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F1Part IU.K. The Regulator

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Textual Amendments

F1Pt. 1A substituted for Pt. 1 (24.1.2013 for specified purposes, 19.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), ss. 6(1), 122(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(b)(c)(2), Sch. Pts. 2, 3, 4; S.I. 2013/423, art. 3, Sch.

[F1PART 1AU.K.The Regulators

CHAPTER 1U.K.The Financial Conduct Authority

The Financial Conduct AuthorityU.K.

1AThe Financial Conduct AuthorityU.K.

(1)The body corporate previously known as the Financial Services Authority is renamed as the Financial Conduct Authority.

(2)The Financial Conduct Authority is in this Act referred to as “the FCA”.

(3)The FCA is to have the functions conferred on it by or under this Act.

(4)The FCA must comply with the requirements as to its constitution set out in Schedule 1ZA.

(5)Schedule 1ZA also makes provision about the status of the FCA and the exercise of certain of its functions.

(6)References in this Act or any other enactment to functions conferred on the FCA by or under this Act include references to functions conferred on the FCA by or under—

(a)the Insolvency Act 1986,

(b)the Banking Act 2009,

(c)the Financial Services Act 2012, or

(d)a qualifying EU provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order.

The FCA's general dutiesU.K.

1BThe FCA's general dutiesU.K.

(1)In discharging its general functions the FCA must, so far as is reasonably possible, act in a way which—

(a)is compatible with its strategic objective, and

(b)advances one or more of its operational objectives.

(2)The FCA's strategic objective is: ensuring that the relevant markets (see section 1F) function well.

(3)The FCA's operational objectives are—

(a)the consumer protection objective (see section 1C);

(b)the integrity objective (see section 1D);

(c)the competition objective (see section 1E).

(4)The FCA must, so far as is compatible with acting in a way which advances the consumer protection objective or the integrity objective, discharge its general functions in a way which promotes effective competition in the interests of consumers.

(5)In discharging its general functions the FCA must have regard to—

(a)the regulatory principles in section 3B, and

(b)the importance of taking action intended to minimise the extent to which it is possible for a business carried on—

(i)by an authorised person or a recognised investment exchange, or

(ii)in contravention of the general prohibition,

to be used for a purpose connected with financial crime.

(6)For the purposes of this Chapter, the FCA's general functions are—

(a)its function of making rules under this Act (considered as a whole),

(b)its function of preparing and issuing codes under this Act (considered as a whole),

(c)its functions in relation to the giving of general guidance under this Act (considered as a whole), and

(d)its function of determining the general policy and principles by reference to which it performs particular functions under this Act.

(7)Except to the extent that an order under section 50 of the Financial Services Act 2012 (orders relating to mutual societies functions) so provides, the FCA's general functions do not include functions that are transferred functions within the meaning of section 52 of that Act.

(8)General guidance” has the meaning given in section 139B(5).

1CThe consumer protection objectiveU.K.

(1)The consumer protection objective is: securing an appropriate degree of protection for consumers.

(2)In considering what degree of protection for consumers may be appropriate, the FCA must have regard to—

(a)the differing degrees of risk involved in different kinds of investment or other transaction;

(b)the differing degrees of experience and expertise that different consumers may have;

(c)the needs that consumers may have for the timely provision of information and advice that is accurate and fit for purpose;

(d)the general principle that consumers should take responsibility for their decisions;

(e)the general principle that those providing regulated financial services should be expected to provide consumers with a level of care that is appropriate having regard to the degree of risk involved in relation to the investment or other transaction and the capabilities of the consumers in question;

(f)the differing expectations that consumers may have in relation to different kinds of investment or other transaction;

(g)any information which the consumer financial education body has provided to the FCA in the exercise of the consumer financial education function;

(h)any information which the scheme operator of the ombudsman scheme has provided to the FCA pursuant to section 232A.

1DThe integrity objectiveU.K.

(1)The integrity objective is: protecting and enhancing the integrity of the UK financial system.

(2)The “integrity” of the UK financial system includes—

(a)its soundness, stability and resilience,

(b)its not being used for a purpose connected with financial crime,

(c)its not being affected by behaviour that amounts to market abuse,

(d)the orderly operation of the financial markets, and

(e)the transparency of the price formation process in those markets.

1EThe competition objectiveU.K.

(1)The competition objective is: promoting effective competition in the interests of consumers in the markets for—

(a)regulated financial services, or

(b)services provided by a recognised investment exchange in carrying on regulated activities in respect of which it is by virtue of section 285(2) exempt from the general prohibition.

(2)The matters to which the FCA may have regard in considering the effectiveness of competition in the market for any services mentioned in subsection (1) include—

(a)the needs of different consumers who use or may use those services, including their need for information that enables them to make informed choices,

(b)the ease with which consumers who may wish to use those services, including consumers in areas affected by social or economic deprivation, can access them,

(c)the ease with which consumers who obtain those services can change the person from whom they obtain them,

(d)the ease with which new entrants can enter the market, and

(e)how far competition is encouraging innovation.

Interpretation of terms used in relation to FCA's general dutiesU.K.

1FMeaning of “relevant markets” in strategic objectiveU.K.

In section 1B(2) “the relevant markets” means—

(a)the financial markets,

(b)the markets for regulated financial services (see section 1H(2)), and

(c)the markets for services that are provided by persons other than authorised persons in carrying on regulated activities but are provided without contravening the general prohibition.

1GMeaning of “consumer”U.K.

(1)In sections 1B to 1E “consumers” means persons who—

(a)use, have used or may use—

(i)regulated financial services, or

(ii)services that are provided by persons other than authorised persons but are provided in carrying on regulated activities,

(b)have relevant rights or interests in relation to any of those services,

(c)have invested, or may invest, in financial instruments, or

(d)have relevant rights or interests in relation to financial instruments.

(2)A person (“P”) has a “relevant right or interest” in relation to any services within subsection (1)(a) if P has a right or interest—

(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.

(3)If a person is providing a service within subsection (1)(a) as trustee, the persons who are, have been or may be beneficiaries of the trust are to be treated as persons who use, have used or may use the service.

(4)A person who deals with another person (“B”) in the course of B providing a service within subsection (1)(a) is to be treated as using the service.

(5)A person (“P”) has a “relevant right or interest” in relation to any financial instrument if P has—

(a)a right or interest which is derived from, or is otherwise attributable to, investment in the instrument by others, or

(b)a right or interest which may be adversely affected by the investment in the instrument by persons acting on P's behalf or in a fiduciary capacity in relation to P.

1HFurther interpretative provisions for sections 1B to 1GU.K.

(1)The following provisions have effect for the interpretation of sections 1B to 1G.

(2)Regulated financial services” means services provided—

(a)by authorised persons in carrying on regulated activities;

(b)by authorised persons in carrying on a consumer credit business in connection with the accepting of deposits;

(c)by authorised persons in communicating, or approving the communication by others of, invitations to engage in investment activity;

(d)by authorised persons who are investment firms, or credit institutions, in providing relevant ancillary services;

(e)by persons acting as appointed representatives;

(f)by payment service providers in providing payment services;

(g)by electronic money issuers in issuing electronic money;

(h)by sponsors to issuers of securities;

(i)by primary information providers to persons who issue financial instruments.

(3)Financial crime” includes any offence involving—

(a)fraud or dishonesty,

(b)misconduct in, or misuse of information relating to, a financial market,

(c)handling the proceeds of crime, or

(d)the financing of terrorism.

(4)Offence” includes an act or omission which would be an offence if it had taken place in the United Kingdom.

(5)“Issuer”, except in the expression “electronic money issuer”, has the meaning given in section 102A(6).

(6)Financial instrument” has the meaning given in section 102A(4).

(7)Securities” has the meaning given in section 102A(2).

(8)In this section—

1IMeaning of “the UK financial system”U.K.

In this Act “the UK financial system” means the financial system operating in the United Kingdom and includes—

(a)financial markets and exchanges,

(b)regulated activities, and

(c)other activities connected with financial markets and exchanges.

Power to amend objectivesU.K.

1JPower to amend objectivesU.K.

The Treasury may by order amend any of the following provisions—

(a)in section 1E(1), paragraphs (a) and (b),

(b)section 1G, and

(c)section 1H(2) and (5) to (8).

Guidance about objectivesU.K.

1KGuidance about objectivesU.K.

(1)The general guidance given by the FCA under section 139A must include guidance about how it intends to advance its operational objectives in discharging its general functions in relation to different categories of authorised person or regulated activity.

(2)Before giving or altering any guidance complying with subsection (1), the FCA must consult the PRA.

Supervision, monitoring and enforcementU.K.

1LSupervision, monitoring and enforcementU.K.

(1)The FCA must maintain arrangements for supervising authorised persons.

(2)The FCA must maintain arrangements designed to enable it to determine whether persons other than authorised persons are complying—

(a)with requirements imposed on them by or under this Act, in cases where the FCA is the appropriate regulator for the purposes of Part 14 (disciplinary measures), or

(b)with requirements imposed on them by any qualifying EU provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order.

(3)The FCA must also maintain arrangements for enforcing compliance by persons other than authorised persons with relevant requirements, within the meaning of Part 14, in cases where the FCA is the appropriate regulator for the purposes of any provision of that Part.

Modifications etc. (not altering text)

Arrangements for consulting practitioners and consumersU.K.

1MThe FCA's general duty to consultU.K.

The FCA must make and maintain effective arrangements for consulting practitioners and consumers on the extent to which its general policies and practices are consistent with its general duties under section 1B.

1NThe FCA Practitioner PanelU.K.

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the FCA Practitioner Panel”) to represent the interests of practitioners.

(2)The FCA must appoint one of the members of the FCA Practitioner Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The FCA must appoint to the FCA Practitioner Panel such—

(a)persons representing authorised persons, and

(b)persons representing recognised investment exchanges,

as it considers appropriate.

(5)The FCA may appoint to the FCA Practitioner Panel such other persons as it considers appropriate.

1OThe Smaller Business Practitioner PanelU.K.

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Smaller Business Practitioner Panel”) to represent the interests of eligible practitioners.

(2)Eligible practitioners” means authorised persons of a description specified in a statement maintained by the FCA.

(3)The FCA must appoint one of the members of the Smaller Business Practitioner Panel to be its chair.

(4)The Treasury's approval is required for the appointment or dismissal of the chair.

(5)The FCA must appoint to the Smaller Business Practitioner Panel such—

(a)individuals who are eligible practitioners, and

(b)persons representing eligible practitioners,

as it considers appropriate.

(6)The FCA may appoint to the Smaller Business Practitioner Panel such other persons as it considers appropriate.

(7)In making the appointments, the FCA must have regard to the desirability of ensuring the representation of eligible practitioners carrying on a range of regulated activities.

(8)The FCA may revise the statement maintained under subsection (2).

(9)The FCA must—

(a)give the Treasury a copy of the statement or revised statement without delay, and

(b)publish the statement as for the time being in force in such manner as it thinks fit.

1PThe Markets Practitioner PanelU.K.

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Markets Practitioner Panel”) to represent the interests of practitioners who are likely to be affected by the exercise by the FCA of its functions relating to markets, including its functions under Parts 6, 8A and 18.

(2)The FCA must appoint one of the members of the Markets Practitioner Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The FCA must appoint to the Markets Practitioner Panel such persons to represent the interests of persons within subsection (5) as it considers appropriate.

(5)The persons within this subsection are—

(a)authorised persons,

(b)persons who issue financial instruments,

(c)sponsors, as defined in section 88(2),

(d)recognised investment exchanges, and

(e)primary information providers, as defined in section 89P(2).

(6)The FCA may appoint to the Markets Practitioner Panel such other persons as it considers appropriate.

1QThe Consumer PanelU.K.

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Consumer Panel”) to represent the interests of consumers.

(2)The FCA must appoint one of the members of the Consumer Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The FCA may appoint to the Consumer Panel such consumers, or persons representing the interests of consumers, as it considers appropriate.

(5)The FCA must secure that membership of the Consumer Panel is such as to give a fair degree of representation to those who are using, or are or may be contemplating using, services otherwise than in connection with businesses carried on by them.

(6)Sections 425A and 425B (meaning of “consumers”) apply for the purposes of this section, but the references to consumers in this section do not include consumers who are authorised persons.

1RDuty to consider representations made by the PanelsU.K.

(1)The FCA must consider representations that are made to it in accordance with arrangements made under section 1M.

(2)The FCA must from time to time publish in such manner as it thinks fit responses to the representations.

ReviewsU.K.

1SReviewsU.K.

(1)The Treasury may appoint an independent person to conduct a review of the economy, efficiency and effectiveness with which the FCA has used its resources in discharging its functions.

(2)A review may be limited by the Treasury to such functions of the FCA (however described) as the Treasury may specify in appointing the person to conduct it.

(3)A review is not to be concerned with the merits of the FCA's general policy or principles in complying with its general duties under section 1B(1) and (4).

(4)On completion of a review, the person conducting it must make a written report to the Treasury—

(a)setting out the result of the review, and

(b)making such recommendations (if any) as the person considers appropriate.

(5)A copy of the report must be—

(a)laid before Parliament, and

(b)published in such manner as the Treasury consider appropriate.

(6)Any expenses reasonably incurred in the conduct of the review are to be met by the Treasury out of money provided by Parliament.

(7)Independent” means appearing to the Treasury to be independent of the FCA.

1TRight to obtain documents and informationU.K.

(1)A person conducting a review under section 1S—

(a)has a right of access at any reasonable time to all such documents as the person may reasonably require for the purposes of the review, and

(b)may require any person holding or accountable for any such document to provide such information and explanation as are reasonably necessary for that purpose.

(2)Subsection (1) applies only to documents in the custody of or under the control of the FCA.

(3)An obligation imposed on a person as a result of the exercise of the powers conferred by subsection (1) is enforceable by injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.

CHAPTER 2U.K.The Prudential Regulation Authority

The Prudential Regulation AuthorityU.K.

2AThe Prudential Regulation AuthorityU.K.

(1)The body corporate originally incorporated as the Prudential Regulation Authority Limited is renamed as the Prudential Regulation Authority.

(2)The Prudential Regulation Authority is in this Act referred to as “the PRA”.

(3)The PRA is to have the functions conferred on it by or under this Act.

(4)The PRA must comply with the requirements as to its constitution set out in Schedule 1ZB.

(5)Schedule 1ZB also confers on the Bank of England functions in relation to the PRA and makes provision about the status of the PRA and the exercise of certain of its functions.

(6)References in this Act or any other enactment to functions conferred on the PRA by or under this Act include references to functions conferred on the PRA by or under—

(a)the Insolvency Act 1986,

(b)the Banking Act 2009,

(c)the Financial Services Act 2012, or

(d)a qualifying EU provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order.

The PRA's general dutiesU.K.

2BThe PRA's general objectiveU.K.

(1)In discharging its general functions the PRA must, so far as is reasonably possible, act in a way which advances its general objective.

(2)The PRA's general objective is: promoting the safety and soundness of PRA-authorised persons.

(3)That objective is to be advanced primarily by—

(a)seeking to ensure that the business of PRA-authorised persons is carried on in a way which avoids any adverse effect on the stability of the UK financial system, and

(b)seeking to minimise the adverse effect that the failure of a PRA-authorised person could be expected to have on the stability of the UK financial system.

(4)The adverse effects mentioned in subsection (3) may, in particular, result from the disruption of the continuity of financial services.

(5)In this Act “PRA-authorised person” means an authorised person who has permission—

(a)given under Part 4A, or

(b)resulting from any other provision of this Act,

to carry on regulated activities that consist of or include one or more PRA-regulated activities (see section 22A).

(6)Subsection (1) is subject to sections 2C and 2D.

2CInsurance objectiveU.K.

(1)In discharging its general functions so far as relating to a PRA-regulated activity relating to the effecting or carrying out of contracts of insurance or PRA-authorised persons carrying on that activity, the PRA must, so far as is reasonably possible, act in a way—

(a)which is compatible with its general objective and its insurance objective, and

(b)which the PRA considers most appropriate for the purpose of advancing those objectives.

(2)The PRA's insurance objective is: contributing to the securing of an appropriate degree of protection for those who are or may become policyholders.

(3)This section applies only if the effecting or carrying out of contracts of insurance as principal is to any extent a PRA-regulated activity.

2DPower to provide for additional objectivesU.K.

(1)Subsection (2) applies to an order under section 22A which—

(a)is made at any time after the coming into force of the first order under that section, and

(b)contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order is that an activity would become a PRA-regulated activity.

(2)An order to which this subsection applies may specify an additional objective (“the specified objective”) in relation to specified activities that become PRA-regulated activities by virtue of the order (“the additional activities”).

(3)In discharging its general functions so far as relating to the additional activities or PRA-authorised persons carrying on those activities, the PRA must, so far as is reasonably possible, act in a way—

(a)which is compatible with its general objective and the specified objective, and

(b)which the PRA considers most appropriate for the purpose of advancing those objectives.

2EStrategyU.K.

(1)The PRA must—

(a)determine its strategy in relation to its objectives, and

(b)from time to time review, and if necessary revise, the strategy.

(2)Before determining or revising its strategy, the PRA must consult the court of directors of the Bank of England about a draft of the strategy or of the revisions.

(3)The PRA must determine its strategy within 12 months of the coming into force of this section.

(4)The PRA must carry out and complete a review of its strategy before the end of each relevant period.

(5)The relevant period is 12 months beginning with the date on which the previous review was completed, except that in the case of the first review the relevant period is the period of 12 months beginning with the date on which the strategy was determined under subsection (3).

(6)The PRA must publish its strategy.

(7)If the strategy is revised the PRA must publish the revised strategy.

(8)Publication under subsection (6) or (7) is to be in such manner as the PRA thinks fit.

2FInterpretation of references to objectivesU.K.

In this Act, a reference, in relation to any function of the PRA, to the objectives of the PRA is a reference to its general objective but—

(a)so far as the function is exercisable in relation to the activity of effecting or carrying out contracts of insurance, or PRA-authorised persons carrying on that activity, is a reference to its general objective and its insurance objective;

(b)so far as the function is exercisable in relation to an activity to which an objective specified by order by virtue of section 2D(2) relates, or PRA-authorised persons carrying on that activity, is a reference to its general objective and the objective specified by the order.

2GLimit on effect of sections 2B to 2DU.K.

Nothing in sections 2B to 2D is to be regarded as requiring the PRA to ensure that no PRA-authorised person fails.

2HDuty to have regard to regulatory principlesU.K.

(1)In discharging its general functions, the PRA must also have regard to—

(a)the regulatory principles in section 3B, and

(b)the need to minimise any adverse effect on competition in the relevant markets that may result from the manner in which the PRA discharges those functions.

(2)In subsection (1)(b) “the relevant markets” means the markets for services provided by PRA-authorised persons in carrying on regulated activities.

2IGuidance about objectivesU.K.

(1)The PRA must give, and from time to time review, guidance about how it intends to advance its objectives in discharging its general functions in relation to different categories of PRA-authorised person or PRA-regulated activity.

(2)Before giving or altering any guidance complying with subsection (1), the PRA must consult the FCA.

(3)The PRA must publish the guidance as for the time being in force.

2JInterpretation of Chapter 2U.K.

(1)For the purposes of this Chapter, the PRA's general functions are—

(a)its function of making rules under this Act (considered as a whole),

(b)its function of preparing and issuing codes under this Act (considered as a whole), and

(c)its function of determining the general policy and principles by reference to which it performs particular functions under this Act.

(2)Except to the extent that an order under section 50 of the Financial Services Act 2012 (orders relating to mutual societies functions) so provides, the PRA's general functions do not include functions that are transferred functions within the meaning of section 52 of that Act.

(3)For the purposes of this Chapter, the cases in which a PRA-authorised person (“P”) is to be regarded as failing include those where—

(a)P enters insolvency,

(b)any of the stabilisation options in Part 1 of the Banking Act 2009 is achieved in relation to P, or

(c)P falls to be taken for the purposes of the compensation scheme to be unable, or likely to be unable, to satisfy claims against P.

(4)In subsection (3)(a) “insolvency” includes—

(a)bankruptcy,

(b)liquidation,

(c)bank insolvency,

(d)administration,

(e)bank administration,

(f)receivership,

(g)a composition between P and P's creditors, and

(h)a scheme of arrangement of P's affairs.

SupervisionU.K.

2KArrangements for supervision of PRA-authorised personsU.K.

The PRA must maintain arrangements for supervising PRA-authorised persons.

Arrangements for consulting practitionersU.K.

2LThe PRA's general duty to consultU.K.

The PRA must make and maintain effective arrangements for consulting PRA-authorised persons or, where appropriate, persons appearing to the PRA to represent the interests of such persons on the extent to which its general policies and practices are consistent with its general duties under sections 2B to 2H.

2MThe PRA Practitioner PanelU.K.

(1)Arrangements under section 2L must include the establishment and maintenance of a panel of persons (to be known as “the PRA Practitioner Panel”) to represent the interests of practitioners.

(2)The PRA must appoint one of the members of the PRA Practitioner Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The PRA must appoint to the PRA Practitioner Panel such persons representing PRA-authorised persons as it considers appropriate.

(5)The PRA may appoint to the PRA Practitioner Panel such other persons as it considers appropriate.

2NDuty to consider representationsU.K.

(1)The PRA must consider representations that are made to it in accordance with arrangements made under section 2L.

(2)The PRA must from time to time publish in such manner as it thinks fit responses to the representations.

ReviewsU.K.

2OReviewsU.K.

(1)The Treasury may appoint an independent person to conduct a review of the economy, efficiency and effectiveness with which the PRA has used its resources in discharging its functions.

(2)A review may be limited by the Treasury to such functions of the PRA (however described) as the Treasury may specify in appointing the person to conduct it.

(3)A review is not to be concerned with the merits of the PRA's general policy or principles in pursuing the PRA's objectives.

(4)On completion of a review, the person conducting it must make a written report to the Treasury—

(a)setting out the result of the review, and

(b)making such recommendations (if any) as the person considers appropriate.

(5)A copy of the report must be—

(a)laid before Parliament, and

(b)published in such manner as the Treasury consider appropriate.

(6)Any expenses reasonably incurred in the conduct of the review are to be met by the Treasury out of money provided by Parliament.

(7)Independent” means appearing to the Treasury to be independent of the PRA.

2PRight to obtain documents and informationU.K.

(1)A person conducting a review under section 2O—

(a)has a right of access at any reasonable time to all such documents as the person may reasonably require for the purposes of the review, and

(b)may require any person holding or accountable for any such document to provide such information and explanation as are reasonably necessary for that purpose.

(2)Subsection (1) applies only to documents in the custody of or under the control of the PRA.

(3)An obligation imposed on a person as a result of the exercise of the powers conferred by subsection (1) is enforceable by injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.

CHAPTER 3U.K.Further provisions relating to FCA and PRA

IntroductoryU.K.

3AMeaning of “regulator”U.K.

(1)This section has effect for the interpretation of this Act.

(2)The FCA and the PRA are the “regulators”, and references to a regulator are to be read accordingly.

(3)Subsection (2) does not affect—

(a)the meaning of the following expressions—

(b)the meaning of “the appropriate regulator” in Part 18 (recognised investment exchanges and clearing houses).

Regulatory principlesU.K.

3BRegulatory principles to be applied by both regulatorsU.K.

(1)In relation to the regulators, the regulatory principles referred to in section 1B(5)(a) and 2H(1)(a) are as follows—

(a)the need to use the resources of each regulator in the most efficient and economic way;

(b)the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;

(c)the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term;

(d)the general principle that consumers should take responsibility for their decisions;

(e)the responsibilities of the senior management of persons subject to requirements imposed by or under this Act, including those affecting consumers, in relation to compliance with those requirements;

(f)the desirability where appropriate of each regulator exercising its functions in a way that recognises differences in the nature of, and objectives of, businesses carried on by different persons subject to requirements imposed by or under this Act;

(g)the desirability in appropriate cases of each regulator publishing information relating to persons on whom requirements are imposed by or under this Act, or requiring such persons to publish information, as a means of contributing to the advancement by each regulator of its objectives;

(h)the principle that the regulators should exercise their functions as transparently as possible.

(2)Consumer” has the meaning given in section 1G.

(3)Objectives”, in relation to the FCA, means operational objectives.

(4)The Treasury may by order amend subsection (2).

Corporate governanceU.K.

3CDuty to follow principles of good governanceU.K.

In managing its affairs, each regulator must have regard to such generally accepted principles of good corporate governance as it is reasonable to regard as applicable to it.

Relationship between FCA and PRAU.K.

3DDuty of FCA and PRA to ensure co-ordinated exercise of functionsU.K.

(1)The regulators must co-ordinate the exercise of their respective functions conferred by or under this Act with a view to ensuring—

(a)that each regulator consults the other regulator (where not otherwise required to do so) in connection with any proposed exercise of a function in a way that may have a material adverse effect on the advancement by the other regulator of any of its objectives;

(b)that where appropriate each regulator obtains information and advice from the other regulator in connection with the exercise of its functions in relation to matters of common regulatory interest in cases where the other regulator may be expected to have relevant information or relevant expertise;

(c)that where either regulator exercises functions in relation to matters of common regulatory interest, both regulators comply with their respective duties under section 1B(5)(a) or 2H(1)(a), so far as relating to the regulatory principles in section 3B(1)(a) and (b).

(2)The duty in subsection (1) applies only to the extent that compliance with the duty—

(a)is compatible with the advancement by each regulator of any of its objectives, and

(b)does not impose a burden on the regulators that is disproportionate to the benefits of compliance.

(3)A function conferred on either regulator by or under this Act relates to matters of common regulatory interest if—

(a)the other regulator exercises similar or related functions in relation to the same persons,

(b)the other regulator exercises functions which relate to different persons but relate to similar subject-matter, or

(c)its exercise could affect the advancement by the other regulator of any of its objectives.

(4)Objectives”, in relation to the FCA, means operational objectives.

3EMemorandum of understandingU.K.

(1)The regulators must prepare and maintain a memorandum which describes in general terms—

(a)the role of each regulator in relation to the exercise of functions conferred by or under this Act which relate to matters of common regulatory interest, and

(b)how the regulators intend to comply with section 3D in relation to the exercise of such functions.

(2)The memorandum may in particular contain provisions about how the regulators intend to comply with section 3D in relation to—

(a)applications for Part 4A permission;

(b)the variation of permission;

(c)the imposition of requirements;

(d)the obtaining and disclosure of information;

(e)cases where a PRA-authorised person is a member of a group whose other members include one or more other authorised persons (whether or not PRA-authorised persons);

(f)functions under Schedule 3 (EEA passport rights) and Schedule 4 (Treaty rights);

(g)the making of rules;

(h)directions under section 138A (modification or waiver of rules);

(i)powers to appoint competent persons under Part 11 (information gathering and investigations) to conduct investigations on their behalf;

(j)functions under Part 12 (control over authorised persons);

(k)functions under Part 13 (incoming firms: intervention by regulator);

(l)functions under Part 19 (Lloyd's);

(m)functions under section 347 (record of authorised persons etc.);

(n)functions under Part 24 (insolvency);

(o)fees payable to either regulator.

(3)The memorandum must contain provision about the co-ordination by the regulators of—

(a)the exercise of their functions relating to membership of, and their relations with, the European Supervisory Authorities (namely, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority),

(b)their relations with regulatory bodies outside the United Kingdom, and

(c)the exercise of their functions in relation to the compensation scheme.

(4)The regulators must review the memorandum at least once in each calendar year.

(5)The regulators must give the Treasury a copy of the memorandum and any revised memorandum.

(6)The Treasury must lay before Parliament a copy of any document received by them under this section.

(7)The regulators must ensure that the memorandum as currently in force is published in the way appearing to them to be best calculated to bring it to the attention of the public.

(8)The memorandum need not relate to any aspect of compliance with section 3D if the regulators consider—

(a)that publication of information about that aspect would be against the public interest, or

(b)that that aspect is a technical or operational matter not affecting the public.

(9)The reference in subsection (1)(a) to matters of common regulatory interest is to be read in accordance with section 3D(3).

3FWith-profits insurance policiesU.K.

(1)The regulators must prepare and maintain a memorandum which describes in general terms—

(a)the role of each regulator in relation to the exercise of functions conferred by or under this Act so far as they relate to with-profits insurers, and

(b)how the regulators intend to comply with section 3D in relation to the exercise of those functions so far as they relate to the effecting or carrying out of with-profits policies by with-profits insurers.

(2)The memorandum required by this section may be combined with the memorandum required by section 3E.

(3)If the memorandum required by this section is contained in a separate document, the PRA and the FCA must publish the memorandum as currently in force in such manner as they think fit.

(4)Subsections (1) to (3) apply only if the effecting or carrying out of with-profits policies is a PRA-regulated activity.

(5)For the purposes of this section—

(a)a “with-profits policy” is a contract of insurance under which the policyholder is eligible to receive a financial benefit at the discretion of the insurer;

(b)a “with-profits insurer” is a PRA-authorised person who has a Part 4A permission, or permission resulting from any other provision of this Act, relating to the effecting or carrying out of with-profits policies (whether or not the permission also relates to contracts of insurance of other kinds).

(6)The Treasury may by order amend the definition of “with-profits policy” applying for the purposes of this section.

3GPower to establish boundary between FCA and PRA responsibilitiesU.K.

(1)The Treasury may by order specify matters that, in relation to the exercise by either regulator of its functions relating to PRA-authorised persons, are to be, or are to be primarily, the responsibility of one regulator rather than the other.

(2)The order may—

(a)provide that one regulator is or is not to have regard to specified matters when exercising specified functions;

(b)require one regulator to consult the other.

3HParliamentary control of orders under section 3GU.K.

(1)No order may be made under section 3G unless—

(a)a draft of the order has been laid before Parliament and approved by a resolution of each House, or

(b)subsection (3) applies.

(2)Subsection (3) applies if an order under section 3G contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without a draft being so laid and approved.

(3)Where this subsection applies the order—

(a)must be laid before Parliament after being made, and

(b)ceases to have effect at the end of the relevant period unless before the end of that period the order is approved by a resolution of each House of Parliament (but without that affecting anything done under the order or the power to make a new order).

(4)The “relevant period” is a period of 28 days beginning with the day on which the order is made.

(5)In calculating the relevant period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.

Power of PRA to restrain proposed action by FCAU.K.

3IPower of PRA to require FCA to refrain from specified actionU.K.

(1)Where the first, second and third conditions are met, the PRA may give a direction under this section to the FCA.

(2)The first condition is that the FCA is proposing—

(a)to exercise any of its regulatory powers in relation to PRA-authorised persons generally, a class of PRA-authorised persons or a particular PRA-authorised person, or

(b)to exercise any of its insolvency powers in relation to—

(i)a PRA-authorised person,

(ii)an appointed representative whose principal, or one of whose principals, is a PRA-authorised person, or

(iii)a person who is carrying on a PRA-regulated activity in contravention of the general prohibition.

(3)In subsection (2)—

(a)regulatory powers”, in relation to the FCA, means its powers in relation to the regulation of authorised persons, other than its powers in relation to consent for the purposes of section 55F or 55I or its powers under Part 24;

(b)insolvency powers”, in relation to the FCA, means its powers under Part 24.

(4)The second condition is that the PRA is of the opinion that the exercise of the power in the manner proposed may—

(a)threaten the stability of the UK financial system, or

(b)result in the failure of a PRA-authorised person in a way that would adversely affect the UK financial system.

(5)The third condition is that the PRA is of the opinion that the giving of the direction is necessary in order to avoid the possible consequence falling within subsection (4).

(6)A direction under this section is a direction requiring the FCA not to exercise the power or not to exercise it in a specified manner.

(7)The direction may be expressed to have effect during a specified period or until revoked.

(8)The FCA is not required to comply with a direction under this section if or to the extent that in the opinion of the FCA compliance would be incompatible with any EU obligation or any other international obligation of the United Kingdom.

(9)The reference in subsection (4)(b) to the “failure” of a PRA-authorised person is to be read in accordance with section 2J(3) and (4).

3JPower of PRA in relation to with-profits policiesU.K.

(1)Where the first, second and third conditions are met, the PRA may give a direction under this section to the FCA.

(2)The first condition is that the FCA is proposing to exercise any of its regulatory powers in relation to with-profits insurers, a class of with-profits insurers or a particular with-profits insurer.

(3)In subsection (2) “regulatory powers”, in relation to the FCA, means its powers in relation to the regulation of authorised persons, including its powers under Part 24 (insolvency) but not its powers in relation to consent for the purposes of section 55F or 55I.

(4)The second condition is that the proposed exercise of the power relates to the provision of financial benefits under with-profits policies at the discretion of the insurer, or affects or may affect the amount, timing or distribution of financial benefits that are so provided or the entitlement to future benefits that are so provided.

(5)The third condition is that the PRA is of the opinion that the giving of the direction is desirable in order to advance the PRA's general objective or its insurance objective.

(6)A direction under this section is a direction requiring the FCA not to exercise the power or not to exercise it in a specified manner.

(7)The direction may be expressed to have effect during a specified period or until revoked.

(8)The FCA is not required to comply with a direction under this section if or to the extent that in the opinion of the FCA compliance would be incompatible with any EU obligation or any other international obligation of the United Kingdom.

(9)Subsections (1) to (8) apply only if the effecting or carrying out of with-profits policies is a PRA-regulated activity.

(10)In this section “with-profits insurer” and “with-profits policy” have the same meaning as they have for the purposes of section 3F.

3KRevocation of directions under section 3I or 3JU.K.

(1)The PRA may at any time by notice to the FCA revoke a direction under section 3I or 3J.

(2)The revocation of a direction under section 3I or 3J does not affect the validity of anything previously done in accordance with it.

3LFurther provisions about directions under section 3I or 3JU.K.

(1)Before giving a direction under section 3I or 3J, the PRA must consult the FCA.

(2)A direction under section 3I or 3J must be given or confirmed in writing, and must be accompanied by a statement of the reasons for giving it.

(3)A notice revoking a direction under section 3I or 3J must be given or confirmed in writing.

(4)The PRA must—

(a)publish the direction and statement, or the notice, in such manner as it thinks fit, and

(b)where the direction or notice relates to a particular authorised person or a particular with-profits insurer, give a copy of the direction and statement, or the notice, to that person.

(5)The PRA must give the Treasury a copy of—

(a)a direction under section 3I;

(b)a statement relating to such a direction;

(c)a notice revoking such a direction.

(6)The Treasury must lay before Parliament any document received by them under subsection (5).

(7)Subsection (4) does not apply where the PRA, after consulting the Treasury, decides that compliance with that subsection would be against the public interest, and at any time when this subsection excludes the application of subsection (4) in relation to a direction under section 3I, subsection (6) also does not apply.

(8)Where the PRA decides that compliance with subsection (4) would be against the public interest, it must from time to time review that decision and if it subsequently decides that compliance is no longer against the public interest it must—

(a)comply with that subsection, and

(b)in the case of a direction under section 3I, notify the Treasury for the purposes of subsection (6).

Directions relating to consolidated supervisionU.K.

3MDirections relating to consolidated supervision of groupsU.K.

(1)This section applies where one of the regulators (“the supervising regulator”), but not the other, is the competent authority for the purpose of consolidated supervision that is required in relation to some or all of the members of a group (“the relevant group”) in pursuance of any of the relevant directives.

(2)Consolidated supervision” includes supplementary supervision.

(3)The “relevant directives” are—

(a)the banking consolidation directive;

(b)Directive 2002/87/EC of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate;

(c)Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions;

(d)Directive 2009/138/EC of the European Parliament and the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).

(4)The supervising regulator may, if it considers it necessary to do so for the effective consolidated supervision of the relevant group, give the other regulator a direction under this section.

(5)A direction under this section is a direction requiring the other regulator to exercise, or not to exercise, a relevant function in a specified manner in relation to authorised persons who are members of the relevant group.

(6)The direction may relate to members of the relevant group other than the members in respect of which consolidated supervision is required.

(7)A “relevant function”, in relation to either regulator, is a function conferred by or under this Act which relates to the regulation of authorised persons, but does not include—

(a)the regulator's function of making rules under this Act;

(b)its function of preparing and issuing codes under this Act;

(c)its function of determining the general policy and principles by reference to which it performs particular functions;

(d)the FCA's functions in relation to the giving of general guidance;

(e)the PRA's functions in relation to the giving of guidance under section 2I;

(f)the FCA's functions in relation to consent for the purposes of section 55F or 55I.

(8)The direction may not require the regulator to which it is given (“the directed regulator”) to do anything that it has no power to do, but the direction is relevant to the exercise of any discretion conferred on the directed regulator.

(9)The directed regulator must comply with the direction as soon as practicable, but this is subject to subsections (10) and (11).

(10)The directed regulator is not required to comply with a direction under this section if or to the extent that in its opinion compliance would be incompatible with any EU obligation or any other international obligation of the United Kingdom.

(11)Directions given by the FCA under this section are subject to any directions given to the FCA under section 3I or 3J.

3NRevocation of directions under section 3MU.K.

(1)The supervising regulator may at any time by notice to the other regulator revoke a direction under section 3M.

(2)The revocation of the direction does not affect the validity of anything previously done in accordance with it.

(3)Expressions defined for the purposes of section 3M have the same meaning in this section.

3OFurther provisions about directions under section 3MU.K.

(1)Before giving a direction under section 3M, the supervising regulator must consult the other regulator.

(2)A direction under section 3M must be given or confirmed in writing, and must be accompanied by a statement of the reasons for giving it.

(3)A notice revoking a direction under section 3M must be given or confirmed in writing.

(4)The regulator to which a direction under section 3M is given must give a copy of the direction and statement to each of the authorised persons to whom the direction relates.

(5)The supervising regulator must publish the direction and statement, or the notice, in such manner as it thinks fit.

(6)But subsection (4) or (5) does not apply in a case where the regulator on which the duty is imposed considers that compliance with that subsection would be against the public interest.

(7)In a case where a regulator decides that compliance with subsection (4) or (5) would be against the public interest, the regulator must from time to time review that decision and if it subsequently decides that compliance is no longer against the public interest it must comply with the subsection.

(8)Expressions defined for the purposes of section 3M have the same meaning in this section.

3PConsultation by regulator complying with directionU.K.

(1)If the directed regulator is required by this Act to consult any person other than the supervising regulator before exercising the relevant function to which the direction relates, the directed regulator must give the supervising regulator copies of any written representations received from the persons consulted.

(2)Expressions defined for the purposes of section 3M have the same meaning in this section.

Co-operation with Bank of EnglandU.K.

3QCo-operation by FCA and PRA with Bank of EnglandU.K.

(1)Each regulator must take such steps as it considers appropriate to co-operate with the Bank of England in connection with—

(a)the pursuit by the Bank of its Financial Stability Objective, and

(b)the Bank's compliance with its duties under sections 58 and 59 of the Financial Services Act 2012 (duty to notify Treasury of possible need for public funds and of subsequent changes).

(2)Co-operation under subsection (1) may include the sharing of information that the regulator is not prevented from disclosing.

Arrangements for provision of servicesU.K.

3RArrangements for provision of servicesU.K.

(1)The regulators may enter into arrangements with each other for the provision of services by one of them to the other.

(2)Either regulator may enter into arrangements with the Bank of England for the provision of services—

(a)by the Bank to the regulator, or

(b)by the regulator to the Bank.

(3)Either regulator may enter into arrangements with any of the bodies specified in subsection (4) for the provision of services by the regulator to that body.

(4)Those bodies are—

(a)the consumer financial education body (see section 3S(2)),

(b)the scheme manager (see section 212(1)), and

(c)the scheme operator (see section 225(2)).

(5)The FCA may enter into arrangements with—

(a)a local weights and measures authority in England, Wales or Scotland, or

(b)the Department of Enterprise, Trade and Investment in Northern Ireland,

for the provision by the authority or department to the FCA of services which relate to activities to which this subsection applies.

(6)Subsection (5) applies to activities that are regulated activities by virtue of—

(a)an order made under section 22(1) in relation to an investment of a kind falling within paragraph 23 or 23B of Schedule 2, or

(b)an order made under section 22(1A)(a).

(7)Arrangements under this section are to be on such terms as may be agreed by the parties.

Enhancing public understanding of financial matters etc.U.K.

3SThe consumer financial education bodyU.K.

(1)The consumer financial education body continues to have the consumer financial education function.

(2)The “consumer financial education body” means the body corporate originally established by the Financial Services Authority under section 6A of this Act (as it had effect before the passing of the Financial Services Act 2012).

(3)The consumer financial education function is to enhance—

(a)the understanding and knowledge of members of the public of financial matters (including the UK financial system), and

(b)the ability of members of the public to manage their own financial affairs.

(4)The consumer financial education function includes, in particular—

(a)promoting awareness of the benefits of financial planning;

(b)promoting awareness of the financial advantages and disadvantages in relation to particular decisions relating to different kinds of goods or services;

(c)promoting awareness of the benefits and risks associated with different kinds of financial dealing (which includes informing the FCA and other bodies of those benefits and risks);

(d)the publication of educational materials or the carrying out of other educational activities;

(e)the provision of information and advice to members of the public;

(f)assisting members of the public with the management of debt;

(g)working with other organisations which provide debt services, with a view to improving—

(i)the availability to the public of those services;

(ii)the quality of the services provided;

(iii)consistency in the services available, in the way in which they are provided and in the advice given.

(5)In subsection (4) “debt services” means debt advice or assistance with the management of debt.

(6)Schedule 1A makes further provision about the consumer financial education body.]

Part IIU.K. Regulated And Prohibited Activities

The general prohibitionU.K.

19 The general prohibition.U.K.

(1)No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is—

(a)an authorised person; or

(b)an exempt person.

(2)The prohibition is referred to in this Act as the general prohibition.

Requirement for permissionU.K.

20 Authorised persons acting without permission.U.K.

(1)If an authorised person [F2other than a PRA-authorised person] carries on a regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission—

[F3(a)given to that person under Part 4A, or]

(b)resulting from any other provision of this Act,

he is to be taken to have contravened a requirement imposed on him by the [F4FCA] under this Act.

[F5(1A)If a PRA-authorised person carries on a regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission given to the person under Part 4A or resulting from any other provision of this Act, the person is to be taken to have contravened—

(a)a requirement imposed by the FCA, and

(b)a requirement imposed by the PRA.]

[F6(2)A contravention within subsection (1) or (1A)—

(a)does not, except as provided by section 23(1A), make a person guilty of an offence,

(b)does not, except as provided by section 26A, make any transaction void or unenforceable, and

(c)does not, except as provided by subsection (3), give rise to any right of action for breach of statutory duty.]

(3)In prescribed cases [F7a contravention within subsection (1) or (1A)] is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.

[F8(4)Subsections (1) and (1A) are subject to section 39(1D).

(5)References in this Act to an authorised person acting in contravention of this section are references to the person acting in a way that results in a contravention within subsection (1) or (1A).]

Textual Amendments

F7Words in s. 20(3) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 9 para. 2(5) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C2S. 20 excluded (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 62(1)-(4); S.I. 2001/3538, art. 2(1)

S. 20 applied (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 62(5); S.I. 2001/3538, art. 2(1)

S. 20 modified (31.10.2001) by S.I. 2001/3374, art. 1, Sch. para. 2

C7S. 20 modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 2}

Commencement Information

I1S. 20 wholly in force at 1.12.2001; s. 20 not in force at Royal Assent see s. 431(2); s. 20(3) in force for certain purposes at 25.2.2001 by S.I. 2001/516, art. 2(b), Sch. Pt. 2; s. 20 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

Financial promotionU.K.

21 Restrictions on financial promotion.U.K.

(1)A person (“A”) must not, in the course of business, communicate an invitation or inducement to engage in investment activity.

(2)But subsection (1) does not apply if—

(a)A is an authorised person; or

(b)the content of the communication is approved for the purposes of this section by an authorised person.

(3)In the case of a communication originating outside the United Kingdom, subsection (1) applies only if the communication is capable of having an effect in the United Kingdom.

(4)The Treasury may by order specify circumstances in which a person is to be regarded for the purposes of subsection (1) as—

(a)acting in the course of business;

(b)not acting in the course of business.

(5)The Treasury may by order specify circumstances (which may include compliance with financial promotion rules) in which subsection (1) does not apply.

(6)An order under subsection (5) may, in particular, provide that subsection (1) does not apply in relation to communications—

(a)of a specified description;

(b)originating in a specified country or territory outside the United Kingdom;

(c)originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or

(d)originating outside the United Kingdom.

(7)The Treasury may by order repeal subsection (3).

(8)Engaging in investment activity” means—

(a)entering or offering to enter into an agreement the making or performance of which by either party constitutes a controlled activity; or

(b)exercising any rights conferred by a controlled investment to acquire, dispose of, underwrite or convert a controlled investment.

(9)An activity is a controlled activity if—

(a)it is an activity of a specified kind or one which falls within a specified class of activity; and

(b)it relates to an investment of a specified kind, or to one which falls within a specified class of investment.

(10)An investment is a controlled investment if it is an investment of a specified kind or one which falls within a specified class of investment.

(11)Schedule 2 (except paragraph 26) applies for the purposes of subsections (9) and (10) with references to section 22 being read as references to each of those subsections.

(12)Nothing in Schedule 2, as applied by subsection (11), limits the powers conferred by subsection (9) or (10).

(13)Communicate” includes causing a communication to be made.

(14)Investment” includes any asset, right or interest.

(15)Specified” means specified in an order made by the Treasury.

Modifications etc. (not altering text)

C8S. 21(1) modified (31.10.2001) by S.I. 2001/3374, art. 1, Sch. para. 6

C13S. 21(2) modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 3}

Commencement Information

I2S. 21 wholly in force at 1.12.2001; s. 21 not in force at Royal Assent see s. 431(2); s. 21 in force for certain purposes at 25.2.2001 by S.I. 2001/516, art. 2(b), Sch. Pt. 2; s. 21 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

Regulated activitiesU.K.

22[F9Regulated activities]U.K.

(1)An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and—

(a)relates to an investment of a specified kind; or

(b)in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind.

[F10(1A)An activity is also a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and relates to—

(a)information about a person's financial standing, or

(b)the setting of a specified benchmark.]

(2)Schedule 2 makes provision supplementing this section.

(3)Nothing in Schedule 2 limits the powers conferred by subsection (1) [F11or (1A)].

(4)Investment” includes any asset, right or interest.

(5)Specified” means specified in an order made by the Treasury.

[F12(6)Benchmark” means an index, rate or price that—

(a)is determined from time to time by reference to the state of the market,

(b)is made available to the public (whether free of charge or on payment), and

(c)is used for reference for purposes that include one or more of the following—

(i)determining the interest payable, or other sums due, under loan agreements or under other contracts relating to investments;

(ii)determining the price at which investments may be bought or sold or the value of investments;

(iii)measuring the performance of investments.]

Textual Amendments

Modifications etc. (not altering text)

C14S. 22 applied (1.9.2002) by 1974 c. 39, s. 16(6E)(a) (as inserted (1.9.2002) by 2001/544, arts. 2(2)(b), 90(2))

[F1322ADesignation of activities requiring prudential regulation by PRAU.K.

(1)The Treasury may by order specify the regulated activities that are “PRA-regulated activities” for the purposes of this Act.

(2)An order under subsection (1) may—

(a)provide for exceptions;

(b)confer powers on the Treasury or either regulator;

(c)authorise the making of rules or other instruments by either regulator for purposes of, or connected with, any relevant provision;

(d)make provision in respect of any information or document which in the opinion of the Treasury or either regulator is relevant for purposes of, or connected with, any relevant provision;

(e)make such consequential, transitional, or supplemental provision as the Treasury consider appropriate for purposes of, or connected with, any relevant provision.

(3)Provision made as a result of subsection (2)(e) may amend any primary or subordinate legislation, including any provision of, or made under, this Act.

(4)Relevant provision” means this section or any provision made under this section.

Textual Amendments

22BParliamentary control in relation to certain orders under section 22AU.K.

(1)This section applies to the first order made under section 22A(1).

(2)This section also applies to any subsequent order made under section 22A(1) which—

(a)contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order would be—

(i)that an activity would become a PRA-regulated activity, or

(ii)that a PRA-regulated activity would become a regulated activity that is not a PRA-regulated activity, or

(b)amends primary legislation.

(3)No order to which this section applies may be made unless—

(a)a draft of the order has been laid before Parliament and approved by a resolution of each House, or

(b)subsection (5) applies.

(4)Subsection (5) applies if an order to which this section applies contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without a draft being so laid and approved.

(5)Where this subsection applies the order—

(a)must be laid before Parliament after being made, and

(b)ceases to have effect at the end of the relevant period unless before the end of that period the order is approved by a resolution of each House of Parliament (but without that affecting anything done under the order or the power to make a new order).

(6)The “relevant period” is a period of 28 days beginning with the day on which the order is made.

(7)In calculating the relevant period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.]

Textual Amendments

OffencesU.K.

23 Contravention of the general prohibition [F14or section 20(1) or (1A)].U.K.

(1)A person who contravenes the general prohibition is guilty of an offence and liable—

(a)on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;

(b)on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both.

[F15(1A)An authorised person (“A”) is guilty of an offence if A carries on a credit-related regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission—

(a)given to that person under Part 4A, or

(b)resulting from any other provision of this Act.

(1B)In this Act “credit-related regulated activity” means a regulated activity of a kind designated by the Treasury by order.

(1C)The Treasury may designate a regulated activity under subsection (1B) only if the activity involves a person—

(a)entering into or administering an agreement under which the person provides another person with credit,

(b)exercising or being able to exercise the rights of the lender under an agreement under which another person provides a third party with credit, or

(c)taking steps to procure payment of debts due under an agreement under which another person is provided with credit.

(1D)But a regulated activity may not be designated under subsection (1B) if the agreement in question is one under which the obligation of the borrower is secured on land.

(1E)Credit” includes any cash loan or other financial accommodation.

(1F)A person guilty of an offence under subsection (1A) is liable—

(a)on summary conviction, to imprisonment for a term not exceeding the applicable maximum term or a fine not exceeding the statutory maximum, or both;

(b)on conviction on indictment, to imprisonment for a term not exceeding two years, or a fine, or both.

(1G)The “applicable maximum term” is—

(a)in England and Wales, 12 months (or 6 months, if the offence was committed before the commencement of section 154(1) of the Criminal Justice Act 2003);

(b)in Scotland, 12 months;

(c)in Northern Ireland, 6 months.]

(2)In this Act “an authorisation offence” means an offence under this section.

(3)In proceedings for an authorisation offence it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

[F16(4)Subsection (1A) is subject to section 39(1D).

(5)No proceedings may be brought against a person in respect of an offence under subsection (1A) in a case where either regulator has taken action under section 205, 206 or 206A in relation to the alleged contravention within section 20(1) or (1A).]

[F1723AParliamentary control in relation to certain orders under section 23U.K.

(1)This section applies to the first order made under section 23(1B).

(2)This section also applies to any subsequent order made under section 23(1B) which contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order would be that an activity would become a credit-related regulated activity.

(3)An order to which this section applies may not be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House.]

24 False claims to be authorised or exempt.U.K.

(1)A person who is neither an authorised person nor, in relation to the regulated activity in question, an exempt person is guilty of an offence if he—

(a)describes himself (in whatever terms) as an authorised person;

(b)describes himself (in whatever terms) as an exempt person in relation to the regulated activity; or

(c)behaves, or otherwise holds himself out, in a manner which indicates (or which is reasonably likely to be understood as indicating) that he is—

(i)an authorised person; or

(ii)an exempt person in relation to the regulated activity.

(2)In proceedings for an offence under this section it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(3)A person guilty of an offence under this section is liable on summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding level 5 on the standard scale, or both.

(4)But where the conduct constituting the offence involved or included the public display of any material, the maximum fine for the offence is level 5 on the standard scale multiplied by the number of days for which the display continued.

25 Contravention of section 21.U.K.

(1)A person who contravenes section 21(1) is guilty of an offence and liable—

(a)on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;

(b)on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both.

(2)In proceedings for an offence under this section it is a defence for the accused to show—

(a)that he believed on reasonable grounds that the content of the communication was prepared, or approved for the purposes of section 21, by an authorised person; or

(b)that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

Enforceability of agreementsU.K.

26 Agreements made by unauthorised persons.U.K.

(1)An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.

(2)The other party is entitled to recover—

(a)any money or other property paid or transferred by him under the agreement; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(3)Agreement” means an agreement—

(a)made after this section comes into force; and

(b)the making or performance of which constitutes, or is part of, the regulated activity in question.

(4)This section does not apply if the regulated activity is accepting deposits.

Modifications etc. (not altering text)

C18S. 26(1)(2) applied (1.12.2001) by S.I. 2001/2657, arts. 1(1), 5(1)(4) (which was revoked (8.10.2001) by S.I. 2001/3083, arts. 1(2), 23); S.I. 2001/3538, art. 2(1)

S. 26(1)(2) applied (1.12.2001) by S.I. 2001/3083, arts. 1(2), 5(1); S.I. 2001/3538, art. 2(1)

[F1826AAgreements relating to creditU.K.

(1)An agreement that is made by an authorised person in contravention of section 20 is unenforceable against the other party if the agreement is entered into in the course of carrying on a credit-related regulated activity involving matters falling within section 23(1C)(a).

(2)The other party is entitled to recover—

(a)any money or other property paid or transferred by that party under the agreement, and

(b)compensation for any loss sustained by that party as a result of having parted with it.

(3)In subsections (1) and (2) “agreement” means an agreement—

(a)which is made after this section comes into force, and

(b)the making or performance of which constitutes, or is part of, the credit-related regulated activity.

(4)If the administration of an agreement involves the carrying on of a credit-related regulated activity, the agreement may not be enforced by a person for the time being exercising the rights of the lender under the agreement unless that person has permission, given under Part 4A or resulting from any other provision of this Act, in relation to that activity.

(5)If the taking of steps to procure payment of debts due under an agreement involves the carrying on of a credit-related regulated activity, the agreement may not be enforced by a person for the time being exercising the rights of the lender under the agreement unless the agreement is enforced in accordance with permission—

(a)given under Part 4A to the person enforcing the agreement, or

(b)resulting from any other provision of this Act.]

Textual Amendments

27 Agreements made through unauthorised persons.U.K.

[F19(1)This section applies to an agreement that—

(a)is made by an authorised person (“the provider”) in the course of carrying on a regulated activity,

(b)is not made in contravention of the general prohibition,

(c)if it relates to a credit-related regulated activity, is not made in contravention of section 20, and

(d)is made in consequence of something said or done by another person (“the third party”) in the course of—

(i)a regulated activity carried on by the third party in contravention of the general prohibition, or

(ii)a credit-related regulated activity carried on by the third party in contravention of section 20.

(1A)The agreement is unenforceable against the other party.]

(2)The other party is entitled to recover—

(a)any money or other property paid or transferred by him under the agreement; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(3)Agreement” means an agreement—

(a)made after this section comes into force; and

(b)the making or performance of which constitutes, or is part of, the regulated activity in question carried on by the provider.

(4)This section does not apply if the regulated activity is accepting deposits.

Textual Amendments

Modifications etc. (not altering text)

C19S. 27(1)(2) applied (1.12.2001) by S.I. 2001/2657, arts. 1(1), 5(2)(5) (which was revoked (8.10.2001) by S.I. 2001/3083, arts. 1(2), 23); S.I. 2001/3538, art. 2(1)

S. 27(1)(2) applied (1.12.2001) by S.I. 2001/3083, arts. 1(2), 5(2); S.I. 2001/3538, art. 2(1)

28 Agreements made unenforceable by section 26 or 27[F20: general cases].U.K.

(1)This section applies to an agreement which is unenforceable because of section 26 or 27[F21, other than an agreement entered into in the course of carrying on a credit-related regulated activity].

(2)The amount of compensation recoverable as a result of that section is—

(a)the amount agreed by the parties; or

(b)on the application of either party, the amount determined by the court.

(3)If the court is satisfied that it is just and equitable in the circumstances of the case, it may allow—

(a)the agreement to be enforced; or

(b)money and property paid or transferred under the agreement to be retained.

(4)In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must—

(a)if the case arises as a result of section 26, have regard to the issue mentioned in subsection (5); or

(b)if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6).

(5)The issue is whether the person carrying on the regulated activity concerned reasonably believed that he was not contravening the general prohibition by making the agreement.

(6)The issue is whether the provider knew that the third party was (in carrying on the regulated activity) contravening the general prohibition.

(7)If the person against whom the agreement is unenforceable—

(a)elects not to perform the agreement, or

(b)as a result of this section, recovers money paid or other property transferred by him under the agreement,

he must repay any money and return any other property received by him under the agreement.

(8)If property transferred under the agreement has passed to a third party, a reference in section 26 or 27 or this section to that property is to be read as a reference to its value at the time of its transfer under the agreement.

(9)The commission of an authorisation offence does not make the agreement concerned illegal or invalid to any greater extent than is provided by section 26 or 27.

Textual Amendments

F20Words in s. 28 heading inserted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 9 para. 7(b) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C20S. 28 applied (with modifications) (1.12.2001) by S.I. 2001/2657, arts. 1(1), 5(6) (which was revoked (8.10.2001) by S.I. 2001/3083, arts. 1(2), 23); S.I. 2001/3538, art. 2(1)

S. 28 applied (with modifications) (1.12.2001) by S.I. 2001/3083, arts. 1(2), 5(6); S.I. 2001/3538, art. 2(1)

[F2228ACredit-related agreements made unenforceable by section 26, 26A or 27U.K.

(1)This section applies to an agreement that—

(a)is entered into in the course of carrying on a credit-related regulated activity, and

(b)is unenforceable because of section 26, 26A or 27.

(2)The amount of compensation recoverable as a result of that section is—

(a)the amount agreed by the parties, or

(b)on the application of either party, the amount specified in a written notice given by the FCA to the applicant.

(3)If on application by the relevant firm the FCA is satisfied that it is just and equitable in the circumstances of the case, it may by written notice to the applicant allow—

(a)the agreement to be enforced, or

(b)money paid or property transferred under the agreement to be retained.

(4)In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the FCA must—

(a)if the case arises as a result of section 26 or 26A, have regard to the issue mentioned in subsection (5), or

(b)if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6).

(5)The issue is whether the relevant firm reasonably believed that by making the agreement the relevant firm was neither contravening the general prohibition nor contravening section 20.

(6)The issue is whether the provider knew that the third party was (in carrying on the credit-related regulated activity) either contravening the general prohibition or contravening section 20.

(7)An application to the FCA under this section by the relevant firm may relate to specified agreements or to agreements of a specified description or made at a specified time.

(8)The relevant firm” means—

(a)in a case falling within section 26, the person in breach of the general prohibition;

(b)in a case falling within section 26A or 27, the authorised person concerned.

(9)If the FCA thinks fit, it may when acting under subsection (2)(b) or (3)—

(a)limit the determination in its notice to specified agreements, or agreements of a specified description or made at a specified time;

(b)make the determination in its notice conditional on the doing of specified acts by the applicant.

28BDecisions under section 28A: procedureU.K.

(1)A notice under section 28A(2)(b) or (3) must—

(a)give the FCA's reasons for its determination, and

(b)give an indication of—

(i)the right to have the matter referred to the Tribunal that is conferred by subsection (3), and

(ii)the procedure on such a reference.

(2)The FCA must, so far as it is reasonably practicable to do so, give a copy of the notice to any other person who appears to it to be affected by the determination to which the notice relates.

(3)A person who is aggrieved by the determination of an application under section 28A(2)(b) or (3) may refer the matter to the Tribunal.]

29 Accepting deposits in breach of general prohibition.U.K.

(1)This section applies to an agreement between a person (“the depositor”) and another person (“the deposit-taker”) made in the course of the carrying on by the deposit-taker of accepting deposits in contravention of the general prohibition.

(2)If the depositor is not entitled under the agreement to recover without delay any money deposited by him, he may apply to the court for an order directing the deposit-taker to return the money to him.

(3)The court need not make such an order if it is satisfied that it would not be just and equitable for the money deposited to be returned, having regard to the issue mentioned in subsection (4).

(4)The issue is whether the deposit-taker reasonably believed that he was not contravening the general prohibition by making the agreement.

(5)Agreement” means an agreement—

(a)made after this section comes into force; and

(b)the making or performance of which constitutes, or is part of, accepting deposits.

30 Enforceability of agreements resulting from unlawful communications.U.K.

(1)In this section—

(2)If in consequence of an unlawful communication a person enters as a customer into a controlled agreement, it is unenforceable against him and he is entitled to recover—

(a)any money or other property paid or transferred by him under the agreement; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(3)If in consequence of an unlawful communication a person exercises any rights conferred by a controlled investment, no obligation to which he is subject as a result of exercising them is enforceable against him and he is entitled to recover—

(a)any money or other property paid or transferred by him under the obligation; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(4)But the court may allow—

(a)the agreement or obligation to be enforced, or

(b)money or property paid or transferred under the agreement or obligation to be retained,

if it is satisfied that it is just and equitable in the circumstances of the case.

(5)In considering whether to allow the agreement or obligation to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must have regard to the issues mentioned in subsections (6) and (7).

(6)If the applicant made the unlawful communication, the issue is whether he reasonably believed that he was not making such a communication.

(7)If the applicant did not make the unlawful communication, the issue is whether he knew that the agreement was entered into in consequence of such a communication.

(8)Applicant” means the person seeking to enforce the agreement or obligation or retain the money or property paid or transferred.

(9)Any reference to making a communication includes causing a communication to be made.

(10)The amount of compensation recoverable as a result of subsection (2) or (3) is—

(a)the amount agreed between the parties; or

(b)on the application of either party, the amount determined by the court.

(11)If a person elects not to perform an agreement or an obligation which (by virtue of subsection (2) or (3)) is unenforceable against him, he must repay any money and return any other property received by him under the agreement.

(12)If (by virtue of subsection (2) or (3)) a person recovers money paid or property transferred by him under an agreement or obligation, he must repay any money and return any other property received by him as a result of exercising the rights in question.

(13)If any property required to be returned under this section has passed to a third party, references to that property are to be read as references to its value at the time of its receipt by the person required to return it.

Part IIIU.K. Authorisation and Exemption

AuthorisationU.K.

31 Authorised persons.U.K.

(1)The following persons are authorised for the purposes of this Act—

(a)a person who has a [F23Part 4A permission] to carry on one or more regulated activities;

(b)an EEA firm qualifying for authorisation under Schedule 3;

(c)a Treaty firm qualifying for authorisation under Schedule 4;

(d)a person who is otherwise authorised by a provision of, or made under, this Act.

(2)In this Act “authorised person” means a person who is authorised for the purposes of this Act.

Textual Amendments

F23Words in s. 31(1)(a) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 11(1), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

Commencement Information

I3S. 31 wholly in force at 1.12.2001; s. 31 not in force at Royal Assent see s. 431(2); s. 31(1)(b) in force for specified purposes at 25.2.2001 by S.I. 2001/516, art. 2(c), Sch. Pt. 3; s. 31(1)(b) in force for specified purposes at 18.6.2001 by S.I. 2001/1820, art. 2, Sch.; s. 31(1)(c) in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 31 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

32 Partnerships and unincorporated associations.U.K.

(1)If a firm is authorised—

(a)it is authorised to carry on the regulated activities concerned in the name of the firm; and

(b)its authorisation is not affected by any change in its membership.

(2)If an authorised firm is dissolved, its authorisation continues to have effect in relation to any [F24individual or] firm which succeeds to the business of the dissolved firm.

[F25(3)For the purposes of this section, an individual or firm is to be regarded as succeeding to the business of a dissolved firm only if succession is to the whole or substantially the whole of the business of the former firm.]

(4)Firm” means—

(a)a partnership; or

(b)an unincorporated association of persons.

(5)“Partnership” does not include a partnership which is constituted under the law of any place outside the United Kingdom and is a body corporate.

Ending of authorisationU.K.

33 Withdrawal of authorisation F26....U.K.

(1)This section applies if—

(a)an authorised person’s [F27Part 4A permission] is cancelled; and

(b)as a result, there is no regulated activity for which he has permission.

(2)The [F28appropriate regulator] must give a direction withdrawing that person’s status as an authorised person.

[F29(2A)In subsection (2) “the appropriate regulator” means—

(a)in the case of a PRA-authorised person, the PRA, and

(b)in any other case, the FCA.]

34 EEA firms.U.K.

(1)An EEA firm ceases to qualify for authorisation under Part II of Schedule 3 if it ceases to be an EEA firm as a result of—

(a)having its EEA authorisation withdrawn; or

(b)ceasing to have an EEA right in circumstances in which EEA authorisation is not required.

(2)At the request of an EEA firm, [F30the appropriate regulator] may give a direction cancelling its authorisation under Part II of Schedule 3.

[F31(2A)In subsection (2) “the appropriate regulator” means—

(a)in the case of a PRA-authorised person, the PRA, and

(b)in any other case, the FCA.]

(3)If an EEA firm has a [F32Part 4A permission], it does not cease to be an authorised person merely because it ceases to qualify for authorisation under Part II of Schedule 3.

Textual Amendments

F30Words in s. 34(2) substituted (27.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 4 para. 27(2) (with Sch. 20); S.I. 2013/423, arts. 2, 3, Sch.

F31S. 34(2A) inserted (27.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 4 para. 27(3) (with Sch. 20); S.I. 2013/423, arts. 2, 3, Sch.

F32Words in s. 34(3) substituted (27.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 4 para. 27(4) (with Sch. 20); S.I. 2013/423, arts. 2, 3, Sch.

Modifications etc. (not altering text)

C22S. 34(2) modified (1.12.2001) by S.I. 2001/2511, regs. 1(1), 8; S.I. 2001/3538, art. 2(1)

35 Treaty firms.U.K.

(1)A Treaty firm ceases to qualify for authorisation under Schedule 4 if its home State authorisation is withdrawn.

(2)At the request of a Treaty firm, [F33the appropriate regulator] may give a direction cancelling its Schedule 4 authorisation.

[F34(2A)In subsection (2) “the appropriate regulator” means—

(a)in the case of a PRA-authorised person, the PRA, and

(b)in any other case, the FCA.]

(3)If a Treaty firm has a [F35Part 4A permission], it does not cease to be an authorised person merely because it ceases to qualify for authorisation under Schedule 4.

Textual Amendments

F33Words in s. 35(2) substituted (27.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 4 para. 28(2) (with Sch. 20); S.I. 2013/423, arts. 2, 3, Sch.

F34S. 35(2A) inserted (27.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 4 para. 28(3) (with Sch. 20); S.I. 2013/423, arts. 2, 3, Sch.

F35Words in s. 35(3) substituted (27.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 4 para. 28(4) (with Sch. 20); S.I. 2013/423, arts. 2, 3, Sch.

36 Persons authorised as a result of paragraph 1(1) of Schedule 5.U.K.

(1)At the request of a person authorised as a result of paragraph 1(1) of Schedule 5, the [F36FCA] may give a direction cancelling his authorisation as such a person.

(2)If a person authorised as a result of paragraph 1(1) of Schedule 5 has a [F37Part 4A permission], he does not cease to be an authorised person merely because he ceases to be a person so authorised.

Textual Amendments

Exercise of EEA rights by UK firmsU.K.

37 Exercise of EEA rights by UK firms.U.K.

Part III of Schedule 3 makes provision in relation to the exercise outside the United Kingdom of EEA rights by UK firms.

Commencement Information

I4S. 37 wholly in force at 1.12.2001; s. 37 not in force at Royal Assent see s. 431(2); s. 37 in force for specified purposes at 25.2.2001 by S.I. 2001/516, art. 2(c), Sch. Pt. 3; s. 37 in force for specified purposes at 18.6.2001 by S.I. 2001/1820, art. 2, Sch.; s. 37 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2, Sch. Pt. 2; s. 37 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

ExemptionU.K.

38 Exemption orders.U.K.

(1)The Treasury may by order (“an exemption order”) provide for—

(a)specified persons, or

(b)persons falling within a specified class,

to be exempt from the general prohibition.

(2)But a person cannot be an exempt person as a result of an exemption order if he has a [F38Part 4A permission].

(3)An exemption order may provide for an exemption to have effect—

(a)in respect of all regulated activities;

(b)in respect of one or more specified regulated activities;

(c)only in specified circumstances;

(d)only in relation to specified functions;

(e)subject to conditions.

(4)Specified” means specified by the exemption order.

39 Exemption of appointed representatives.U.K.

(1)If a person (other than an authorised person)—

(a)is a party to a contract with an authorised person (“his principal”) which—

(i)permits or requires him to carry on business of a prescribed description, and

(ii)complies with such requirements as may be prescribed, and

(b)is someone for whose activities in carrying on the whole or part of that business his principal has accepted responsibility in writing,

he is exempt from the general prohibition in relation to any regulated activity comprised in the carrying on of that business for which his principal has accepted responsibility.

[F39(1A)But a person is not exempt as a result of subsection (1)—

(a)if his principal is an investment firm or a credit institution, and

(b)so far as the business for which his principal has accepted responsibility is investment services business,

unless he is entered on the applicable register.

(1B)The “applicable register” is—

(a)in the case of a person established in an EEA State (other than the United Kingdom) which permits investment firms authorised by the competent authority of that State to appoint tied agents, the register of tied agents maintained in that State pursuant to Article 23 of the markets in financial instruments directive;

(b)in the case of a person established in an EEA State which does not permit investment firms authorised as mentioned in paragraph (a) to appoint tied agents—

(i)if his principal has his relevant office in the United Kingdom, the record maintained by the [F40FCA] by virtue of section 347(1)(ha), and

(ii)if his principal is established in an EEA State (other than the United Kingdom) which permits investment firms authorised by the competent authority of the State to appoint tied agents, the register of tied agents maintained by that State pursuant to Article 23 of the markets in financial instruments directive; and

(c)in any other case, the record maintained by the [F40FCA] by virtue of section 347(1)(ha).]

[F41(1C)Subsection (1D) applies where an authorised person (“A”)—

(a)has permission under Part 4A, or permission resulting from any other provision of this Act, only in relation to one or more qualifying activities,

(b)is a party to a contract with another authorised person (A's “principal”) which—

(i)permits or requires A to carry on business of a prescribed description (“the relevant business”), and

(ii)complies with such requirements as may be prescribed, and

(c)is someone for whose activities in carrying on the whole or part of the relevant business A's principal has accepted responsibility in writing.

(1D)Sections 20(1) and (1A) and 23(1A) do not apply in relation to the carrying on by A of a relevant additional activity.

(1E)In subsections (1C) and (1D)—

(a)qualifying activity” means a regulated activity which is of a prescribed kind and relates—

(i)to rights under a contract of the kind mentioned in paragraph 23 of Schedule 2, other than one under which the obligation of the borrower to repay is secured on land, or

(ii)to rights under a contract of the kind mentioned in paragraph 23B of that Schedule;

(b)relevant additional activity” means a regulated activity which—

(i)is not one to which A's permission relates, and

(ii)is comprised in the carrying on of the business for which A's principal has accepted responsibility.]

[F42(2)In this Act “appointed representative” means—

(a)a person who is exempt as a result of subsection (1), or

(b)a person carrying on a regulated activity in circumstances where, as a result of subsection (1D), sections 20(1) and (1A) and 23(1A) do not apply.]

(3)The principal of an appointed representative is responsible, to the same extent as if he had expressly permitted it, for anything done or omitted by the representative in carrying on the business for which he has accepted responsibility.

[F43(4)In determining whether an authorised person has complied with—

(a)a provision contained in or made under this Act, or

(b)a qualifying EU provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order,

anything which a relevant person 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.]

(5)Relevant person” means a person who at the material time is or was an appointed representative by virtue of being a party to a contract with the authorised person.

(6)Nothing in subsection (4) is to cause the knowledge or intentions of an appointed representative to be attributed to his principal for the purpose of determining whether the principal has committed an offence, unless in all the circumstances it is reasonable for them to be attributed to him.

[F44(7)A person carries on “investment services business” if—

(a)the business includes providing services or carrying on activities of the kind mentioned in Article 4.1.25 of the markets in financial instruments directive, and

(b)as a result of providing such services or carrying on such activities he is a tied agent or would be if he were established in an EEA State.

(8)In this section—

Textual Amendments

F40Word in s. 39(1B) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 18 para. 5(2) (with Sch. 20); S.I. 2013/113, art. 2(1)(b), Sch. Pt. 2; S.I. 2013/423, art. 3, Sch.

F41S. 39(1C)-(1E) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 10(2), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F43S. 39(4) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 18 para. 5(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(b), Sch. Pt. 2; S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C29S. 39(2) modified (31.10.2001) by S.I. 2001/3374, art. 1, Sch. para. 7

Commencement Information

I5S. 39 wholly in force at 1.12.2001; s. 39 not in force at Royal Assent see s. 431(2); s. 39(1) in force for certain purposes at 25.2.2001 by S.I. 2001/516, art. 2(b), Sch. Pt. 2; s. 39 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

[F4539ACertain tied agents operating outside United KingdomU.K.

(1)This section applies to an authorised person whose relevant office is in the United Kingdom if—

(a)he is a party to a contract with a person (other than an authorised person) who is established—

(i)in the United Kingdom, or

(ii)in an EEA State which does not permit investment firms authorised by the competent authority of the State to appoint tied agents; and

(b)the contract is a relevant contract.

(2)A contract is a “relevant contract” if it satisfies conditions A to C.

(3)Condition A is that the contract permits or requires the person mentioned in subsection (1)(a) (the “agent”) to carry on investment services business.

(4)Condition B is that either—

(a)it is a condition of the contract that such business may only be carried on by the agent in an EEA State other than the United Kingdom; or

(b)in a case not falling within paragraph (a), the [F46FCA] is satisfied that no such business is, or is likely to be, carried on by the agent in the United Kingdom.

(5)Condition C is that the business is of a description that, if carried on in the United Kingdom, would be prescribed for the purposes of section 39(1)(a)(i).

(6)An authorised person to whom this section applies who—

(a)enters into or continues to perform a relevant contract with an agent which does not comply with the applicable requirements,

(b)enters into or continues to perform a relevant contract without accepting or having accepted responsibility in writing for the agent's activities in carrying on investment services business,

(c)enters into a relevant contract with an agent who is not entered on the record maintained by the [F46FCA] by virtue of section 347(1)(ha), or

(d)continues to perform a relevant contract with an agent when he knows or ought to know that the agent is not entered on that record,

is to be taken for the purposes of this Act to have contravened a requirement imposed on him by or under this Act.

(7)The “applicable requirements” are the requirements prescribed for the purposes of subsection (1)(a)(ii) of section 39 which have effect in the case of a person to whom subsection (1A) of that section applies.

(8)A person carries on “investment services business” if—

(a)his business includes providing services or carrying on activities of the kind mentioned in Article 4.1.25 of the markets in financial instruments directive, and

(b)as a result of providing such services or carrying on such activities he is a tied agent.

(9)In this section—

F47Part IVU.K. Permission to Carry on Regulated Activities

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F47Pt. 4A substituted for ss. 40-55 (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), ss. 11(2), 122(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(b)(c), Sch. Pts. 2, 3; S.I. 2013/423, art. 3, Sch.

[F47PART 4AU.K.Permission to carry on regulated activities

Modifications etc. (not altering text)

Application for permissionU.K.

55AApplication for permissionU.K.

(1)An application for permission to carry on one or more regulated activities may be made to the appropriate regulator by—

(a)an individual,

(b)a body corporate,

(c)a partnership, or

(d)an unincorporated association.

(2)The appropriate regulator”, in relation to an application under this section, means—

(a)the PRA, in a case where—

(i)the regulated activities to which the application relates consist of or include a PRA-regulated activity, or

(ii)the applicant is a PRA-authorised person otherwise than by virtue of a Part 4A permission;

(b)the FCA, in any other case.

(3)An authorised person who has a permission under this Part which is in force may not apply for permission under this section.

(4)An EEA firm may not apply for permission under this section to carry on a regulated activity which it is, or would be, entitled to carry on in exercise of an EEA right, whether through a United Kingdom branch or by providing services in the United Kingdom.

(5)A permission given by the appropriate regulator under this Part or having effect as if so given is referred to in this Act as “a Part 4A permission”.

Modifications etc. (not altering text)

55BThe threshold conditionsU.K.

(1)The threshold conditions”, in relation to a regulated activity, means the conditions set out in or specified under Schedule 6, as read with any threshold condition code made by either regulator under section 137O.

(2)Any reference in this Part to the threshold conditions for which either regulator is responsible is to be read as a reference to the conditions set out in or specified under Schedule 6 that are expressed to be relevant to the discharge by that regulator of its functions, as read with any threshold condition code made by that regulator under section 137O.

(3)In giving or varying permission, imposing or varying a requirement, or giving consent, under any provision of this Part, each regulator must ensure that the person concerned will satisfy, and continue to satisfy, in relation to all of the regulated activities for which the person has or will have permission, the threshold conditions for which that regulator is responsible.

(4)But the duty imposed by subsection (3) does not prevent a regulator, having due regard to that duty, from taking such steps as it considers are necessary, in relation to a particular person, in order to advance—

(a)in the case of the FCA, any of its operational objectives;

(b)in the case of the PRA, any of its objectives.

55CPower to amend Schedule 6U.K.

(1)The Treasury may by order amend Parts 1 and 2 of Schedule 6 by altering, adding or repealing provisions, or by substituting for those Parts as they have effect for the time being provisions specified in the order.

(2)Different provision may be made under this section—

(a)in relation to the discharge of the functions of each regulator;

(b)in relation to different regulated activities;

(c)in relation to persons who carry on, or seek to carry on, activities that consist of or include a PRA-regulated activity and in relation to other persons.

55DFirms based outside EEAU.K.

(1)This section applies in relation to a person (“the non-EEA firm”)—

(a)who is a body incorporated in, or formed under the law of, or is an individual who is a national of, any country or territory outside the EEA, and

(b)who is carrying on a regulated activity in any country or territory outside the United Kingdom in accordance with the law of that country or territory (“the overseas state”).

(2)In determining whether the non-EEA firm is satisfying or will satisfy, and continue to satisfy, any one or more of the threshold conditions for which a UK regulator is responsible, the UK regulator may have regard to any opinion notified to it by a regulatory authority in the overseas state (“the overseas regulator”) which relates to the non-EEA firm and appears to the UK regulator to be relevant to compliance with those conditions.

(3)In considering how much weight (if any) to attach to the opinion, the UK regulator must have regard to the nature and scope of the supervision exercised in relation to the non-EEA firm by the overseas regulator.

(4)In this section “UK regulator” means the FCA or the PRA.

55EGiving permission: the FCAU.K.

(1)This section applies where the FCA is the appropriate regulator in relation to an application for permission under section 55A.

(2)The FCA may give permission for the applicant to carry on the regulated activity or activities to which the application relates or such of them as may be specified in the permission.

(3)If the applicant is a member of a group which includes a PRA-authorised person, the FCA must consult the PRA before determining the application.

(4)If it gives permission, the FCA must specify the permitted regulated activity or activities, described in such manner as the FCA considers appropriate.

(5)The FCA may—

(a)incorporate in the description of a regulated activity such limitations (for example as to circumstances in which the activity may, or may not, be carried on) as it considers appropriate;

(b)specify a narrower or wider description of regulated activity than that to which the application relates;

(c)give permission for the carrying on of a regulated activity which is not included among those to which the application relates and is not a PRA-regulated activity.

55FGiving permission: the PRAU.K.

(1)This section applies where the PRA is the appropriate regulator in relation to an application for permission under section 55A.

(2)The PRA may with the consent of the FCA give permission for the applicant to carry on the regulated activity or activities to which the application relates or such of them as may be specified in the permission.

(3)If it gives permission, the PRA must specify the permitted regulated activity or activities, described in such manner as the PRA considers appropriate.

(4)The PRA may—

(a)incorporate in the description of a regulated activity such limitations (for example as to circumstances in which the activity may, or may not, be carried on) as it considers appropriate;

(b)specify a narrower or wider description of regulated activity than that to which the application relates;

(c)give permission for the carrying on of a regulated activity which is not included among those to which the application relates.

(5)Consent given by the FCA for the purposes of this section may be conditional on the manner in which the PRA exercises its powers under subsections (3) and (4).

(6)Subsections (3) and (4)(b) and (c) do not enable the PRA to give permission that relates only to activities that are not PRA-regulated activities, except where the applicant is a PRA-authorised person otherwise than by virtue of a Part 4A permission.

55GGiving permission: special casesU.K.

(1)The applicant” means an applicant for permission under section 55A.

(2)If the applicant—

(a)in relation to a particular regulated activity, is exempt from the general prohibition as a result of section 39(1) or an order made under section 38(1), but

(b)has applied for permission in relation to another regulated activity,

the application is to be treated as relating to all the regulated activities which, if permission is given, the applicant will carry on.

(3)If the applicant—

(a)in relation to a particular regulated activity, is exempt from the general prohibition as a result of [F49any of subsections (2) to (3C) of section 285], but

(b)has applied for permission in relation to another regulated activity,

the application is to be treated as relating only to that other regulated activity.

(4)If the applicant—

(a)is a person to whom, in relation to a particular regulated activity, the general prohibition does not apply as a result of Part 19, but

(b)has applied for permission in relation to another regulated activity,

the application is to be treated as relating only to that other regulated activity.

(5)Subsection (6) applies where either regulator (“the responsible regulator”) receives an application for permission under section 55A which is in the regulator's opinion similar to an application which was previously made to the other regulator and was either—

(a)treated by the other regulator as not being a valid application to that regulator because of the regulated activities to which it related, or

(b)refused by the other regulator after being considered.

(6)The responsible regulator must have regard to the desirability of minimising—

(a)the additional work for the applicant in dealing with the new application, and

(b)the time taken to deal with the new application.

Variation and cancellation of Part 4A permissionU.K.

55HVariation by FCA at request of authorised personU.K.

(1)This section applies in relation to an authorised person who has a Part 4A permission but is not a PRA-authorised person.

(2)The FCA may, on the application of the authorised person, vary the permission by—

(a)adding a regulated activity, other than a PRA-regulated activity, to those to which the permission relates;

(b)removing a regulated activity from those to which the permission relates;

(c)varying the description of a regulated activity to which the permission relates.

(3)The FCA may, on the application of the authorised person, cancel the permission.

(4)The FCA may refuse an application under this section if it appears to it that it is desirable to do so in order to advance any of its operational objectives.

(5)If the applicant is a member of a group which includes a PRA-authorised person, the FCA must consult the PRA before determining the application.

(6)If as a result of a variation of a Part 4A permission under this section there are no longer any regulated activities for which the authorised person concerned has permission, the FCA must, once it is satisfied that it is no longer necessary to keep the permission in force, cancel it.

(7)The FCA's power to vary a Part 4A permission under this section extends to including in the permission as varied any provision that could be included if a fresh permission were being given by it in response to an application under section 55A.

55IVariation by PRA at request of authorised personU.K.

(1)On the application of a PRA-authorised person with a Part 4A permission, the PRA may with the consent of the FCA vary the permission by—

(a)adding a regulated activity to those to which the permission relates;

(b)removing a regulated activity from those to which the permission relates;

(c)varying the description of a regulated activity to which the permission relates.

(2)On the application of a PRA-authorised person with a Part 4A permission, the PRA may, after consulting the FCA, cancel the permission.

(3)On the application of an authorised person other than a PRA-authorised person, the PRA may with the consent of the FCA vary the permission by adding to the regulated activities to which the permission relates one or more regulated activities which include a PRA-regulated activity.

(4)The PRA may refuse an application under this section if it appears to it that it is desirable to do so in order to advance any of its objectives.

(5)The FCA may withhold its consent to a proposed variation under this section if it appears to it that it is desirable to do so in order to advance one or more of its operational objectives.

(6)If as a result of a variation of a Part 4A permission under this section there are no longer any regulated activities for which the authorised person concerned has permission, the PRA must, once it is satisfied after consulting the FCA that it is no longer necessary to keep the permission in force, cancel it.

(7)The PRA's power to vary a Part 4A permission under this section extends to including in the permission as varied any provision that could be included if a fresh permission were being given by it in response to an application under section 55A.

(8)Consent given by the FCA for the purposes of subsection (1) may be conditional on the manner in which the PRA exercises its powers under section 55F(3) and (4) (as a result of subsection (7)).

55JVariation or cancellation on initiative of regulatorU.K.

(1)Either regulator may exercise its power under this section in relation to an authorised person with a Part 4A permission (“A”) if it appears to the regulator that—

(a)A is failing, or is likely to fail, to satisfy the threshold conditions for which the regulator is responsible,

(b)A has failed, during a period of at least 12 months, to carry on a regulated activity to which the Part 4A permission relates, or

(c)it is desirable to exercise the power in order to advance—

(i)in the case of the FCA, one or more of its operational objectives,

(ii)in the case of the PRA, any of its objectives.

(2)The FCA's power under this section is the power—

(a)to vary the Part 4A permission by—

(i)adding a regulated activity other than a PRA-regulated activity to those to which the permission relates,

(ii)removing a regulated activity from those to which the permission relates, or

(iii)varying the description of a regulated activity to which the permission relates in a way which, if it is a PRA-regulated activity, does not, in the opinion of the FCA, widen the description, or

(b)to cancel the Part 4A permission.

(3)The PRA's power under this section is the power—

(a)in the case of a PRA-authorised person, to vary the Part 4A permission in any of the ways mentioned in section 55I(1) or to cancel it;

(b)in the case of an authorised person who is not a PRA-authorised person, to vary the Part 4A permission by adding a PRA-regulated activity to those to which the permission relates and, if the PRA does so, to vary the Part 4A permission in any of the other ways mentioned in section 55I(1).

(4)The FCA—

(a)must consult the PRA before exercising its power under this section in relation to—

(i)a PRA-authorised person, or

(ii)a member of a group which includes a PRA-authorised person, and

(b)in the case of a PRA-authorised person, may exercise the power so as to add a new activity to those to which the permission relates or to widen the description of a regulated activity to which the permission relates, only with the consent of the PRA.

(5)The PRA—

(a)must consult the FCA before exercising its power under this section, and

(b)may exercise the power so as to add a new activity to those to which the permission relates or to widen the description of a regulated activity to which the permission relates, only with the consent of the FCA.

(6)Without prejudice to the generality of subsections (1) to (3), a regulator may, in relation to an authorised person who is an investment firm, exercise its power under this section to cancel the Part 4A permission if it appears to it that any of the conditions in section 55K is met.

(7)Without prejudice to the generality of subsections (1) and (2), the FCA may, in relation to an authorised person who has permission to carry on the regulated activity specified in article 24A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (which relates to bids in emission allowance auctions), exercise its power under this section to vary the Part 4A permission of the person concerned by removing that activity from those to which the permission relates if it appears to the FCA that the person has seriously and systematically infringed the provisions of paragraph 2 or 3 of Article 59 of the emission allowance auctioning regulation.

(8)If, as a result of a variation of a Part 4A permission under this section, there are no longer any regulated activities for which the authorised person concerned has permission, the regulator responsible for the variation must, once it is satisfied that it is no longer necessary to keep the permission in force, cancel it.

(9)Before cancelling under subsection (8) a Part 4A permission which relates to a person who (before the variation) was a PRA-authorised person, the regulator must consult the other regulator.

(10)The power of either regulator to vary a Part 4A permission under this section extends to including in the permission as varied any provision that could be included if a fresh permission were being given in response to an application to that regulator under section 55A.

(11)Consent given by one regulator for the purpose of subsection (4)(b) or (5)(b) may be conditional on the manner in which the other regulator exercises its powers under section 55E(4) and (5) or 55F(3) and (4) (as a result of subsection (10)).

(12)The power of the FCA or the PRA under this section is referred to in this Part as its own-initiative variation power.

55KInvestment firms: particular conditions that enable cancellationU.K.

(1)The conditions referred to in section 55J(6) are as follows—

(a)that the firm has failed, during a period of at least 6 months, to carry on a regulated activity which is an investment service or activity for which it has a Part 4A permission;

(b)that the firm obtained the Part 4A permission by making a false statement or by other irregular means;

(c)that the firm no longer satisfies the requirements for authorisation pursuant to Chapter I of Title II of the markets in financial instruments directive, or pursuant to or contained in any EU legislation made under that Chapter, in relation to a regulated activity which is an investment service or activity for which it has a Part 4A permission;

(d)that the firm has seriously and systematically infringed the operating conditions pursuant to Chapter II of Title II of the markets in financial instruments directive, or pursuant to or contained in any EU legislation made under that Chapter, in relation to a regulated activity which is an investment service or activity for which it has a Part 4A permission.

(2)For the purposes of this section a regulated activity is an investment service or activity if it falls within the definition of “investment services and activities” in section 417(1).

Imposition and variation of requirementsU.K.

55LImposition of requirements by FCAU.K.

(1)Where a person has applied (whether to the FCA or the PRA) for a Part 4A permission or the variation of a Part 4A permission, the FCA may impose on that person such requirements, taking effect on or after the giving or variation of the permission, as the FCA considers appropriate.

(2)The FCA may exercise its power under subsection (3) in relation to an authorised person with a Part 4A permission (whether given by it or by the PRA) (“A”) if it appears to the FCA that—

(a)A is failing, or is likely to fail, to satisfy the threshold conditions for which the FCA is responsible,

(b)A has failed, during a period of at least 12 months, to carry on a regulated activity to which the Part 4A permission relates, or

(c)it is desirable to exercise the power in order to advance one or more of the FCA's operational objectives.

(3)The FCA's power under this subsection is a power—

(a)to impose a new requirement,

(b)to vary a requirement imposed by the FCA under this section, or

(c)to cancel such a requirement.

(4)The FCA's power under subsection (3) is referred to in this Part as its own-initiative requirement power.

(5)The FCA may, on the application of an authorised person with a Part 4A permission—

(a)impose a new requirement,

(b)vary a requirement imposed by the FCA under this section, or

(c)cancel such a requirement.

(6)The FCA may refuse an application under subsection (5) if it appears to it that it is desirable to do so in order to advance any of its operational objectives.

(7)The FCA must consult the PRA before imposing or varying a requirement which relates to—

(a)a person who is, or will on the granting of an application for Part 4A permission be, a PRA-authorised person, or

(b)a person who is a member of a group which includes a PRA-authorised person.

Modifications etc. (not altering text)

55MImposition of requirements by PRAU.K.

(1)Where—

(a)a person has applied for a Part 4A permission in relation to activities which consist of or include a PRA-regulated activity,

(b)a PRA-authorised person has applied for a Part 4A permission or the variation of a Part 4A permission, or

(c)an authorised person other than a PRA-authorised person has applied for a Part 4A permission to be varied by adding to the regulated activities to which it relates one or more regulated activities which include a PRA-regulated activity,

the PRA may impose on that person such requirements, taking effect on or after the giving or variation of the permission, as the PRA considers appropriate.

(2)The PRA may exercise its power under subsection (3) in relation to a PRA-authorised person with a Part 4A permission (“P”) if it appears to the PRA that—

(a)P is failing, or is likely to fail, to satisfy the threshold conditions for which the PRA is responsible,

(b)P has failed, during a period of at least 12 months, to carry on a regulated activity to which the Part 4A permission relates, or

(c)it is desirable to exercise the power in order to advance any of the PRA's objectives.

(3)The PRA's power under this subsection is a power—

(a)to impose a new requirement,

(b)to vary a requirement imposed by the PRA under this section, or

(c)to cancel such a requirement.

(4)The PRA's power under subsection (3) is referred to in this Part as its own-initiative requirement power.

(5)The PRA may, on the application of a PRA-authorised person with a Part 4A permission—

(a)impose a new requirement,

(b)vary a requirement imposed by the PRA under this section, or

(c)cancel such a requirement.

(6)The PRA may refuse an application under subsection (5) if it appears to it that it is desirable to do so in order to advance any of its objectives.

(7)The PRA must consult the FCA before imposing or varying a requirement.

Modifications etc. (not altering text)

55NRequirements under section 55L or 55M: further provisionsU.K.

(1)A requirement may, in particular, be imposed—

(a)so as to require the person concerned to take specified action, or

(b)so as to require the person concerned to refrain from taking specified action.

(2)A requirement may extend to activities which are not regulated activities.

(3)A requirement may be imposed by reference to the person's relationship with—

(a)the person's group, or

(b)other members of the person's group.

(4)A requirement may be expressed to expire at the end of such period as the regulator imposing it may specify, but the imposition of a requirement that expires at the end of a specified period does not affect the regulator's power to impose a new requirement.

(5)A requirement may refer to the past conduct of the person concerned (for example, by requiring the person concerned to review or take remedial action in respect of past conduct).

(6)In this section “requirement” means a requirement imposed under section 55L or 55M.

55OImposition of requirements on acquisition of controlU.K.

(1)This section applies if it appears to the appropriate regulator that—

(a)a person has acquired control over a UK authorised person who has a Part 4A permission, but

(b)there are no grounds for exercising its own-initiative requirement power.

(2)If it appears to the appropriate regulator that the likely effect of the acquisition of control on the UK authorised person, or on any of its activities, is uncertain, the appropriate regulator may—

(a)impose on the UK authorised person a requirement that could be imposed by that regulator under section 55L or 55M (as the case may be) on the giving of permission, or

(b)vary a requirement imposed by that regulator under that section on the UK authorised person.

(3)The appropriate regulator” means—

(a)in a case where the UK authorised person is a PRA-authorised person, the FCA or the PRA;

(b)in any other case, the FCA.

(4)This section does not affect any duty of the appropriate regulator to consult or obtain the consent of the other regulator in connection with the imposition of the requirement.

(5)Any reference to a person having acquired control is to be read in accordance with Part 12.

55PProhibitions and restrictionsU.K.

(1)This section applies if—

(a)on a person being given a Part 4A permission, either regulator imposes an assets requirement on that person,

(b)an assets requirement is imposed on an authorised person, or

(c)an assets requirement previously imposed on such a person is varied.

(2)A person on whom an assets requirement is imposed is referred to in this section as “A”.

(3)The “appropriate regulator” is the regulator which imposed the requirement.

(4)Assets requirement” means a requirement under section 55L or 55M—

(a)prohibiting the disposal of, or other dealing with, any of A's assets (whether in the United Kingdom or elsewhere) or restricting such disposals or dealings, or

(b)that all or any of A's assets, or all or any assets belonging to consumers but held by A or to A's order, must be transferred to and held by a trustee approved by the appropriate regulator.

(5)If the appropriate regulator—

(a)imposes a requirement of the kind mentioned in subsection (4)(a), and

(b)gives notice of the requirement to any institution with whom A keeps an account,

the notice has the effects mentioned in subsection (6).

(6)Those effects are that—

(a)the institution does not act in breach of any contract with A if, having been instructed by A (or on A's behalf) to transfer any sum or otherwise make any payment out of A's account, it refuses to do so in the reasonably held belief that complying with the instruction would be incompatible with the requirement, and

(b)if the institution complies with such an instruction, it is liable to pay to the appropriate regulator an amount equal to the amount transferred from, or otherwise paid out of, A's account in contravention of the requirement.

(7)If the appropriate regulator imposes a requirement of the kind mentioned in subsection (4)(b), no assets held by a person as trustee in accordance with the requirement may, while the requirement is in force, be released or dealt with except with the consent of the appropriate regulator.

(8)If, while a requirement of the kind mentioned in subsection (4)(b) is in force, A creates a charge over any assets of A held in accordance with the requirement, the charge is (to the extent that it confers security over the assets) void against the liquidator and any of A's creditors.

(9)Assets held by a person as trustee (“T”) are to be taken to be held by T in accordance with any requirement mentioned in subsection (4)(b) only if—

(a)A has given T written notice that those assets are to be held by T in accordance with the requirement, or

(b)they are assets into which assets to which paragraph (a) applies have been transposed by T on the instructions of A.

(10)A person who contravenes subsection (7) is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(11)Charge” includes a mortgage (or in Scotland a security over property).

(12)Subsections (7) and (9) do not affect any equitable interest or remedy in favour of a person who is a beneficiary of a trust as a result of a requirement of the kind mentioned in subsection (4)(b).

Exercise of power in support of overseas regulatorU.K.

55QExercise of power in support of overseas regulatorU.K.

(1)Either UK regulator's own-initiative powers may be exercised in respect of an authorised person at the request of, or for the purpose of assisting, an overseas regulator of a prescribed kind.

(2)Subsection (1) applies whether or not the UK regulator has powers which are exercisable in relation to the authorised person by virtue of any provision of Part 13.

(3)Subsection (1) does not affect any duty of one UK regulator to consult or obtain the consent of the other UK regulator in relation to the exercise of its own-initiative powers.

(4)If a request to a UK regulator for the exercise of its own-initiative powers has been made by an overseas regulator who is—

(a)of a prescribed kind, and

(b)acting in pursuance of provisions of a prescribed kind,

the UK regulator must, in deciding whether or not to exercise those powers in response to the request, consider whether it is necessary to do so in order to comply with an EU obligation.

(5)In deciding whether or not to do so, in any case in which the UK regulator does not consider that the exercise of its own-initiative powers is necessary in order to comply with an EU obligation, it may take into account in particular—

(a)whether in the country or territory of the overseas regulator concerned, corresponding assistance would be given to a United Kingdom regulatory authority;

(b)whether the case concerns the breach of a law, or other requirement, which has no close parallel in the United Kingdom or involves the assertion of a jurisdiction not recognised by the United Kingdom;

(c)the seriousness of the case and its importance to persons in the United Kingdom;

(d)whether it is otherwise appropriate in the public interest to give the assistance sought.

(6)The UK regulator may decide not to exercise its own-initiative powers, in response to a request, unless the overseas regulator concerned undertakes to make such contribution towards the cost of their exercise as the UK regulator considers appropriate.

(7)Subsection (6) does not apply if the UK regulator decides that it is necessary for it to exercise its own-initiative powers in order to comply with an EU obligation.

(8)In subsection (6) “request” means a request of a kind mentioned in subsection (1).

(9)In this section—

(a)UK regulator” means the FCA or the PRA;

(b)overseas regulator” means a regulator outside the United Kingdom;

(c)own-initiative powers”, in relation to the FCA or the PRA, means its own-initiative variation power and its own-initiative requirement power.

Connected personsU.K.

55RPersons connected with an applicantU.K.

(1)In considering—

(a)an application for a Part 4A permission,

(b)whether to vary or cancel a Part 4A permission,

(c)whether to impose or vary a requirement under this Part, or

(d)whether to give any consent required by any provision of this Part,

the regulator concerned may have regard to any person appearing to it to be, or likely to be, in a relationship with the applicant or a person given permission which is relevant.

(2)Before—

(a)giving permission in response to an application under section 55A made by a person who is connected with an EEA firm (other than an EEA firm falling within paragraph 5(e) of Schedule 3 (insurance and reinsurance intermediaries)), or

(b)cancelling or varying a Part 4A permission given to such a person,

the regulator concerned must in prescribed circumstances consult the firm's home state regulator.

(3)A person (“A”) is connected with an EEA firm if—

(a)A is a subsidiary undertaking of the firm, or

(b)A is a subsidiary undertaking of a parent undertaking of the firm.

Additional permissionsU.K.

55SDuty of FCA or PRA to consider other permissionsU.K.

(1)“Additional Part 4A permission” —

(a)in relation to either regulator, means a Part 4A permission which is in force in relation to an EEA firm or a Treaty firm, and

(b)in relation to the FCA, also includes a Part 4A permission which is in force in relation to a person authorised as a result of paragraph 1(1) of Schedule 5.

(2)If either regulator is considering whether, and if so how, to exercise its own-initiative variation power or its own-initiative requirement power in relation to an additional Part 4A permission, it must take into account—

(a)the home state authorisation of the authorised person concerned,

(b)any relevant directive, and

(c)relevant provisions of the Treaty.

Persons whose interests are protectedU.K.

55TPersons whose interests are protectedU.K.

For the purpose of any provision of this Part which refers to the FCA's operational objectives, or the PRA's objectives in relation to the exercise of a power in relation to a particular person, it does not matter whether there is a relationship between that person and the persons whose interests will be protected by the exercise of the power.

ProcedureU.K.

55UApplications under this PartU.K.

(1)An application for a Part 4A permission must—

(a)contain a statement of the regulated activity or regulated activities which the applicant proposes to carry on and for which the applicant wishes to have permission, and

(b)give the address of a place in the United Kingdom for service on the applicant of any notice or other document which is required or authorised to be served on the applicant under this Act.

(2)An application for the variation of a Part 4A permission must contain a statement—

(a)of the desired variation, and

(b)of the regulated activity or regulated activities which the applicant proposes to carry on if the permission is varied.

(3)An application for the variation of a requirement imposed under section 55L or 55M or for the imposition of a new requirement must contain a statement of the desired variation or requirement.

(4)An application under this Part must—

(a)be made in such manner as the regulator to which it is to be made may direct, and

(b)contain, or be accompanied by, such other information as that regulator may reasonably require.

(5)At any time after the application is received and before it is determined, the appropriate regulator may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application or, as the case requires, to decide whether to give consent.

(6)In subsection (5), the “appropriate regulator” means—

(a)in a case where the application is made to the FCA, the FCA;

(b)in a case where the application is made to the PRA, the FCA or the PRA.

(7)Different directions may be given, and different requirements imposed, in relation to different applications or categories of application.

(8)Each regulator may require an applicant to provide information which the applicant is required to provide to it under this section in such form, or to verify it in such a way, as the regulator may direct.

(9)The PRA must consult the FCA before—

(a)giving a direction under this section in relation to a class of applications, or

(b)imposing a requirement under this section in relation to a class of applications.

55VDetermination of applicationsU.K.

(1)An application under this Part must be determined by the regulator to which it is required to be made (“the appropriate regulator”) before the end of the period of 6 months beginning with the date on which it received the completed application.

(2)The appropriate regulator may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within 12 months beginning with the date on which it received the application.

(3)Where the application cannot be determined by the appropriate regulator without the consent of the other regulator, the other regulator's decision must also be made within the period required by subsection (1) or (2).

(4)The applicant may withdraw the application, by giving the appropriate regulator written notice, at any time before the appropriate regulator determines it.

(5)If the appropriate regulator grants an application—

(a)for Part 4A permission,

(b)for the variation or cancellation of a Part 4A permission,

(c)for the variation or cancellation of a requirement imposed under section 55L or 55M, or

(d)for the imposition of a new requirement under either of those sections,

it must give the applicant written notice.

(6)The notice must state the date from which the permission, variation, cancellation or requirement has effect.

(7)A notice under this section which is given by the PRA and relates to the grant of an application for Part 4A permission or for the variation of a Part 4A permission must state that the FCA has given its consent to the grant of the application.

55WApplications under this Part: communications between regulatorsU.K.

The PRA must as soon as practicable notify the FCA of the receipt or withdrawal of—

(a)an application for permission under section 55A,

(b)an application under section 55I, or

(c)an application under section 55M(5).

55XDetermination of applications: warning notices and decision noticesU.K.

(1)If a regulator proposes—

(a)to give a Part 4A permission but to exercise its power under section 55E(5)(a) or (b) or 55F(4)(a) or (b),

(b)to give a Part 4A permission but to exercise its power under section 55L(1) or 55M(1) in connection with the application for permission,

(c)to vary a Part 4A permission on the application of an authorised person but to exercise its power under section 55E(5)(a) or (b) or 55F(4)(a) or (b),

(d)to vary a Part 4A permission but to exercise its power under section 55L(1) or 55M(1) in connection with the application for variation, or

(e)in the case of the FCA, to exercise its power under section 55L(1) in connection with an application to the PRA for a Part 4A permission or the variation of a Part 4A permission,

it must give the applicant a warning notice.

(2)If a regulator proposes to refuse an application made under this Part, it must (unless subsection (3) applies) give the applicant a warning notice.

(3)This subsection applies if it appears to the regulator that—

(a)the applicant is an EEA firm, and

(b)the application is made with a view to carrying on a regulated activity in a manner in which the applicant is, or would be, entitled to carry on that activity in the exercise of an EEA right whether through a United Kingdom branch or by providing services in the United Kingdom.

(4)If a regulator decides—

(a)to give a Part 4A permission but to exercise its power under section 55E(5)(a) or (b) or 55F(4)(a) or (b),

(b)to give a Part 4A permission but to exercise its power under section 55L(1) or 55M(1) in connection with the giving of the permission,

(c)to vary a Part 4A permission on the application of an authorised person but to exercise its power under section 55E(5)(a) or (b) or 55F(4)(a) or (b),

(d)to vary a Part 4A permission on the application of an authorised person but to exercise its power under section 55L(1) or 55M(1) in connection with the variation,

(e)in the case of the FCA, to exercise its power under section 55L(1) in connection with an application to the PRA for a Part 4A permission or the variation of a Part 4A permission, or

(f)to refuse an application under this Part,

it must give the applicant a decision notice.

55YExercise of own-initiative power: procedureU.K.

(1)This section applies to an exercise of either regulator's own-initiative variation power or own-initiative requirement power in relation to an authorised person (“A”).

(2)A variation of a permission or the imposition or variation of a requirement takes effect—

(a)immediately, if the notice given under subsection (4) states that that is the case,

(b)on such date as may be specified in the notice, or

(c)if no date is specified in the notice, when the matter to which the notice relates is no longer open to review.

(3)A variation of a permission, or the imposition or variation of a requirement, may be expressed to take effect immediately (or on a specified date) only if the regulator concerned, having regard to the ground on which it is exercising its own-initiative variation power or own-initiative requirement power, reasonably considers that it is necessary for the variation, or the imposition or variation of the requirement, to take effect immediately (or on that date).

(4)If either regulator proposes to vary a Part 4A permission or to impose or vary a requirement, or varies a Part 4A permission or imposes or varies a requirement, with immediate effect, it must give A written notice.

(5)The notice must—

(a)give details of the variation of the permission or the requirement or its variation,

(b)state the regulator's reasons for the variation of the permission or the imposition or variation of the requirement,

(c)inform A that A may make representations to the regulator within such period as may be specified in the notice (whether or not A has referred the matter to the Tribunal),

(d)inform A of when the variation of the permission or the imposition or variation of the requirement takes effect, and

(e)inform A of A's right to refer the matter to the Tribunal.

(6)The regulator may extend the period allowed under the notice for making representations.

(7)If, having considered any representations made by A, the regulator decides—

(a)to vary the permission, or impose or vary the requirement, in the way proposed, or

(b)if the permission has been varied or the requirement imposed or varied, not to rescind the variation of the permission or the imposition or variation of the requirement,

it must give A written notice.

(8)If, having considered any representations made by A, the regulator decides—

(a)not to vary the permission, or impose or vary the requirement, in the way proposed,

(b)to vary the permission or requirement in a different way, or impose a different requirement, or

(c)to rescind a variation or requirement which has effect,

it must give A written notice.

(9)A notice under subsection (7) must inform A of A's right to refer the matter to the Tribunal.

(10)A notice under subsection (8)(b) must comply with subsection (5).

(11)If a notice informs A of A's right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.

(12)For the purposes of subsection (2)(c), whether a matter is open to review is to be determined in accordance with section 391(8).

55ZCancellation of Part 4A permission: procedureU.K.

(1)If a regulator proposes to cancel an authorised person's Part 4A permission otherwise than at the person's request, it must give the person a warning notice.

(2)If a regulator decides to cancel an authorised person's Part 4A permission otherwise than at the person's request, it must give the person a decision notice.

NotificationU.K.

55Z1Notification of ESMAU.K.

A regulator must notify ESMA of—

(a)the giving by it of a Part 4A permission to an investment firm, where the regulated activities to which the permission relates are investment services and activities,

(b)the giving by it of a Part 4A permission to a management company (as defined in section 237(2)), where the regulated activities to which the permission relates fall within paragraph 8 of Schedule 2,

(c)the cancellation by it of a Part 4A permission of a description falling within paragraph (b), or

(d)the cancellation by it of a Part 4A permission under section 55J(6), in reliance on any one or more of the conditions in section 55K(1)(b) to (d).

Modifications etc. (not altering text)

55Z2Notification of EBAU.K.

(1)A regulator must notify EBA of—

(a)the giving by it of a Part 4A permission to a credit institution, where the regulated activity to which the permission relates falls within paragraph 4 of Schedule 2, or

(b)the cancellation by it of a Part 4A permission of a description falling within paragraph (a).

(2)Credit institution” has the meaning given in section 1H(8).

Modifications etc. (not altering text)

References to the TribunalU.K.

55Z3Right to refer matters to the TribunalU.K.

(1)An applicant who is aggrieved by the determination of an application made under this Part may refer the matter to the Tribunal.

(2)An authorised person who is aggrieved by the exercise by either regulator of its own-initiative variation power or its own-initiative requirement power may refer the matter to the Tribunal.

InterpretationU.K.

55Z4Interpretation of Part 4AU.K.

In this Part—

Part VU.K. Performance of Regulated Activities

Modifications etc. (not altering text)

C43Pt. V (ss. 56-71) modified (1.12.2001) by S.I. 2001/3592, arts. 1(2), 114(3)(a), 128(3)(a) (with art. 23(2))

Prohibition ordersU.K.

56 Prohibition orders.U.K.

[F50(1)The FCA may make a prohibition order if it appears to it that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by—

(a)an authorised person,

(b)a person who is an exempt person in relation to that activity, or

(c)a person to whom, as a result of Part 20, the general prohibition does not apply in relation to that activity.

(1A)The PRA may make a prohibition order if it appears to it that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by—

(a)a PRA-authorised person, or

(b)a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.]

(2)[F51A “prohibition order” is an order] prohibiting the individual from performing a specified function, any function falling within a specified description or any function.

(3)A prohibition order may relate to—

(a)a specified regulated activity, any regulated activity falling within a specified description or all regulated activities;

[F52(b)all persons falling within subsection (3A) or a particular paragraph of that subsection or all persons within a specified class of person falling within a particular paragraph of that subsection.]

[F53(3A)A person falls within this subsection if the person is—

(a)an authorised person,

(b)an exempt person, or

(c)a person to whom, as a result of Part 20, the general prohibition does not apply in relation to a regulated activity.]

(4)An individual who performs or agrees to perform a function in breach of a prohibition order is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(5)In proceedings for an offence under subsection (4) it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(6)[F54A person falling within subsection (3A)] must take reasonable care to ensure that no function of his, in relation to the carrying on of a regulated activity, is performed by a person who is prohibited from performing that function by a prohibition order.

(7)[F55The regulator that has made a prohibition order] may, on the application of the individual named in [F56the order], vary or revoke it.

[F57(7A)If—

(a)the FCA proposes to vary or revoke a prohibition order, and

(b)as a result of the proposed variation or revocation, an individual—

(i)will no longer be prohibited from performing a function of interest to the PRA, or

(ii)will be prohibited from performing such a function,

the FCA must consult the PRA before varying or revoking the order.

(7B)A function is of interest to the PRA if it is performed in relation to a regulated activity carried on by—

(a)a PRA-authorised person, or

(b)a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.

(7C)The PRA must consult the FCA before varying or revoking a prohibition order.]

F58(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)Specified” means specified in the prohibition order.

Textual Amendments

F50S. 56(1)(1A) substituted for s. 56(1) (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(2), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F51Words in s. 56(2) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(3), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F52S. 56(3)(b) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(4), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F54Words in s. 56(6) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(6), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F55Words in s. 56(7) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(7)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F56Words in s. 56(7) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(7)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F57S. 56(7A)-(7C) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(8), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F58S. 56(8) omitted (1.4.2013) by virtue of Financial Services Act 2012 (c. 21), ss. 13(9), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C44S. 56 amended (temp. from 3.9.2001 to 1.12.2001) by S.I. 2001/2659, arts. 1(2), 3(3); S.I. 2001/3538, art. 2(1)

S. 56 modified (temp. from 31.10.2001) by S.I. 2001/3374, arts. 1, 11

S. 56 extended (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 79(1); S.I. 2001/3538, art. 2(1)

C47S. 56(7) extended (1.12.2001) by S.I. 2001/3592, arts. 1(2), 55(5) (with art. 23(2))

C48S. 56(8) amended (temp. from 3.9.2001 to 1.12.2001) by S.I. 2001/2659, arts. 1(2), 3(4); S.I. 2001/3538, art. 2(1)

Commencement Information

I6S. 56 wholly in force at 1.12.2001; s. 56 not in force at Royal Assent see s. 431(2); s. 56 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 56 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

57 Prohibition orders: procedure and right to refer to Tribunal.U.K.

(1)If [F59a regulator] proposes to make a prohibition order it must give the individual concerned a warning notice.

(2)The warning notice must set out the terms of the prohibition.

(3)If [F60a regulator] decides to make a prohibition order it must give the individual concerned a decision notice.

(4)The decision notice must—

(a)name the individual to whom the prohibition order applies;

(b)set out the terms of the order; and

(c)be given to the individual named in the order.

(5)A person against whom a decision to make a prohibition order is made may refer the matter to the Tribunal.

[F61(6)If—

(a)the FCA proposes to make a prohibition order, and

(b)as a result of the proposed order, an individual will be prohibited from performing a function of interest to the PRA,

the FCA must consult the PRA before giving a warning notice under this section.

(7)A function is of interest to the PRA if it is performed in relation to a regulated activity carried on by—

(a)a PRA-authorised person, or

(b)a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.

(8)The PRA must consult the FCA before giving a warning notice under this section.]

Textual Amendments

Modifications etc. (not altering text)

C49S. 57 excluded (1.12.2001) by S.I. 2001/3592, arts. 1(2), 110(3) (with art. 23(2))

C51S. 57(1) extended (1.12.2001) by S.I. 2001/3592, arts. 1(2), 55(1) (with art. 23(2))

Commencement Information

I7S. 57 wholly in force at 1.12.2001; s. 57 not in force at Royal Assent see s. 431(2); s. 57 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 57 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

58 Applications relating to prohibitions: procedure and right to refer to Tribunal.U.K.

(1)This section applies to an application for the variation or revocation of a prohibition order.

(2)If the [F62appropriate regulator] decides to grant the application, it must give the applicant written notice of its decision.

(3)If the [F62appropriate regulator] proposes to refuse the application, it must give the applicant a warning notice.

(4)If the [F62appropriate regulator] decides to refuse the application, it must give the applicant a decision notice.

(5)If the [F62appropriate regulator] gives the applicant a decision notice, he may refer the matter to the Tribunal.

[F63(6)The appropriate regulator” means the regulator to which the application is made.]

Textual Amendments

Modifications etc. (not altering text)

C52S. 58 excluded (1.12.2001) by S.I. 2001/3592, arts. 1(2), 110(3) (with art. 23(2))

Commencement Information

I8S. 58 wholly in force at 1.12.2001; s. 58 not in force at Royal Assent see s. 431(2); s. 58 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 58 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

ApprovalU.K.

59 Approval for particular arrangements.U.K.

(1)An authorised person (“A”) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by A in relation to the carrying on by A of a regulated activity, unless [F64the appropriate regulator] approves the performance by that person of the controlled function to which the arrangement relates.

(2)An authorised person (“A”) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by a contractor of A in relation to the carrying on by A of a regulated activity, unless [F65the appropriate regulator] approves the performance by that person of the controlled function to which the arrangement relates.

[F66(3)“Controlled function”—

(a)in relation to the carrying on of a regulated activity by a PRA-authorised person, means a function of a description specified in rules made by the FCA or the PRA, and

(b)in relation to the carrying on of a regulated activity by any other authorised person, means a function of a description specified in rules made by the FCA.

(4)“The appropriate regulator”—

(a)in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA, and

(b)in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA with the consent of the FCA.

(5)The FCA may specify a description of function under subsection (3)(a) or (b) only if, in relation to the carrying on of a regulated activity by an authorised person, it is satisfied that the function is—

(a)a customer-dealing function, or

(b)a significant-influence function.

(6)The PRA may specify a description of function under subsection (3)(a) only if, in relation to the carrying on of a regulated activity by a PRA-authorised person, it is satisfied that the function is a significant-influence function.

(7)In determining whether a function is a significant-influence function, the FCA or the PRA may take into account the likely consequences of a failure to discharge the function properly.

(7A)Customer-dealing function”, in relation to the carrying on of a regulated activity by an authorised person (“A”), means a function that will involve the person performing it in dealing with—

(a)customers of A, or

(b)property of customers of A,

in a manner substantially connected with the carrying on of the activity.

(7B)Significant-influence function”, in relation to the carrying on of a regulated activity by an authorised person, means a function that is likely to enable the person responsible for its performance to exercise a significant influence on the conduct of the authorised person's affairs, so far as relating to the activity.]

(8)Neither subsection (1) nor subsection (2) applies to an arrangement which allows a person to perform a function if the question of whether he is a fit and proper person to perform the function is reserved under any of the single market directives [F67or the emission allowance auctioning regulation] to an authority in a country or territory outside the United Kingdom.

F68(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10)“Arrangement”—

(a)means any kind of arrangement for the performance of a function of A which is entered into by A or any contractor of his with another person; and

(b)includes, in particular, that other person’s appointment to an office, his becoming a partner or his employment (whether under a contract of service or otherwise).

(11)Customer”, in relation to an authorised person, means a person who is using, or who is or may be contemplating using, any of the services provided by the authorised person.

Textual Amendments

F64Words in s. 59(1) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 14(1)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F65Words in s. 59(2) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 14(1)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F66S. 59(3)-(7B) substituted for s. 59(3)-(7) (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 14(1)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C54S. 59 extended (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 74(2), 76(2); S.I. 2001/3538, art. 2(1)

S. 59 extended (1.12.2001) by S.I. 2001/3592, arts. 1(2), 49(1) (with art. 23(2))

C55S. 59 modified (29.9.2008 at 8.00 a.m.) by The Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 (S.I. 2008/2546), art. 15(1)

C56S. 59 modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 3}

C57S. 59 modified (1.1.2010) by The Northern Rock plc Transfer Order 2009 (S.I. 2009/3226), arts. 1(2)(b), 10

C58S. 59(1) extended (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 75(2); S.I. 2001/3538, art. 2(1)

Commencement Information

I9S. 59 wholly in force at 1.12.2001; s. 59 not in force at Royal Assent see s. 431(2); s. 59 in force for specified purposes at 18.6.2001 by S.I. 2001/1820, art. 2, Sch.; s. 59 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 59 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

[F6959ASpecifying functions as controlled functions: supplementaryU.K.

(1)The FCA must—

(a)keep under review the exercise of its power under section 59(3)(a) to specify any significant-influence function as a controlled function, and

(b)exercise that power in a way that it considers will minimise the likelihood that approvals fall to be given by both the FCA and the PRA in respect of the performance by a person of significant-influence functions in relation to the carrying on of a regulated activity by the same PRA-authorised person.

(2)The FCA and the PRA must each consult the other before exercising any power under section 59(3)(a).

(3)Any reference in this section to the exercise of a power includes its exercise by way of amendment or revocation of provision previously made in the exercise of the power.

(4)Approval” means an approval under section 59.

(5)Any expression which is used both in this section and section 59 has the same meaning in this section as in that section.

Textual Amendments

F69Ss. 59A, 59B inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), ss. 14(2), 122(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

59BRole of FCA in relation to PRA decisionsU.K.

(1)The FCA may arrange with the PRA that in such cases as may be described in the arrangements the PRA may give approval under section 59 without obtaining the consent of the FCA.

(2)Arrangements under this section must be in writing, and must specify the date on which they come into force.

(3)The regulators must publish any arrangements under this section in such manner as they think fit.

(4)Section 59(4)(b) has effect subject to any arrangements in force under this section.]

Textual Amendments

F69Ss. 59A, 59B inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), ss. 14(2), 122(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

60 Applications for approval.U.K.

(1)An application for the [F70appropriate regulator's] approval under section 59 may be made by the authorised person concerned.

(2)The application must—

(a)be made in such manner as the [F70appropriate regulator] may direct; and

(b)contain, or be accompanied by, such information as the [F70appropriate regulator] may reasonably require.

[F71(3)At any time after the application is received and before it is determined, the appropriate regulator may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application or, as the case requires, to decide whether to give consent.]

(4)The [F70appropriate regulator] may require an applicant to present information which he is required to give under this section in such form, or to verify it in such a way, as the [F70appropriate regulator] may direct.

(5)Different directions may be given, and different requirements imposed, in relation to different applications or categories of application.

(6)The authorised person concerned” includes a person who has applied for permission under [F72Part 4A] and will be the authorised person concerned if permission is given.

[F73(7)The PRA must consult the FCA before—

(a)giving a direction under subsection (2)(a) in relation to a class of applicants, or

(b)imposing a requirement under subsection (2)(b) on a class of applicants.

(8)The PRA must as soon as practicable notify the FCA of the receipt or withdrawal of an application to the PRA, unless the case is one in which by virtue of arrangements under section 59B the consent of the FCA is not required.

(9)“The appropriate regulator”—

(a)in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA;

(b)in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA, and for the purposes of subsection (3) also includes the FCA in cases where the consent of the FCA is required.]

Textual Amendments

F70Words in s. 60 substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 4(1) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F71S. 60(3) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 4(2) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F72Words in s. 60(6) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 4(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F73S. 60(7)-(9) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 4(4) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C59S. 60 amended (temp. from 3.9.2001 to 1.12.2001) by S.I. 2001/2659, arts. 1(2), 3(3); S.I. 2001/3538, art. 2(1)

S. 60 modified (temp. from 31.10.2001) by S.I. 2001/3374, arts. 1, 11

S. 60: “the authorised person concerned” extended (1.12.2001) by S.I. 2001/2511, regs. 1(1), 10; S.I. 2001/3538, art. 2(1)

S. 60 extended (1.12.2001) by S.I. 2001/3592, arts. 1(2), 50(1), 51(1), 53(1) (with art. 23(2))

C61S. 60 modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 3}

C63S. 60(3) extended (1.12.2001) by S.I. 2001/3592, arts. 1(2), 50(5) (with art. 23(2))

Commencement Information

I10S. 60 wholly in force at 1.12.2001; s. 60 not in force at Royal Assent see s. 431(2); s. 60(2)(4) in force for specified purposes at 18.6.2001 by S.I. 2001/1820, art. 2, Sch.; s. 60 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 60 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

61 Determination of applications.U.K.

(1)[F74The regulator to which an application is made under section 60 may grant the application] only if it is satisfied that the person in respect of whom the application is made (“the candidate”) is a fit and proper person to perform the function to which the application relates.

(2)In deciding that question, [F75the regulator] may have regard (among other things) to whether the candidate, or any person who may perform a function on his behalf—

(a)has obtained a qualification,

(b)has undergone, or is undergoing, training, or

(c)possesses a level of competence,

required by general rules [F76made by that regulator] in relation to persons performing functions of the kind to which the application relates.

[F77(2A)Subsections (1) and (2) apply in relation to the giving by the FCA of any required consent as they apply in relation to the grant of the application.]

(3)[F78The regulator to which an application is made under section 60 must, before the end of the period for consideration, determine] whether—

(a)to grant the application; or

(b)to give a warning notice under section 62(2).

[F79(3A)The period for consideration”—

(a)in any case where the application under section 60 is made by a person applying for permission under Part 4A (see section 60(6)), means whichever ends last of—

(i)the period within which the application for that permission must be determined under section 55V(1) or (2), and

(ii)the period of 3 months beginning with the date on which the regulator receives the application under section 60, and

(b)in any other case, means the period of 3 months beginning with the date on which the regulator receives the application under section 60.]

(4)If [F80a regulator] imposes a requirement under section 60(3), the period for consideration stops running on the day on which the requirement is imposed but starts running again—

(a)on the day on which the required information is received by [F80a regulator]; or

(b)if the information is not provided on a single day, on the last of the days on which it is received by [F80a regulator].

(5)A person who makes an application under section 60 may withdraw his application by giving written notice to the [F81regulator to which the application was made] at any time before the [F82regulator] determines it, but only with the consent of—

(a)the candidate; and

(b)the person by whom the candidate is to be retained to perform the function concerned, if not the applicant.

Textual Amendments

Modifications etc. (not altering text)

C64S. 61 modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 3}

C66S. 61(3) modified (1.12.2001) by S.I. 2001/3592, arts. 1(2), 49(3), 53(2) (with art. 23(2))

Commencement Information

I11S. 61 wholly in force at 1.12.2001; s. 61 not in force at Royal Assent see s. 431(2); s. 61 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 61 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

62 Applications for approval: procedure and right to refer to Tribunal.U.K.

(1)[F83If the regulator to which an application is made under section 60 (“an application”) decides to grant the application, it] must give written notice of its decision to each of the interested parties.

(2)If [F84the regulator to which an application is made] proposes to refuse [F85the application], it must give a warning notice to each of the interested parties.

(3)If [F84the regulator to which an application is made] decides to refuse [F85the application], it must give a decision notice to each of the interested parties.

(4)If [F84the regulator to which an application is made] decides to refuse [F85the application], each of the interested parties may refer the matter to the Tribunal.

(5)“The interested parties”, in relation to an application, are—

(a)the applicant;

(b)the person in respect of whom the application is made (“A”); and

(c)the person by whom A’s services are to be retained, if not the applicant.

Textual Amendments

Modifications etc. (not altering text)

C69S. 62 modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 3}

Commencement Information

I12S. 62 wholly in force at 1.12.2001; s. 62 not in force at Royal Assent see s. 431(2); s. 62 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 62 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

63 Withdrawal of approval.U.K.

[F86(1)The FCA may withdraw an approval under section 59 given by the FCA or the PRA in relation to the performance by a person of a function if the FCA considers that the person is not a fit and proper person to perform the function.

(1A)The PRA may withdraw an approval under section 59 in relation to the performance by a person (“A”) of a function if—

(a)the PRA gave the approval, or the FCA gave the approval and the function is a significant-influence function performed in relation to the carrying on by a PRA-authorised person of a regulated activity, and

(b)the PRA considers that A is not a fit and proper person to perform the function.

(1B)Significant-influence function” has the same meaning as in section 59.

(1C)Before one regulator withdraws an approval given by the other regulator, it must consult the other regulator.]

(2)When considering whether to withdraw [F87an approval, the FCA or the PRA may take into account any matter which could be taken into account in] considering an application made under section 60 in respect of the performance of the function to which the approval relates [F88(on the assumption, if it is not the case, that the application was one falling to be considered by it)].

(3)If [F89a regulator] proposes to withdraw [F90an approval] , it must give each of the interested parties a warning notice.

(4)If [F89a regulator] decides to withdraw [F90an approval], it must give each of the interested parties a decision notice.

(5)If [F89a regulator] decides to withdraw [F90an approval], each of the interested parties may refer the matter to the Tribunal.

(6)“The interested parties”, in relation to an approval, are—

(a)the person on whose application it was given (“A”);

(b)the person in respect of whom it was given (“B”); and

(c)the person by whom B’s services are retained, if not A.

Textual Amendments

F86S. 63(1)-(1C) substituted for s. 63(1) (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 14(3), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F89Words in s. 63(3)-(5) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 7(3)(a) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F90Words in s. 63(3)-(5) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 7(3)(b) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C74S. 63(1)(3)-(6) excluded (1.12.2001) by S.I. 2001/3592, arts. 1(2), 61(2) (with art. 23(2))

C75S. 63(3) extended (1.12.2001) by S.I. 2001/3592, arts. 1(2), 52(2) (with art. 23(2))

C76S. 63(4) modified (1.12.2001) by S.I. 2001/3592, arts. 1(2), 75(2) (with art. 23(2))

Commencement Information

I13S. 63 wholly in force at 1.12.2001; s. 63 not in force at Royal Assent see s. 431(2); s. 63 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 63 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)

[F91Performance of controlled functions without approvalU.K.

Textual Amendments

F91Ss. 63A-63D and preceding cross-heading inserted (8.6.2010) by Financial Services Act 2010 (c. 28), ss. 11, 26(2)(b)

63APower to impose penaltiesU.K.

(1)If the [F92appropriate regulator] is satisfied that—

(a)a person (“P”) has at any time performed a controlled function without approval, and

(b)at that time P knew, or could reasonably be expected to have known, that P was performing a controlled function without approval,

it may impose a penalty on P of such amount as it considers appropriate.

(2)For the purposes of this section P performs a controlled function 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 section 59.

(3)The [F92appropriate regulator] 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).

(4)The limitation period” means the period of three years beginning with the first day on which the [F92appropriate regulator] knew that the person concerned had performed a controlled function without approval.

(5)For this purpose the [F92appropriate regulator] 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.

[F93(5A)The appropriate regulator”—

(a)in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA, and

(b)in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA.]

(6)Any [F94other] expression which is used both in this section and section 59 has the same meaning in this section as in that section.

63BProcedure and right to refer to TribunalU.K.

(1)If [F95a regulator] proposes to impose a penalty on a person under section 63A, it must give the person a warning notice.

(2)A warning notice must state the amount of the penalty.

(3)If [F95a regulator] 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 [F95a regulator] decides to impose a penalty on a person under section 63A, the person may refer the matter to the Tribunal.

Textual Amendments

Modifications etc. (not altering text)

63CStatement of policyU.K.

(1)[F96Each regulator] 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.

(2)[F97Each regulator's] policy in determining whether a penalty should be imposed, and 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 extent to which the person could reasonably be expected to have known that a controlled function was performed without approval;

(c)the length of the period during which the person performed a controlled function without approval; and

(d)whether the person on whom the penalty is to be imposed is an individual.

(3)[F98Each regulator's] policy in determining whether a penalty should be imposed on a person must also include having regard to the appropriateness of taking action against the person instead of, or in addition to, taking action against an authorised person.

(4)A statement issued under this section must include an indication of the circumstances in which [F99the regulator that has issued the statement] would expect to be satisfied that a person could reasonably be expected to have known that the person was performing a controlled function without approval.

(5)[F100A regulator] may at any time alter or replace a statement issued [F101by it] under this section.

(6)If a statement issued under this section is altered or [F102replaced by a regulator, the regulator] must issue the altered or replaced statement.

(7)[F103A regulator] must, without delay, give the Treasury a copy of any statement which it publishes under this section.

(8)A statement issued under this section [F104by a regulator] must be published by the [F105regulator] in the way appearing to the [F105regulator] to be best calculated to bring it to the attention of the public.

(9)The [F106regulator] may charge a reasonable fee for providing a person with a copy of the statement.

(10)In exercising, or deciding whether to exercise, its power under section 63A in the case of any particular person, [F107a regulator] must have regard to any statement of policy published [F108by it] under this section and in force at a time when the person concerned performed a controlled function without approval.

Textual Amendments

F96Words in s. 63C(1) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(2) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F97Words in s. 63C(2) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F98Words in s. 63C(3) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F99Words in s. 63C(4) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(4) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F100Words in s. 63C(5) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(5)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F101Words in s. 63C(5) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(5)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F102Words in s. 63C(6) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(6) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F103Words in s. 63C(7) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(7) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F104Words in s. 63C(8) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(8)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F105Word in s. 63C(8) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(8)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F106Word in s. 63C(9) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(9) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F107Words in s. 63C(10) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(10)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F108Words in s. 63C(10) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 10(10)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

63DStatement of policy: procedureU.K.

(1)Before [F109a regulator issues] a statement under section 63C, the [F110regulator] must publish a draft of the proposed statement in the way appearing to the [F110regulator] 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 [F111regulator] within a specified time.

(3)Before issuing the proposed statement, the [F112regulator] must have regard to any representations made to it in accordance with subsection (2).

(4)If the [F113regulator] issues the proposed statement it must publish an account, in general terms, of—

(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 [F114regulator], significant, the [F114regulator] must (in addition to complying with subsection (4)) publish details of the difference.

(6)[F115A regulator] may charge a reasonable fee for providing a person with a copy of a draft published [F116by it] under subsection (1).

(7)This section also applies to a proposal to alter or replace a statement.]

Textual Amendments

F109Words in s. 63D(1) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(2)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F110Word in s. 63D(1) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(2)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F111Word in s. 63D(2) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F112Word in s. 63D(3) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F113Word in s. 63D(4) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F114Word in s. 63D(5) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F115Words in s. 63D(6) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(4)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F116Words in s. 63D(6) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 11(4)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

Conduct [F117of approved persons]U.K.

Textual Amendments

F117Words in cross-heading before s. 64 inserted (8.6.2010) by Financial Services Act 2010 (c. 28), ss. 24(1), 26(2)(d)(e), Sch. 2 para. 7

64 Conduct: statements and codes.U.K.

[F118(1)The FCA may issue statements of principle with respect to the conduct expected of persons in relation to whom either regulator has given its approval under section 59.

(1A)The PRA may issue statements of principle with respect to—

(a)the conduct expected of persons in relation to whom it has given its approval under section 59, and

(b)the conduct expected of persons in relation to whom the FCA has given its approval under section 59 in respect of the performance by them of significant-influence functions in relation to the carrying on by PRA-authorised persons of regulated activities.

(1B)A statement of principle issued by either regulator may relate to conduct expected of persons in relation to—

(a)the performance by them of controlled functions, or

(b)the performance by them of any other functions in relation to the carrying on by authorised persons of regulated activities.]

(2)If [F119a regulator] issues a statement of principle under subsection (1) [F120or (1A)], it must also issue a code of practice for the purpose of helping to determine whether or not a person’s conduct complies with the statement of principle.

(3)A code issued under subsection (2) may specify—

(a)descriptions of conduct which, in the opinion of the [F121regulator issuing the code], comply with a statement of principle;

(b)descriptions of conduct which, in the opinion of the [F121regulator issuing the code], do not comply with a statement of principle;

(c)factors which, in the opinion of the [F121regulator issuing the code], are to be taken into account in determining whether or not a person’s conduct complies with a statement of principle.

(4)[F122A regulator] may at any time alter or replace a statement or code issued [F123by it] under this section.

(5)If a statement or code is altered or replaced [F124by a regulator], the altered or replacement statement or code must be issued by the [F125regulator].

(6)A statement or code issued under this section must be published by [F126the regulator that issued it] in the way appearing to [F127that regulator] to be best calculated to bring it to the attention of the public.

(7)A code published under this section and in force at the time when any particular conduct takes place may be relied on so far as it tends to establish whether or not that conduct complies with a statement of principle.

(8)Failure to comply with a statement of principle under this section does not of itself give rise to any right of action by persons affected or affect the validity of any transaction.

(9)A person is not to be taken to have failed to comply with a statement of principle if he shows that, at the time of the alleged failure, it or its associated code of practice had not been published.

(10)[F128A regulator] must, without delay, give the Treasury a copy of any statement or code which it publishes under this section.

(11)The power under this section to issue statements of principle and codes of practice—

(a)includes power to make different provision in relation to persons, cases or circumstances of different descriptions; and

[F129(b)is to be treated for the purposes of section 1B(6)(a) as part of the FCA's rule-making functions (where the power is exercisable by the FCA) and is to be treated for the purposes of section 2J(1)(a) as part of the PRA's rule-making functions (where the power is exercisable by the PRA).]

(12)[F130A regulator] may charge a reasonable fee for providing a person with a copy of a statement or code published [F131by it] under this section.

[F132(13)Any expression which is used both in this section and section 59 has the same meaning in this section as in that section.]

Textual Amendments

F118S. 64(1)-(1B) substituted for s. 64(1) (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), ss. 14(4), 122(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F119Words in s. 64(2) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(2)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F120Words in s. 64(2) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(2)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F121Words in s. 64(3)(a)-(c) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F122Words in s. 64(4) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(4)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F123Words in s. 64(4) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(4)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F124Words in s. 64(5) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(5)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F125Word in s. 64(5) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(5)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F126Words in s. 64(6) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(6)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F127Words in s. 64(6) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(6)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F128Words in s. 64(10) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(7) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F129S. 64(11)(b) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(8) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F130Words in s. 64(12) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(9)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F131Words in s. 64(12) inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(9)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F132S. 64(13) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 12(10) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

65 Statements and codes: procedure.U.K.

[F133(1)Before a regulator issues a statement or code under section 64, it must—

(a)consult the other regulator; and

(b)after doing so, publish a draft of the statement or code in the way appearing to it to be best calculated to bring the statement or code to the attention of the public.

(1A)The duty of the FCA to consult the PRA under subsection (1)(a) applies only in so far as the statement or code applies to persons in relation to whom approval is given under section 59 in respect of the performance by them of significant-influence functions (within the meaning of that section) in relation to the carrying on by PRA-authorised persons of regulated activities.]

(2)The draft must be accompanied by —

(a)a cost benefit analysis; and

(b)notice that representations about the proposal may be made to [F134the regulator publishing the draft] within a specified time.

(3)Before [F135a regulator issues] the proposed statement or code, [F136it] must have regard to any representations made to it in accordance with subsection (2)(b).

(4)If [F137a regulator] issues the proposed statement or code it must publish an account, in general terms, of—

(a)the representations made to it in accordance with subsection (2)(b); and

(b)its response to them.

(5)If the statement or code differs from the draft published under subsection (1) in a way which is, in the opinion of [F138the regulator issuing the statement or code], significant—

(a)[F139the regulator] must (in addition to complying with subsection (4)) publish details of the difference; and

(b)those details must be accompanied by a cost benefit analysis.

(6)Neither subsection (2)(a) nor subsection (5)(b) applies if [F140the regulator concerned] considers—

(a)that, making the appropriate comparison, there will be no increase in costs; or

(b)that, making that comparison, there will be an increase in costs but the increase will be of minimal significance.

[F141(7)Subsections (1)(b) and (2) to (6) do not apply in relation to—

(a)a statement or code issued by the FCA if it considers that the delay involved in complying with them would be prejudicial to the interests of consumers, as defined in section 425A; or

(b)a statement or code issued by the PRA if it considers that the delay involved in complying with them would—

(i)be prejudicial to the safety and soundness of PRA-authorised persons, or

(ii)in a case where section 2C applies, be prejudicial to securing the appropriate degree of protection for policyholders.]

(8)A statement or code must state that it is issued under section 64.

(9)[F142A regulator] may charge a reasonable fee for providing a copy of a draft published [F143by it] under subsection (1).

(10)This section also applies to a proposal to alter or replace a statement or code.

[F144(11)Cost benefit analysis” means—

(a)an analysis of the costs together with an analysis of the benefits that will arise—

(i)if the proposed statement or code is issued, or

(ii)if subsection (5)(b) applies, from the statement or code that has been issued, and

(b)subject to subsection (11A), an estimate of those costs and of those benefits.

(11A)If, in the opinion of the regulator concerned—

(a)the costs or benefits referred to in subsection (11) cannot reasonably be estimated, or

(b)it is not reasonably practicable to produce an estimate,

the cost benefit analysis need not estimate them, but must include a statement of the opinion of the regulator concerned and an explanation of it.]

(12)The appropriate comparison” means—

(a)in relation to subsection (2)(a), a comparison between the overall position if the statement or code is issued and the overall position if it is not issued;

(b)in relation to subsection (5)(b), a comparison between the overall position after the issuing of the statement or code and the overall position before it was issued.

Textual Amendments

F133S. 65(1)(1A) substituted for s. 65(1) (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 13(2) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F134Words in s. 65(2)(b) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 13(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F135Words in s. 65(3) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 13(4)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F136Word in s. 65(3) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 13(4)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F137Words in s. 65(4) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 13(5) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F138Words in s. 65(5) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 13(6)(a) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3, Sch.

F139Words in s. 65(5) substituted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 13(6)(b) (with Sch. 20); S.I. 2013/113, art. 2(1)(c), Sch. Pt. 3; S.I. 2013/423, art. 3