5)
The regulations may in particular enable the Treasury to require the
40
scheme manager or valuer—
(a)
to use, or not to use, specified methods;
(b)
to take specified matters into account in a specified manner; or
(c)
not to take specified matters into account.
(6)
Regulations—
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(a)
must provide for independent verification of expenses within
section 214B(2);

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(b)
may provide for the independent verification of other matters;
and
(c)
may contain provision about the appointment and payment of
an auditor.
(7)
Regulations—
5
(a)
must contain provision enabling the valuer to reconsider a
decision;
(b)
must provide a right of appeal to a court or tribunal against any
decision of the valuer;
(c)
may provide for payment of the valuer; and
10
(d)
may apply (with or without modifications) or make provision
corresponding to—
(i)
any provision of sections 54 to 56 of the Banking Act
2009; or
(ii)
any provision made, or that could be made, by virtue of
15
any of those sections.
(8)
Regulations may make provision for payments under section 214B(2) to
be made—
(a)
before any verification required by the regulations is
undertaken, and
20
(b)
before the limit imposed by section 214C is calculated,

subject to any necessary later adjustment.
(9)
If they do so they must provide that the amount of any payment
required by virtue of subsection (8) must not be such as to give rise to
an expectation that an amount will be required to be repaid to the
25
scheme manager (once any necessary verification has been undertaken
and the limit imposed by section 214C has been calculated).
(10)
Regulations may—
(a)
make provision supplementing section 214B or 214C or this
section;
30
(b)
make further provision about the method by which amounts to
be paid under section 214B(2) are to be determined;
(c)
make provision about timing;
(d)
make provision about procedures to be followed;
(e)
provide for discretionary functions to be exercised by a
35
specified body or by persons of a specified class; and
(f)
make provision about the resolution of disputes (which may
include provision conferring jurisdiction on a court or tribunal).
(11)
“Regulations” means regulations made by the Treasury.
(12)
Any payment made by the Treasury by virtue of this section is to be met out of
40
money provided by Parliament.
(13)
The compensation scheme may make provision about payments under
section 214B(2) and levies in connection with such payments (except
provision inconsistent with any provision made by or under section
214B or 214C or this section).”
45
(2)
Sections 214B to 214D of the Financial Services and Markets Act 2000 (as
substituted by subsection (1)) apply to any case where a stabilisation power

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was exercised before the commencement of this section as if the references in
sections 214B(4) and 214C(5) and (6) of that Act to any time were to any time
on or after 19 November 2009.
29
Power to require FSCS manager to act in relation to other schemes
In the Financial Services and Markets Act 2000, after Part 15 insert—
5
“Part 15A
Power to require FSCS manager to act in relation to other schemes
Introduction
224B
Meaning of “relevant scheme” etc
(1)
The following provisions apply for the purposes of this Part.
10
(2)
“Relevant scheme” means a scheme or arrangement (other than the
FSCS) for the payment of compensation (in certain cases) to customers
of persons who provide financial services or carry on a business
connected with the provision of such services.
(3)
References to the manager of a relevant scheme are to the person who
15
administers it or (if there is no such person) the person responsible for
making payments under it.
(4)
“The FSCS” means the Financial Services Compensation Scheme (see
section 213(2)).
(5)
“The FSCS manager” means the scheme manager as defined by section
20
212(1).
(6)
“Expense” includes anything that, if incurred in relation to the FSCS,
would amount to an expense for the purposes of the FSCS.
(7)
“Notice” means a notice in writing.
(8)
In subsection (2)—
25
(a)
“customers” includes customers outside the United Kingdom;
(b)
“persons” includes persons outside the United Kingdom;
(c)
references to the provision of financial services include the
provision outside the United Kingdom of such services.
Power to require FSCS manager to act
30
224C
Power to require FSCS manager to act on behalf of manager of relevant
scheme
(1)
This section applies if compensation is payable under a relevant
scheme.
(2)
The Treasury may by notice require the FSCS manager to exercise (on
35
behalf of the manager of the relevant scheme) specified functions in
respect of specified claims for compensation under the relevant
scheme.