Financial Services Bill

House of Commons

Session 2009 - 10
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Financial Services Bill

Financial Services Bill
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(6)
Regulations under section 9 may provide that any requirement imposed on an
authorised person by the regulations is to be treated for the purposes of
prescribed provisions of the Financial Services and Markets Act 2000 as if it had
been imposed on the person by a provision of that Act.
(7)
For the purposes of section 9 and this section—
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“authorised person” has the same meaning as in the Financial Services
and Markets Act 2000 (see section 31),
“the FSA” means the Financial Services Authority,
“group” has the same meaning as in the Financial Services and Markets
Act 2000 (see section 421),
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“officer”—
(a)
in relation to a partnership, means a partner, and
(b)
in relation to a body corporate whose affairs are managed by its
members, means a member, and
“prescribed” means specified in, or determined in accordance with,
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regulations under section 9.
11
Rules made by FSA about remuneration
In the Financial Services and Markets Act 2000, after section 139 insert—
“139A
General rules about remuneration
(1)
The Authority must exercise its power to make general rules so as to
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make rules requiring each authorised person (or each authorised
person of a specified description) to have, and act in accordance with, a
remuneration policy.
(2)
A “remuneration policy” is a policy about the remuneration by the
authorised person of—
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(a)
officers,
(b)
employees, and
(c)
other persons,

of a specified description.
(3)
The rules must secure that any remuneration policy that an authorised
30
person is required by the rules to have is consistent with—
(a)
the effective management of risks; and
(b)
the Implementation Standards.
(4)
When making rules about remuneration policies, the Authority must
have regard to any other international standards about the
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remuneration of individuals working in the financial sector (or certain
such individuals).
(5)
The Treasury may direct the Authority to consider whether the
remuneration policies of authorised persons specified in the direction
(or of authorised persons of a description so specified) comply with
40
requirements imposed by the rules as to the contents of the policies.
(6)
Before giving a direction under subsection (5), the Treasury must
consult the Authority.
(7)
If the Authority considers that a remuneration policy fails to make
provision which complies with the requirements mentioned in
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subsection (5), the Authority must take such steps as it considers
appropriate to deal with the failure.
(8)
The steps that the Authority may take include requiring the
remuneration policy to be revised.
(9)
General rules may—
5
(a)
prohibit persons (or persons of a specified description) from
being remunerated in a specified way;
(b)
provide that any provision of an agreement that contravenes
such a prohibition is void; and
(c)
provide for the recovery of any payment made, or other
10
property transferred, in pursuance of a provision that is void by
virtue of paragraph (b).
(10)
A prohibition may be imposed under subsection (9)(a) only for the
purpose of ensuring that the provision of remuneration is consistent
with—
15
(a)
the effective management of risks; or
(b)
the Implementation Standards.
(11)
In this section—
“the Implementation Standards” means the Implementation
Standards for Principles for Sound Compensation Practices,
20
issued by the Financial Stability Board on 25 September 2009;
and
“specified” (except in subsection (5)) means specified by the rules.
(12)
References to the Implementation Standards or to international
standards of a kind mentioned in subsection (4) are to standards that
25
are for the time being in force.”
Recovery and resolution plans
12
Rules made by FSA about recovery and resolution plans
(1)
In the Financial Services and Markets Act 2000, after section 139A (which is
inserted by section 11 above) insert—
30
“139B
  Rules about recovery plans
(1)
The Authority must exercise its power to make general rules so as to
make rules requiring each authorised person (or each authorised
person of a specified description) to prepare, and keep up-to-date, a
recovery plan.
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(2)
A “recovery plan” is a document containing information within
subsection (3) or (4) of a specified description.
(3)
Information is within this subsection if it relates to action to be taken to
secure that, in the event of specified circumstances affecting the
carrying on of the business (or any part of the business) of the
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authorised person—
(a)
the business of the authorised person, or
(b)
a specified part of the business of the authorised person,

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is capable of being carried on (whether or not by the authorised person
and whether or not in the same way as previously).
(4)
Information is within this subsection if it would facilitate the carrying
on of the business (or any part of the business) of the authorised person
by any other person.
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(5)
The Authority must consider whether each recovery plan makes
satisfactory provision in relation to the matters required by the rules to
be covered by the plan.
(6)
If the Authority considers that a recovery plan fails to make satisfactory
provision in relation to any such matter, the Authority must take such
10
steps as it considers appropriate to deal with the failure.
(7)
The steps that the Authority may take include requiring the recovery
plan to be revised.
(8)
The authorised persons subject to general rules about recovery plans
must include authorised persons in relation to whom any power under
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Part 1 of the Banking Act 2009 (special resolution regime) is exercisable.
(9)
Before preparing a draft of general rules about recovery plans having
effect in relation to those persons, the Authority must consult—
(a)
the Treasury; and
(b)
the Bank of England.
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139C
Rules about resolution plans
(1)
The Authority must exercise its power to make general rules so as to
make rules requiring each authorised person (or each authorised
person of a specified description) to prepare, and keep up-to-date, a
resolution plan.
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(2)
A “resolution plan” is a document containing information within
subsection (3) or (4) of a specified description.
(3)
Information is within this subsection if it relates to action to be taken in
the event of—
(a)
circumstances arising in which it is likely that the business (or
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any part of the business) of the authorised person will fail; or
(b)
the failure of the business (or any part of the business) of the
authorised person.
(4)
Information is within this subsection if it would facilitate anything
falling to be done by any person in consequence of that failure.
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(5)
An example of information within subsection (4) is information that, in
the event of that failure, would facilitate —
(a)
planning by the Treasury in relation to the possible exercise of
any of their powers under Part 1 of the Banking Act 2009; or
(b)
planning by the Bank of England in relation to the possible
40
exercise of any of its powers under Part 1, 2 or 3 of that Act.
(6)
The Authority must consider whether each resolution plan makes
satisfactory provision in relation to the matters required by the rules to
be covered by the plan.

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(7)
If the Authority considers that a resolution plan fails to make
satisfactory provision in relation to any such matter, the Authority
must take such steps as it considers appropriate to deal with the failure.
(8)
The steps that the Authority may take include requiring the resolution
plan to be revised.
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(9)
The authorised persons subject to general rules about resolution plans
must include authorised persons in relation to whom any power under
Part 1 of the Banking Act 2009 is exercisable.
(10)
Before preparing a draft of general rules about resolution plans having
effect in relation to those persons, the Authority must consult—
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(a)
the Treasury; and
(b)
the Bank of England.
139D
Sections 139B and 139C: interpretation
(1)
In sections 139B and 139C any reference to the taking of action includes
the taking of action by—
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(a)
the authorised person;
(b)
any other person in the same group as the authorised person; or
(c)
a partnership of which the authorised person is a member.
(2)
In subsection (1)(b) the definition of “group” in section 421 applies with
the omission of subsection (1)(e) and (f) of that section.
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(3)
For the purposes of section 139C the cases in which the business (or any
part of the business) of the authorised person is to be regarded as
having failed include—
(a)
the insolvency or bankruptcy of the authorised person;
(b)
the authorised person entering into administration; and
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(c)
a power under Part 1 of the Banking Act 2009 being exercised in
relation to the authorised person.
(4)
In sections 139B and 139C references to the business of an authorised
person include the business of—
(a)
any person in the same group as the authorised person; and
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(b)
a partnership of which the authorised person is a member;

and, accordingly, references in subsection (3)(a) to (c) of this section to
the authorised person include any person within paragraph (a) or (b).
(5)
In sections 139B and 139C “specified” means specified in general rules.
(6)
In this section—
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“administration” includes administration under Part 3 of the
Banking Act 2009;
“insolvency” includes insolvency under Part 2 of that Act.
139E
Rules about recovery and resolution plans: supplementary provision
(1)
General rules about recovery or resolution plans may, in particular—
40
(a)
impose a requirement on authorised persons to collect, and
keep up-to-date, information of a description specified in the
rules; and

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(b)
make provision as to the inclusion in the plans of information in
respect of the steps to be taken to ensure compliance with that
requirement.
(2)
If the Authority considers that an authorised person has contravened
that requirement, the Authority may require the authorised person to
5
appoint a skilled person to collect or update the information in
question.
(3)
References in this section to a skilled person are to a person—
(a)
nominated or approved by the Authority; and
(b)
appearing to the Authority to have the skills necessary to collect
10
or update the information in question.
(4)
The skilled person may require any person to provide all such
assistance as the skilled person may reasonably require to collect or
update the information in question.
(5)
A requirement imposed by subsection (4) is enforceable, on the
15
application of the Authority, by an injunction or, in Scotland, by an
order for specific performance under section 45 of the Court of Session
Act 1988.
(6)
A contractual or other requirement imposed on a person (“P”) to keep
any information in confidence does not apply if—
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(a)
the information is or may be relevant to anything required to be
done as a result of section 139B or 139C or this section;
(b)
an authorised person or a skilled person requests or requires P
to provide the information for the purpose of securing that
those things are done; and
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(c)
the Authority has approved the making of the request or the
imposition of the requirement before it is made or imposed.
(7)
General rules about recovery or resolution plans may, in particular,
make provision about the form of the plans.
(8)
When making general rules about recovery or resolution plans, the
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Authority must have regard to any international standards about
documents whose purpose corresponds to the purpose of recovery or
resolution plans.
139F
Special provision in relation to resolution plans
(1)
In the case of resolution plans required to be prepared by general rules,
35
the Authority must consult—
(a)
the Treasury, and
(b)
the Bank of England (“the Bank”),

about the adequacy of the plans so far as relating to any matter which
may be relevant to the exercise by the Treasury or the Bank of any
40
power under Part 1, 2 or 3 of the Banking Act 2009.
(2)
After being consulted under subsection (1)—
(a)
the Treasury or the Bank may notify the Authority that, in the
opinion of the Treasury or the Bank, a resolution plan fails to
make satisfactory provision in relation to any such matter; and
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(b)
if the Treasury or the Bank give a notification under paragraph
(a), the Treasury or the Bank must give reasons for being of that
opinion to the Authority.
(3)
The Authority must have regard to any notification given under
paragraph (a) of subsection (2) before considering whether any
5
resolution plan makes satisfactory provision in relation to any such
matter.
(4)
If—
(a)
a notification is given under that paragraph, but
(b)
the Authority is nonetheless of the opinion that the resolution
10
plan makes satisfactory provision in relation to any such matter,

the Authority must give reasons for being of that opinion to the person
who gave the notification.”
(2)
The Treasury may by order require the FSA to make, by a date specified in the
order, recovery plan rules, or resolution plan rules, which impose
15
requirements on authorised persons who are of a description specified in the
order.
(3)
Before making an order under subsection (2), the Treasury must consult the
FSA.
(4)
An order under subsection (2) is subject to negative resolution procedure.
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(5)
In this section—
“the FSA” means the Financial Services Authority,
“recovery plan rules” means general rules imposing requirements of a
kind mentioned in section 139B(1) of the Financial Services and
Markets Act 2000, and
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“resolution plan rules” means general rules imposing requirements of a
kind mentioned in section 139C(1) of that Act.
Short selling
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Power of FSA to prohibit, or require disclosure of, short selling
In the Financial Services and Markets Act 2000, after Part 8 insert—
30
“Part 8A
Short selling
Short selling rules
131B
Short selling rules
(1)
The Authority may make rules prohibiting in specified cases persons
35
from engaging in short selling in relation to relevant financial
instruments (or relevant financial instruments of a specified
description).
(2)
The Authority may make rules requiring—

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(a)
a person who has engaged in short selling in relation to relevant
financial instruments (or relevant financial instruments of a
specified description), or
(b)
an authorised person of a specified description who has acted
on behalf of such a person,
5

to disclose in specified cases specified information, or information of a
specified description, about the short selling.
(3)
Rules under subsection (2) may specify the time by which, and the way
in which, the disclosure must be made (and may in particular provide
for the information to be disclosed to the Authority or published in a
10
specified way).
(4)
Rules under subsection (2) may apply in relation to short selling
engaged in before the rules are made where the resulting short position
is still open when the rules are made.
(5)
The reference to a short position being open is to be read in accordance
15
with provision made by the rules.
(6)
Rules under this section may apply to short selling wholly outside the
United Kingdom by persons outside the United Kingdom, but only in
so far as the rules relate to UK financial instruments.
(7)
The description of relevant financial instruments that may be specified
20
by the rules includes relevant financial instruments issued by a
specified person.
(8)
Rules under this section are referred to in this Part as “short selling
rules”.
131C
Short selling rules: definitions etc
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(1)
This section supplements section 131B.
(2)
The cases in which a person (“S”) engages in short selling in relation to
a financial instrument (a “shorted instrument”) include any case
where—
(a)
S enters into a transaction which creates, or relates to, another
30
financial instrument; and
(b)
the effect (or one of the effects) of the transaction is to confer a
financial advantage on S in the event of a decrease in the price
or value of the shorted instrument.
(3)
“Financial instrument” has the meaning given by Article 4.1(17) of the
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markets in financial instruments directive.
(4)
“Relevant financial instrument” means a financial instrument that—
(a)
is admitted to trading on a regulated market or on any other
prescribed market in an EEA State; or
(b)
has such other connection with a market in an EEA State as may
40
be specified.
(5)
“Specified” means specified by short selling rules.
(6)
“UK financial instrument” means a financial instrument that is
admitted to trading on a market in the United Kingdom.
(7)
In the case of a financial instrument that is admitted to trading on—
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