Financial Services Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Financial Services Bill

Financial Services Bill
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Performance of controlled function without approval
In the Financial Services and Markets Act 2000, after section 63 insert—
“Performance of controlled functions without approval
63A
Power to impose penalties
(1)
If the Authority is satisfied that a person (“P”) has at any time
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performed a controlled function without approval, it may impose a
penalty on P of such amount as it considers appropriate.
(2)
But the Authority may not impose a penalty on P if, having considered
any representations made to it in response to a warning notice, there
are reasonable grounds for it to be satisfied that P—
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(a)
did not know, and
(b)
could not reasonably be expected to have known,

that P was at that time performing a controlled function without
approval.
(3)
For the purposes of this section P performs a controlled function
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without approval at any time if at that time—
(a)
P performs a controlled function under an arrangement entered
into by an authorised person (“A”), or by a contractor of A, in
relation to the carrying on by A of a regulated activity; and
(b)
the performance by P of the function was not approved under
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section 59.
(4)
The Authority may not impose a penalty 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 concerned under section 63B(1).
(5)
“The limitation period” means the period of four years beginning with
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the first day on which the Authority knew that the person concerned
had performed a controlled function without approval.
(6)
For this purpose the Authority is to be treated as knowing that a person
has performed a controlled function without approval if it has
information from which that can reasonably be inferred.
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(7)
Any expression which is used both in this section and section 59 has the
same meaning in this section as in that section.
63B
Procedure and right to refer to Tribunal
(1)
If the Authority proposes to impose a penalty on a person under section
63A, it must give the person a warning notice.
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(2)
A warning notice must state the amount of the penalty.
(3)
If the Authority decides to impose a penalty on a person under section
63A, it must give the person a decision notice.
(4)
A decision notice must state the amount of the penalty.
(5)
If the Authority decides to impose a penalty on a person under section
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63A, the person may refer the matter to the Tribunal.

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63C
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 63A; and
(b)
the amount of penalties under that section.
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(2)
The Authority’s policy in determining what the amount of a penalty
should be must include having regard to—
(a)
the conduct of the person on whom the penalty is to be
imposed;
(b)
the length of the period during which the person performed a
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controlled function without approval; and
(c)
whether the person on whom the penalty is to be imposed is an
individual.
(3)
The Authority may at any time alter or replace a statement issued
under this section.
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(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
statement which it publishes under this section.
(6)
A statement issued under this section must be published by the
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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
a copy of the statement.
(8)
In exercising, or deciding whether to exercise, its power under section
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63A in the case of any particular person, the Authority must have
regard to any statement of policy published under this section and in
force at a time when the person concerned performed a controlled
function without approval.
63D
Statement of policy: procedure
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(1)
Before issuing a statement under section 63C, 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
proposal may be made to the Authority within a specified time.
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(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—
(a)
the representations made to it in accordance with subsection (2);
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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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Approved persons guilty of misconduct
(1)
Section 66 of the Financial Services and Markets Act 2000 (performance of
regulated activities: disciplinary powers) is amended as follows.
(2)
In subsection (3)—
(a)
in the opening words, for “it may—” substitute “it may do one or more
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of the following—”, and
(b)
after paragraph (a) (but before the “or” at the end of it) insert—
“(aa)
suspend, for such period as it considers appropriate,
any approval of the performance by him of any function
to which the approval relates;
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(ab)
impose, for such period as it considers appropriate, such
limitations or other restrictions in relation to the
performance by him of any function to which any
approval relates as it considers appropriate;”.
(3)
After that subsection insert—
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“(3A)
The period for which a suspension or restriction is to have effect may
not exceed two years.
(3B)
A suspension or restriction may have effect in relation to part of a
function.
(3C)
A restriction may, in particular, be imposed so as to require any person
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to take, or refrain from taking, specified action.
(3D)
The Authority may—
(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.”
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(4)
In subsection (4), for “two years” substitute “four years”.
Collective proceedings
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Collective proceedings orders
(1)
The court may, on the application of a person (“the representative”), by order
authorise the representative to bring collective proceedings before the court in
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respect of financial services claims of a kind specified in the order.
(2)
“Collective proceedings” means proceedings brought by the representative on
behalf of persons who are entitled to bring (or have brought) proceedings in
respect of the specified kind of claim.
(3)
“Collective proceedings order” means an order under subsection (1).
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(4)
A collective proceedings order may be made only if it appears to the court that
the specified kind of claims raise the same, similar or related issues of fact or
law.
(5)
A person may be authorised under subsection (1) to bring proceedings even if
the person would not otherwise be regarded as having any interest, or any
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sufficient interest, in the proceedings.
(6)
Proceedings may be authorised under subsection (1) even if each represented
person does not have a claim of the specified kind against all of the defendants
to the proceedings.
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Collective proceedings: “opt-in” and “opt-out” bases
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(1)
This section applies where a collective proceedings order has been made.
(2)
The court must direct that the collective proceedings are to be brought either
on an “opt-in” basis or on an “opt-out” basis.
(3)
If the court directs that the proceedings are to be brought on an “opt-out” basis,
it may at any time direct that any issue in the proceedings is to be determined
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on an “opt-in” basis.
(4)
Any direction may be varied or revoked by a further direction.
(5)
Collective proceedings are brought on an “opt-in” basis if they are brought on
behalf of each person who—
(a)
has a claim of the specified kind, and
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(b)
notifies the representative, in a way and by a time specified by the
court, that the claim should be included in the collective proceedings.
(6)
Collective proceedings are brought on an “opt-out” basis if they are brought on
behalf of each person who has a claim of the specified kind except—
(a)
any person who notifies the representative, in a way and by a time
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specified by the court, that the claim should not be included in the
collective proceedings, and
(b)
any person who—
(i)
is not domiciled in the United Kingdom at a time specified by
the court, and
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(ii)
does not, in a way and by a time so specified, notify the
representative that the claim should be included in the
collective proceedings.
(7)
Subsection (5) applies (with appropriate modifications) for the purposes of
interpreting the reference in subsection (3) to the determination of an issue on
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an “opt-in” basis.
(8)
Sections 41, 42, 45 and 46 of the Civil Jurisdiction and Judgments Act 1982
apply for the purpose of determining whether a person is regarded as
“domiciled in the United Kingdom” for the purposes of subsection (6)(b)
above.
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Judgments and orders: effect on represented persons
(1)
When giving a judgment or making an order in collective proceedings, the
court must either—

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(a)
direct that all represented persons, or specified represented persons,
are bound by the judgment or order, or
(b)
direct that the judgment or order does not bind represented persons.
(2)
“Specified” means specified in the direction.
(3)
Any represented person, or description of represented persons, may be
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specified.
(4)
Nothing in this section limits any power of the court to direct that any other
person is bound by a judgment or order.
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Meaning of “financial services claim”
(1)
“Financial services claim” means any cause of action that—
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(a)
is against a person who (at the time it arises) is of a description in the
first column of the following table, and
(b)
is of a description set out in the corresponding entry in the second
column of the table;

but this is subject to subsection (2).
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Description of person
Description of cause of action

Authorised person
Relates to—

(a)
a service provided, or to be

provided, in connection with

the carrying on of a

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regulated activity, or

(b)
a dealing with the

authorised person in the

course of the authorised

person’s carrying on of a

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regulated activity

Authorised person who is an
Relates to a relevant ancillary

investment firm or credit institution
service

Person acting as an appointed
Relates to a service provided, or to

representative
be provided, by the person when so

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acting

Payment service provider
Relates to a payment service

A person carrying on a business of a
Relates to the business

kind mentioned in section 226A(3)

of FSMA 2000 (consumer credit

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matters)


In the table, references to a regulated activity include an activity that was not a
regulated activity when the cause of action arose but is a regulated activity
when the collective proceedings order is made.
(2)
The Treasury may by order provide that “financial services claim” does not
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include any cause of action of a description specified in the order.

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(3)
In this section—
“appointed representative”, “authorised person”, “investment firm” and
“regulated activity” have the same meanings as in FSMA 2000,
“credit institution” and “relevant ancillary service” have the same
meanings as in section 138 of FSMA 2000, and
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“payment service” and “payment service provider” have the meanings
given by regulation 2(1) of the Payment Services Regulations 2009.
(4)
References to causes of action include ones arising before the commencement
of this section.
(5)
The Treasury may by order amend this section so as to include within the
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meaning of “financial services claim” any cause of action relating to—
(a)
the provision of any financial service, or
(b)
any activity ancillary to the provision of a financial service.
(6)
An order under subsection (2) is subject to negative resolution procedure.
(7)
An order under subsection (5) is subject to affirmative resolution procedure.
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Regulations about collective proceedings
(1)
The Treasury may make regulations about collective proceedings.
(2)
The regulations may in particular—
(a)
provide that the Financial Services Authority, the Office of Fair Trading
and the Ombudsman scheme operator are entitled to be heard on an
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application for a collective proceedings order,
(b)
require the court to have regard to prescribed matters when
considering whether to make such an order,
(c)
provide that the court may make such an order only in prescribed
circumstances or only if it considers that prescribed criteria are met,
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(d)
provide that any collective proceedings do not include, or include only
in prescribed circumstances, any claim (or any claim of a prescribed
description) of or against a person of a prescribed description or a
prescribed person,
(e)
modify the effect of any limitation provision,
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(f)
make provision about damages, and
(g)
require a person of a prescribed description to give notice of a
prescribed matter to a prescribed person or a person of a prescribed
description.
(3)
Regulations made by virtue of subsection (2)(e)—
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(a)
may provide that in prescribed cases no account is to be taken, for the
purposes of any limitation provision, of any prescribed period,
(b)
may enable the court to direct that, for the purposes of any limitation
provision, no account is to be taken of any period specified by the court,
and
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(c)
may make provision, in relation to proceedings other than collective
proceedings as well as collective proceedings, relieving a person from
the consequences of a mistake (including a mistake that collective
proceedings had been brought or were being continued in respect of a
cause of action).
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The provision that may be made includes provision about periods before the
commencement of collective proceedings.
(4)
The regulations 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
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(b)
if there is no such direction, in a way that is appropriate for bringing it
to the attention of those persons.
(5)
In this section and section 23 “prescribed” means prescribed by regulations
under subsection (1).
(6)
Regulations under subsection (1) are subject to negative resolution procedure.
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Regulations under section 22(1): damages
(1)
This section makes provision about regulations under section 22(1) made by
virtue of section 22(2)(f) (damages).
(2)
The regulations may enable the court to make an award of damages without
undertaking an assessment of the amount of damages recoverable in respect of
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each claim comprised in the proceedings.
(3)
The regulations may in particular enable the court, having regard to the
amount of damages likely to be awarded in respect of different kinds of claim
comprised in the collective proceedings—
(a)
to make a single award of damages in respect of all those claims, based
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on its estimate of the total damages likely to be awarded if it were to
make a separate award of damages in respect of each claim, or
(b)
to direct that damages in respect of all those claims are to be calculated
in accordance with a formula specified by the court or in such other
way as is so specified.
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(4)
The regulations must—
(a)
provide that damages are to be paid to the representative or to such
other person as the court may direct, and
(b)
make provision about the way in which the representative or other
person is to hold and deal with any payment of damages.
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(5)
The provision that may be made by virtue of subsection (4)(b) includes—
(a)
provision enabling the court to give directions about the making of
payments to represented persons, including directions as to—
(i)
the circumstances in which payments are to be made, and
(ii)
the amount of any payment or the way in which that amount is
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to be calculated, and
(b)
provision about the purposes for which any money not paid to
represented persons is to be applied (which may include charitable or
other purposes).
(6)
The circumstances referred to in subsection (5)(a)(i) may include any matter
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being established to the satisfaction of the court or a person.
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Rules of court about collective proceedings
(1)
Rules of court may make provision about collective proceedings.