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Financial Services and Markets Act 2000

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This is the original version (as it was originally enacted).

Financial Services and Markets Act 2000

2000 CHAPTER 8

An Act to make provision about the regulation of financial services and markets; to provide for the transfer of certain statutory functions relating to building societies, friendly societies, industrial and provident societies and certain other mutual societies; and for connected purposes.

[14th June 2000]

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Part IThe Regulator

1The Financial Services Authority

(1)The body corporate known as the Financial Services Authority (“the Authority”) is to have the functions conferred on it by or under this Act.

(2)The Authority must comply with the requirements as to its constitution set out in Schedule 1.

(3)Schedule 1 also makes provision about the status of the Authority and the exercise of certain of its functions.

The Authority’s general duties

2The Authority’s general duties

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

(a)which is compatible with the regulatory objectives; and

(b)which the Authority considers most appropriate for the purpose of meeting those objectives.

(2)The regulatory objectives are—

(a)market confidence;

(b)public awareness;

(c)the protection of consumers; and

(d)the reduction of financial crime.

(3)In discharging its general functions the Authority must have regard to—

(a)the need to use its resources in the most efficient and economic way;

(b)the responsibilities of those who manage the affairs of authorised persons;

(c)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;

(d)the desirability of facilitating innovation in connection with regulated activities;

(e)the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom;

(f)the need to minimise the adverse effects on competition that may arise from anything done in the discharge of those functions;

(g)the desirability of facilitating competition between those who are subject to any form of regulation by the Authority.

(4)The Authority’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 (considered as a whole); and

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

(5)“General guidance” has the meaning given in section 158(5).

The regulatory objectives

3Market confidence

(1)The market confidence objective is: maintaining confidence in the financial system.

(2)“The 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.

4Public awareness

(1)The public awareness objective is: promoting public understanding of the financial system.

(2)It includes, in particular—

(a)promoting awareness of the benefits and risks associated with different kinds of investment or other financial dealing; and

(b)the provision of appropriate information and advice.

(3)“The financial system” has the same meaning as in section 3.

5The protection of consumers

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

(2)In considering what degree of protection may be appropriate, the Authority 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 in relation to different kinds of regulated activity;

(c)the needs that consumers may have for advice and accurate information; and

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

(3)“Consumers” means persons—

(a)who are consumers for the purposes of section 138; or

(b)who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.

6The reduction of financial crime

(1)The reduction of financial crime objective is: reducing the extent to which it is possible for a business carried on—

(a)by a regulated person, or

(b)in contravention of the general prohibition,

to be used for a purpose connected with financial crime.

(2)In considering that objective the Authority must, in particular, have regard to the desirability of—

(a)regulated persons being aware of the risk of their businesses being used in connection with the commission of financial crime;

(b)regulated persons taking appropriate measures (in relation to their administration and employment practices, the conduct of transactions by them and otherwise) to prevent financial crime, facilitate its detection and monitor its incidence;

(c)regulated persons devoting adequate resources to the matters mentioned in paragraph (b).

(3)“Financial crime” includes any offence involving—

(a)fraud or dishonesty;

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

(c)handling the proceeds of crime.

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

(5)“Regulated person” means an authorised person, a recognised investment exchange or a recognised clearing house.

Corporate governance

7Duty of Authority to follow principles of good governance

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

Arrangements for consulting practitioners and consumers

8The Authority’s general duty to consult

The Authority 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 2.

9The Practitioner Panel

(1)Arrangements under section 8 must include the establishment and maintenance of a panel of persons (to be known as “the Practitioner Panel”) to represent the interests of practitioners.

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

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

(4)The Authority must have regard to any representations made to it by the Practitioner Panel.

(5)The Authority must appoint to the Practitioner Panel such—

(a)individuals who are authorised persons,

(b)persons representing authorised persons,

(c)persons representing recognised investment exchanges, and

(d)persons representing recognised clearing houses,

as it considers appropriate.

10The Consumer Panel

(1)Arrangements under section 8 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 Authority must appoint one of the members of the Consumer Panel to be its chairman.

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

(4)The Authority must have regard to any representations made to it by the Consumer Panel.

(5)The Authority must appoint to the Consumer Panel such consumers, or persons representing the interests of consumers, as it considers appropriate.

(6)The Authority must secure that the 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.

(7)“Consumers” means persons, other than authorised persons—

(a)who are consumers for the purposes of section 138; or

(b)who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.

11Duty to consider representations by the Panels

(1)This section applies to a representation made, in accordance with arrangements made under section 8, by the Practitioner Panel or by the Consumer Panel.

(2)The Authority must consider the representation.

(3)If the Authority disagrees with a view expressed, or proposal made, in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.

Reviews

12Reviews

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

(2)A review may be limited by the Treasury to such functions of the Authority (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 Authority’s general policy or principles in pursuing regulatory objectives or in exercising functions under Part VI.

(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 he considers appropriate.

(5)A copy of the report must be—

(a)laid before each House of Parliament; and

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

(6)Any expenses reasonably incurred in the conduct of a 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 Authority.

13Right to obtain documents and information

(1)A person conducting a review under section 12—

(a)has a right of access at any reasonable time to all such documents as he may reasonably require for 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 or under the control of the Authority.

(3)An obligation imposed on a person as a result of the exercise of powers conferred by subsection (1) is enforceable by injunction or, in Scotland, by an order for specific performance under section 45 of the [1988 c. 36.] Court of Session Act 1988.

Inquiries

14Cases in which the Treasury may arrange independent inquiries

(1)This section applies in two cases.

(2)The first is where it appears to the Treasury that—

(a)events have occurred in relation to—

(i)a collective investment scheme, or

(ii)a person who is, or was at the time of the events, carrying on a regulated activity (whether or not as an authorised person),

which posed or could have posed a grave risk to the financial system or caused or risked causing significant damage to the interests of consumers; and

(b)those events might not have occurred, or the risk or damage might have been reduced, but for a serious failure in—

(i)the system established by this Act for the regulation of such schemes or of such persons and their activities; or

(ii)the operation of that system.

(3)The second is where it appears to the Treasury that—

(a)events have occurred in relation to listed securities or an issuer of listed securities which caused or could have caused significant damage to holders of listed securities; and

(b)those events might not have occurred but for a serious failure in the regulatory system established by Part VI or in its operation.

(4)If the Treasury consider that it is in the public interest that there should be an independent inquiry into the events and the circumstances surrounding them, they may arrange for an inquiry to be held under section 15.

(5)“Consumers” means persons—

(a)who are consumers for the purposes of section 138; or

(b)who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.

(6)“The financial system” has the same meaning as in section 3.

(7)“Listed securities” means anything which has been admitted to the official list under Part VI.

15Power to appoint person to hold an inquiry

(1)If the Treasury decide to arrange for an inquiry to be held under this section, they may appoint such person as they consider appropriate to hold the inquiry.

(2)The Treasury may, by a direction to the appointed person, control—

(a)the scope of the inquiry;

(b)the period during which the inquiry is to be held;

(c)the conduct of the inquiry; and

(d)the making of reports.

(3)A direction may, in particular—

(a)confine the inquiry to particular matters;

(b)extend the inquiry to additional matters;

(c)require the appointed person to discontinue the inquiry or to take only such steps as are specified in the direction;

(d)require the appointed person to make such interim reports as are so specified.

16Powers of appointed person and procedure

(1)The person appointed to hold an inquiry under section 15 may—

(a)obtain such information from such persons and in such manner as he thinks fit;

(b)make such inquiries as he thinks fit; and

(c)determine the procedure to be followed in connection with the inquiry.

(2)The appointed person may require any person who, in his opinion, is able to provide any information, or produce any document, which is relevant to the inquiry to provide any such information or produce any such document.

(3)For the purposes of an inquiry, the appointed person has the same powers as the court in respect of the attendance and examination of witnesses (including the examination of witnesses abroad) and in respect of the production of documents.

(4)“Court” means—

(a)the High Court; or

(b)in Scotland, the Court of Session.

17Conclusion of inquiry

(1)On completion of an inquiry under section 15, the person holding the inquiry must make a written report to the Treasury—

(a)setting out the result of the inquiry; and

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

(2)The Treasury may publish the whole, or any part, of the report and may do so in such manner as they consider appropriate.

(3)Subsection (4) applies if the Treasury propose to publish a report but consider that it contains material—

(a)which relates to the affairs of a particular person whose interests would, in the opinion of the Treasury, be seriously prejudiced by publication of the material; or

(b)the disclosure of which would be incompatible with an international obligation of the United Kingdom.

(4)The Treasury must ensure that the material is removed before publication.

(5)The Treasury must lay before each House of Parliament a copy of any report or part of a report published under subsection (2).

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

18Obstruction and contempt

(1)If a person (“A”)—

(a)fails to comply with a requirement imposed on him by a person holding an inquiry under section 15, or

(b)otherwise obstructs such an inquiry,

the person holding the inquiry may certify the matter to the High Court (or, in Scotland, the Court of Session).

(2)The court may enquire into the matter.

(3)If, after hearing—

(a)any witnesses who may be produced against or on behalf of A, and

(b)any statement made by or on behalf of A,

the court is satisfied that A would have been in contempt of court if the inquiry had been proceedings before the court, it may deal with him as if he were in contempt.

Part IIRegulated And Prohibited Activities

The general prohibition

19The general prohibition

(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 permission

20Authorised persons acting without permission

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

(a)given to him by the Authority under Part IV, 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 Authority under this Act.

(2)The contravention does not—

(a)make a person guilty of an offence;

(b)make any transaction void or unenforceable; or

(c)(subject to subsection (3)) give rise to any right of action for breach of statutory duty.

(3)In prescribed cases the contravention 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.

Financial promotion

21Restrictions on financial promotion

(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.

Regulated activities

22The classes of activity and categories of investment

(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.

(2)Schedule 2 makes provision supplementing this section.

(3)Nothing in Schedule 2 limits the powers conferred by subsection (1).

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

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

Offences

23Contravention of the general prohibition

(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.

(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.

24False claims to be authorised or exempt

(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.

25Contravention of section 21

(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 agreements

26Agreements made by unauthorised persons

(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.

27Agreements made through unauthorised persons

(1)An agreement made by an authorised person (“the provider”)—

(a)in the course of carrying on a regulated activity (not in contravention of the general prohibition), but

(b)in consequence of something said or done by another person (“the third party”) in the course of a regulated activity carried on by the third party 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 carried on by the provider.

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

28Agreements made unenforceable by section 26 or 27

(1)This section applies to an agreement which is unenforceable because of section 26 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 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.

29Accepting deposits in breach of general prohibition

(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.

30Enforceability of agreements resulting from unlawful communications

(1)In this section—

  • “unlawful communication” means a communication in relation to which there has been a contravention of section 21(1);

  • “controlled agreement” means an agreement the making or performance of which by either party constitutes a controlled activity for the purposes of that section; and

  • “controlled investment” has the same meaning as in section 21.

(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 IIIAuthorisation and Exemption

Authorisation

31Authorised persons

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

(a)a person who has a Part IV 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.

32Partnerships and unincorporated associations

(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 firm which succeeds to the business of the dissolved firm.

(3)For the purposes of this section, a firm is to be regarded as succeeding to the business of another firm only if—

(a)the members of the resulting firm are substantially the same as those of the former firm; and

(b)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 authorisation

33Withdrawal of authorisation by the Authority

(1)This section applies if—

(a)an authorised person’s Part IV permission is cancelled; and

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

(2)The Authority must give a direction withdrawing that person’s status as an authorised person.

34EEA firms

(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, the Authority may give a direction cancelling its authorisation under Part II of Schedule 3.

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

35Treaty firms

(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, the Authority may give a direction cancelling its Schedule 4 authorisation.

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

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

(1)At the request of a person authorised as a result of paragraph 1(1) of Schedule 5, the Authority 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 Part IV permission, he does not cease to be an authorised person merely because he ceases to be a person so authorised.

Exercise of EEA rights by UK firms

37Exercise of EEA rights by UK firms

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

Exemption

38Exemption orders

(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 Part IV 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.

39Exemption of appointed representatives

(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.

(2)A person who is exempt as a result of subsection (1) is referred to in this Act as an appointed representative.

(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.

(4)In determining whether an authorised person has complied with a provision contained in or made under this Act, 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.

Part IVPermission to Carry on Regulated Activities

Application for permission

40Application for permission

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

(a)an individual;

(b)a body corporate;

(c)a partnership; or

(d)an unincorporated association.

(2)An authorised person may not apply for permission under this section if he has a permission—

(a)given to him by the Authority under this Part, or

(b)having effect as if so given,

which is in force.

(3)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.

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

41The threshold conditions

(1)“The threshold conditions”, in relation to a regulated activity, means the conditions set out in Schedule 6.

(2)In giving or varying permission, or imposing or varying any requirement, under this Part the Authority must ensure that the person concerned will satisfy, and continue to satisfy, the threshold conditions in relation to all of the regulated activities for which he has or will have permission.

(3)But the duty imposed by subsection (2) does not prevent the Authority, having due regard to that duty, from taking such steps as it considers are necessary, in relation to a particular authorised person, in order to secure its regulatory objective of the protection of consumers.

Permission

42Giving permission

(1)“The applicant” means an applicant for permission under section 40.

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

(3)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, he will carry on.

(4)If the applicant—

(a)in relation to a particular regulated activity, is exempt from the general prohibition as a result of section 285(2) or (3), 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)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 XIX, 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.

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

(7)The Authority 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.

43Imposition of requirements

(1)A Part IV permission may include such requirements as the Authority considers appropriate.

(2)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 him to refrain from taking specified action.

(3)A requirement may extend to activities which are not regulated activities.

(4)A requirement may be imposed by reference to the person’s relationship with—

(a)his group; or

(b)other members of his group.

(5)A requirement expires at the end of such period as the Authority may specify in the permission.

(6)But subsection (5) does not affect the Authority’s powers under section 44 or 45.

Variation and cancellation of Part IV permission

44Variation etc. at request of authorised person

(1)The Authority may, on the application of an authorised person with a Part IV permission, vary the permission by—

(a)adding a regulated activity to those for which it gives permission;

(b)removing a regulated activity from those for which it gives permission;

(c)varying the description of a regulated activity for which it gives permission;

(d)cancelling a requirement imposed under section 43; or

(e)varying such a requirement.

(2)The Authority may, on the application of an authorised person with a Part IV permission, cancel the permission.

(3)The Authority may refuse an application under this section if it appears to it—

(a)that the interests of consumers, or potential consumers, would be adversely affected if the application were to be granted; and

(b)that it is desirable in the interests of consumers, or potential consumers, for the application to be refused.

(4)If, as a result of a variation of a Part IV permission under this section, there are no longer any regulated activities for which the authorised person concerned has permission, the Authority must, once it is satisfied that it is no longer necessary to keep the permission in force, cancel it.

(5)The Authority’s power to vary a Part IV permission under this section extends to including any provision in the permission as varied that could be included if a fresh permission were being given in response to an application under section 40.

45Variation etc. on the Authority’s own initiative

(1)The Authority may exercise its power under this section in relation to an authorised person if it appears to it that—

(a)he is failing, or is likely to fail, to satisfy the threshold conditions;

(b)he has failed, during a period of at least 12 months, to carry on a regulated activity for which he has a Part IV permission; or

(c)it is desirable to exercise that power in order to protect the interests of consumers or potential consumers.

(2)The Authority’s power under this section is the power to vary a Part IV permission in any of the ways mentioned in section 44(1) or to cancel it.

(3)If, as a result of a variation of a Part IV permission under this section, there are no longer any regulated activities for which the authorised person concerned has permission, the Authority must, once it is satisfied that it is no longer necessary to keep the permission in force, cancel it.

(4)The Authority’s power to vary a Part IV permission under this section extends to including any provision in the permission as varied that could be included if a fresh permission were being given in response to an application under section 40.

(5)The Authority’s power under this section is referred to in this Part as its own-initiative power.

46Variation of permission on acquisition of control

(1)This section applies if it appears to the Authority that—

(a)a person has acquired control over a UK authorised person who has a Part IV permission; but

(b)there are no grounds for exercising its own-initiative power.

(2)If it appears to the Authority that the likely effect of the acquisition of control on the authorised person, or on any of its activities, is uncertain the Authority may vary the authorised person’s permission by—

(a)imposing a requirement of a kind that could be imposed under section 43 on giving permission; or

(b)varying a requirement included in the authorised person’s permission under that section.

(3)Any reference to a person having acquired control is to be read in accordance with Part XII.

47Exercise of power in support of overseas regulator

(1)The Authority’s own-initiative power may be exercised in respect of an authorised person at the request of, or for the purpose of assisting, a regulator who is—

(a)outside the United Kingdom; and

(b)of a prescribed kind.

(2)Subsection (1) applies whether or not the Authority has powers which are exercisable in relation to the authorised person by virtue of any provision of Part XIII.

(3)If a request to the Authority for the exercise of its own-initiative power has been made by a regulator who is—

(a)outside the United Kingdom,

(b)of a prescribed kind, and

(c)acting in pursuance of provisions of a prescribed kind,

the Authority must, in deciding whether or not to exercise that power in response to the request, consider whether it is necessary to do so in order to comply with a Community obligation.

(4)In deciding in any case in which the Authority does not consider that the exercise of its own-initiative power is necessary in order to comply with a Community obligation, it may take into account in particular—

(a)whether in the country or territory of the 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.

(5)The Authority may decide not to exercise its own-initiative power, in response to a request, unless the regulator concerned undertakes to make such contribution towards the cost of its exercise as the Authority considers appropriate.

(6)Subsection (5) does not apply if the Authority decides that it is necessary for it to exercise its own-initiative power in order to comply with a Community obligation.

(7)In subsections (4) and (5) “request” means a request of a kind mentioned in subsection (1).

48Prohibitions and restrictions

(1)This section applies if the Authority—

(a)on giving a person a Part IV permission, imposes an assets requirement on him; or

(b)varies an authorised person’s Part IV permission so as to alter an assets requirement imposed on him or impose such a requirement on him.

(2)A person on whom an assets requirement is imposed is referred to in this section as “A”.

(3)“Assets requirement” means a requirement under section 43—

(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 his order, must be transferred to and held by a trustee approved by the Authority.

(4)If the Authority—

(a)imposes a requirement of the kind mentioned in subsection (3)(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 (5).

(5)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 his 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 Authority an amount equal to the amount transferred from, or otherwise paid out of, A’s account in contravention of the requirement.

(6)If the Authority imposes a requirement of the kind mentioned in subsection (3)(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 Authority.

(7)If, while a requirement of the kind mentioned in subsection (3)(b) is in force, A creates a charge over any assets of his 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.

(8)Assets held by a person as trustee (“T”) are to be taken to be held by T in accordance with a requirement mentioned in subsection (3)(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.

(9)A person who contravenes subsection (6) is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(10)“Charge” includes a mortgage (or in Scotland a security over property).

(11)Subsections (6) and (8) 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 (3)(b).

Connected persons

49Persons connected with an applicant

(1)In considering—

(a)an application for a Part IV permission, or

(b)whether to vary or cancel a Part IV permission,

the Authority may have regard to any person appearing to it to be, or likely to be, in a relationship with the applicant or person given permission which is relevant.

(2)Before—

(a)giving permission in response to an application made by a person who is connected with an EEA firm, or

(b)cancelling or varying any permission given by the Authority to such a person,

the Authority must 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 permissions

50Authority’s duty to consider other permissions etc

(1)“Additional Part IV permission” means a Part IV permission which is in force in relation to an EEA firm, a Treaty firm or a person authorised as a result of paragraph 1(1) of Schedule 5.

(2)If the Authority is considering whether, and if so how, to exercise its own-initiative power under this Part in relation to an additional Part IV 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.

Procedure

51Applications under this Part

(1)An application for a Part IV permission must—

(a)contain a statement of the regulated activity or regulated activities which the applicant proposes to carry on and for which he 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 him under this Act.

(2)An application for the variation of a Part IV 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 his permission is varied.

(3)Any application under this Part must—

(a)be made in such manner as the Authority may direct; and

(b)contain, or be accompanied by, such other information as the Authority may reasonably require.

(4)At any time after receiving an application and before determining it, the Authority may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application.

(5)Different directions may be given, and different requirements imposed, in relation to different applications or categories of application.

(6)The Authority may require an applicant to provide information which he is required to provide under this section in such form, or to verify it in such a way, as the Authority may direct.

52Determination of applications

(1)An application under this Part must be determined by the Authority before the end of the period of six months beginning with the date on which it received the completed application.

(2)The Authority may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within twelve months beginning with the date on which it received the application.

(3)The applicant may withdraw his application, by giving the Authority written notice, at any time before the Authority determines it.

(4)If the Authority grants an application for, or for variation of, a Part IV permission, it must give the applicant written notice.

(5)The notice must state the date from which the permission, or the variation, has effect.

(6)If the Authority proposes—

(a)to give a Part IV permission but to exercise its power under section 42(7)(a) or (b) or 43(1), or

(b)to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 44(5)),

it must give the applicant a warning notice.

(7)If the Authority proposes to refuse an application made under this Part, it must (unless subsection (8) applies) give the applicant a warning notice.

(8)This subsection applies if it appears to the Authority 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.

(9)If the Authority decides—

(a)to give a Part IV permission but to exercise its power under section 42(7)(a) or (b) or 43(1),

(b)to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 44(5)), or

(c)to refuse an application under this Part,

it must give the applicant a decision notice.

53Exercise of own-initiative power: procedure

(1)This section applies to an exercise of the Authority’s own-initiative power to vary an authorised person’s Part IV permission.

(2)A variation 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 may be expressed to take effect immediately (or on a specified date) only if the Authority, having regard to the ground on which it is exercising its own-initiative power, reasonably considers that it is necessary for the variation to take effect immediately (or on that date).

(4)If the Authority proposes to vary the Part IV permission, or varies it with immediate effect, it must give the authorised person written notice.

(5)The notice must—

(a)give details of the variation;

(b)state the Authority’s reasons for the variation and for its determination as to when the variation takes effect;

(c)inform the authorised person that he may make representations to the Authority within such period as may be specified in the notice (whether or not he has referred the matter to the Tribunal);

(d)inform him of when the variation takes effect; and

(e)inform him of his right to refer the matter to the Tribunal.

(6)The Authority may extend the period allowed under the notice for making representations.

(7)If, having considered any representations made by the authorised person, the Authority decides—

(a)to vary the permission in the way proposed, or

(b)if the permission has been varied, not to rescind the variation,

it must give him written notice.

(8)If, having considered any representations made by the authorised person, the Authority decides—

(a)not to vary the permission in the way proposed,

(b)to vary the permission in a different way, or

(c)to rescind a variation which has effect,

it must give him written notice.

(9)A notice given under subsection (7) must inform the authorised person of his 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 person of his 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).

54Cancellation of Part IV permission: procedure

(1)If the Authority proposes to cancel an authorised person’s Part IV permission otherwise than at his request, it must give him a warning notice.

(2)If the Authority decides to cancel an authorised person’s Part IV permission otherwise than at his request, it must give him a decision notice.

References to the Tribunal

55Right to refer matters to the Tribunal

(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 of the Authority’s own-initiative power may refer the matter to the Tribunal.

Part VPerformance of Regulated Activities

Prohibition orders

56Prohibition orders

(1)Subsection (2) applies if it appears to the Authority that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised person.

(2)The Authority may make an order (“a prohibition 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;

(b)authorised persons generally or any person within a specified class of authorised person.

(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)An authorised person 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)The Authority may, on the application of the individual named in a prohibition order, vary or revoke it.

(8)This section applies to the performance of functions in relation to a regulated activity carried on by—

(a)a person who is an exempt person in relation to that activity, and

(b)a person to whom, as a result of Part XX, the general prohibition does not apply in relation to that activity,

as it applies to the performance of functions in relation to a regulated activity carried on by an authorised person.

(9)“Specified” means specified in the prohibition order.

57Prohibition orders: procedure and right to refer to Tribunal

(1)If the Authority 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 the Authority 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.

58Applications relating to prohibitions: procedure and right to refer to Tribunal

(1)This section applies to an application for the variation or revocation of a prohibition order.

(2)If the Authority decides to grant the application, it must give the applicant written notice of its decision.

(3)If the Authority proposes to refuse the application, it must give the applicant a warning notice.

(4)If the Authority decides to refuse the application, it must give the applicant a decision notice.

(5)If the Authority gives the applicant a decision notice, he may refer the matter to the Tribunal.

Approval

59Approval for particular arrangements

(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 the Authority 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 the Authority approves the performance by that person of the controlled function to which the arrangement relates.

(3)“Controlled function” means a function of a description specified in rules.

(4)The Authority may specify a description of function under subsection (3) only if, in relation to the carrying on of a regulated activity by an authorised person, it is satisfied that the first, second or third condition is met.

(5)The first condition is that the function 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 regulated activity.

(6)The second condition is that the function will involve the person performing it in dealing with customers of the authorised person in a manner substantially connected with the carrying on of the regulated activity.

(7)The third condition is that the function will involve the person performing it in dealing with property of customers of the authorised person in a manner substantially connected with the carrying on of the regulated 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 to an authority in a country or territory outside the United Kingdom.

(9)In determining whether the first condition is met, the Authority may take into account the likely consequences of a failure to discharge that function properly.

(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.

60Applications for approval

(1)An application for the Authority’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 Authority may direct; and

(b)contain, or be accompanied by, such information as the Authority may reasonably require.

(3)At any time after receiving the application and before determining it, the Authority may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application.

(4)The Authority 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 Authority 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 Part IV and will be the authorised person concerned if permission is given.

61Determination of applications

(1)The Authority may grant an application made under section 60 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, the Authority 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 in relation to persons performing functions of the kind to which the application relates.

(3)The Authority must, before the end of the period of three months beginning with the date on which it receives an application made under section 60 (“the period for consideration”), determine whether—

(a)to grant the application; or

(b)to give a warning notice under section 62(2).

(4)If the Authority 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 the Authority; or

(b)if the information is not provided on a single day, on the last of the days on which it is received by the Authority.

(5)A person who makes an application under section 60 may withdraw his application by giving written notice to the Authority at any time before the Authority 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.

62Applications for approval: procedure and right to refer to Tribunal

(1)If the Authority decides to grant an application made under section 60 (“an application”), it must give written notice of its decision to each of the interested parties.

(2)If the Authority proposes to refuse an application, it must give a warning notice to each of the interested parties.

(3)If the Authority decides to refuse an application, it must give a decision notice to each of the interested parties.

(4)If the Authority decides to refuse an 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.

63Withdrawal of approval

(1)The Authority may withdraw an approval given under section 59 if it considers that the person in respect of whom it was given is not a fit and proper person to perform the function to which the approval relates.

(2)When considering whether to withdraw its approval, the Authority may take into account any matter which it could take into account if it were considering an application made under section 60 in respect of the performance of the function to which the approval relates.

(3)If the Authority proposes to withdraw its approval, it must give each of the interested parties a warning notice.

(4)If the Authority decides to withdraw its approval, it must give each of the interested parties a decision notice.

(5)If the Authority decides to withdraw its 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.

Conduct

64Conduct: statements and codes

(1)The Authority may issue statements of principle with respect to the conduct expected of approved persons.

(2)If the Authority issues a statement of principle under subsection (1), 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 Authority, comply with a statement of principle;

(b)descriptions of conduct which, in the opinion of the Authority, do not comply with a statement of principle;

(c)factors which, in the opinion of the Authority, are to be taken into account in determining whether or not a person’s conduct complies with a statement of principle.

(4)The Authority may at any time alter or replace a statement or code issued under this section.

(5)If a statement or code is altered or replaced, the altered or replacement statement or code must be issued by the Authority.

(6)A statement or code issued under this section must be published by the Authority in the way appearing to the Authority 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)The Authority 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

(b)is to be treated for the purposes of section 2(4)(a) as part of the Authority’s rule-making functions.

(12)The Authority may charge a reasonable fee for providing a person with a copy of a statement or code published under this section.

(13)“Approved person” means a person in relation to whom the Authority has given its approval under section 59.

65Statements and codes: procedure

(1)Before issuing a statement or code under section 64, the Authority must publish a draft of it in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(2)The draft must be accompanied by —

(a)a cost benefit analysis; and

(b)notice that representations about the proposal may be made to the Authority within a specified time.

(3)Before issuing the proposed statement or code, the Authority must have regard to any representations made to it in accordance with subsection (2)(b).

(4)If the Authority 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 the Authority, significant—

(a)the Authority 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 the Authority 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.

(7)Subsections (1) to (6) do not apply if the Authority considers that the delay involved in complying with them would prejudice the interests of consumers.

(8)A statement or code must state that it is issued under section 64.

(9)The Authority may charge a reasonable fee for providing a copy of a draft published under subsection (1).

(10)This section also applies to a proposal to alter or replace a statement or code.

(11)“Cost benefit analysis” means an estimate of the costs together with an analysis of the benefits that will arise—

(a)if the proposed statement or code is issued; or

(b)if subsection (5)(b) applies, from the statement or code that has been issued.

(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.

66Disciplinary powers

(1)The Authority may take action against a person under this section if—

(a)it appears to the Authority that he is guilty of misconduct; and

(b)the Authority is satisfied that it is appropriate in all the circumstances to take action against him.

(2)A person is guilty of misconduct if, while an approved person—

(a)he has failed to comply with a statement of principle issued under section 64; or

(b)he has been knowingly concerned in a contravention by the relevant authorised person of a requirement imposed on that authorised person by or under this Act.

(3)If the Authority is entitled to take action under this section against a person, it may—

(a)impose a penalty on him of such amount as it considers appropriate; or

(b)publish a statement of his misconduct.

(4)The Authority may not take action under this section after the end of the period of two years beginning with the first day on which the Authority knew of the misconduct, unless proceedings in respect of it against the person concerned were begun before the end of that period.

(5)For the purposes of subsection (4)—

(a)the Authority is to be treated as knowing of misconduct if it has information from which the misconduct can reasonably be inferred; and

(b)proceedings against a person in respect of misconduct are to be treated as begun when a warning notice is given to him under section 67(1).

(6)“Approved person” has the same meaning as in section 64.

(7)“Relevant authorised person”, in relation to an approved person, means the person on whose application approval under section 59 was given.

67Disciplinary measures: procedure and right to refer to Tribunal

(1)If the Authority proposes to take action against a person under section 66, it must give him a warning notice.

(2)A warning notice about a proposal to impose a penalty must state the amount of the penalty.

(3)A warning notice about a proposal to publish a statement must set out the terms of the statement.

(4)If the Authority decides to take action against a person under section 66, it must give him a decision notice.

(5)A decision notice about the imposition of a penalty must state the amount of the penalty.

(6)A decision notice about the publication of a statement must set out the terms of the statement.

(7)If the Authority decides to take action against a person under section 66, he may refer the matter to the Tribunal.

68Publication

After a statement under section 66 is published, the Authority must send a copy of it to the person concerned and to any person to whom a copy of the decision notice was given.

69Statement of policy

(1)The Authority must prepare and issue a statement of its policy with respect to—

(a)the imposition of penalties under section 66; and

(b)the amount of penalties under that section.

(2)The Authority’s policy in determining what the amount of a penalty should be must include having regard to—

(a)the seriousness of the misconduct in question in relation to the nature of the principle or requirement concerned;

(b)the extent to which that misconduct was deliberate or reckless; and

(c)whether the person on whom the penalty is to be imposed is an individual.

(3)The Authority may at any time alter or replace a statement issued under this section.

(4)If a statement issued under this section is altered or replaced, the Authority must issue the altered or replacement statement.

(5)The Authority must, without delay, give the Treasury a copy of any statement which it publishes under this section.

(6)A statement issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(7)The Authority may charge a reasonable fee for providing a person with a copy of the statement.

(8)In exercising, or deciding whether to exercise, its power under section 66 in the case of any particular misconduct, the Authority must have regard to any statement of policy published under this section and in force at the time when the misconduct in question occurred.

70Statements of policy: procedure

(1)Before issuing a statement under section 69, the Authority must publish a draft of the proposed statement in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(2)The draft must be accompanied by notice that representations about the proposal may be made to the Authority within a specified time.

(3)Before issuing the proposed statement, the Authority must have regard to any representations made to it in accordance with subsection (2).

(4)If the Authority issues the proposed statement it must publish an account, in general terms, of—

(a)the representations made to it in accordance with subsection (2); and

(b)its response to them.

(5)If the statement differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant, the Authority must (in addition to complying with subsection (4)) publish details of the difference.

(6)The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1).

(7)This section also applies to a proposal to alter or replace a statement.

Breach of statutory duty

71Actions for damages

(1)A contravention of section 56(6) or 59(1) or (2) is actionable at the suit of a private 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.

(2)In prescribed cases, a contravention of that kind which would be actionable at the suit of a private person is actionable at the suit of a person who is not a private person, subject to the defences and other incidents applying to actions for breach of statutory duty.

(3)“Private person” has such meaning as may be prescribed.

Part VIOfficial Listing

The competent authority

72The competent authority

(1)On the coming into force of this section, the functions conferred on the competent authority by this Part are to be exercised by the Authority.

(2)Schedule 7 modifies this Act in its application to the Authority when it acts as the competent authority.

(3)But provision is made by Schedule 8 allowing some or all of those functions to be transferred by the Treasury so as to be exercisable by another person.

73General duty of the competent authority

(1)In discharging its general functions the competent authority must have regard to—

(a)the need to use its resources in the most efficient and economic way;

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

(c)the desirability of facilitating innovation in respect of listed securities;

(d)the international character of capital markets and the desirability of maintaining the competitive position of the United Kingdom;

(e)the need to minimise the adverse effects on competition of anything done in the discharge of those functions;

(f)the desirability of facilitating competition in relation to listed securities.

(2)The competent authority’s general functions are—

(a)its function of making rules under this Part (considered as a whole);

(b)its functions in relation to the giving of general guidance in relation to this Part (considered as a whole);

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

The official list

74The official list

(1)The competent authority must maintain the official list.

(2)The competent authority may admit to the official list such securities and other things as it considers appropriate.

(3)But—

(a)nothing may be admitted to the official list except in accordance with this Part; and

(b)the Treasury may by order provide that anything which falls within a description or category specified in the order may not be admitted to the official list.

(4)The competent authority may make rules (“listing rules”) for the purposes of this Part.

(5)In the following provisions of this Part—

  • “security” means anything which has been, or may be, admitted to the official list; and

  • “listing” means being included in the official list in accordance with this Part.

Listing

75Applications for listing

(1)Admission to the official list may be granted only on an application made to the competent authority in such manner as may be required by listing rules.

(2)No application for listing may be entertained by the competent authority unless it is made by, or with the consent of, the issuer of the securities concerned.

(3)No application for listing may be entertained by the competent authority in respect of securities which are to be issued by a body of a prescribed kind.

(4)The competent authority may not grant an application for listing unless it is satisfied that—

(a)the requirements of listing rules (so far as they apply to the application), and

(b)any other requirements imposed by the authority in relation to the application,

are complied with.

(5)An application for listing may be refused if, for a reason relating to the issuer, the competent authority considers that granting it would be detrimental to the interests of investors.

(6)An application for listing securities which are already officially listed in another EEA State may be refused if the issuer has failed to comply with any obligations to which he is subject as a result of that listing.

76Decision on application

(1)The competent authority must notify the applicant of its decision on an application for listing—

(a)before the end of the period of six months beginning with the date on which the application is received; or

(b)if within that period the authority has required the applicant to provide further information in connection with the application, before the end of the period of six months beginning with the date on which that information is provided.

(2)If the competent authority fails to comply with subsection (1), it is to be taken to have decided to refuse the application.

(3)If the competent authority decides to grant an application for listing, it must give the applicant written notice.

(4)If the competent authority proposes to refuse an application for listing, it must give the applicant a warning notice.

(5)If the competent authority decides to refuse an application for listing, it must give the applicant a decision notice.

(6)If the competent authority decides to refuse an application for listing, the applicant may refer the matter to the Tribunal.

(7)If securities are admitted to the official list, their admission may not be called in question on the ground that any requirement or condition for their admission has not been complied with.

77Discontinuance and suspension of listing

(1)The competent authority may, in accordance with listing rules, discontinue the listing of any securities if satisfied that there are special circumstances which preclude normal regular dealings in them.

(2)The competent authority may, in accordance with listing rules, suspend the listing of any securities.

(3)If securities are suspended under subsection (2) they are to be treated, for the purposes of sections 96 and 99, as still being listed.

(4)This section applies to securities whenever they were admitted to the official list.

(5)If the competent authority discontinues or suspends the listing of any securities, the issuer may refer the matter to the Tribunal.

78Discontinuance or suspension: procedure

(1)A discontinuance or suspension takes effect—

(a)immediately, if the notice under subsection (2) states that that is the case;

(b)in any other case, on such date as may be specified in that notice.

(2)If the competent authority—

(a)proposes to discontinue or suspend the listing of securities, or

(b)discontinues or suspends the listing of securities with immediate effect,

it must give the issuer of the securities written notice.

(3)The notice must—

(a)give details of the discontinuance or suspension;

(b)state the competent authority’s reasons for the discontinuance or suspension and for choosing the date on which it took effect or takes effect;

(c)inform the issuer of the securities that he may make representations to the competent authority within such period as may be specified in the notice (whether or not he has referred the matter to the Tribunal);

(d)inform him of the date on which the discontinuance or suspension took effect or will take effect; and

(e)inform him of his right to refer the matter to the Tribunal.

(4)The competent authority may extend the period within which representations may be made to it.

(5)If, having considered any representations made by the issuer of the securities, the competent authority decides—

(a)to discontinue or suspend the listing of the securities, or

(b)if the discontinuance or suspension has taken effect, not to cancel it,

the competent authority must give the issuer of the securities written notice.

(6)A notice given under subsection (5) must inform the issuer of the securities of his right to refer the matter to the Tribunal.

(7)If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.

(8)If the competent authority decides—

(a)not to discontinue or suspend the listing of the securities, or

(b)if the discontinuance or suspension has taken effect, to cancel it,

the competent authority must give the issuer of the securities written notice.

(9)The effect of cancelling a discontinuance is that the securities concerned are to be readmitted, without more, to the official list.

(10)If the competent authority has suspended the listing of securities and proposes to refuse an application by the issuer of the securities for the cancellation of the suspension, it must give him a warning notice.

(11)The competent authority must, having considered any representations made in response to the warning notice—

(a)if it decides to refuse the application, give the issuer of the securities a decision notice;

(b)if it grants the application, give him written notice of its decision.

(12)If the competent authority decides to refuse an application for the cancellation of the suspension of listed securities, the applicant may refer the matter to the Tribunal.

(13)“Discontinuance” means a discontinuance of listing under section 77(1).

(14)“Suspension” means a suspension of listing under section 77(2).

Listing particulars

79Listing particulars and other documents

(1)Listing rules may provide that securities (other than new securities) of a kind specified in the rules may not be admitted to the official list unless—

(a)listing particulars have been submitted to, and approved by, the competent authority and published; or

(b)in such cases as may be specified by listing rules, such document (other than listing particulars or a prospectus of a kind required by listing rules) as may be so specified has been published.

(2)“Listing particulars” means a document in such form and containing such information as may be specified in listing rules.

(3)For the purposes of this Part, the persons responsible for listing particulars are to be determined in accordance with regulations made by the Treasury.

(4)Nothing in this section affects the competent authority’s general power to make listing rules.

80General duty of disclosure in listing particulars

(1)Listing particulars submitted to the competent authority under section 79 must contain all such information as investors and their professional advisers would reasonably require, and reasonably expect to find there, for the purpose of making an informed assessment of—

(a)the assets and liabilities, financial position, profits and losses, and prospects of the issuer of the securities; and

(b)the rights attaching to the securities.

(2)That information is required in addition to any information required by—

(a)listing rules, or

(b)the competent authority,

as a condition of the admission of the securities to the official list.

(3)Subsection (1) applies only to information—

(a)within the knowledge of any person responsible for the listing particulars; or

(b)which it would be reasonable for him to obtain by making enquiries.

(4)In determining what information subsection (1) requires to be included in listing particulars, regard must be had (in particular) to—

(a)the nature of the securities and their issuer;

(b)the nature of the persons likely to consider acquiring them;

(c)the fact that certain matters may reasonably be expected to be within the knowledge of professional advisers of a kind which persons likely to acquire the securities may reasonably be expected to consult; and

(d)any information available to investors or their professional advisers as a result of requirements imposed on the issuer of the securities by a recognised investment exchange, by listing rules or by or under any other enactment.

81Supplementary listing particulars

(1)If at any time after the preparation of listing particulars which have been submitted to the competent authority under section 79 and before the commencement of dealings in the securities concerned following their admission to the official list—

(a)there is a significant change affecting any matter contained in those particulars the inclusion of which was required by—

(i)section 80,

(ii)listing rules, or

(iii)the competent authority, or

(b)a significant new matter arises, the inclusion of information in respect of which would have been so required if it had arisen when the particulars were prepared,

the issuer must, in accordance with listing rules, submit supplementary listing particulars of the change or new matter to the competent authority, for its approval and, if they are approved, publish them.

(2)“Significant” means significant for the purpose of making an informed assessment of the kind mentioned in section 80(1).

(3)If the issuer of the securities is not aware of the change or new matter in question, he is not under a duty to comply with subsection (1) unless he is notified of the change or new matter by a person responsible for the listing particulars.

(4)But it is the duty of any person responsible for those particulars who is aware of such a change or new matter to give notice of it to the issuer.

(5)Subsection (1) applies also as respects matters contained in any supplementary listing particulars previously published under this section in respect of the securities in question.

82Exemptions from disclosure

(1)The competent authority may authorise the omission from listing particulars of any information, the inclusion of which would otherwise be required by section 80 or 81, on the ground—

(a)that its disclosure would be contrary to the public interest;

(b)that its disclosure would be seriously detrimental to the issuer; or

(c)in the case of securities of a kind specified in listing rules, that its disclosure is unnecessary for persons of the kind who may be expected normally to buy or deal in securities of that kind.

(2)But—

(a)no authority may be granted under subsection (1)(b) in respect of essential information; and

(b)no authority granted under subsection (1)(b) extends to any such information.

(3)The Secretary of State or the Treasury may issue a certificate to the effect that the disclosure of any information (including information that would otherwise have to be included in listing particulars for which they are themselves responsible) would be contrary to the public interest.

(4)The competent authority is entitled to act on any such certificate in exercising its powers under subsection (1)(a).

(5)This section does not affect any powers of the competent authority under listing rules made as a result of section 101(2).

(6)“Essential information” means information which a person considering acquiring securities of the kind in question would be likely to need in order not to be misled about any facts which it is essential for him to know in order to make an informed assessment.

(7)“Listing particulars” includes supplementary listing particulars.

83Registration of listing particulars

(1)On or before the date on which listing particulars are published as required by listing rules, a copy of the particulars must be delivered for registration to the registrar of companies.

(2)A statement that a copy has been delivered to the registrar must be included in the listing particulars when they are published.

(3)If there has been a failure to comply with subsection (1) in relation to listing particulars which have been published—

(a)the issuer of the securities in question, and

(b)any person who is a party to the publication and aware of the failure,

is guilty of an offence.

(4)A person guilty of an offence under subsection (3) is liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum;

(b)on conviction on indictment, to a fine.

(5)“Listing particulars” includes supplementary listing particulars.

(6)“The registrar of companies” means—

(a)if the securities are, or are to be, issued by a company incorporated in Great Britain whose registered office is in England and Wales, the registrar of companies in England and Wales;

(b)if the securities are, or are to be, issued by a company incorporated in Great Britain whose registered office is in Scotland, the registrar of companies in Scotland;

(c)if the securities are, or are to be, issued by a company incorporated in Northern Ireland, the registrar of companies for Northern Ireland; and

(d)in any other case, any of those registrars.

Prospectuses

84Prospectuses

(1)Listing rules must provide that no new securities for which an application for listing has been made may be admitted to the official list unless a prospectus has been submitted to, and approved by, the competent authority and published.

(2)“New securities” means securities which are to be offered to the public in the United Kingdom for the first time before admission to the official list.

(3)“Prospectus” means a prospectus in such form and containing such information as may be specified in listing rules.

(4)Nothing in this section affects the competent authority’s general power to make listing rules.

85Publication of prospectus

(1)If listing rules made under section 84 require a prospectus to be published before particular new securities are admitted to the official list, it is unlawful for any of those securities to be offered to the public in the United Kingdom before the required prospectus is published.

(2)A person who contravenes subsection (1) is guilty of an offence and liable—

(a)on summary conviction, to imprisonment for a term not exceeding three months or a fine not exceeding level 5 on the standard scale;

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

(3)A person is not to be regarded as contravening subsection (1) merely because a prospectus does not fully comply with the requirements of listing rules as to its form or content.

(4)But subsection (3) does not affect the question whether any person is liable to pay compensation under section 90.

(5)Any contravention of subsection (1) 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.

86Application of this Part to prospectuses

(1)The provisions of this Part apply in relation to a prospectus required by listing rules as they apply in relation to listing particulars.

(2)In this Part—

(a)any reference to listing particulars is to be read as including a reference to a prospectus; and

(b)any reference to supplementary listing particulars is to be read as including a reference to a supplementary prospectus.

87Approval of prospectus where no application for listing

(1)Listing rules may provide for a prospectus to be submitted to and approved by the competent authority if—

(a)securities are to be offered to the public in the United Kingdom for the first time;

(b)no application for listing of the securities has been made under this Part; and

(c)the prospectus is submitted by, or with the consent of, the issuer of the securities.

(2)“Non-listing prospectus” means a prospectus submitted to the competent authority as a result of any listing rules made under subsection (1).

(3)Listing rules made under subsection (1) may make provision—

(a)as to the information to be contained in, and the form of, a non-listing prospectus; and

(b)as to the timing and manner of publication of a non-listing prospectus.

(4)The power conferred by subsection (3)(b) is subject to such provision made by or under any other enactment as the Treasury may by order specify.

(5)Schedule 9 modifies provisions of this Part as they apply in relation to non-listing prospectuses.

Sponsors

88Sponsors

(1)Listing rules may require a person to make arrangements with a sponsor for the performance by the sponsor of such services in relation to him as may be specified in the rules.

(2)“Sponsor” means a person approved by the competent authority for the purposes of the rules.

(3)Listing rules made by virtue of subsection (1) may—

(a)provide for the competent authority to maintain a list of sponsors;

(b)specify services which must be performed by a sponsor;

(c)impose requirements on a sponsor in relation to the provision of services or specified services;

(d)specify the circumstances in which a person is qualified for being approved as a sponsor.

(4)If the competent authority proposes—

(a)to refuse a person’s application for approval as a sponsor, or

(b)to cancel a person’s approval as a sponsor,

it must give him a warning notice.

(5)If, after considering any representations made in response to the warning notice, the competent authority decides—

(a)to grant the application for approval, or

(b)not to cancel the approval,

it must give the person concerned, and any person to whom a copy of the warning notice was given, written notice of its decision.

(6)If, after considering any representations made in response to the warning notice, the competent authority decides—

(a)to refuse to grant the application for approval, or

(b)to cancel the approval,

it must give the person concerned a decision notice.

(7)A person to whom a decision notice is given under this section may refer the matter to the Tribunal.

89Public censure of sponsor

(1)Listing rules may make provision for the competent authority, if it considers that a sponsor has contravened a requirement imposed on him by rules made as a result of section 88(3)(c), to publish a statement to that effect.

(2)If the competent authority proposes to publish a statement it must give the sponsor a warning notice setting out the terms of the proposed statement.

(3)If, after considering any representations made in response to the warning notice, the competent authority decides to make the proposed statement, it must give the sponsor a decision notice setting out the terms of the statement.

(4)A sponsor to whom a decision notice is given under this section may refer the matter to the Tribunal.

Compensation

90Compensation for false or misleading particulars

(1)Any person responsible for listing particulars is liable to pay compensation to a person who has—

(a)acquired securities to which the particulars apply; and

(b)suffered loss in respect of them as a result of—

(i)any untrue or misleading statement in the particulars; or

(ii)the omission from the particulars of any matter required to be included by section 80 or 81.

(2)Subsection (1) is subject to exemptions provided by Schedule 10.

(3)If listing particulars are required to include information about the absence of a particular matter, the omission from the particulars of that information is to be treated as a statement in the listing particulars that there is no such matter.

(4)Any person who fails to comply with section 81 is liable to pay compensation to any person who has—

(a)acquired securities of the kind in question; and

(b)suffered loss in respect of them as a result of the failure.

(5)Subsection (4) is subject to exemptions provided by Schedule 10.

(6)This section does not affect any liability which may be incurred apart from this section.

(7)References in this section to the acquisition by a person of securities include references to his contracting to acquire them or any interest in them.

(8)No person shall, by reason of being a promoter of a company or otherwise, incur any liability for failing to disclose information which he would not be required to disclose in listing particulars in respect of a company’s securities—

(a)if he were responsible for those particulars; or

(b)if he is responsible for them, which he is entitled to omit by virtue of section 82.

(9)The reference in subsection (8) to a person incurring liability includes a reference to any other person being entitled as against that person to be granted any civil remedy or to rescind or repudiate an agreement.

(10)“Listing particulars”, in subsection (1) and Schedule 10, includes supplementary listing particulars.

Penalties

91Penalties for breach of listing rules

(1)If the competent authority considers that—

(a)an issuer of listed securities, or

(b)an applicant for listing,

has contravened any provision of listing rules, it may impose on him a penalty of such amount as it considers appropriate.

(2)If, in such a case, the competent authority considers that a person who was at the material time a director of the issuer or applicant was knowingly concerned in the contravention, it may impose on him a penalty of such amount as it considers appropriate.

(3)If the competent authority is entitled to impose a penalty on a person under this section in respect of a particular matter it may, instead of imposing a penalty on him in respect of that matter, publish a statement censuring him.

(4)Nothing in this section prevents the competent authority from taking any other steps which it has power to take under this Part.

(5)A penalty under this section is payable to the competent authority.

(6)The competent authority may not take action against a person under this section after the end of the period of two years beginning with the first day on which it knew of the contravention unless proceedings against that person, in respect of the contravention, were begun before the end of that period.

(7)For the purposes of subsection (6)—

(a)the competent authority is to be treated as knowing of a contravention if it has information from which the contravention can reasonably be inferred; and

(b)proceedings against a person in respect of a contravention are to be treated as begun when a warning notice is given to him under section 92.

92Procedure

(1)If the competent authority proposes to take action against a person under section 91, it must give him a warning notice.

(2)A warning notice about a proposal to impose a penalty must state the amount of the proposed penalty.

(3)A warning notice about a proposal to publish a statement must set out the terms of the proposed statement.

(4)If the competent authority decides to take action against a person under section 91, it must give him a decision notice.

(5)A decision notice about the imposition of a penalty must state the amount of the penalty.

(6)A decision notice about the publication of a statement must set out the terms of the statement.

(7)If the competent authority decides to take action against a person under section 91, he may refer the matter to the Tribunal.

93Statement of policy

(1)The competent authority must prepare and issue a statement (“its policy statement”) of its policy with respect to—

(a)the imposition of penalties under section 91; and

(b)the amount of penalties under that section.

(2)The competent authority’s policy in determining what the amount of a penalty should be must include having regard to—

(a)the seriousness of the contravention in question in relation to the nature of the requirement contravened;

(b)the extent to which that contravention was deliberate or reckless; and

(c)whether the person on whom the penalty is to be imposed is an individual.

(3)The competent authority may at any time alter or replace its policy statement.

(4)If its policy statement is altered or replaced, the competent authority must issue the altered or replacement statement.

(5)In exercising, or deciding whether to exercise, its power under section 91 in the case of any particular contravention, the competent authority must have regard to any policy statement published under this section and in force at the time when the contravention in question occurred.

(6)The competent authority must publish a statement issued under this section in the way appearing to the competent authority to be best calculated to bring it to the attention of the public.

(7)The competent authority may charge a reasonable fee for providing a person with a copy of the statement.

(8)The competent authority must, without delay, give the Treasury a copy of any policy statement which it publishes under this section.

94Statements of policy: procedure

(1)Before issuing a statement under section 93, the competent authority must publish a draft of the proposed statement in the way appearing to the competent authority to be best calculated to bring it to the attention of the public.

(2)The draft must be accompanied by notice that representations about the proposal may be made to the competent authority within a specified time.

(3)Before issuing the proposed statement, the competent authority must have regard to any representations made to it in accordance with subsection (2).

(4)If the competent authority issues the proposed statement it must publish an account, in general terms, of—

(a)the representations made to it in accordance with subsection (2); 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 competent authority, significant, the competent authority must (in addition to complying with subsection (4)) publish details of the difference.

(6)The competent authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1).

(7)This section also applies to a proposal to alter or replace a statement.

Competition

95Competition scrutiny

(1)The Treasury may by order provide for—

(a)regulating provisions, and

(b)the practices of the competent authority in exercising its functions under this Part (“practices”),

to be kept under review.

(2)Provision made as a result of subsection (1) must require the person responsible for keeping regulating provisions and practices under review to consider—

(a)whether any regulating provision or practice has a significantly adverse effect on competition; or

(b)whether two or more regulating provisions or practices taken together have, or a particular combination of regulating provisions and practices has, such an effect.

(3)An order under this section may include provision corresponding to that made by any provision of Chapter III of Part X.

(4)Subsection (3) is not to be read as in any way restricting the power conferred by subsection (1).

(5)Subsections (6) to (8) apply for the purposes of provision made by or under this section.

(6)Regulating provisions or practices have a significantly adverse effect on competition if—

(a)they have, or are intended or likely to have, that effect; or

(b)the effect that they have, or are intended or likely to have, is to require or encourage behaviour which has, or is intended or likely to have, a significantly adverse effect on competition.

(7)If regulating provisions or practices have, or are intended or likely to have, the effect of requiring or encouraging exploitation of the strength of a market position they are to be taken to have, or be intended or be likely to have, an adverse effect on competition.

(8)In determining whether any of the regulating provisions or practices have, or are intended or likely to have, a particular effect, it may be assumed that the persons to whom the provisions concerned are addressed will act in accordance with them.

(9)“Regulating provisions” means—

(a)listing rules,

(b)general guidance given by the competent authority in connection with its functions under this Part.

Miscellaneous

96Obligations of issuers of listed securities

(1)Listing rules may—

(a)specify requirements to be complied with by issuers of listed securities; and

(b)make provision with respect to the action that may be taken by the competent authority in the event of non-compliance.

(2)If the rules require an issuer to publish information, they may include provision authorising the competent authority to publish it in the event of his failure to do so.

(3)This section applies whenever the listed securities were admitted to the official list.

97Appointment by competent authority of persons to carry out investigations

(1)Subsection (2) applies if it appears to the competent authority that there are circumstances suggesting that—

(a)there may have been a breach of listing rules;

(b)a person who was at the material time a director of an issuer of listed securities has been knowingly concerned in a breach of listing rules by that issuer;

(c)a person who was at the material time a director of a person applying for the admission of securities to the official list has been knowingly concerned in a breach of listing rules by that applicant;

(d)there may have been a contravention of section 83, 85 or 98.

(2)The competent authority may appoint one or more competent persons to conduct an investigation on its behalf.

(3)Part XI applies to an investigation under subsection (2) as if—

(a)the investigator were appointed under section 167(1);

(b)references to the investigating authority in relation to him were to the competent authority;

(c)references to the offences mentioned in section 168 were to those mentioned in subsection (1)(d);

(d)references to an authorised person were references to the person under investigation.

98Advertisements etc. in connection with listing applications

(1)If listing particulars are, or are to be, published in connection with an application for listing, no advertisement or other information of a kind specified by listing rules may be issued in the United Kingdom unless the contents of the advertisement or other information have been submitted to the competent authority and that authority has—

(a)approved those contents; or

(b)authorised the issue of the advertisement or information without such approval.

(2)A person who contravenes subsection (1) is guilty of an offence and liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum;

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

(3)A person who issues an advertisement or other information to the order of another person is not guilty of an offence under subsection (2) if he shows that he believed on reasonable grounds that the advertisement or information had been approved, or its issue authorised, by the competent authority.

(4)If information has been approved, or its issue has been authorised, under this section, neither the person issuing it nor any person responsible for, or for any part of, the listing particulars incurs any civil liability by reason of any statement in or omission from the information if that information and the listing particulars, taken together, would not be likely to mislead persons of the kind likely to consider acquiring the securities in question.

(5)The reference in subsection (4) to a person incurring civil liability includes a reference to any other person being entitled as against that person to be granted any civil remedy or to rescind or repudiate an agreement.

99Fees

(1)Listing rules may require the payment of fees to the competent authority in respect of—

(a)applications for listing;

(b)the continued inclusion of securities in the official list;

(c)applications under section 88 for approval as a sponsor; and

(d)continued inclusion of sponsors in the list of sponsors.

(2)In exercising its powers under subsection (1), the competent authority may set such fees as it considers will (taking account of the income it expects as the competent authority) enable it—

(a)to meet expenses incurred in carrying out its functions under this Part or for any incidental purpose;

(b)to maintain adequate reserves; and

(c)in the case of the Authority, to repay the principal of, and pay any interest on, any money which it has borrowed and which has been used for the purpose of meeting expenses incurred in relation to—

(i)its assumption of functions from the London Stock Exchange Limited in relation to the official list; and

(ii)its assumption of functions under this Part.

(3)In fixing the amount of any fee which is to be payable to the competent authority, no account is to be taken of any sums which it receives, or expects to receive, by way of penalties imposed by it under this Part.

(4)Subsection (2)(c) applies whether expenses were incurred before or after the coming into force of this Part.

(5)Any fee which is owed to the competent authority under any provision made by or under this Part may be recovered as a debt due to it.

100Penalties

(1)In determining its policy with respect to the amount of penalties to be imposed by it under this Part, the competent authority must take no account of the expenses which it incurs, or expects to incur, in discharging its functions under this Part.

(2)The competent authority must prepare and operate a scheme for ensuring that the amounts paid to it by way of penalties imposed under this Part are applied for the benefit of issuers of securities admitted to the official list.

(3)The scheme may, in particular, make different provision with respect to different classes of issuer.

(4)Up to date details of the scheme must be set out in a document (“the scheme details”).

(5)The scheme details must be published by the competent authority in the way appearing to it to be best calculated to bring them to the attention of the public.

(6)Before making the scheme, the competent authority must publish a draft of the proposed scheme in the way appearing to it to be best calculated to bring it to the attention of the public.

(7)The draft must be accompanied by notice that representations about the proposals may be made to the competent authority within a specified time.

(8)Before making the scheme, the competent authority must have regard to any representations made to it under subsection (7).

(9)If the competent authority makes the proposed scheme, it must publish an account, in general terms, of—

(a)the representations made to it in accordance with subsection (7); and

(b)its response to them.

(10)If the scheme differs from the draft published under subsection (6) in a way which is, in the opinion of the competent authority, significant the competent authority must (in addition to complying with subsection (9)) publish details of the difference.

(11)The competent authority must, without delay, give the Treasury a copy of any scheme details published by it.

(12)The competent authority may charge a reasonable fee for providing a person with a copy of—

(a)a draft published under subsection (6);

(b)scheme details.

(13)Subsections (6) to (10) and (12) apply also to a proposal to alter or replace the scheme.

101Listing rules: general provisions

(1)Listing rules may make different provision for different cases.

(2)Listing rules may authorise the competent authority to dispense with or modify the application of the rules in particular cases and by reference to any circumstances.

(3)Listing rules must be made by an instrument in writing.

(4)Immediately after an instrument containing listing rules is made, it must be printed and made available to the public with or without payment.

(5)A person is not to be taken to have contravened any listing rule if he shows that at the time of the alleged contravention the instrument containing the rule had not been made available as required by subsection (4).

(6)The production of a printed copy of an instrument purporting to be made by the competent authority on which is endorsed a certificate signed by an officer of the authority authorised by it for that purpose and stating—

(a)that the instrument was made by the authority,

(b)that the copy is a true copy of the instrument, and

(c)that on a specified date the instrument was made available to the public as required by subsection (4),

is evidence (or in Scotland sufficient evidence) of the facts stated in the certificate.

(7)A certificate purporting to be signed as mentioned in subsection (6) is to be treated as having been properly signed unless the contrary is shown.

(8)A person who wishes in any legal proceedings to rely on a rule-making instrument may require the Authority to endorse a copy of the instrument with a certificate of the kind mentioned in subsection (6).

102Exemption from liability in damages

(1)Neither the competent authority nor any person who is, or is acting as, a member, officer or member of staff of the competent authority is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of the authority’s functions.

(2)Subsection (1) does not apply—

(a)if the act or omission is shown to have been in bad faith; or

(b)so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the [1998 c. 42.] Human Rights Act 1998.

103Interpretation of this Part

(1)In this Part—

  • “application” means an application made under section 75;

  • “issuer”, in relation to anything which is or may be admitted to the official list, has such meaning as may be prescribed by the Treasury;

  • “listing” has the meaning given in section 74(5);

  • “listing particulars” has the meaning given in section 79(2);

  • “listing rules” has the meaning given in section 74(4);

  • “new securities” has the meaning given in section 84(2);

  • “the official list” means the list maintained as the official list by the Authority immediately before the coming into force of section 74, as that list has effect for the time being;

  • “security” (except in section 74(2)) has the meaning given in section 74(5).

(2)In relation to any function conferred on the competent authority by this Part, any reference in this Part to the competent authority is to be read as a reference to the person by whom that function is for the time being exercisable.

(3)If, as a result of an order under Schedule 8, different functions conferred on the competent authority by this Part are exercisable by different persons, the powers conferred by section 91 are exercisable by such person as may be determined in accordance with the provisions of the order.

(4)For the purposes of this Part, a person offers securities if, and only if, as principal—

(a)he makes an offer which, if accepted, would give rise to a contract for their issue or sale by him or by another person with whom he has made arrangements for their issue or sale; or

(b)he invites a person to make such an offer.

(5)“Offer” and “offeror” are to be read accordingly.

(6)For the purposes of this Part, the question whether a person offers securities to the public in the United Kingdom is to be determined in accordance with Schedule 11.

(7)For the purposes of subsection (4) “sale” includes any disposal for valuable consideration.

Part VIIControl of Business Transfers

104Control of business transfers

No insurance business transfer scheme or banking business transfer scheme is to have effect unless an order has been made in relation to it under section 111(1).

105Insurance business transfer schemes

(1)A scheme is an insurance business transfer scheme if it—

(a)satisfies one of the conditions set out in subsection (2);

(b)results in the business transferred being carried on from an establishment of the transferee in an EEA State; and

(c)is not an excluded scheme.

(2)The conditions are that—

(a)the whole or part of the business carried on in one or more member States by a UK authorised person who has permission to effect or carry out contracts of insurance (“the authorised person concerned”) is to be transferred to another body (“the transferee”);

(b)the whole or part of the business, so far as it consists of reinsurance, carried on in the United Kingdom through an establishment there by an EEA firm qualifying for authorisation under Schedule 3 which has permission to effect or carry out contracts of insurance (“the authorised person concerned”) is to be transferred to another body (“the transferee”);

(c)the whole or part of the business carried on in the United Kingdom by an authorised person who is neither a UK authorised person nor an EEA firm but who has permission to effect or carry out contracts of insurance (“the authorised person concerned”) is to be transferred to another body (“the transferee”).

(3)A scheme is an excluded scheme for the purposes of this section if it falls within any of the following cases:

  • Case 1

    Where the authorised person concerned is a friendly society.

  • Case 2

    Where—

    (a)

    the authorised person concerned is a UK authorised person;

    (b)

    the business to be transferred under the scheme is business which consists of the effecting or carrying out of contracts of reinsurance in one or more EEA States other than the United Kingdom; and

    (c)

    the scheme has been approved by a court in an EEA State other than the United Kingdom or by the host state regulator.

  • Case 3

    Where—

    (a)

    the authorised person concerned is a UK authorised person;

    (b)

    the business to be transferred under the scheme is carried on in one or more countries or territories (none of which is an EEA State) and does not include policies of insurance (other than reinsurance) against risks arising in an EEA State; and

    (c)

    the scheme has been approved by a court in a country or territory other than an EEA State or by the authority responsible for the supervision of that business in a country or territory in which it is carried on.

  • Case 4

    Where the business to be transferred under the scheme is the whole of the business of the authorised person concerned and—

    (a)

    consists solely of the effecting or carrying out of contracts of reinsurance, or

    (b)

    all the policyholders are controllers of the firm or of firms within the same group as the firm which is the transferee,

    and, in either case, all of the policyholders who will be affected by the transfer have consented to it.

(4)The parties to a scheme which falls within Case 2, 3 or 4 may apply to the court for an order sanctioning the scheme as if it were an insurance business transfer scheme.

(5)Subsection (6) applies if the scheme involves a compromise or arrangement falling within section 427A of the [1985 c. 6.] Companies Act 1985 (or Article 420A of the Companies [S.I. 1986/1032 (N.I. 6).] (Northern Ireland) Order 1986).

(6)Sections 425 to 427 of that Act (or Articles 418 to 420 of that Order) have effect as modified by section 427A of that Act (or Article 420A of that Order) in relation to that compromise or arrangement.

(7)But subsection (6) does not affect the operation of this Part in relation to the scheme.

(8)“UK authorised person” means a body which is an authorised person and which—

(a)is incorporated in the United Kingdom; or

(b)is an unincorporated association formed under the law of any part of the United Kingdom.

(9)“Establishment” means, in relation to a person, his head office or a branch of his.

106Banking business transfer schemes

(1)A scheme is a banking business transfer scheme if it—

(a)satisfies one of the conditions set out in subsection (2);

(b)is one under which the whole or part of the business to be transferred includes the accepting of deposits; and

(c)is not an excluded scheme.

(2)The conditions are that—

(a)the whole or part of the business carried on by a UK authorised person who has permission to accept deposits (“the authorised person concerned”) is to be transferred to another body (“the transferee”);

(b)the whole or part of the business carried on in the United Kingdom by an authorised person who is not a UK authorised person but who has permission to accept deposits (“the authorised person concerned”) is to be transferred to another body which will carry it on in the United Kingdom (“the transferee”).

(3)A scheme is an excluded scheme for the purposes of this section if—

(a)the authorised person concerned is a building society or a credit union; or

(b)the scheme is a compromise or arrangement to which section 427A(1) of the [1985 c. 6.] Companies Act 1985 or Article 420A of the [S.I. 1986/1032 (N.I.6).] Companies (Northern Ireland) Order 1986 (mergers and divisions of public companies) applies.

(4)For the purposes of subsection (2)(a) it is immaterial whether or not the business to be transferred is carried on in the United Kingdom.

(5)“UK authorised person” has the same meaning as in section 105.

(6)“Building society” has the meaning given in the [1986 c. 53.] Building Societies Act 1986.

(7)“Credit union” means a credit union within the meaning of—

(a)the [1979 c. 34.] Credit Unions Act 1979;

(b)the [S.I. 1985/1205 (N.I. 12).] Credit Unions (Northern Ireland) Order 1985.

107Application for order sanctioning transfer scheme

(1)An application may be made to the court for an order sanctioning an insurance business transfer scheme or a banking business transfer scheme.

(2)An application may be made by—

(a)the authorised person concerned;

(b)the transferee; or

(c)both.

(3)The application must be made—

(a)if the authorised person concerned and the transferee are registered or have their head offices in the same jurisdiction, to the court in that jurisdiction;

(b)if the authorised person concerned and the transferee are registered or have their head offices in different jurisdictions, to the court in either jurisdiction;

(c)if the transferee is not registered in the United Kingdom and does not have his head office there, to the court which has jurisdiction in relation to the authorised person concerned.

(4)“Court” means—

(a)the High Court; or

(b)in Scotland, the Court of Session.

108Requirements on applicants

(1)The Treasury may by regulations impose requirements on applicants under section 107.

(2)The court may not determine an application under that section if the applicant has failed to comply with a prescribed requirement.

(3)The regulations may, in particular, include provision—

(a)as to the persons to whom, and periods within which, notice of an application must be given;

(b)enabling the court to waive a requirement of the regulations in prescribed circumstances.

109Scheme reports

(1)An application under section 107 in respect of an insurance business transfer scheme must be accompanied by a report on the terms of the scheme (“a scheme report”).

(2)A scheme report may be made only by a person—

(a)appearing to the Authority to have the skills necessary to enable him to make a proper report; and

(b)nominated or approved for the purpose by the Authority.

(3)A scheme report must be made in a form approved by the Authority.

110Right to participate in proceedings

On an application under section 107, the following are also entitled to be heard—

(a)the Authority, and

(b)any person (including an employee of the authorised person concerned or of the transferee) who alleges that he would be adversely affected by the carrying out of the scheme.

111Sanction of the court for business transfer schemes

(1)This section sets out the conditions which must be satisfied before the court may make an order under this section sanctioning an insurance business transfer scheme or a banking business transfer scheme.

(2)The court must be satisfied that—

(a)the appropriate certificates have been obtained (as to which see Parts I and II of Schedule 12);

(b)the transferee has the authorisation required (if any) to enable the business, or part, which is to be transferred to be carried on in the place to which it is to be transferred (or will have it before the scheme takes effect).

(3)The court must consider that, in all the circumstances of the case, it is appropriate to sanction the scheme.

112Effect of order sanctioning business transfer scheme

(1)If the court makes an order under section 111(1), it may by that or any subsequent order make such provision (if any) as it thinks fit—

(a)for the transfer to the transferee of the whole or any part of the undertaking concerned and of any property or liabilities of the authorised person concerned;

(b)for the allotment or appropriation by the transferee of any shares, debentures, policies or other similar interests in the transferee which under the scheme are to be allotted or appropriated to or for any other person;

(c)for the continuation by (or against) the transferee of any pending legal proceedings by (or against) the authorised person concerned;

(d)with respect to such incidental, consequential and supplementary matters as are, in its opinion, necessary to secure that the scheme is fully and effectively carried out.

(2)An order under subsection (1)(a) may—

(a)transfer property or liabilities whether or not the authorised person concerned otherwise has the capacity to effect the transfer in question;

(b)make provision in relation to property which was held by the authorised person concerned as trustee;

(c)make provision as to future or contingent rights or liabilities of the authorised person concerned, including provision as to the construction of instruments (including wills) under which such rights or liabilities may arise;

(d)make provision as to the consequences of the transfer in relation to any retirement benefits scheme (within the meaning of section 611 of the [1988 c. 1.] Income and Corporation Taxes Act 1988) operated by or on behalf of the authorised person concerned.

(3)If an order under subsection (1) makes provision for the transfer of property or liabilities—

(a)the property is transferred to and vests in, and

(b)the liabilities are transferred to and become liabilities of,

the transferee as a result of the order.

(4)But if any property or liability included in the order is governed by the law of any country or territory outside the United Kingdom, the order may require the authorised person concerned, if the transferee so requires, to take all necessary steps for securing that the transfer to the transferee of the property or liability is fully effective under the law of that country or territory.

(5)Property transferred as the result of an order under subsection (1) may, if the court so directs, vest in the transferee free from any charge which is (as a result of the scheme) to cease to have effect.

(6)An order under subsection (1) which makes provision for the transfer of property is to be treated as an instrument of transfer for the purposes of the provisions mentioned in subsection (7) and any other enactment requiring the delivery of an instrument of transfer for the registration of property.

(7)The provisions are—

(a)section 183(1) of the [1985 c. 6.] Companies Act 1985;

(b)Article 193(1) and (2) of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986.

(8)If the court makes an order under section 111(1) in relation to an insurance business transfer scheme, it may by that or any subsequent order make such provision (if any) as it thinks fit—

(a)for dealing with the interests of any person who, within such time and in such manner as the court may direct, objects to the scheme;

(b)for the dissolution, without winding up, of the authorised person concerned;

(c)for the reduction, on such terms and subject to such conditions (if any) as it thinks fit, of the benefits payable under—

(i)any description of policy, or

(ii)policies generally,

entered into by the authorised person concerned and transferred as a result of the scheme.

(9)If, in the case of an insurance business transfer scheme, the authorised person concerned is not an EEA firm, it is immaterial for the purposes of subsection (1)(a), (c) or (d) or subsection (2), (3) or (4) that the law applicable to any of the contracts of insurance included in the transfer is the law of an EEA State other than the United Kingdom.

(10)The transferee must, if an insurance or banking business transfer scheme is sanctioned by the court, deposit two office copies of the order made under subsection (1) with the Authority within 10 days of the making of the order.

(11)But the Authority may extend that period.

(12)“Property” includes property, rights and powers of any description.

(13)“Liabilities” includes duties.

(14)“Shares” and “debentures” have the same meaning as in—

(a)the [1985 c. 6.] Companies Act 1985; or

(b)in Northern Ireland, the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986.

(15)“Charge” includes a mortgage (or, in Scotland, a security over property).

113Appointment of actuary in relation to reduction of benefits

(1)This section applies if an order has been made under section 111(1).

(2)The court making the order may, on the application of the Authority, appoint an independent actuary—

(a)to investigate the business transferred under the scheme; and

(b)to report to the Authority on any reduction in the benefits payable under policies entered into by the authorised person concerned that, in the opinion of the actuary, ought to be made.

114Rights of certain policyholders

(1)This section applies in relation to an insurance business transfer scheme if—

(a)the authorised person concerned is an authorised person other than an EEA firm qualifying for authorisation under Schedule 3;

(b)the court has made an order under section 111 in relation to the scheme; and

(c)an EEA State other than the United Kingdom is, as regards any policy included in the transfer which evidences a contract of insurance, the State of the commitment or the EEA State in which the risk is situated (“the EEA State concerned”).

(2)The court must direct that notice of the making of the order, or the execution of any instrument, giving effect to the transfer must be published by the transferee in the EEA State concerned.

(3)A notice under subsection (2) must specify such period as the court may direct as the period during which the policyholder may exercise any right which he has to cancel the policy.

(4)The order or instrument mentioned in subsection (2) does not bind the policyholder if—

(a)the notice required under that subsection is not published; or

(b)the policyholder cancels the policy during the period specified in the notice given under that subsection.

(5)The law of the EEA State concerned governs—

(a)whether the policyholder has a right to cancel the policy; and

(b)the conditions, if any, subject to which any such right may be exercised.

(6)Paragraph 6 of Schedule 12 applies for the purposes of this section as it applies for the purposes of that Schedule.

Business transfers outside the United Kingdom

115Certificates for purposes of insurance business transfers overseas

Part III of Schedule 12 makes provision about certificates which the Authority may issue in relation to insurance business transfers taking place outside the United Kingdom.

116Effect of insurance business transfers authorised in other EEA States

(1)This section applies if, as a result of an authorised transfer, an EEA firm falling within paragraph 5(d) of Schedule 3 transfers to another body all its rights and obligations under any UK policies.

(2)This section also applies if, as a result of an authorised transfer, a company authorised in an EEA State other than the United Kingdom under Article 27 of the first life insurance directive, or Article 23 of the first non-life insurance directive, transfers to another body all its rights and obligations under any UK policies.

(3)If appropriate notice of the execution of an instrument giving effect to the transfer is published, the instrument has the effect in law—

(a)of transferring to the transferee all the transferor’s rights and obligations under the UK policies to which the instrument applies, and

(b)if the instrument so provides, of securing the continuation by or against the transferee of any legal proceedings by or against the transferor which relate to those rights and obligations.

(4)No agreement or consent is required before subsection (3) has the effects mentioned.

(5)“Authorised transfer” means—

(a)in subsection (1), a transfer authorised in the home State of the EEA firm in accordance with—

(i)Article 11 of the third life directive; or

(ii)Article 12 of the third non-life directive; and

(b)in subsection (2), a transfer authorised in an EEA State other than the United Kingdom in accordance with—

(i)Article 31a of the first life directive; or

(ii)Article 28a of the first non-life directive.

(6)“UK policy” means a policy evidencing a contract of insurance (other than a contract of reinsurance) to which the applicable law is the law of any part of the United Kingdom.

(7)“Appropriate notice” means—

(a)if the UK policy evidences a contract of insurance in relation to which an EEA State other than the United Kingdom is the State of the commitment, notice given in accordance with the law of that State;

(b)if the UK policy evidences a contract of insurance where the risk is situated in an EEA State other than the United Kingdom, notice given in accordance with the law of that EEA State;

(c)in any other case, notice given in accordance with the applicable law.

(8)Paragraph 6 of Schedule 12 applies for the purposes of this section as it applies for the purposes of that Schedule.

Modifications

117Power to modify this Part

The Treasury may by regulations—

(a)provide for prescribed provisions of this Part to have effect in relation to prescribed cases with such modifications as may be prescribed;

(b)make such amendments to any provision of this Part as they consider appropriate for the more effective operation of that or any other provision of this Part.

Part VIIIPenalties for Market Abuse

Market abuse

118Market abuse

(1)For the purposes of this Act, market abuse is behaviour (whether by one person alone or by two or more persons jointly or in concert)—

(a)which occurs in relation to qualifying investments traded on a market to which this section applies;

(b)which satisfies any one or more of the conditions set out in subsection (2); and

(c)which is likely to be regarded by a regular user of that market who is aware of the behaviour as a failure on the part of the person or persons concerned to observe the standard of behaviour reasonably expected of a person in his or their position in relation to the market.

(2)The conditions are that—

(a)the behaviour is based on information which is not generally available to those using the market but which, if available to a regular user of the market, would or would be likely to be regarded by him as relevant when deciding the terms on which transactions in investments of the kind in question should be effected;

(b)the behaviour is likely to give a regular user of the market a false or misleading impression as to the supply of, or demand for, or as to the price or value of, investments of the kind in question;

(c)a regular user of the market would, or would be likely to, regard the behaviour as behaviour which would, or would be likely to, distort the market in investments of the kind in question.

(3)The Treasury may by order prescribe (whether by name or by description)—

(a)the markets to which this section applies; and

(b)the investments which are qualifying investments in relation to those markets.

(4)The order may prescribe different investments or descriptions of investment in relation to different markets or descriptions of market.

(5)Behaviour is to be disregarded for the purposes of subsection (1) unless it occurs—

(a)in the United Kingdom; or

(b)in relation to qualifying investments traded on a market to which this section applies which is situated in the United Kingdom or which is accessible electronically in the United Kingdom.

(6)For the purposes of this section, the behaviour which is to be regarded as occurring in relation to qualifying investments includes behaviour which—

(a)occurs in relation to anything which is the subject matter, or whose price or value is expressed by reference to the price or value, of those qualifying investments; or

(b)occurs in relation to investments (whether qualifying or not) whose subject matter is those qualifying investments.

(7)Information which can be obtained by research or analysis conducted by, or on behalf of, users of a market is to be regarded for the purposes of this section as being generally available to them.

(8)Behaviour does not amount to market abuse if it conforms with a rule which includes a provision to the effect that behaviour conforming with the rule does not amount to market abuse.

(9)Any reference in this Act to a person engaged in market abuse is a reference to a person engaged in market abuse whether alone or with one or more other persons.

(10)In this section—

  • “behaviour” includes action or inaction;

  • “investment” is to be read with section 22 and Schedule 2;

  • “regular user”, in relation to a particular market, means a reasonable person who regularly deals on that market in investments of the kind in question.

The code

119The code

(1)The Authority must prepare and issue a code containing such provisions as the Authority considers will give appropriate guidance to those determining whether or not behaviour amounts to market abuse.

(2)The code may among other things specify—

(a)descriptions of behaviour that, in the opinion of the Authority, amount to market abuse;

(b)descriptions of behaviour that, in the opinion of the Authority, do not amount to market abuse;

(c)factors that, in the opinion of the Authority, are to be taken into account in determining whether or not behaviour amounts to market abuse.

(3)The code may make different provision in relation to persons, cases or circumstances of different descriptions.

(4)The Authority may at any time alter or replace the code.

(5)If the code is altered or replaced, the altered or replacement code must be issued by the Authority.

(6)A code issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(7)The Authority must, without delay, give the Treasury a copy of any code published under this section.

(8)The Authority may charge a reasonable fee for providing a person with a copy of the code.

120Provisions included in the Authority’s code by reference to the City Code

(1)The Authority may include in a code issued by it under section 119 (“the Authority’s code”) provision to the effect that in its opinion behaviour conforming with the City Code—

(a)does not amount to market abuse;

(b)does not amount to market abuse in specified circumstances; or

(c)does not amount to market abuse if engaged in by a specified description of person.

(2)But the Treasury’s approval is required before any such provision may be included in the Authority’s code.

(3)If the Authority’s code includes provision of a kind authorised by subsection (1), the Authority must keep itself informed of the way in which the Panel on Takeovers and Mergers interprets and administers the relevant provisions of the City Code.

(4)“City Code” means the City Code on Takeovers and Mergers issued by the Panel as it has effect at the time when the behaviour occurs.

(5)“Specified” means specified in the Authority’s code.

121Codes: procedure

(1)Before issuing a code under section 119, the Authority must publish a draft of the proposed code in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(2)The draft must be accompanied by—

(a)a cost benefit analysis; and

(b)notice that representations about the proposal may be made to the Authority within a specified time.

(3)Before issuing the proposed code, the Authority must have regard to any representations made to it in accordance with subsection (2)(b).

(4)If the Authority issues the proposed 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 code differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant—

(a)the Authority 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)Subsections (1) to (5) do not apply if the Authority considers that there is an urgent need to publish the code.

(7)Neither subsection (2)(a) nor subsection (5)(b) applies if the Authority 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.

(8)The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1).

(9)This section also applies to a proposal to alter or replace a code.

(10)“Cost benefit analysis” means an estimate of the costs together with an analysis of the benefits that will arise—

(a)if the proposed code is issued; or

(b)if subsection (5)(b) applies, from the code that has been issued.

(11)“The appropriate comparison” means—

(a)in relation to subsection (2)(a), a comparison between the overall position if the 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 code and the overall position before it was issued.

122Effect of the code

(1)If a person behaves in a way which is described (in the code in force under section 119 at the time of the behaviour) as behaviour that, in the Authority’s opinion, does not amount to market abuse that behaviour of his is to be taken, for the purposes of this Act, as not amounting to market abuse.

(2)Otherwise, the code in force under section 119 at the time when particular behaviour occurs may be relied on so far as it indicates whether or not that behaviour should be taken to amount to market abuse.

Power to impose penalties

123Power to impose penalties in cases of market abuse

(1)If the Authority is satisfied that a person (“A”)—

(a)is or has engaged in market abuse, or

(b)by taking or refraining from taking any action has required or encouraged another person or persons to engage in behaviour which, if engaged in by A, would amount to market abuse,

it may impose on him a penalty of such amount as it considers appropriate.

(2)But the Authority may not impose a penalty on a person if, having considered any representations made to it in response to a warning notice, there are reasonable grounds for it to be satisfied that—

(a)he believed, on reasonable grounds, that his behaviour did not fall within paragraph (a) or (b) of subsection (1), or

(b)he took all reasonable precautions and exercised all due diligence to avoid behaving in a way which fell within paragraph (a) or (b) of that subsection.

(3)If the Authority is entitled to impose a penalty on a person under this section it may, instead of imposing a penalty on him, publish a statement to the effect that he has engaged in market abuse.

Statement of policy

124Statement of policy

(1)The Authority must prepare and issue a statement of its policy with respect to—

(a)the imposition of penalties under section 123; and

(b)the amount of penalties under that section.

(2)The Authority’s policy in determining what the amount of a penalty should be must include having regard to—

(a)whether the behaviour in respect of which the penalty is to be imposed had an adverse effect on the market in question and, if it did, how serious that effect was;

(b)the extent to which that behaviour was deliberate or reckless; and

(c)whether the person on whom the penalty is to be imposed is an individual.

(3)A statement issued under this section must include an indication of the circumstances in which the Authority is to be expected to regard a person as—

(a)having a reasonable belief that his behaviour did not amount to market abuse; or

(b)having taken reasonable precautions and exercised due diligence to avoid engaging in market abuse.

(4)The Authority may at any time alter or replace a statement issued under this section.

(5)If a statement issued under this section is altered or replaced, the Authority must issue the altered or replacement statement.

(6)In exercising, or deciding whether to exercise, its power under section 123 in the case of any particular behaviour, the Authority must have regard to any statement published under this section and in force at the time when the behaviour concerned occurred.

(7)A statement issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(8)The Authority may charge a reasonable fee for providing a person with a copy of a statement published under this section.

(9)The Authority must, without delay, give the Treasury a copy of any statement which it publishes under this section.

125Statement of policy: procedure

(1)Before issuing a statement of policy under section 124, the Authority must publish a draft of the proposed statement in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(2)The draft must be accompanied by notice that representations about the proposal may be made to the Authority within a specified time.

(3)Before issuing the proposed statement, the Authority must have regard to any representations made to it in accordance with subsection (2).

(4)If the Authority issues the proposed statement it must publish an account, in general terms, of—

(a)the representations made to it in accordance with subsection (2); and

(b)its response to them.

(5)If the statement differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant, the Authority must (in addition to complying with subsection (4)) publish details of the difference.

(6)The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1).

(7)This section also applies to a proposal to alter or replace a statement.

Procedure

126Warning notices

(1)If the Authority proposes to take action against a person under section 123, it must give him a warning notice.

(2)A warning notice about a proposal to impose a penalty must state the amount of the proposed penalty.

(3)A warning notice about a proposal to publish a statement must set out the terms of the proposed statement.

127Decision notices and right to refer to Tribunal

(1)If the Authority decides to take action against a person under section 123, it must give him a decision notice.

(2)A decision notice about the imposition of a penalty must state the amount of the penalty.

(3)A decision notice about the publication of a statement must set out the terms of the statement.

(4)If the Authority decides to take action against a person under section 123, that person may refer the matter to the Tribunal.

Miscellaneous

128Suspension of investigations

(1)If the Authority considers it desirable or expedient because of the exercise or possible exercise of a power relating to market abuse, it may direct a recognised investment exchange or recognised clearing house—

(a)to terminate, suspend or limit the scope of any inquiry which the exchange or clearing house is conducting under its rules; or

(b)not to conduct an inquiry which the exchange or clearing house proposes to conduct under its rules.

(2)A direction under this section—

(a)must be given to the exchange or clearing house concerned by notice in writing; and

(b)is enforceable, on the application of the Authority, by injunction or, in Scotland, by an order under section 45 of the [1988 c. 36.] Court of Session Act 1988.

(3)The Authority’s powers relating to market abuse are its powers—

(a)to impose penalties under section 123; or

(b)to appoint a person to conduct an investigation under section 168 in a case falling within subsection (2)(d) of that section.

129Power of court to impose penalty in cases of market abuse

(1)The Authority may on an application to the court under section 381 or 383 request the court to consider whether the circumstances are such that a penalty should be imposed on the person to whom the application relates.

(2)The court may, if it considers it appropriate, make an order requiring the person concerned to pay to the Authority a penalty of such amount as it considers appropriate.

130Guidance

(1)The Treasury may from time to time issue written guidance for the purpose of helping relevant authorities to determine the action to be taken in cases where behaviour occurs which is behaviour—

(a)with respect to which the power in section 123 appears to be exercisable; and

(b)which appears to involve the commission of an offence under section 397 of this Act or Part V of the [1993 c. 36.] Criminal Justice Act 1993 (insider dealing).

(2)The Treasury must obtain the consent of the Attorney General and the Secretary of State before issuing any guidance under this section.

(3)In this section “relevant authorities”—

(a)in relation to England and Wales, means the Secretary of State, the Authority, the Director of the Serious Fraud Office and the Director of Public Prosecutions;

(b)in relation to Northern Ireland, means the Secretary of State, the Authority, the Director of the Serious Fraud Office and the Director of Public Prosecutions for Northern Ireland.

(4)Subsections (1) to (3) do not apply to Scotland.

(5)In relation to Scotland, the Lord Advocate may from time to time, after consultation with the Treasury, issue written guidance for the purpose of helping the Authority to determine the action to be taken in cases where behaviour mentioned in subsection (1) occurs.

131Effect on transactions

The imposition of a penalty under this Part does not make any transaction void or unenforceable.

Part IXHearings and Appeals

132The Financial Services and Markets Tribunal

(1)For the purposes of this Act, there is to be a tribunal known as the Financial Services and Markets Tribunal (but referred to in this Act as “the Tribunal”).

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

(3)The Lord Chancellor may by rules make such provision as appears to him to be necessary or expedient in respect of the conduct of proceedings before the Tribunal.

(4)Schedule 13 is to have effect as respects the Tribunal and its proceedings (but does not limit the Lord Chancellor’s powers under this section).

133Proceedings: general provision

(1)A reference to the Tribunal under this Act must be made before the end of—

(a)the period of 28 days beginning with the date on which the decision notice or supervisory notice in question is given; or

(b)such other period as may be specified in rules made under section 132.

(2)Subject to rules made under section 132, the Tribunal may allow a reference to be made after the end of that period.

(3)On a reference the Tribunal may consider any evidence relating to the subject-matter of the reference, whether or not it was available to the Authority at the material time.

(4)On a reference the Tribunal must determine what (if any) is the appropriate action for the Authority to take in relation to the matter referred to it.

(5)On determining a reference, the Tribunal must remit the matter to the Authority with such directions (if any) as the Tribunal considers appropriate for giving effect to its determination.

(6)In determining a reference made as a result of a decision notice, the Tribunal may not direct the Authority to take action which the Authority would not, as a result of section 388(2), have had power to take when giving the decision notice.

(7)In determining a reference made as a result of a supervisory notice, the Tribunal may not direct the Authority to take action which would have otherwise required the giving of a decision notice.

(8)The Tribunal may, on determining a reference, make recommendations as to the Authority’s regulating provisions or its procedures.

(9)The Authority must not take the action specified in a decision notice—

(a)during the period within which the matter to which the decision notice relates may be referred to the Tribunal; and

(b)if the matter is so referred, until the reference, and any appeal against the Tribunal’s determination, has been finally disposed of.

(10)The Authority must act in accordance with the determination of, and any direction given by, the Tribunal.

(11)An order of the Tribunal may be enforced—

(a)as if it were an order of a county court; or

(b)in Scotland, as if it were an order of the Court of Session.

(12)“Supervisory notice” has the same meaning as in section 395.

Legal assistance before the Tribunal

134Legal assistance scheme

(1)The Lord Chancellor may by regulations establish a scheme governing the provision of legal assistance in connection with proceedings before the Tribunal.

(2)If the Lord Chancellor establishes a scheme under subsection (1), it must provide that a person is eligible for assistance only if—

(a)he falls within subsection (3); and

(b)he fulfils such other criteria (if any) as may be prescribed as a result of section 135(1)(d).

(3)A person falls within this subsection if he is an individual who has referred a matter to the Tribunal under section 127(4).

(4)In this Part of this Act “the legal assistance scheme” means any scheme in force under subsection (1).

135Provisions of the legal assistance scheme

(1)The legal assistance scheme may, in particular, make provision as to—

(a)the kinds of legal assistance that may be provided;

(b)the persons by whom legal assistance may be provided;

(c)the manner in which applications for legal assistance are to be made;

(d)the criteria on which eligibility for legal assistance is to be determined;

(e)the persons or bodies by whom applications are to be determined;

(f)appeals against refusals of applications;

(g)the revocation or variation of decisions;

(h)its administration and the enforcement of its provisions.

(2)Legal assistance under the legal assistance scheme may be provided subject to conditions or restrictions, including conditions as to the making of contributions by the person to whom it is provided.

136Funding of the legal assistance scheme

(1)The Authority must pay to the Lord Chancellor such sums at such times as he may, from time to time, determine in respect of the anticipated or actual cost of legal assistance provided in connection with proceedings before the Tribunal under the legal assistance scheme.

(2)In order to enable it to pay any sum which it is obliged to pay under subsection (1), the Authority must make rules requiring the payment to it by authorised persons or any class of authorised person of specified amounts or amounts calculated in a specified way.

(3)Sums received by the Lord Chancellor under subsection (1) must be paid into the Consolidated Fund.

(4)The Lord Chancellor must, out of money provided by Parliament fund the cost of legal assistance provided in connection with proceedings before the Tribunal under the legal assistance scheme.

(5)Subsection (6) applies if, as respects a period determined by the Lord Chancellor, the amount paid to him under subsection (1) as respects that period exceeds the amount he has expended in that period under subsection (4).

(6)The Lord Chancellor must—

(a)repay, out of money provided by Parliament, the excess to the Authority; or

(b)take the excess into account on the next occasion on which he makes a determination under subsection (1).

(7)The Authority must make provision for any sum repaid to it under subsection (6)(a)—

(a)to be distributed among—

(i)the authorised persons on whom a levy was imposed in the period in question as a result of rules made under subsection (2); or

(ii)such of those persons as it may determine;

(b)to be applied in order to reduce any amounts which those persons, or such of them as it may determine, are or will be liable to pay to the Authority, whether under rules made under subsection (2) or otherwise; or

(c)to be partly so distributed and partly so applied.

(8)If the Authority considers that it is not practicable to deal with any part of a sum repaid to it under subsection (6)(a) in accordance with provision made by it as a result of subsection (7), it may, with the consent the Lord Chancellor, apply or dispose of that part of that sum in such manner as it considers appropriate.

(9)“Specified” means specified in the rules.

Appeals

137Appeal on a point of law

(1)A party to a reference to the Tribunal may with permission appeal—

(a)to the Court of Appeal, or

(b)in Scotland, to the Court of Session,

on a point of law arising from a decision of the Tribunal disposing of the reference.

(2)“Permission” means permission given by the Tribunal or by the Court of Appeal or (in Scotland) the Court of Session.

(3)If, on an appeal under subsection (1), the court considers that the decision of the Tribunal was wrong in law, it may—

(a)remit the matter to the Tribunal for rehearing and determination by it; or

(b)itself make a determination.

(4)An appeal may not be brought from a decision of the Court of Appeal under subsection (3) except with the leave of—

(a)the Court of Appeal; or

(b)the House of Lords.

(5)An appeal lies, with the leave of the Court of Session or the House of Lords, from any decision of the Court of Session under this section, and such leave may be given on such terms as to costs, expenses or otherwise as the Court of Session or the House of Lords may determine.

(6)Rules made under section 132 may make provision for regulating or prescribing any matters incidental to or consequential on an appeal under this section.

Part XRules and Guidance

Chapter IRule-making Powers

138General rule-making power

(1)The Authority may make such rules applying to authorised persons—

(a)with respect to the carrying on by them of regulated activities, or

(b)with respect to the carrying on by them of activities which are not regulated activities,

as appear to it to be necessary or expedient for the purpose of protecting the interests of consumers.

(2)Rules made under this section are referred to in this Act as the Authority’s general rules.

(3)The Authority’s power to make general rules is not limited by any other power which it has to make regulating provisions.

(4)The Authority’s general rules may make provision applying to authorised persons even though there is no relationship between the authorised persons to whom the rules will apply and the persons whose interests will be protected by the rules.

(5)General rules may contain requirements which take into account, in the case of an authorised person who is a member of a group, any activity of another member of the group.

(6)General rules may not—

(a)make provision prohibiting an EEA firm from carrying on, or holding itself out as carrying on, any activity which it has permission conferred by Part II of Schedule 3 to carry on in the United Kingdom;

(b)make provision, as respects an EEA firm, about any matter responsibility for which is, under any of the single market directives, reserved to the firm’s home state regulator.

(7)“Consumers” means persons—

(a)who use, have used, or are or may be contemplating using, any of the services provided by—

(i)authorised persons in carrying on regulated activities; or

(ii)persons acting as appointed representatives;

(b)who have rights or interests which are derived from, or are otherwise attributable to, the use of any such services by other persons; or

(c)who have rights or interests which may be adversely affected by the use of any such services by persons acting on their behalf or in a fiduciary capacity in relation to them.

(8)If an authorised person is carrying on a regulated activity in his capacity as a 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 are or may be contemplating using services provided by the authorised person in his carrying on of that activity.

(9)For the purposes of subsection (7) a person who deals with an authorised person in the course of the authorised person’s carrying on of a regulated activity is to be treated as using services provided by the authorised person in carrying on those activities.

139Miscellaneous ancillary matters

(1)Rules relating to the handling of money held by an authorised person in specified circumstances (“clients' money”) may—

(a)make provision which results in that clients' money being held on trust in accordance with the rules;

(b)treat two or more accounts as a single account for specified purposes (which may include the distribution of money held in the accounts);

(c)authorise the retention by the authorised person of interest accruing on the clients' money; and

(d)make provision as to the distribution of such interest which is not to be retained by him.

(2)An institution with which an account is kept in pursuance of rules relating to the handling of clients' money does not incur any liability as constructive trustee if money is wrongfully paid from the account, unless the institution permits the payment—

(a)with knowledge that it is wrongful; or

(b)having deliberately failed to make enquiries in circumstances in which a reasonable and honest person would have done so.

(3)In the application of subsection (1) to Scotland, the reference to money being held on trust is to be read as a reference to its being held as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him.

(4)Rules may—

(a)confer rights on persons to rescind agreements with, or withdraw offers to, authorised persons within a specified period; and

(b)make provision, in respect of authorised persons and persons exercising those rights, for the restitution of property and the making or recovery of payments where those rights are exercised.

(5)“Rules” means general rules.

(6)“Specified” means specified in the rules.

140Restriction on managers of authorised unit trust schemes

(1)The Authority may make rules prohibiting an authorised person who has permission to act as the manager of an authorised unit trust scheme from carrying on a specified activity.

(2)Such rules may specify an activity which is not a regulated activity.

141Insurance business rules

(1)The Authority may make rules prohibiting an authorised person who has permission to effect or carry out contracts of insurance from carrying on a specified activity.

(2)Such rules may specify an activity which is not a regulated activity.

(3)The Authority may make rules in relation to contracts entered into by an authorised person in the course of carrying on business which consists of the effecting or carrying out of contracts of long-term insurance.

(4)Such rules may, in particular—

(a)restrict the descriptions of property or indices of the value of property by reference to which the benefits under such contracts may be determined;

(b)make provision, in the interests of the protection of policyholders, for the substitution of one description of property, or index of value, by reference to which the benefits under a contract are to be determined for another such description of property or index.

(5)Rules made under this section are referred to in this Act as insurance business rules.

142Insurance business: regulations supplementing Authority’s rules

(1)The Treasury may make regulations for the purpose of preventing a person who is not an authorised person but who—

(a)is a parent undertaking of an authorised person who has permission to effect or carry out contracts of insurance, and

(b)falls within a prescribed class,

from doing anything to lessen the effectiveness of asset identification rules.

(2)“Asset identification rules” means rules made by the Authority which require an authorised person who has permission to effect or carry out contracts of insurance to identify assets which belong to him and which are maintained in respect of a particular aspect of his business.

(3)The regulations may, in particular, include provision—

(a)prohibiting the payment of dividends;

(b)prohibiting the creation of charges;

(c)making charges created in contravention of the regulations void.

(4)The Treasury may by regulations provide that, in prescribed circumstances, charges created in contravention of asset identification rules are void.

(5)A person who contravenes regulations under subsection (1) is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(6)“Charges” includes mortgages (or in Scotland securities over property).

143Endorsement of codes etc

(1)The Authority may make rules (“endorsing rules”)—

(a)endorsing the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers;

(b)endorsing the Rules Governing Substantial Acquisitions of Shares issued by the Panel.

(2)Endorsement may be—

(a)as respects all authorised persons; or

(b)only as respects a specified kind of authorised person.

(3)At any time when endorsing rules are in force, and if asked to do so by the Panel, the Authority may exercise its powers under Part IV or section 66 as if failure to comply with an endorsed provision was a ground entitling the Authority to exercise those powers.

(4)At any time when endorsing rules are in force and if asked to do so by the Panel, the Authority may exercise its powers under Part XIII, XIV or XXV as if the endorsed provisions were rules applying to the persons in respect of whom they are endorsed.

(5)For the purposes of subsections (3) and (4), a failure to comply with a requirement imposed, or ruling given, under an endorsed provision is to be treated as a failure to comply with the endorsed provision under which that requirement was imposed or ruling was given.

(6)If endorsed provisions are altered, subsections (3) and (4) apply to them as altered, but only if before the alteration the Authority has notified the Panel (and has not withdrawn its notification) that it is satisfied with the Panel’s consultation procedures.

(7)“Consultation procedures” means procedures designed to provide an opportunity for persons likely to be affected by alterations to those provisions to make representations about proposed alterations to any of those provisions.

(8)Subsections (1), (2)(d), (4), (5), (6)(a) and (12) of section 155 apply (with the necessary modifications) to a proposal to give notification of the kind mentioned in subsection (6) as they apply to a proposal to make endorsing rules.

(9)This section applies in relation to particular provisions of the code or rules mentioned in subsection (1) as it applies to the code or the rules.

Specific rules

144Price stabilising rules

(1)The Authority may make rules (“price stabilising rules”) as to—

(a)the circumstances and manner in which,

(b)the conditions subject to which, and

(c)the time when or the period during which,

action may be taken for the purpose of stabilising the price of investments of specified kinds.

(2)Price stabilising rules—

(a)are to be made so as to apply only to authorised persons;

(b)may make different provision in relation to different kinds of investment.

(3)The Authority may make rules which, for the purposes of section 397(5)(b), treat a person who acts or engages in conduct—

(a)for the purpose of stabilising the price of investments, and

(b)in conformity with such provisions corresponding to price stabilising rules and made by a body or authority outside the United Kingdom as may be specified in the rules under this subsection,

as acting, or engaging in that conduct, for that purpose and in conformity with price stabilising rules.

(4)The Treasury may by order impose limitations on the power to make rules under this section.

(5)Such an order may, in particular—

(a)specify the kinds of investment in relation to which price stabilising rules may make provision;

(b)specify the kinds of investment in relation to which rules made under subsection (3) may make provision;

(c)provide for price stabilising rules to make provision for action to be taken for the purpose of stabilising the price of investments only in such circumstances as the order may specify;

(d)provide for price stabilising rules to make provision for action to be taken for that purpose only at such times or during such periods as the order may specify.

(6)If provisions specified in rules made under subsection (3) are altered, the rules continue to apply to those provisions as altered, but only if before the alteration the Authority has notified the body or authority concerned (and has not withdrawn its notification) that it is satisfied with its consultation procedures.

(7)“Consultation procedures” has the same meaning as in section 143.

145Financial promotion rules

(1)The Authority may make rules applying to authorised persons about the communication by them, or their approval of the communication by others, of invitations or inducements—

(a)to engage in investment activity; or

(b)to participate in a collective investment scheme.

(2)Rules under this section may, in particular, make provision about the form and content of communications.

(3)Subsection (1) applies only to communications which—

(a)if made by a person other than an authorised person, without the approval of an authorised person, would contravene section 21(1);

(b)may be made by an authorised person without contravening section 238(1).

(4)“Engage in investment activity” has the same meaning as in section 21.

(5)The Treasury may by order impose limitations on the power to make rules under this section.

146Money laundering rules

The Authority may make rules in relation to the prevention and detection of money laundering in connection with the carrying on of regulated activities by authorised persons.

147Control of information rules

(1)The Authority may make rules (“control of information rules”) about the disclosure and use of information held by an authorised person (“A”).

(2)Control of information rules may—

(a)require the withholding of information which A would otherwise have to disclose to a person (“B”) for or with whom A does business in the course of carrying on any regulated or other activity;

(b)specify circumstances in which A may withhold information which he would otherwise have to disclose to B;

(c)require A not to use for the benefit of B information A holds which A would otherwise have to use in that way;

(d)specify circumstances in which A may decide not to use for the benefit of B information A holds which A would otherwise have to use in that way.

Modification or waiver

148Modification or waiver of rules

(1)This section applies in relation to the following—

(a)auditors and actuaries rules;

(b)control of information rules;

(c)financial promotion rules;

(d)general rules;

(e)insurance business rules;

(f)money laundering rules; and

(g)price stabilising rules.

(2)The Authority may, on the application or with the consent of an authorised person, direct that all or any of the rules to which this section applies—

(a)are not to apply to the authorised person; or

(b)are to apply to him with such modifications as may be specified in the direction.

(3)An application must be made in such manner as the Authority may direct.

(4)The Authority may not give a direction unless it is satisfied that—

(a)compliance by the authorised person with the rules, or with the rules as unmodified, would be unduly burdensome or would not achieve the purpose for which the rules were made; and

(b)the direction would not result in undue risk to persons whose interests the rules are intended to protect.

(5)A direction may be given subject to conditions.

(6)Unless it is satisfied that it is inappropriate or unnecessary to do so, a direction must be published by the Authority in such a way as it thinks most suitable for bringing the direction to the attention of—

(a)those likely to be affected by it; and

(b)others who may be likely to make an application for a similar direction.

(7)In deciding whether it is satisfied as mentioned in subsection (6), the Authority must—

(a)take into account whether the direction relates to a rule contravention of which is actionable in accordance with section 150;

(b)consider whether its publication would prejudice, to an unreasonable degree, the commercial interests of the authorised person concerned or any other member of his immediate group; and

(c)consider whether its publication would be contrary to an international obligation of the United Kingdom.

(8)For the purposes of paragraphs (b) and (c) of subsection (7), the Authority must consider whether it would be possible to publish the direction without either of the consequences mentioned in those paragraphs by publishing it without disclosing the identity of the authorised person concerned.

(9)The Authority may—

(a)revoke a direction; or

(b)vary it on the application, or with the consent, of the authorised person to whom it relates.

(10)“Direction” means a direction under subsection (2).

(11)“Immediate group”, in relation to an authorised person (“A”), means—

(a)A;

(b)a parent undertaking of A;

(c)a subsidiary undertaking of A;

(d)a subsidiary undertaking of a parent undertaking of A;

(e)a parent undertaking of a subsidiary undertaking of A.

Contravention of rules

149Evidential provisions

(1)If a particular rule so provides, contravention of the rule does not give rise to any of the consequences provided for by other provisions of this Act.

(2)A rule which so provides must also provide—

(a)that contravention may be relied on as tending to establish contravention of such other rule as may be specified; or

(b)that compliance may be relied on as tending to establish compliance with such other rule as may be specified.

(3)A rule may include the provision mentioned in subsection (1) only if the Authority considers that it is appropriate for it also to include the provision required by subsection (2).

150Actions for damages

(1)A contravention by an authorised person of a rule is actionable at the suit of a private 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.

(2)If rules so provide, subsection (1) does not apply to contravention of a specified provision of those rules.

(3)In prescribed cases, a contravention of a rule which would be actionable at the suit of a private person is actionable at the suit of a person who is not a private person, subject to the defences and other incidents applying to actions for breach of statutory duty.

(4)In subsections (1) and (3) “rule” does not include—

(a)listing rules; or

(b)a rule requiring an authorised person to have or maintain financial resources.

(5)“Private person” has such meaning as may be prescribed.

151Limits on effect of contravening rules

(1)A person is not guilty of an offence by reason of a contravention of a rule made by the Authority.

(2)No such contravention makes any transaction void or unenforceable.

Procedural provisions

152Notification of rules to the Treasury

(1)If the Authority makes any rules, it must give a copy to the Treasury without delay.

(2)If the Authority alters or revokes any rules, it must give written notice to the Treasury without delay.

(3)Notice of an alteration must include details of the alteration.

153Rule-making instruments

(1)Any power conferred on the Authority to make rules is exercisable in writing.

(2)An instrument by which rules are made by the Authority (“a rule-making instrument”) must specify the provision under which the rules are made.

(3)To the extent to which a rule-making instrument does not comply with subsection (2), it is void.

(4)A rule-making instrument must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(5)The Authority may charge a reasonable fee for providing a person with a copy of a rule-making instrument.

(6)A person is not to be taken to have contravened any rule made by the Authority if he shows that at the time of the alleged contravention the rule-making instrument concerned had not been made available in accordance with this section.

154Verification of rules

(1)The production of a printed copy of a rule-making instrument purporting to be made by the Authority—

(a)on which is endorsed a certificate signed by a member of the Authority’s staff authorised by it for that purpose, and

(b)which contains the required statements,

is evidence (or in Scotland sufficient evidence) of the facts stated in the certificate.

(2)The required statements are—

(a)that the instrument was made by the Authority;

(b)that the copy is a true copy of the instrument; and

(c)that on a specified date the instrument was made available to the public in accordance with section 153(4).

(3)A certificate purporting to be signed as mentioned in subsection (1) is to be taken to have been properly signed unless the contrary is shown.

(4)A person who wishes in any legal proceedings to rely on a rule-making instrument may require the Authority to endorse a copy of the instrument with a certificate of the kind mentioned in subsection (1).

155Consultation

(1)If the Authority proposes to make any rules, it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of the public.

(2)The draft must be accompanied by—

(a)a cost benefit analysis;

(b)an explanation of the purpose of the proposed rules;

(c)an explanation of the Authority’s reasons for believing that making the proposed rules is compatible with its general duties under section 2; and

(d)notice that representations about the proposals may be made to the Authority within a specified time.

(3)In the case of a proposal to make rules under a provision mentioned in subsection (9), the draft must also be accompanied by details of the expected expenditure by reference to which the proposal is made.

(4)Before making the proposed rules, the Authority must have regard to any representations made to it in accordance with subsection (2)(d).

(5)If the Authority makes the proposed rules, it must publish an account, in general terms, of—

(a)the representations made to it in accordance with subsection (2)(d); and

(b)its response to them.

(6)If the rules differ from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant—

(a)the Authority must (in addition to complying with subsection (5)) publish details of the difference; and

(b)those details must be accompanied by a cost benefit analysis.

(7)Subsections (1) to (6) do not apply if the Authority considers that the delay involved in complying with them would be prejudicial to the interests of consumers.

(8)Neither subsection (2)(a) nor subsection (6)(b) applies if the Authority 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.

(9)Neither subsection (2)(a) nor subsection (6)(b) requires a cost benefit analysis to be carried out in relation to rules made under—

(a)section 136(2);

(b)subsection (1) of section 213 as a result of subsection (4) of that section;

(c)section 234;

(d)paragraph 17 of Schedule 1.

(10)“Cost benefit analysis” means an estimate of the costs together with an analysis of the benefits that will arise—

(a)if the proposed rules are made; or

(b)if subsection (6) applies, from the rules that have been made.

(11)“The appropriate comparison” means—

(a)in relation to subsection (2)(a), a comparison between the overall position if the rules are made and the overall position if they are not made;

(b)in relation to subsection (6)(b), a comparison between the overall position after the making of the rules and the overall position before they were made.

(12)The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1).

156General supplementary powers

(1)Rules made by the Authority may make different provision for different cases and may, in particular, make different provision in respect of different descriptions of authorised person, activity or investment.

(2)Rules made by the Authority may contain such incidental, supplemental, consequential and transitional provision as the Authority considers appropriate.

Chapter IIGuidance

157Guidance

(1)The Authority may give guidance consisting of such information and advice as it considers appropriate—

(a)with respect to the operation of this Act and of any rules made under it;

(b)with respect to any matters relating to functions of the Authority;

(c)for the purpose of meeting the regulatory objectives;

(d)with respect to any other matters about which it appears to the Authority to be desirable to give information or advice.

(2)The Authority may give financial or other assistance to persons giving information or advice of a kind which the Authority could give under this section.

(3)If the Authority proposes to give guidance to regulated persons generally, or to a class of regulated person, in relation to rules to which those persons are subject, subsections (1), (2) and (4) to (10) of section 155 apply to the proposed guidance as they apply to proposed rules.

(4)The Authority may—

(a)publish its guidance;

(b)offer copies of its published guidance for sale at a reasonable price; and

(c)if it gives guidance in response to a request made by any person, make a reasonable charge for that guidance.

(5)In this Chapter, references to guidance given by the Authority include references to any recommendation made by the Authority to persons generally, to regulated persons generally or to any class of regulated person.

(6)“Regulated person” means any—

(a)authorised person;

(b)person who is otherwise subject to rules made by the Authority.

158Notification of guidance to the Treasury

(1)On giving any general guidance, the Authority must give the Treasury a copy of the guidance without delay.

(2)If the Authority alters any of its general guidance, it must give written notice to the Treasury without delay.

(3)The notice must include details of the alteration.

(4)If the Authority revokes any of its general guidance, it must give written notice to the Treasury without delay.

(5)“General guidance” means guidance given by the Authority under section 157 which is—

(a)given to persons generally, to regulated persons generally or to a class of regulated person;

(b)intended to have continuing effect; and

(c)given in writing or other legible form.

(6)“Regulated person” has the same meaning as in section 157.

Chapter IIICompetition Scrutiny

159Interpretation

(1)In this Chapter—

  • “Director” means the Director General of Fair Trading;

  • “practices”, in relation to the Authority, means practices adopted by the Authority in the exercise of functions under this Act;

  • “regulating provisions” means any—

    (a)

    rules;

    (b)

    general guidance (as defined by section 158(5));

    (c)

    statement issued by the Authority under section 64;

    (d)

    code issued by the Authority under section 64 or 119.

(2)For the purposes of this Chapter, regulating provisions or practices have a significantly adverse effect on competition if—

(a)they have, or are intended or likely to have, that effect; or

(b)the effect that they have, or are intended or likely to have, is to require or encourage behaviour which has, or is intended or likely to have, a significantly adverse effect on competition.

(3)If regulating provisions or practices have, or are intended or likely to have, the effect of requiring or encouraging exploitation of the strength of a market position they are to be taken, for the purposes of this Chapter, to have an adverse effect on competition.

(4)In determining under this Chapter whether any of the regulating provisions have, or are likely to have, a particular effect, it may be assumed that the persons to whom the provisions concerned are addressed will act in accordance with them.

160Reports by Director General of Fair Trading

(1)The Director must keep the regulating provisions and the Authority’s practices under review.

(2)If at any time the Director considers that—

(a)a regulating provision or practice has a significantly adverse effect on competition, or

(b)two or more regulating provisions or practices taken together, or a particular combination of regulating provisions and practices, have such an effect,

he must make a report to that effect.

(3)If at any time the Director considers that—

(a)a regulating provision or practice does not have a significantly adverse effect on competition, or

(b)two or more regulating provisions or practices taken together, or a particular combination of regulating provisions and practices, do not have any such effect,

he may make a report to that effect.

(4)A report under subsection (2) must include details of the adverse effect on competition.

(5)If the Director makes a report under subsection (2) he must—

(a)send a copy of it to the Treasury, the Competition Commission and the Authority; and

(b)publish it in the way appearing to him to be best calculated to bring it to the attention of the public.

(6)If the Director makes a report under subsection (3)—

(a)he must send a copy of it to the Treasury, the Competition Commission and the Authority; and

(b)he may publish it.

(7)Before publishing a report under this section the Director must, so far as practicable, exclude any matter which relates to the private affairs of a particular individual the publication of which, in the opinion of the Director, would or might seriously and prejudicially affect his interests.

(8)Before publishing such a report the Director must, so far as practicable, exclude any matter which relates to the affairs of a particular body the publication of which, in the opinion of the Director, would or might seriously and prejudicially affect its interests.

(9)Subsections (7) and (8) do not apply in relation to copies of a report which the Director is required to send under subsection (5)(a) or (6)(a).

(10)For the purposes of the law of defamation, absolute privilege attaches to any report of the Director under this section.

161Power of Director to request information

(1)For the purpose of investigating any matter with a view to its consideration under section 160, the Director may exercise the powers conferred on him by this section.

(2)The Director may by notice in writing require any person to produce to him or to a person appointed by him for the purpose, at a time and place specified in the notice, any document which—

(a)is specified or described in the notice; and

(b)is a document in that person’s custody or under his control.

(3)The Director may by notice in writing—

(a)require any person carrying on any business to provide him with such information as may be specified or described in the notice; and

(b)specify the time within which, and the manner and form in which, any such information is to be provided.

(4)A requirement may be imposed under subsection (2) or (3)(a) only in respect of documents or information which relate to any matter relevant to the investigation.

(5)If a person (“the defaulter”) refuses, or otherwise fails, to comply with a notice under this section, the Director may certify that fact in writing to the court and the court may enquire into the case.

(6)If, after hearing any witness who may be produced against or on behalf of the defaulter and any statement which may be offered in defence, the court is satisfied that the defaulter did not have a reasonable excuse for refusing or otherwise failing to comply with the notice, the court may deal with the defaulter as if he were in contempt.

(7)“Court” means—

(a)the High Court; or

(b)in relation to Scotland, the Court of Session.

162Consideration by Competition Commission

(1)If the Director—

(a)makes a report under section 160(2), or

(b)asks the Commission to consider a report that he has made under section 160(3),

the Commission must investigate the matter.

(2)The Commission must then make its own report on the matter unless it considers that, as a result of a change of circumstances, no useful purpose would be served by a report.

(3)If the Commission decides in accordance with subsection (2) not to make a report, it must make a statement setting out the change of circumstances which resulted in that decision.

(4)A report made under this section must state the Commission’s conclusion as to whether—

(a)the regulating provision or practice which is the subject of the report has a significantly adverse effect on competition; or

(b)the regulating provisions or practices, or combination of regulating provisions and practices, which are the subject of the report have such an effect.

(5)A report under this section stating the Commission’s conclusion that there is a significantly adverse effect on competition must also—

(a)state whether the Commission considers that that effect is justified; and

(b)if it states that the Commission considers that it is not justified, state its conclusion as to what action, if any, ought to be taken by the Authority.

(6)Subsection (7) applies whenever the Commission is considering, for the purposes of this section, whether a particular adverse effect on competition is justified.

(7)The Commission must ensure, so far as that is reasonably possible, that the conclusion it reaches is compatible with the functions conferred, and obligations imposed, on the Authority by or under this Act.

(8)A report under this section must contain such an account of the Commission’s reasons for its conclusions as is expedient, in the opinion of the Commission, for facilitating proper understanding of them.

(9)Schedule 14 supplements this section.

(10)If the Commission makes a report under this section it must send a copy to the Treasury, the Authority and the Director.

163Role of the Treasury

(1)This section applies if the Competition Commission makes a report under section 162(2) which states its conclusion that there is a significantly adverse effect on competition.

(2)If the Commission’s conclusion, as stated in the report, is that the adverse effect on competition is not justified, the Treasury must give a direction to the Authority requiring it to take such action as may be specified in the direction.

(3)But subsection (2) does not apply if the Treasury consider—

(a)that, as a result of action taken by the Authority in response to the Commission’s report, it is unnecessary for them to give a direction; or

(b)that the exceptional circumstances of the case make it inappropriate or unnecessary for them to do so.

(4)In considering the action to be specified in a direction under subsection (2), the Treasury must have regard to any conclusion of the Commission included in the report because of section 162(5)(b).

(5)Subsection (6) applies if—

(a)the Commission’s conclusion, as stated in its report, is that the adverse effect on competition is justified; but

(b)the Treasury consider that the exceptional circumstances of the case require them to act.

(6)The Treasury may give a direction to the Authority requiring it to take such action—

(a)as they consider to be necessary in the light of the exceptional circumstances of the case; and

(b)as may be specified in the direction.

(7)The Authority may not be required as a result of this section to take any action—

(a)that it would not have power to take in the absence of a direction under this section; or

(b)that would otherwise be incompatible with any of the functions conferred, or obligations imposed, on it by or under this Act.

(8)Subsection (9) applies if the Treasury are considering—

(a)whether subsection (2) applies and, if so, what action is to be specified in a direction under that subsection; or

(b)whether to give a direction under subsection (6).

(9)The Treasury must—

(a)do what they consider appropriate to allow the Authority, and any other person appearing to the Treasury to be affected, an opportunity to make representations; and

(b)have regard to any such representations.

(10)If, in reliance on subsection (3)(a) or (b), the Treasury decline to act under subsection (2), they must make a statement to that effect, giving their reasons.

(11)If the Treasury give a direction under this section they must make a statement giving—

(a)details of the direction; and

(b)if the direction is given under subsection (6), their reasons for giving it.

(12)The Treasury must—

(a)publish any statement made under this section in the way appearing to them best calculated to bring it to the attention of the public; and

(b)lay a copy of it before Parliament.

164The Competition Act 1998

(1)The Chapter I prohibition does not apply to an agreement the parties to which consist of or include—

(a)an authorised person, or

(b)a person who is otherwise subject to the Authority’s regulating provisions,

to the extent to which the agreement consists of provisions the inclusion of which in the agreement is encouraged by any of the Authority’s regulating provisions.

(2)The Chapter I prohibition does not apply to the practices of an authorised person or a person who is otherwise subject to the regulating provisions to the extent to which the practices are encouraged by any of the Authority’s regulating provisions.

(3)The Chapter II prohibition does not apply to conduct of—

(a)an authorised person, or

(b)a person who is otherwise subject to the Authority’s regulating provisions,

to the extent to which the conduct is encouraged by any of the Authority’s regulating provisions.

(4)“The Chapter I prohibition” means the prohibition imposed by section 2(1) of the [1998 c. 41.] Competition Act 1998.

(5)“The Chapter II prohibition” means the prohibition imposed by section 18(1) of that Act.

Part XIInformation Gathering and Investigations

Powers to gather information

165Authority’s power to require information

(1)The Authority may, by notice in writing given to an authorised person, require him—

(a)to provide specified information or information of a specified description; or

(b)to produce specified documents or documents of a specified description.

(2)The information or documents must be provided or produced—

(a)before the end of such reasonable period as may be specified; and

(b)at such place as may be specified.

(3)An officer who has written authorisation from the Authority to do so may require an authorised person without delay—

(a)to provide the officer with specified information or information of a specified description; or

(b)to produce to him specified documents or documents of a specified description.

(4)This section applies only to information and documents reasonably required in connection with the exercise by the Authority of functions conferred on it by or under this Act.

(5)The Authority may require any information provided under this section to be provided in such form as it may reasonably require.

(6)The Authority may require—

(a)any information provided, whether in a document or otherwise, to be verified in such manner, or

(b)any document produced to be authenticated in such manner,

as it may reasonably require.

(7)The powers conferred by subsections (1) and (3) may also be exercised to impose requirements on—

(a)a person who is connected with an authorised person;

(b)an operator, trustee or depositary of a scheme recognised under section 270 or 272 who is not an authorised person;

(c)a recognised investment exchange or recognised clearing house.

(8)“Authorised person” includes a person who was at any time an authorised person but who has ceased to be an authorised person.

(9)“Officer” means an officer of the Authority and includes a member of the Authority’s staff or an agent of the Authority.

(10)“Specified” means—

(a)in subsections (1) and (2), specified in the notice; and

(b)in subsection (3), specified in the authorisation.

(11)For the purposes of this section, a person is connected with an authorised person (“A”) if he is or has at any relevant time been—

(a)a member of A’s group;

(b)a controller of A;

(c)any other member of a partnership of which A is a member; or

(d)in relation to A, a person mentioned in Part I of Schedule 15.

166Reports by skilled persons

(1)The Authority may, by notice in writing given to a person to whom subsection (2) applies, require him to provide the Authority with a report on any matter about which the Authority has required or could require the provision of information or production of documents under section 165.

(2)This subsection applies to—

(a)an authorised person (“A”),

(b)any other member of A’s group,

(c)a partnership of which A is a member, or

(d)a person who has at any relevant time been a person falling within paragraph (a), (b) or (c),

who is, or was at the relevant time, carrying on a business.

(3)The Authority may require the report to be in such form as may be specified in the notice.

(4)The person appointed to make a report required by subsection (1) must be a person—

(a)nominated or approved by the Authority; and

(b)appearing to the Authority to have the skills necessary to make a report on the matter concerned.

(5)It is the duty of any person who is providing (or who at any time has provided) services to a person to whom subsection (2) applies in relation to a matter on which a report is required under subsection (1) to give a person appointed to provide such a report all such assistance as the appointed person may reasonably require.

(6)The obligation imposed by subsection (5) is enforceable, on the application of the Authority, by an injunction or, in Scotland, by an order for specific performance under section 45 of the [1988 c. 36.] Court of Session Act 1988.

Appointment of investigators

167Appointment of persons to carry out general investigations

(1)If it appears to the Authority or the Secretary of State (“the investigating authority”) that there is good reason for doing so, the investigating authority may appoint one or more competent persons to conduct an investigation on its behalf into—

(a)the nature, conduct or state of the business of an authorised person or of an appointed representative;

(b)a particular aspect of that business; or

(c)the ownership or control of an authorised person.

(2)If a person appointed under subsection (1) thinks it necessary for the purposes of his investigation, he may also investigate the business of a person who is or has at any relevant time been—

(a)a member of the group of which the person under investigation (“A”) is part; or

(b)a partnership of which A is a member.

(3)If a person appointed under subsection (1) decides to investigate the business of any person under subsection (2) he must give that person written notice of his decision.

(4)The power conferred by this section may be exercised in relation to a former authorised person (or appointed representative) but only in relation to—

(a)business carried on at any time when he was an authorised person (or appointed representative); or

(b)the ownership or control of a former authorised person at any time when he was an authorised person.

(5)“Business” includes any part of a business even if it does not consist of carrying on regulated activities.

168Appointment of persons to carry out investigations in particular cases

(1)Subsection (3) applies if it appears to an investigating authority that there are circumstances suggesting that—

(a)a person may have contravened any regulation made under section 142; or

(b)a person may be guilty of an offence under section 177, 191, 346 or 398(1) or under Schedule 4.

(2)Subsection (3) also applies if it appears to an investigating authority that there are circumstances suggesting that—

(a)an offence under section 24(1) or 397 or under Part V of the [1993 c. 36.] Criminal Justice Act 1993 may have been committed;

(b)there may have been a breach of the general prohibition;

(c)there may have been a contravention of section 21 or 238; or

(d)market abuse may have taken place.

(3)The investigating authority may appoint one or more competent persons to conduct an investigation on its behalf.

(4)Subsection (5) applies if it appears to the Authority that there are circumstances suggesting that—

(a)a person may have contravened section 20;

(b)a person may be guilty of an offence under prescribed regulations relating to money laundering;

(c)an authorised person may have contravened a rule made by the Authority;

(d)an individual may not be a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised or exempt person;

(e)an individual may have performed or agreed to perform a function in breach of a prohibition order;

(f)an authorised or exempt person may have failed to comply with section 56(6);

(g)an authorised person may have failed to comply with section 59(1) or (2);

(h)a person in relation to whom the Authority has given its approval under section 59 may not be a fit and proper person to perform the function to which that approval relates; or

(i)a person may be guilty of misconduct for the purposes of section 66.

(5)The Authority may appoint one or more competent persons to conduct an investigation on its behalf.

(6)“Investigating authority” means the Authority or the Secretary of State.

Assistance to overseas regulators

169Investigations etc. in support of overseas regulator

(1)At the request of an overseas regulator, the Authority may—

(a)exercise the power conferred by section 165; or

(b)appoint one or more competent persons to investigate any matter.

(2)An investigator has the same powers as an investigator appointed under section 168(3) (as a result of subsection (1) of that section).

(3)If the request has been made by a competent authority in pursuance of any Community obligation the Authority must, in deciding whether or not to exercise its investigative power, consider whether its exercise is necessary to comply with any such obligation.

(4)In deciding whether or not to exercise its investigative power, the Authority 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.

(5)The Authority may decide that it will not exercise its investigative power unless the overseas regulator undertakes to make such contribution towards the cost of its exercise as the Authority considers appropriate.

(6)Subsections (4) and (5) do not apply if the Authority considers that the exercise of its investigative power is necessary to comply with a Community obligation.

(7)If the Authority has appointed an investigator in response to a request from an overseas regulator, it may direct the investigator to permit a representative of that regulator to attend, and take part in, any interview conducted for the purposes of the investigation.

(8)A direction under subsection (7) is not to be given unless the Authority is satisfied that any information obtained by an overseas regulator as a result of the interview will be subject to safeguards equivalent to those contained in Part XXIII.

(9)The Authority must prepare a statement of its policy with respect to the conduct of interviews in relation to which a direction under subsection (7) has been given.

(10)The statement requires the approval of the Treasury.

(11)If the Treasury approve the statement, the Authority must publish it.

(12)No direction may be given under subsection (7) before the statement has been published.

(13)“Overseas regulator” has the same meaning as in section 195.

(14)“Investigative power” means one of the powers mentioned in subsection (1).

(15)“Investigator” means a person appointed under subsection (1)(b).

Conduct of investigations

170Investigations: general

(1)This section applies if an investigating authority appoints one or more competent persons (“investigators”) under section 167 or 168(3) or (5) to conduct an investigation on its behalf.

(2)The investigating authority must give written notice of the appointment of an investigator to the person who is the subject of the investigation (“the person under investigation”).

(3)Subsections (2) and (9) do not apply if —

(a)the investigator is appointed as a result of section 168(1) or (4) and the investigating authority believes that the notice required by subsection (2) or (9) would be likely to result in the investigation being frustrated; or

(b)the investigator is appointed as a result of subsection (2) of section 168.

(4)A notice under subsection (2) must—

(a)specify the provisions under which, and as a result of which, the investigator was appointed; and

(b)state the reason for his appointment.

(5)Nothing prevents the investigating authority from appointing a person who is a member of its staff as an investigator.

(6)An investigator must make a report of his investigation to the investigating authority.

(7)The investigating authority may, by a direction to an investigator, control—

(a)the scope of the investigation;

(b)the period during which the investigation is to be conducted;

(c)the conduct of the investigation; and

(d)the reporting of the investigation.

(8)A direction may, in particular—

(a)confine the investigation to particular matters;

(b)extend the investigation to additional matters;

(c)require the investigator to discontinue the investigation or to take only such steps as are specified in the direction;

(d)require the investigator to make such interim reports as are so specified.

(9)If there is a change in the scope or conduct of the investigation and, in the opinion of the investigating authority, the person subject to investigation is likely to be significantly prejudiced by not being made aware of it, that person must be given written notice of the change.

(10)“Investigating authority”, in relation to an investigator, means—

(a)the Authority, if the Authority appointed him;

(b)the Secretary of State, if the Secretary of State appointed him.

171Powers of persons appointed under section 167

(1)An investigator may require the person who is the subject of the investigation (“the person under investigation”) or any person connected with the person under investigation—

(a)to attend before the investigator at a specified time and place and answer questions; or

(b)otherwise to provide such information as the investigator may require.

(2)An investigator may also require any person to produce at a specified time and place any specified documents or documents of a specified description.

(3)A requirement under subsection (1) or (2) may be imposed only so far as the investigator concerned reasonably considers the question, provision of information or production of the document to be relevant to the purposes of the investigation.

(4)For the purposes of this section and section 172, a person is connected with the person under investigation (“A”) if he is or has at any relevant time been—

(a)a member of A’s group;

(b)a controller of A;

(c)a partnership of which A is a member; or

(d)in relation to A, a person mentioned in Part I or II of Schedule 15.

(5)“Investigator” means a person conducting an investigation under section 167.

(6)“Specified” means specified in a notice in writing.

172Additional power of persons appointed as a result of section 168(1) or (4)

(1)An investigator has the powers conferred by section 171.

(2)An investigator may also require a person who is neither the subject of the investigation (“the person under investigation”) nor a person connected with the person under investigation—

(a)to attend before the investigator at a specified time and place and answer questions; or

(b)otherwise to provide such information as the investigator may require for the purposes of the investigation.

(3)A requirement may only be imposed under subsection (2) if the investigator is satisfied that the requirement is necessary or expedient for the purposes of the investigation.

(4)“Investigator” means a person appointed as a result of subsection (1) or (4) of section 168.

(5)“Specified” means specified in a notice in writing.

173Powers of persons appointed as a result of section 168(2)

(1)Subsections (2) to (4) apply if an investigator considers that any person (“A”) is or may be able to give information which is or may be relevant to the investigation.

(2)The investigator may require A—

(a)to attend before him at a specified time and place and answer questions; or

(b)otherwise to provide such information as he may require for the purposes of the investigation.

(3)The investigator may also require A to produce at a specified time and place any specified documents or documents of a specified description which appear to the investigator to relate to any matter relevant to the investigation.

(4)The investigator may also otherwise require A to give him all assistance in connection with the investigation which A is reasonably able to give.

(5)“Investigator” means a person appointed under subsection (3) of section 168 (as a result of subsection (2) of that section).

174Admissibility of statements made to investigators

(1)A statement made to an investigator by a person in compliance with an information requirement is admissible in evidence in any proceedings, so long as it also complies with any requirements governing the admissibility of evidence in the circumstances in question.

(2)But in criminal proceedings in which that person is charged with an offence to which this subsection applies or in proceedings in relation to action to be taken against that person under section 123—

(a)no evidence relating to the statement may be adduced, and

(b)no question relating to it may be asked,

by or on behalf of the prosecution or (as the case may be) the Authority, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of that person.

(3)Subsection (2) applies to any offence other than one—

(a)under section 177(4) or 398;

(b)under section 5 of the [1911 c. 6.] Perjury Act 1911 (false statements made otherwise than on oath);

(c)under section 44(2) of the [1995 c. 39.] Criminal Law (Consolidation)(Scotland) Act 1995 (false statements made otherwise than on oath); or

(d)under Article 10 of the [S.I. 1979/1714 (N.I. 19).] Perjury (Northern Ireland) Order 1979.

(4)“Investigator” means a person appointed under section 167 or 168(3) or (5).

(5)“Information requirement” means a requirement imposed by an investigator under section 171, 172, 173 or 175.

175Information and documents: supplemental provisions

(1)If the Authority or an investigator has power under this Part to require a person to produce a document but it appears that the document is in the possession of a third person, that power may be exercised in relation to the third person.

(2)If a document is produced in response to a requirement imposed under this Part, the person to whom it is produced may—

(a)take copies or extracts from the document; or

(b)require the person producing the document, or any relevant person, to provide an explanation of the document.

(3)If a person who is required under this Part to produce a document fails to do so, the Authority or an investigator may require him to state, to the best of his knowledge and belief, where the document is.

(4)A lawyer may be required under this Part to furnish the name and address of his client.

(5)No person may be required under this Part to disclose information or produce a document in respect of which he owes an obligation of confidence by virtue of carrying on the business of banking unless—

(a)he is the person under investigation or a member of that person’s group;

(b)the person to whom the obligation of confidence is owed is the person under investigation or a member of that person’s group;

(c)the person to whom the obligation of confidence is owed consents to the disclosure or production; or

(d)the imposing on him of a requirement with respect to such information or document has been specifically authorised by the investigating authority.

(6)If a person claims a lien on a document, its production under this Part does not affect the lien.

(7)“Relevant person”, in relation to a person who is required to produce a document, means a person who—

(a)has been or is or is proposed to be a director or controller of that person;

(b)has been or is an auditor of that person;

(c)has been or is an actuary, accountant or lawyer appointed or instructed by that person; or

(d)has been or is an employee of that person.

(8)“Investigator” means a person appointed under section 167 or 168(3) or (5).

176Entry of premises under warrant

(1)A justice of the peace may issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, the Authority or an investigator that there are reasonable grounds for believing that the first, second or third set of conditions is satisfied.

(2)The first set of conditions is—

(a)that a person on whom an information requirement has been imposed has failed (wholly or in part) to comply with it; and

(b)that on the premises specified in the warrant—

(i)there are documents which have been required; or

(ii)there is information which has been required.

(3)The second set of conditions is—

(a)that the premises specified in the warrant are premises of an authorised person or an appointed representative;

(b)that there are on the premises documents or information in relation to which an information requirement could be imposed; and

(c)that if such a requirement were to be imposed—

(i)it would not be complied with; or

(ii)the documents or information to which it related would be removed, tampered with or destroyed.

(4)The third set of conditions is—

(a)that an offence mentioned in section 168 for which the maximum sentence on conviction on indictment is two years or more has been (or is being) committed by any person;

(b)that there are on the premises specified in the warrant documents or information relevant to whether that offence has been (or is being) committed;

(c)that an information requirement could be imposed in relation to those documents or information; and

(d)that if such a requirement were to be imposed—

(i)it would not be complied with; or

(ii)the documents or information to which it related would be removed, tampered with or destroyed.

(5)A warrant under this section shall authorise a constable—

(a)to enter the premises specified in the warrant;

(b)to search the premises and take possession of any documents or information appearing to be documents or information of a kind in respect of which a warrant under this section was issued (“the relevant kind”) or to take, in relation to any such documents or information, any other steps which may appear to be necessary for preserving them or preventing interference with them;

(c)to take copies of, or extracts from, any documents or information appearing to be of the relevant kind;

(d)to require any person on the premises to provide an explanation of any document or information appearing to be of the relevant kind or to state where it may be found; and

(e)to use such force as may be reasonably necessary.

(6)In England and Wales, sections 15(5) to (8) and section 16 of the [1984 c. 60.] Police and Criminal Evidence Act 1984 (execution of search warrants and safeguards) apply to warrants issued under this section.

(7)In Northern Ireland, Articles 17(5) to (8) and 18 of the [S.I. 1989/1341 (N.I. 12).] Police and Criminal Evidence (Northern Ireland) Order 1989 apply to warrants issued under this section.

(8)Any document of which possession is taken under this section may be retained—

(a)for a period of three months; or

(b)if within that period proceedings to which the document is relevant are commenced against any person for any criminal offence, until the conclusion of those proceedings.

(9)In the application of this section to Scotland—

(a)for the references to a justice of the peace substitute references to a justice of the peace or a sheriff; and

(b)for the references to information on oath substitute references to evidence on oath.

(10)“Investigator” means a person appointed under section 167 or 168(3) or (5).

(11)“Information requirement” means a requirement imposed—

(a)by the Authority under section 165 or 175; or

(b)by an investigator under section 171, 172, 173 or 175.

Offences

177Offences

(1)If a person other than the investigator (“the defaulter”) fails to comply with a requirement imposed on him under this Part the person imposing the requirement may certify that fact in writing to the court.

(2)If the court is satisfied that the defaulter failed without reasonable excuse to comply with the requirement, it may deal with the defaulter (and in the case of a body corporate, any director or officer) as if he were in contempt.

(3)A person who knows or suspects that an investigation is being or is likely to be conducted under this Part is guilty of an offence if—

(a)he falsifies, conceals, destroys or otherwise disposes of a document which he knows or suspects is or would be relevant to such an investigation, or

(b)he causes or permits the falsification, concealment, destruction or disposal of such a document,

unless he shows that he had no intention of concealing facts disclosed by the documents from the investigator.

(4)A person who, in purported compliance with a requirement imposed on him under this Part—

(a)provides information which he knows to be false or misleading in a material particular, or

(b)recklessly provides information which is false or misleading in a material particular,

is guilty of an offence.

(5)A person guilty of an offence under subsection (3) or (4) is 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.

(6)Any person who intentionally obstructs the exercise of any rights conferred by a warrant under section 176 is guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding three months or a fine not exceeding level 5 on the standard scale, or both.

(7)“Court” means—

(a)the High Court;

(b)in Scotland, the Court of Session.

Part XIIControl Over Authorised Persons

Notice of control

178Obligation to notify the Authority

(1)If a step which a person proposes to take would result in his acquiring—

(a)control over a UK authorised person,

(b)an additional kind of control over a UK authorised person, or

(c)an increase in a relevant kind of control which he already has over a UK authorised person,

he must notify the Authority of his proposal.

(2)A person who, without himself taking any such step, acquires any such control or additional or increased control must notify the Authority before the end of the period of 14 days beginning with the day on which he first becomes aware that he has acquired it.

(3)A person who is under the duty to notify the Authority imposed by subsection (1) must also give notice to the Authority on acquiring, or increasing, the control in question.

(4)In this Part “UK authorised person” means an authorised person who—

(a)is a body incorporated in, or an unincorporated association formed under the law of, any part of the United Kingdom; and

(b)is not a person authorised as a result of paragraph 1 of Schedule 5.

(5)A notice under subsection (1) or (2) is referred to in this Part as “a notice of control”.

Acquiring, increasing and reducing control

179Acquiring control

(1)For the purposes of this Part, a person (“the acquirer”) acquires control over a UK authorised person (“A”) on first falling within any of the cases in subsection (2).

(2)The cases are where the acquirer—

(a)holds 10% or more of the shares in A;

(b)is able to exercise significant influence over the management of A by virtue of his shareholding in A;

(c)holds 10% or more of the shares in a parent undertaking (“P”) of A;

(d)is able to exercise significant influence over the management of P by virtue of his shareholding in P;

(e)is entitled to exercise, or control the exercise of, 10% or more of the voting power in A;

(f)is able to exercise significant influence over the management of A by virtue of his voting power in A;

(g)is entitled to exercise, or control the exercise of, 10% or more of the voting power in P; or

(h)is able to exercise significant influence over the management of P by virtue of his voting power in P.

(3)In subsection (2) “the acquirer” means—

(a)the acquirer;

(b)any of the acquirer’s associates; or

(c)the acquirer and any of his associates.

(4)For the purposes of this Part, each of the following is to be regarded as a kind of control—

(a)control arising as a result of the holding of shares in A;

(b)control arising as a result of the holding of shares in P;

(c)control arising as a result of the entitlement to exercise, or control the exercise of, voting power in A;

(d)control arising as a result of the entitlement to exercise, or control the exercise of, voting power in P.

(5)For the purposes of this section and sections 180 and 181, “associate”, “shares” and “voting power” have the same meaning as in section 422.

180Increasing control

(1)For the purposes of this Part, a controller of a person (“A”) who is a UK authorised person increases his control over A if—

(a)the percentage of shares held by the controller in A increases by any of the steps mentioned in subsection (2);

(b)the percentage of shares held by the controller in a parent undertaking (“P”) of A increases by any of the steps mentioned in subsection (2);

(c)the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in A increases by any of the steps mentioned in subsection (2);

(d)the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in P increases by any of the steps mentioned in subsection (2); or

(e)the controller becomes a parent undertaking of A.

(2)The steps are—

(a)from below 10% to 10% or more but less than 20%;

(b)from below 20% to 20% or more but less than 33%;

(c)from below 33% to 33% or more but less than 50%;

(d)from below 50% to 50% or more.

(3)In paragraphs (a) to (d) of subsection (1) “the controller” means—

(a)the controller;

(b)any of the controller’s associates; or

(c)the controller and any of his associates.

(4)In the rest of this Part “acquiring control” or “having control” includes—

(a)acquiring or having an additional kind of control; or

(b)acquiring an increase in a relevant kind of control, or having increased control of a relevant kind.

181Reducing control

(1)For the purposes of this Part, a controller of a person (“A”) who is a UK authorised person reduces his control over A if—

(a)the percentage of shares held by the controller in A decreases by any of the steps mentioned in subsection (2),

(b)the percentage of shares held by the controller in a parent undertaking (“P”) of A decreases by any of the steps mentioned in subsection (2),

(c)the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in A decreases by any of the steps mentioned in subsection (2),

(d)the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in P decreases by any of the steps mentioned in subsection (2), or

(e)the controller ceases to be a parent undertaking of A,

unless the controller ceases to have the kind of control concerned over A as a result.

(2)The steps are—

(a)from 50% or more to 33% or more but less than 50%;

(b)from 33% or more to 20% or more but less than 33%;

(c)from 20% or more to 10% or more but less than 20%;

(d)from 10% or more to less than 10%.

(3)In paragraphs (a) to (d) of subsection (1) “the controller” means—

(a)the controller;

(b)any of the controller’s associates; or

(c)the controller and any of his associates.

Acquiring or increasing control: procedure

182Notification

(1)A notice of control must—

(a)be given to the Authority in writing; and

(b)include such information and be accompanied by such documents as the Authority may reasonably require.

(2)The Authority may require the person giving a notice of control to provide such additional information or documents as it reasonably considers necessary in order to enable it to determine what action it is to take in response to the notice.

(3)Different requirements may be imposed in different circumstances.

183Duty of Authority in relation to notice of control

(1)The Authority must, before the end of the period of three months beginning with the date on which it receives a notice of control (“the period for consideration”), determine whether—

(a)to approve of the person concerned having the control to which the notice relates; or

(b)to serve a warning notice under subsection (3) or section 185(3).

(2)Before doing so, the Authority must comply with such requirements as to consultation with competent authorities outside the United Kingdom as may be prescribed.

(3)If the Authority proposes to give the person concerned a notice of objection under section 186(1), it must give him a warning notice.

184Approval of acquisition of control

(1)If the Authority decides to approve of the person concerned having the control to which the notice relates it must notify that person of its approval in writing without delay.

(2)If the Authority fails to comply with subsection (1) of section 183 it is to be treated as having given its approval and notified the person concerned at the end of the period fixed by that subsection.

(3)The Authority’s approval remains effective only if the person to whom it relates acquires the control in question—

(a)before the end of such period as may be specified in the notice; or

(b)if no period is specified, before the end of the period of one year beginning with the date—

(i)of the notice of approval;

(ii)on which the Authority is treated as having given approval under subsection (2); or

(iii)of a decision on a reference to the Tribunal which results in the person concerned receiving approval.

185Conditions attached to approval

(1)The Authority’s approval under section 184 may be given unconditionally or subject to such conditions as the Authority considers appropriate.

(2)In imposing any conditions, the Authority must have regard to its duty under section 41.

(3)If the Authority proposes to impose conditions on a person it must give him a warning notice.

(4)If the Authority decides to impose conditions on a person it must give him a decision notice.

(5)A person who is subject to a condition imposed under this section may apply to the Authority—

(a)for the condition to be varied; or

(b)for the condition to be cancelled.

(6)The Authority may, on its own initiative, cancel a condition imposed under this section.

(7)If the Authority has given its approval to a person subject to a condition, he may refer to the Tribunal—

(a)the imposition of the condition; or

(b)the Authority’s decision to refuse an application made by him under subsection (5).

186Objection to acquisition of control

(1)On considering a notice of control, the Authority may give a decision notice under this section to the person acquiring control (“the acquirer”) unless it is satisfied that the approval requirements are met.

(2)The approval requirements are that—

(a)the acquirer is a fit and proper person to have the control over the authorised person that he has or would have if he acquired the control in question; and

(b)the interests of consumers would not be threatened by the acquirer’s control or by his acquiring that control.

(3)In deciding whether the approval requirements are met, the Authority must have regard, in relation to the control that the acquirer—

(a)has over the authorised person concerned (“A”), or

(b)will have over A if the proposal to which the notice of control relates is carried into effect,

to its duty under section 41 in relation to each regulated activity carried on by A.

(4)If the Authority gives a notice under this section but considers that the approval requirements would be met if the person to whom a notice is given were to take, or refrain from taking, a particular step, the notice must identify that step.

(5)A person to whom a notice under this section is given may refer the matter to the Tribunal.

(6)“Consumers” means persons who are consumers for the purposes of section 138.

187Objection to existing control

(1)If the Authority is not satisfied that the approval requirements are met, it may give a decision notice under this section to a person if he has failed to comply with a duty to notify imposed by section 178.

(2)If the failure relates to subsection (1) or (2) of that section, the Authority may (instead of giving a notice under subsection (1)) approve the acquisition of the control in question by the person concerned as if he had given it a notice of control.

(3)The Authority may also give a decision notice under this section to a person who is a controller of a UK authorised person if the Authority becomes aware of matters as a result of which it is satisfied that—

(a)the approval requirements are not met with respect to the controller; or

(b)a condition imposed under section 185 required that person to do (or refrain from doing) a particular thing and the condition has been breached as a result of his failing to do (or doing) that thing.

(4)A person to whom a notice under this section is given may refer the matter to the Tribunal.

(5)“Approval requirements” has the same meaning as in section 186.

188Notices of objection under section 187: procedure

(1)If the Authority proposes to give a notice of objection to a person under section 187, it must give him a warning notice.

(2)Before doing so, the Authority must comply with such requirements as to consultation with competent authorities outside the United Kingdom as may be prescribed.

(3)If the Authority decides to give a warning notice under this section, it must do so before the end of the period of three months beginning—

(a)in the case of a notice to be given under section 187(1), with the date on which it became aware of the failure to comply with the duty in question;

(b)in the case of a notice to be given under section 187(3), with the date on which it became aware of the matters in question.

(4)The Authority may require the person concerned to provide such additional information or documents as it considers reasonable.

(5)Different requirements may be imposed in different circumstances.

(6)In this Part “notice of objection” means a notice under section 186 or 187.

Improperly acquired shares

189Improperly acquired shares

(1)The powers conferred by this section are exercisable if a person has acquired, or has continued to hold, any shares in contravention of—

(a)a notice of objection; or

(b)a condition imposed on the Authority’s approval.

(2)The Authority may by notice in writing served on the person concerned (“a restriction notice”) direct that any such shares which are specified in the notice are, until further notice, subject to one or more of the following restrictions—

(a)a transfer of (or agreement to transfer) those shares, or in the case of unissued shares any transfer of (or agreement to transfer) the right to be issued with them, is void;

(b)no voting rights are to be exercisable in respect of the shares;

(c)no further shares are to be issued in right of them or in pursuance of any offer made to their holder;

(d)except in a liquidation, no payment is to be made of any sums due from the body corporate on the shares, whether in respect of capital or otherwise.

(3)The court may, on the application of the Authority, order the sale of any shares to which this section applies and, if they are for the time being subject to any restriction under subsection (2), that they are to cease to be subject to that restriction.

(4)No order may be made under subsection (3)—

(a)until the end of the period within which a reference may be made to the Tribunal in respect of the notice of objection; and

(b)if a reference is made, until the matter has been determined or the reference withdrawn.

(5)If an order has been made under subsection (3), the court may, on the application of the Authority, make such further order relating to the sale or transfer of the shares as it thinks fit.

(6)If shares are sold in pursuance of an order under this section, the proceeds of sale, less the costs of the sale, must be paid into court for the benefit of the persons beneficially interested in them; and any such person may apply to the court for the whole or part of the proceeds to be paid to him.

(7)This section applies—

(a)in the case of an acquirer falling within section 178(1), to all the shares—

(i)in the authorised person which the acquirer has acquired;

(ii)which are held by him or an associate of his; and

(iii)which were not so held immediately before he became a person with control over the authorised person;

(b)in the case of an acquirer falling within section 178(2), to all the shares held by him or an associate of his at the time when he first became aware that he had acquired control over the authorised person; and

(c)to all the shares in an undertaking (“C”)—

(i)which are held by the acquirer or an associate of his, and

(ii)which were not so held before he became a person with control in relation to the authorised person,

where C is the undertaking in which shares were acquired by the acquirer (or an associate of his) and, as a result, he became a person with control in relation to that authorised person.

(8)A copy of the restriction notice must be served on—

(a)the authorised person to whose shares it relates; and

(b)if it relates to shares held by an associate of that authorised person, on that associate.

(9)The jurisdiction conferred by this section may be exercised by the High Court and the Court of Session.

Reducing control: procedure

190Notification

(1)If a step which a controller of a UK authorised person proposes to take would result in his—

(a)ceasing to have control of a relevant kind over the authorised person, or

(b)reducing a relevant kind of control over that person,

he must notify the Authority of his proposal.

(2)A controller of a UK authorised person who, without himself taking any such step, ceases to have that control or reduces that control must notify the Authority before the end of the period of 14 days beginning with the day on which he first becomes aware that—

(a)he has ceased to have the control in question; or

(b)he has reduced that control.

(3)A person who is under the duty to notify the Authority imposed by subsection (1) must also give a notice to the Authority—

(a)on ceasing to have the control in question; or

(b)on reducing that control.

(4)A notice under this section must—

(a)be given to the Authority in writing; and

(b)include details of the extent of the control (if any) which the person concerned will retain (or still retains) over the authorised person concerned.

Offences

191Offences under this Part

(1)A person who fails to comply with the duty to notify the Authority imposed on him by section 178(1) or 190(1) is guilty of an offence.

(2)A person who fails to comply with the duty to notify the Authority imposed on him by section 178(2) or 190(2) is guilty of an offence.

(3)If a person who has given a notice of control to the Authority carries out the proposal to which the notice relates, he is guilty of an offence if—

(a)the period of three months beginning with the date on which the Authority received the notice is still running; and

(b)the Authority has not responded to the notice by either giving its approval or giving him a warning notice under section 183(3) or 185(3).

(4)A person to whom the Authority has given a warning notice under section 183(3) is guilty of an offence if he carries out the proposal to which the notice relates before the Authority has decided whether to give him a notice of objection.

(5)A person to whom a notice of objection has been given is guilty of an offence if he acquires the control to which the notice applies at a time when the notice is still in force.

(6)A person guilty of an offence under subsection (1), (2), (3) or (4) is liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(7)A person guilty of an offence under subsection (5) is liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum; and

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

(8)A person guilty of an offence under subsection (5) is also liable on summary conviction to a fine not exceeding one tenth of the statutory maximum for each day on which the offence has continued.

(9)It is a defence for a person charged with an offence under subsection (1) to show that he had, at the time of the alleged offence, no knowledge of the act or circumstances by virtue of which the duty to notify the Authority arose.

(10)If a person—

(a)was under the duty to notify the Authority imposed by section 178(1) or 190(1) but had no knowledge of the act or circumstances by virtue of which that duty arose, but

(b)subsequently becomes aware of that act or those circumstances,

he must notify the Authority before the end of the period of 14 days beginning with the day on which he first became so aware.

(11)A person who fails to comply with the duty to notify the Authority imposed by subsection (10) is guilty of an offence and liable, on summary conviction, to a fine not exceeding level 5 on the standard scale.

Miscellaneous

192Power to change definitions of control etc

The Treasury may by order—

(a)provide for exemptions from the obligations to notify imposed by sections 178 and 190;

(b)amend section 179 by varying, or removing, any of the cases in which a person is treated as having control over a UK authorised person or by adding a case;

(c)amend section 180 by varying, or removing, any of the cases in which a person is treated as increasing control over a UK authorised person or by adding a case;

(d)amend section 181 by varying, or removing, any of the cases in which a person is treated as reducing his control over a UK authorised person or by adding a case;

(e)amend section 422 by varying, or removing, any of the cases in which a person is treated as being a controller of a person or by adding a case.

Part XIIIIncoming Firms: Intervention by Authority

Interpretation

193Interpretation of this Part

(1)In this Part—

  • “additional procedure” means the procedure described in section 199;

  • “incoming firm” means—

    (a)

    an EEA firm which is exercising, or has exercised, its right to carry on a regulated activity in the United Kingdom in accordance with Schedule 3; or

    (b)

    a Treaty firm which is exercising, or has exercised, its right to carry on a regulated activity in the United Kingdom in accordance with Schedule 4; and

  • “power of intervention” means the power conferred on the Authority by section 196.

(2)In relation to an incoming firm which is an EEA firm, expressions used in this Part and in Schedule 3 have the same meaning in this Part as they have in that Schedule.

194General grounds on which power of intervention is exercisable

(1)The Authority may exercise its power of intervention in respect of an incoming firm if it appears to it that—

(a)the firm has contravened, or is likely to contravene, a requirement which is imposed on it by or under this Act (in a case where the Authority is responsible for enforcing compliance in the United Kingdom);

(b)the firm has, in purported compliance with any requirement imposed by or under this Act, knowingly or recklessly given the Authority information which is false or misleading in a material particular; or

(c)it is desirable to exercise the power in order to protect the interests of actual or potential customers.

(2)Subsection (3) applies to an incoming EEA firm falling within sub-paragraph (a) or (b) of paragraph 5 of Schedule 3 which is exercising an EEA right to carry on any Consumer Credit Act business in the United Kingdom.

(3)The Authority may exercise its power of intervention in respect of the firm if the Director General of Fair Trading has informed the Authority that—

(a)the firm,

(b)any of the firm’s employees, agents or associates (whether past or present), or

(c)if the firm is a body corporate, a controller of the firm or an associate of such a controller,

has done any of the things specified in paragraphs (a) to (d) of section 25(2) of the [1974 c. 39.] Consumer Credit Act 1974.

(4)“Associate”, “Consumer Credit Act business” and “controller” have the same meaning as in section 203.

195Exercise of power in support of overseas regulator

(1)The Authority may exercise its power of intervention in respect of an incoming firm at the request of, or for the purpose of assisting, an overseas regulator.

(2)Subsection (1) applies whether or not the Authority’s power of intervention is also exercisable as a result of section 194.

(3)“An overseas regulator” means an authority in a country or territory outside the United Kingdom—

(a)which is a home state regulator; or

(b)which exercises any function of a kind mentioned in subsection (4).

(4)The functions are—

(a)a function corresponding to any function of the Authority under this Act;

(b)a function corresponding to any function exercised by the competent authority under Part VI in relation to the listing of shares;

(c)a function corresponding to any function exercised by the Secretary of State under the [1985 c. 6.] Companies Act 1985;

(d)a function in connection with —

(i)the investigation of conduct of the kind prohibited by Part V of the [1993 c. 36.] Criminal Justice Act 1993 (insider dealing); or

(ii)the enforcement of rules (whether or not having the force of law) relating to such conduct;

(e)a function prescribed by regulations made for the purposes of this subsection which, in the opinion of the Treasury, relates to companies or financial services.

(5)If—

(a)a request to the Authority for the exercise of its power of intervention has been made by a home state regulator in pursuance of a Community obligation, or

(b)a home state regulator has notified the Authority that an EEA firm’s EEA authorisation has been withdrawn,

the Authority must, in deciding whether or not to exercise its power of intervention, consider whether exercising it is necessary in order to comply with a Community obligation.

(6)In deciding in any case in which the Authority does not consider that the exercise of its power of intervention is necessary in order to comply with a Community 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.

(7)The Authority may decide not to exercise its power of intervention, in response to a request, unless the regulator concerned undertakes to make such contribution to the cost of its exercise as the Authority considers appropriate.

(8)Subsection (7) does not apply if the Authority decides that it is necessary for it to exercise its power of intervention in order to comply with a Community obligation.

196The power of intervention

If the Authority is entitled to exercise its power of intervention in respect of an incoming firm under this Part, it may impose any requirement in relation to the firm which it could impose if—

(a)the firm’s permission was a Part IV permission; and

(b)the Authority was entitled to exercise its power under that Part to vary that permission.

Exercise of power of intervention

197Procedure on exercise of power of intervention

(1)A requirement takes effect—

(a)immediately, if the notice given under subsection (3) 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 it relates is no longer open to review.

(2)A requirement may be expressed to take effect immediately (or on a specified date) only if the Authority, having regard to the ground on which it is exercising its power of intervention, considers that it is necessary for the requirement to take effect immediately (or on that date).

(3)If the Authority proposes to impose a requirement under section 196 on an incoming firm, or imposes such a requirement with immediate effect, it must give the firm written notice.

(4)The notice must—

(a)give details of the requirement;

(b)inform the firm of when the requirement takes effect;

(c)state the Authority’s reasons for imposing the requirement and for its determination as to when the requirement takes effect;

(d)inform the firm that it may make representations to the Authority within such period as may be specified in the notice (whether or not it has referred the matter to the Tribunal); and

(e)inform it of its right to refer the matter to the Tribunal.

(5)The Authority may extend the period allowed under the notice for making representations.

(6)If, having considered any representations made by the firm, the Authority decides—

(a)to impose the requirement proposed, or

(b)if it has been imposed, not to rescind the requirement,

it must give it written notice.

(7)If, having considered any representations made by the firm, the Authority decides—

(a)not to impose the requirement proposed,

(b)to impose a different requirement from that proposed, or

(c)to rescind a requirement which has effect,

it must give it written notice.

(8)A notice given under subsection (6) must inform the firm of its right to refer the matter to the Tribunal.

(9)A notice under subsection (7)(b) must comply with subsection (4).

(10)If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.

198Power to apply to court for injunction in respect of certain overseas insurance companies

(1)This section applies if the Authority has received a request made in respect of an incoming EEA firm in accordance with—

(a)Article 20.5 of the first non-life insurance directive; or

(b)Article 24.5 of the first life insurance directive.

(2)The court may, on an application made to it by the Authority with respect to the firm, grant an injunction restraining (or in Scotland an interdict prohibiting) the firm disposing of or otherwise dealing with any of its assets.

(3)If the court grants an injunction, it may by subsequent orders make provision for such incidental, consequential and supplementary matters as it considers necessary to enable the Authority to perform any of its functions under this Act.

(4)“The court” means—

(a)the High Court; or

(b)in Scotland, the Court of Session.

199Additional procedure for EEA firms in certain cases

(1)This section applies if it appears to the Authority that its power of intervention is exercisable in relation to an EEA firm exercising EEA rights in the United Kingdom (“an incoming EEA firm”) in respect of the contravention of a relevant requirement.

(2)A requirement is relevant if—

(a)it is imposed by the Authority under this Act; and

(b)as respects its contravention, any of the single market directives provides that a procedure of the kind set out in the following provisions of this section is to apply.

(3)The Authority must, in writing, require the firm to remedy the situation.

(4)If the firm fails to comply with the requirement under subsection (3) within a reasonable time, the Authority must give a notice to that effect to the firm’s home state regulator requesting it—

(a)to take all appropriate measures for the purpose of ensuring that the firm remedies the situation which has given rise to the notice; and

(b)to inform the Authority of the measures it proposes to take or has taken or the reasons for not taking such measures.

(5)Except as mentioned in subsection (6), the Authority may not exercise its power of intervention unless satisfied—

(a)that the firm’s home state regulator has failed or refused to take measures for the purpose mentioned in subsection (4)(a); or

(b)that the measures taken by the home state regulator have proved inadequate for that purpose.

(6)If the Authority decides that it should exercise its power of intervention in respect of the incoming EEA firm as a matter of urgency in order to protect the interests of consumers, it may exercise that power—

(a)before complying with subsections (3) and (4); or

(b)where it has complied with those subsections, before it is satisfied as mentioned in subsection (5).

(7)In such a case the Authority must at the earliest opportunity inform the firm’s home state regulator and the Commission.

(8)If—

(a)the Authority has (by virtue of subsection (6)) exercised its power of intervention before complying with subsections (3) and (4) or before it is satisfied as mentioned in subsection (5), and

(b)the Commission decides under any of the single market directives that the Authority must rescind or vary any requirement imposed in the exercise of its power of intervention,

the Authority must in accordance with the decision rescind or vary the requirement.

Supplemental

200Rescission and variation of requirements

(1)The Authority may rescind or vary a requirement imposed in exercise of its power of intervention on its own initiative or on the application of the person subject to the requirement.

(2)The power of the Authority on its own initiative to rescind a requirement is exercisable by written notice given by the Authority to the person concerned, which takes effect on the date specified in the notice.

(3)Section 197 applies to the exercise of the power of the Authority on its own initiative to vary a requirement as it applies to the imposition of a requirement.

(4)If the Authority proposes to refuse an application for the variation or rescission of a requirement, it must give the applicant a warning notice.

(5)If the Authority decides to refuse an application for the variation or rescission of a requirement—

(a)the Authority must give the applicant a decision notice; and

(b)that person may refer the matter to the Tribunal.

201Effect of certain requirements on other persons

If the Authority, in exercising its power of intervention, imposes on an incoming firm a requirement of a kind mentioned in subsection (3) of section 48, the requirement has the same effect in relation to the firm as it would have in relation to an authorised person if it had been imposed on the authorised person by the Authority acting under section 45.

202Contravention of requirement imposed under this Part

(1)Contravention of a requirement imposed by the Authority under this Part does not—

(a)make a person guilty of an offence;

(b)make any transaction void or unenforceable; or

(c)(subject to subsection (2)) give rise to any right of action for breach of statutory duty.

(2)In prescribed cases the contravention 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.

Powers of Director General of Fair Trading

203Power to prohibit the carrying on of Consumer Credit Act business

(1)If it appears to the Director General of Fair Trading (“the Director”) that subsection (4) has been, or is likely to be, contravened as respects a consumer credit EEA firm, he may by written notice given to the firm impose on the firm a consumer credit prohibition.

(2)If it appears to the Director that a restriction imposed under section 204 on an EEA consumer credit firm has not been complied with, he may by written notice given to the firm impose a consumer credit prohibition.

(3)“Consumer credit prohibition” means a prohibition on carrying on, or purporting to carry on, in the United Kingdom any Consumer Credit Act business which consists of or includes carrying on one or more listed activities.

(4)This subsection is contravened as respects a firm if—

(a)the firm or any of its employees, agents or associates (whether past or present), or

(b)if the firm is a body corporate, any controller of the firm or an associate of any such controller,

does any of the things specified in paragraphs (a) to (d) of section 25(2) of the [1974 c. 39.] Consumer Credit Act 1974.

(5)A consumer credit prohibition may be absolute or may be imposed—

(a)for such period,

(b)until the occurrence of such event, or

(c)until such conditions are complied with,

as may be specified in the notice given under subsection (1) or (2).

(6)Any period, event or condition so specified may be varied by the Director on the application of the firm concerned.

(7)A consumer credit prohibition may be withdrawn by written notice served by the Director on the firm concerned, and any such notice takes effect on such date as is specified in the notice.

(8)Schedule 16 has effect as respects consumer credit prohibitions and restrictions under section 204.

(9)A firm contravening a prohibition under this section is guilty of an offence and liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum;

(b)on conviction on indictment, to a fine.

(10)In this section and section 204—

  • “a consumer credit EEA firm” means an EEA firm falling within any of paragraphs (a) to (c) of paragraph 5 of Schedule 3 whose EEA authorisation covers any Consumer Credit Act business;

  • “Consumer Credit Act business” means consumer credit business, consumer hire business or ancillary credit business;

  • “consumer credit business”, “consumer hire business” and “ancillary credit business” have the same meaning as in the [1974 c. 39.] Consumer Credit Act 1974;

  • “listed activity” means an activity listed in the Annex to the second banking co-ordination directive or the Annex to the investment services directive;

  • “associate” has the same meaning as in section 25(2) of the [1974 c. 39.] Consumer Credit Act 1974;

  • “controller” has the meaning given by section 189(1) of that Act.

204Power to restrict the carrying on of Consumer Credit Act business

(1)In this section “restriction” means a direction that a consumer credit EEA firm may not carry on in the United Kingdom, otherwise than in accordance with such condition or conditions as may be specified in the direction, any Consumer Credit Act business which—

(a)consists of or includes carrying on any listed activity; and

(b)is specified in the direction.

(2)If it appears to the Director that the situation as respects a consumer credit EEA firm is such that the powers conferred by section 203(1) are exercisable, the Director may, instead of imposing a prohibition, impose such restriction as appears to him desirable.

(3)A restriction—

(a)may be withdrawn, or

(b)may be varied with the agreement of the firm concerned,

by written notice served by the Director on the firm, and any such notice takes effect on such date as is specified in the notice.

(4)A firm contravening a restriction is guilty of an offence and liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum;

(b)on conviction on indictment, to a fine.

Part XIVDisciplinary Measures

205Public censure

If the Authority considers that an authorised person has contravened a requirement imposed on him by or under this Act, the Authority may publish a statement to that effect.

206Financial penalties

(1)If the Authority considers that an authorised person has contravened a requirement imposed on him by or under this Act, it may impose on him a penalty, in respect of the contravention, of such amount as it considers appropriate.

(2)The Authority may not in respect of any contravention both require a person to pay a penalty under this section and withdraw his authorisation under section 33.

(3)A penalty under this section is payable to the Authority.

207Proposal to take disciplinary measures

(1)If the Authority proposes—

(a)to publish a statement in respect of an authorised person (under section 205), or

(b)to impose a penalty on an authorised person (under section 206),

it must give the authorised person a warning notice.

(2)A warning notice about a proposal to publish a statement must set out the terms of the statement.

(3)A warning notice about a proposal to impose a penalty, must state the amount of the penalty.

208Decision notice

(1)If the Authority decides—

(a)to publish a statement under section 205 (whether or not in the terms proposed), or

(b)to impose a penalty under section 206 (whether or not of the amount proposed),

it must without delay give the authorised person concerned a decision notice.

(2)In the case of a statement, the decision notice must set out the terms of the statement.

(3)In the case of a penalty, the decision notice must state the amount of the penalty.

(4)If the Authority decides to—

(a)publish a statement in respect of an authorised person under section 205, or

(b)impose a penalty on an authorised person under section 206,

the authorised person may refer the matter to the Tribunal.

209Publication

After a statement under section 205 is published, the Authority must send a copy of it to the authorised person and to any person on whom a copy of the decision notice was given under section 393(4).

210Statements of policy

(1)The Authority must prepare and issue a statement of its policy with respect to—

(a)the imposition of penalties under this Part; and

(b)the amount of penalties under this Part.

(2)The Authority’s policy in determining what the amount of a penalty should be must include having regard to—

(a)the seriousness of the contravention in question in relation to the nature of the requirement contravened;

(b)the extent to which that contravention was deliberate or reckless; and

(c)whether the person on whom the penalty is to be imposed is an individual.

(3)The Authority may at any time alter or replace a statement issued under this section.

(4)If a statement issued under this section is altered or replaced, the Authority must issue the altered or replacement statement.

(5)The Authority must, without delay, give the Treasury a copy of any statement which it publishes under this section.

(6)A statement issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(7)In exercising, or deciding whether to exercise, its power under section 206 in the case of any particular contravention, the Authority must have regard to any statement published under this section and in force at the time when the contravention in question occurred.

(8)The Authority may charge a reasonable fee for providing a person with a copy of the statement.

211Statements of policy: procedure

(1)Before issuing a statement under section 210, the Authority must publish a draft of the proposed statement in the way appearing to the Authority to be best calculated to bring it to the attention of the public.

(2)The draft must be accompanied by notice that representations about the proposal may be made to the Authority within a specified time.

(3)Before issuing the proposed statement, the Authority must have regard to any representations made to it in accordance with subsection (2).

(4)If the Authority issues the proposed statement it must publish an account, in general terms, of—

(a)the representations made to it in accordance with subsection (2); and

(b)its response to them.

(5)If the statement differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant, the Authority must (in addition to complying with subsection (4)) publish details of the difference.

(6)The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1).

(7)This section also applies to a proposal to alter or replace a statement.

Part XVThe Financial Services Compensation Scheme

The scheme manager

212The scheme manager

(1)The Authority must establish a body corporate (“the scheme manager”) to exercise the functions conferred on the scheme manager by or under this Part.

(2)The Authority must take such steps as are necessary to ensure that the scheme manager is, at all times, capable of exercising those functions.

(3)The constitution of the scheme manager must provide for it to have—

(a)a chairman; and

(b)a board (which must include the chairman) whose members are the scheme manager’s directors.

(4)The chairman and other members of the board must be persons appointed, and liable to removal from office, by the Authority (acting, in the case of the chairman, with the approval of the Treasury).

(5)But the terms of their appointment (and in particular those governing removal from office) must be such as to secure their independence from the Authority in the operation of the compensation scheme.

(6)The scheme manager is not to be regarded as exercising functions on behalf of the Crown.

(7)The scheme manager’s board members, officers and staff are not to be regarded as Crown servants.

The scheme

213The compensation scheme

(1)The Authority must by rules establish a scheme for compensating persons in cases where relevant persons are unable, or are likely to be unable, to satisfy claims against them.

(2)The rules are to be known as the Financial Services Compensation Scheme (but are referred to in this Act as “the compensation scheme”).

(3)The compensation scheme must, in particular, provide for the scheme manager—

(a)to assess and pay compensation, in accordance with the scheme, to claimants in respect of claims made in connection with regulated activities carried on (whether or not with permission) by relevant persons; and

(b)to have power to impose levies on authorised persons, or any class of authorised person, for the purpose of meeting its expenses (including in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks).

(4)The compensation scheme may provide for the scheme manager to have power to impose levies on authorised persons, or any class of authorised person, for the purpose of recovering the cost (whenever incurred) of establishing the scheme.

(5)In making any provision of the scheme by virtue of subsection (3)(b), the Authority must take account of the desirability of ensuring that the amount of the levies imposed on a particular class of authorised person reflects, so far as practicable, the amount of the claims made, or likely to be made, in respect of that class of person.

(6)An amount payable to the scheme manager as a result of any provision of the scheme made by virtue of subsection (3)(b) or (4) may be recovered as a debt due to the scheme manager.

(7)Sections 214 to 217 make further provision about the scheme but are not to be taken as limiting the power conferred on the Authority by subsection (1).

(8)In those sections “specified” means specified in the scheme.

(9)In this Part (except in sections 219, 220 or 224) “relevant person” means a person who was—

(a)an authorised person at the time the act or omission giving rise to the claim against him took place; or

(b)an appointed representative at that time.

(10)But a person who, at that time—

(a)qualified for authorisation under Schedule 3, and

(b)fell within a prescribed category,

is not to be regarded as a relevant person in relation to any activities for which he had permission as a result of any provision of, or made under, that Schedule unless he had elected to participate in the scheme in relation to those activities at that time.

Provisions of the scheme

214General

(1)The compensation scheme may, in particular, make provision—

(a)as to the circumstances in which a relevant person is to be taken (for the purposes of the scheme) to be unable, or likely to be unable, to satisfy claims made against him;

(b)for the establishment of different funds for meeting different kinds of claim;

(c)for the imposition of different levies in different cases;

(d)limiting the levy payable by a person in respect of a specified period;

(e)for repayment of the whole or part of a levy in specified circumstances;

(f)for a claim to be entertained only if it is made by a specified kind of claimant;

(g)for a claim to be entertained only if it falls within a specified kind of claim;

(h)as to the procedure to be followed in making a claim;

(i)for the making of interim payments before a claim is finally determined;

(j)limiting the amount payable on a claim to a specified maximum amount or a maximum amount calculated in a specified manner;

(k)for payment to be made, in specified circumstances, to a person other than the claimant.

(2)Different provision may be made with respect to different kinds of claim.

(3)The scheme may provide for the determination and regulation of matters relating to the scheme by the scheme manager.

(4)The scheme, or particular provisions of the scheme, may be made so as to apply only in relation to—

(a)activities carried on,

(b)claimants,

(c)matters arising, or

(d)events occurring,

in specified territories, areas or localities.

(5)The scheme may provide for a person who—

(a)qualifies for authorisation under Schedule 3, and

(b)falls within a prescribed category,

to elect to participate in the scheme in relation to some or all of the activities for which he has permission as a result of any provision of, or made under, that Schedule.

(6)The scheme may provide for the scheme manager to have power—

(a)in specified circumstances,

(b)but only if the scheme manager is satisfied that the claimant is entitled to receive a payment in respect of his claim—

(i)under a scheme which is comparable to the compensation scheme, or

(ii)as the result of a guarantee given by a government or other authority,

to make a full payment of compensation to the claimant and recover the whole or part of the amount of that payment from the other scheme or under that guarantee.

215Rights of the scheme in relevant person’s insolvency

(1)The compensation scheme may, in particular, make provision—

(a)as to the effect of a payment of compensation under the scheme in relation to rights or obligations arising out of the claim against a relevant person in respect of which the payment was made;

(b)for conferring on the scheme manager a right of recovery against that person.

(2)Such a right of recovery conferred by the scheme does not, in the event of the relevant person’s insolvency, exceed such right (if any) as the claimant would have had in that event.

(3)If a person other than the scheme manager presents a petition under section 9 of the 1986 Act or Article 22 of the 1989 Order in relation to a company or partnership which is a relevant person, the scheme manager has the same rights as are conferred on the Authority by section 362.

(4)If a person other than the scheme manager presents a petition for the winding up of a body which is a relevant person, the scheme manager has the same rights as are conferred on the Authority by section 371.

(5)If a person other than the scheme manager presents a bankruptcy petition to the court in relation to an individual who, or an entity which, is a relevant person, the scheme manager has the same rights as are conferred on the Authority by section 374.

(6)Insolvency rules may be made for the purpose of integrating any procedure for which provision is made as a result of subsection (1) into the general procedure on the administration of a company or partnership or on a winding-up, bankruptcy or sequestration.

(7)“Bankruptcy petition” means a petition to the court—

(a)under section 264 of the 1986 Act or Article 238 of the 1989 Order for a bankruptcy order to be made against an individual;

(b)under section 5 of the 1985 Act for the sequestration of the estate of an individual; or

(c)under section 6 of the 1985 Act for the sequestration of the estate belonging to or held for or jointly by the members of an entity mentioned in subsection (1) of that section.

(8)“Insolvency rules” are—

(a)for England and Wales, rules made under sections 411 and 412 of the 1986 Act;

(b)for Scotland, rules made by order by the Treasury, after consultation with the Scottish Ministers, for the purposes of this section; and

(c)for Northern Ireland, rules made under Article 359 of the 1989 Order and section 55 of the [1978 c. 23.] Judicature (Northern Ireland) Act 1978.

(9)“The 1985 Act”, “the 1986 Act”, “the 1989 Order” and “court” have the same meaning as in Part XXIV.

216Continuity of long-term insurance policies

(1)The compensation scheme may, in particular, include provision requiring the scheme manager to make arrangements for securing continuity of insurance for policyholders, or policyholders of a specified class, of relevant long-term insurers.

(2)“Relevant long-term insurers” means relevant persons who—

(a)have permission to effect or carry out contracts of long-term insurance; and

(b)are unable, or likely to be unable, to satisfy claims made against them.

(3)The scheme may provide for the scheme manager to take such measures as appear to him to be appropriate—

(a)for securing or facilitating the transfer of a relevant long-term insurer’s business so far as it consists of the carrying out of contracts of long-term insurance, or of any part of that business, to another authorised person;

(b)for securing the issue by another authorised person to the policyholders concerned of policies in substitution for their existing policies.

(4)The scheme may also provide for the scheme manager to make payments to the policyholders concerned—

(a)during any period while he is seeking to make arrangements mentioned in subsection (1);

(b)if it appears to him that it is not reasonably practicable to make such arrangements.

(5)A provision of the scheme made by virtue of section 213(3)(b) may include power to impose levies for the purpose of meeting expenses of the scheme manager incurred in—

(a)taking measures as a result of any provision of the scheme made by virtue of subsection (3);

(b)making payments as a result of any such provision made by virtue of subsection (4).

217Insurers in financial difficulties

(1)The compensation scheme may, in particular, include provision for the scheme manager to have power to take measures for safeguarding policyholders, or policyholders of a specified class, of relevant insurers.

(2)“Relevant insurers” means relevant persons who—

(a)have permission to effect or carry out contracts of insurance; and

(b)are in financial difficulties.

(3)The measures may include such measures as the scheme manager considers appropriate for—

(a)securing or facilitating the transfer of a relevant insurer’s business so far as it consists of the carrying out of contracts of insurance, or of any part of that business, to another authorised person;

(b)giving assistance to the relevant insurer to enable it to continue to effect or carry out contracts of insurance.

(4)The scheme may provide—

(a)that if measures of a kind mentioned in subsection (3)(a) are to be taken, they should be on terms appearing to the scheme manager to be appropriate, including terms reducing, or deferring payment of, any of the things to which any of those who are eligible policyholders in relation to the relevant insurer are entitled in their capacity as such;

(b)that if measures of a kind mentioned in subsection (3)(b) are to be taken, they should be conditional on the reduction of, or the deferment of the payment of, the things to which any of those who are eligible policyholders in relation to the relevant insurer are entitled in their capacity as such;

(c)for ensuring that measures of a kind mentioned in subsection (3)(b) do not benefit to any material extent persons who were members of a relevant insurer when it began to be in financial difficulties or who had any responsibility for, or who may have profited from, the circumstances giving rise to its financial difficulties, except in specified circumstances;

(d)for requiring the scheme manager to be satisfied that any measures he proposes to take are likely to cost less than it would cost to pay compensation under the scheme if the relevant insurer became unable, or likely to be unable, to satisfy claims made against him.

(5)The scheme may provide for the Authority to have power—

(a)to give such assistance to the scheme manager as it considers appropriate for assisting the scheme manager to determine what measures are practicable or desirable in the case of a particular relevant insurer;

(b)to impose constraints on the taking of measures by the scheme manager in the case of a particular relevant insurer;

(c)to require the scheme manager to provide it with information about any particular measures which the scheme manager is proposing to take.

(6)The scheme may include provision for the scheme manager to have power—

(a)to make interim payments in respect of eligible policyholders of a relevant insurer;

(b)to indemnify any person making payments to eligible policyholders of a relevant insurer.

(7)A provision of the scheme made by virtue of section 213(3)(b) may include power to impose levies for the purpose of meeting expenses of the scheme manager incurred in—

(a)taking measures as a result of any provision of the scheme made by virtue of subsection (1);

(b)making payments or giving indemnities as a result of any such provision made by virtue of subsection (6).

(8)“Financial difficulties” and “eligible policyholders” have such meanings as may be specified.

Annual report

218Annual report

(1)At least once a year, the scheme manager must make a report to the Authority on the discharge of its functions.

(2)The report must—

(a)include a statement setting out the value of each of the funds established by the compensation scheme; and

(b)comply with any requirements specified in rules made by the Authority.

(3)The scheme manager must publish each report in the way it considers appropriate.

Information and documents

219Scheme manager’s power to require information

(1)The scheme manager may, by notice in writing given to the relevant person in respect of whom a claim is made under the scheme or to a person otherwise involved, require that person—

(a)to provide specified information or information of a specified description; or

(b)to produce specified documents or documents of a specified description.

(2)The information or documents must be provided or produced—

(a)before the end of such reasonable period as may be specified; and

(b)in the case of information, in such manner or form as may be specified.

(3)This section applies only to information and documents the provision or production of which the scheme manager considers—

(a)to be necessary for the fair determination of the claim; or

(b)to be necessary (or likely to be necessary) for the fair determination of other claims made (or which it expects may be made) in respect of the relevant person concerned.

(4)If a document is produced in response to a requirement imposed under this section, the scheme manager may—

(a)take copies or extracts from the document; or

(b)require the person producing the document to provide an explanation of the document.

(5)If a person who is required under this section to produce a document fails to do so, the scheme manager may require the person to state, to the best of his knowledge and belief, where the document is.

(6)If the relevant person is insolvent, no requirement may be imposed under this section on a person to whom section 220 or 224 applies.

(7)If a person claims a lien on a document, its production under this Part does not affect the lien.

(8)“Relevant person” has the same meaning as in section 224.

(9)“Specified” means specified in the notice given under subsection (1).

(10)A person is involved in a claim made under the scheme if he was knowingly involved in the act or omission giving rise to the claim.

220Scheme manager’s power to inspect information held by liquidator etc

(1)For the purpose of assisting the scheme manager to discharge its functions in relation to a claim made in respect of an insolvent relevant person, a person to whom this section applies must permit a person authorised by the scheme manager to inspect relevant documents.

(2)A person inspecting a document under this section may take copies of, or extracts from, the document.

(3)This section applies to—

(a)the administrative receiver, administrator, liquidator or trustee in bankruptcy of an insolvent relevant person;

(b)the permanent trustee, within the meaning of the [1985 c. 66.] Bankruptcy (Scotland) Act 1985, on the estate of an insolvent relevant person.

(4)This section does not apply to a liquidator, administrator or trustee in bankruptcy who is—

(a)the Official Receiver;

(b)the Official Receiver for Northern Ireland; or

(c)the Accountant in Bankruptcy.

(5)“Relevant person” has the same meaning as in section 224.

221Powers of court where information required

(1)If a person (“the defaulter”)—

(a)fails to comply with a requirement imposed under section 219, or

(b)fails to permit documents to be inspected under section 220,

the scheme manager may certify that fact in writing to the court and the court may enquire into the case.

(2)If the court is satisfied that the defaulter failed without reasonable excuse to comply with the requirement (or to permit the documents to be inspected), it may deal with the defaulter (and, in the case of a body corporate, any director or officer) as if he were in contempt.

(3)“Court” means—

(a)the High Court;

(b)in Scotland, the Court of Session.

Miscellaneous

222Statutory immunity

(1)Neither the scheme manager nor any person who is, or is acting as, its board member, officer or member of staff is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of the scheme manager’s functions.

(2)Subsection (1) does not apply—

(a)if the act or omission is shown to have been in bad faith; or

(b)so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the [1998 c. 42.] Human Rights Act 1998.

223Management expenses

(1)The amount which the scheme manager may recover, from the sums levied under the scheme, as management expenses attributable to a particular period may not exceed such amount as may be fixed by the scheme as the limit applicable to that period.

(2)In calculating the amount of any levy to be imposed by the scheme manager, no amount may be included to reflect management expenses unless the limit mentioned in subsection (1) has been fixed by the scheme.

(3)“Management expenses” means expenses incurred, or expected to be incurred, by the scheme manager in connection with its functions under this Act other than those incurred—

(a)in paying compensation;

(b)as a result of any provision of the scheme made by virtue of section 216(3) or (4) or 217(1) or (6).

224Scheme manager’s power to inspect documents held by Official Receiver etc

(1)If, as a result of the insolvency or bankruptcy of a relevant person, any documents have come into the possession of a person to whom this section applies, he must permit any person authorised by the scheme manager to inspect the documents for the purpose of establishing—

(a)the identity of persons to whom the scheme manager may be liable to make a payment in accordance with the compensation scheme; or

(b)the amount of any payment which the scheme manager may be liable to make.

(2)A person inspecting a document under this section may take copies or extracts from the document.

(3)In this section “relevant person” means a person who was—

(a)an authorised person at the time the act or omission which may give rise to the liability mentioned in subsection (1)(a) took place; or

(b)an appointed representative at that time.

(4)But a person who, at that time—

(a)qualified for authorisation under Schedule 3, and

(b)fell within a prescribed category,

is not to be regarded as a relevant person for the purposes of this section in relation to any activities for which he had permission as a result of any provision of, or made under, that Schedule unless he had elected to participate in the scheme in relation to those activities at that time.

(5)This section applies to—

(a)the Official Receiver;

(b)the Official Receiver for Northern Ireland; and

(c)the Accountant in Bankruptcy.

Part XVIThe Ombudsman Scheme

The scheme

225The scheme and the scheme operator

(1)This Part provides for a scheme under which certain disputes may be resolved quickly and with minimum formality by an independent person.

(2)The scheme is to be administered by a body corporate (“the scheme operator”).

(3)The scheme is to be operated under a name chosen by the scheme operator but is referred to in this Act as “the ombudsman scheme”.

(4)Schedule 17 makes provision in connection with the ombudsman scheme and the scheme operator.

226Compulsory jurisdiction

(1)A complaint which relates to an act or omission of a person (“the respondent”) in carrying on an activity to which compulsory jurisdiction rules apply is to be dealt with under the ombudsman scheme if the conditions mentioned in subsection (2) are satisfied.

(2)The conditions are that—

(a)the complainant is eligible and wishes to have the complaint dealt with under the scheme;

(b)the respondent was an authorised person at the time of the act or omission to which the complaint relates; and

(c)the act or omission to which the complaint relates occurred at a time when compulsory jurisdiction rules were in force in relation to the activity in question.

(3)“Compulsory jurisdiction rules” means rules—

(a)made by the Authority for the purposes of this section; and

(b)specifying the activities to which they apply.

(4)Only activities which are regulated activities, or which could be made regulated activities by an order under section 22, may be specified.

(5)Activities may be specified by reference to specified categories (however described).

(6)A complainant is eligible, in relation to the compulsory jurisdiction of the ombudsman scheme, if he falls within a class of person specified in the rules as eligible.

(7)The rules—

(a)may include provision for persons other than individuals to be eligible; but

(b)may not provide for authorised persons to be eligible except in specified circumstances or in relation to complaints of a specified kind.

(8)The jurisdiction of the scheme which results from this section is referred to in this Act as the “compulsory jurisdiction”.

227Voluntary jurisdiction

(1)A complaint which relates to an act or omission of a person (“the respondent”) in carrying on an activity to which voluntary jurisdiction rules apply is to be dealt with under the ombudsman scheme if the conditions mentioned in subsection (2) are satisfied.

(2)The conditions are that—

(a)the complainant is eligible and wishes to have the complaint dealt with under the scheme;

(b)at the time of the act or omission to which the complaint relates, the respondent was participating in the scheme;

(c)at the time when the complaint is referred under the scheme, the respondent has not withdrawn from the scheme in accordance with its provisions;

(d)the act or omission to which the complaint relates occurred at a time when voluntary jurisdiction rules were in force in relation to the activity in question; and

(e)the complaint cannot be dealt with under the compulsory jurisdiction.

(3)“Voluntary jurisdiction rules” means rules—

(a)made by the scheme operator for the purposes of this section; and

(b)specifying the activities to which they apply.

(4)The only activities which may be specified in the rules are activities which are, or could be, specified in compulsory jurisdiction rules.

(5)Activities may be specified by reference to specified categories (however described).

(6)The rules require the Authority’s approval.

(7)A complainant is eligible, in relation to the voluntary jurisdiction of the ombudsman scheme, if he falls within a class of person specified in the rules as eligible.

(8)The rules may include provision for persons other than individuals to be eligible.

(9)A person qualifies for participation in the ombudsman scheme if he falls within a class of person specified in the rules in relation to the activity in question.

(10)Provision may be made in the rules for persons other than authorised persons to participate in the ombudsman scheme.

(11)The rules may make different provision in relation to complaints arising from different activities.

(12)The jurisdiction of the scheme which results from this section is referred to in this Act as the “voluntary jurisdiction”.

(13)In such circumstances as may be specified in voluntary jurisdiction rules, a complaint—

(a)which relates to an act or omission occurring at a time before the rules came into force, and

(b)which could have been dealt with under a scheme which has to any extent been replaced by the voluntary jurisdiction,

is to be dealt with under the ombudsman scheme even though paragraph (b) or (d) of subsection (2) would otherwise prevent that.

(14)In such circumstances as may be specified in voluntary jurisdiction rules, a complaint is to be dealt with under the ombudsman scheme even though—

(a)paragraph (b) or (d) of subsection (2) would otherwise prevent that, and

(b)the complaint is not brought within the scheme as a result of subsection (13),

but only if the respondent has agreed that complaints of that kind were to be dealt with under the scheme.

Determination of complaints

228Determination under the compulsory jurisdiction

(1)This section applies only in relation to the compulsory jurisdiction.

(2)A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case.

(3)When the ombudsman has determined a complaint he must give a written statement of his determination to the respondent and to the complainant.

(4)The statement must—

(a)give the ombudsman’s reasons for his determination;

(b)be signed by him; and

(c)require the complainant to notify him in writing, before a date specified in the statement, whether he accepts or rejects the determination.

(5)If the complainant notifies the ombudsman that he accepts the determination, it is binding on the respondent and the complainant and final.

(6)If, by the specified date, the complainant has not notified the ombudsman of his acceptance or rejection of the determination he is to be treated as having rejected it.

(7)The ombudsman must notify the respondent of the outcome.

(8)A copy of the determination on which appears a certificate signed by an ombudsman is evidence (or in Scotland sufficient evidence) that the determination was made under the scheme.

(9)Such a certificate purporting to be signed by an ombudsman is to be taken to have been duly signed unless the contrary is shown.

229Awards

(1)This section applies only in relation to the compulsory jurisdiction.

(2)If a complaint which has been dealt with under the scheme is determined in favour of the complainant, the determination may include—

(a)an award against the respondent of such amount as the ombudsman considers fair compensation for loss or damage (of a kind falling within subsection (3)) suffered by the complainant (“a money award”);

(b)a direction that the respondent take such steps in relation to the complainant as the ombudsman considers just and appropriate (whether or not a court could order those steps to be taken).

(3)A money award may compensate for—

(a)financial loss; or

(b)any other loss, or any damage, of a specified kind.

(4)The Authority may specify the maximum amount which may be regarded as fair compensation for a particular kind of loss or damage specified under subsection (3)(b).

(5)A money award may not exceed the monetary limit; but the ombudsman may, if he considers that fair compensation requires payment of a larger amount, recommend that the respondent pay the complainant the balance.

(6)The monetary limit is such amount as may be specified.

(7)Different amounts may be specified in relation to different kinds of complaint.

(8)A money award—

(a)may provide for the amount payable under the award to bear interest at a rate and as from a date specified in the award; and

(b)is enforceable by the complainant in accordance with Part III of Schedule 17.

(9)Compliance with a direction under subsection (2)(b)—

(a)is enforceable by an injunction; or

(b)in Scotland, is enforceable by an order under section 45 of the [1988 c. 36.] Court of Session Act 1988.

(10)Only the complainant may bring proceedings for an injunction or proceedings for an order.

(11)“Specified” means specified in compulsory jurisdiction rules.

230Costs

(1)The scheme operator may by rules (“costs rules”) provide for an ombudsman to have power, on determining a complaint under the compulsory jurisdiction, to award costs in accordance with the provisions of the rules.

(2)Costs rules require the approval of the Authority.

(3)Costs rules may not provide for the making of an award against the complainant in respect of the respondent’s costs.

(4)But they may provide for the making of an award against the complainant in favour of the scheme operator, for the purpose of providing a contribution to resources deployed in dealing with the complaint, if in the opinion of the ombudsman—

(a)the complainant’s conduct was improper or unreasonable; or

(b)the complainant was responsible for an unreasonable delay.

(5)Costs rules may authorise an ombudsman making an award in accordance with the rules to order that the amount payable under the award bears interest at a rate and as from a date specified in the order.

(6)An amount due under an award made in favour of the scheme operator is recoverable as a debt due to the scheme operator.

(7)Any other award made against the respondent is to be treated as a money award for the purposes of paragraph 16 of Schedule 17.

Information

231Ombudsman’s power to require information

(1)An ombudsman may, by notice in writing given to a party to a complaint, require that party—

(a)to provide specified information or information of a specified description; or

(b)to produce specified documents or documents of a specified description.

(2)The information or documents must be provided or produced—

(a)before the end of such reasonable period as may be specified; and

(b)in the case of information, in such manner or form as may be specified.

(3)This section applies only to information and documents the production of which the ombudsman considers necessary for the determination of the complaint.

(4)If a document is produced in response to a requirement imposed under this section, the ombudsman may—

(a)take copies or extracts from the document; or

(b)require the person producing the document to provide an explanation of the document.

(5)If a person who is required under this section to produce a document fails to do so, the ombudsman may require him to state, to the best of his knowledge and belief, where the document is.

(6)If a person claims a lien on a document, its production under this Part does not affect the lien.

(7)“Specified” means specified in the notice given under subsection (1).

232Powers of court where information required

(1)If a person (“the defaulter”) fails to comply with a requirement imposed under section 231, the ombudsman may certify that fact in writing to the court and the court may enquire into the case.

(2)If the court is satisfied that the defaulter failed without reasonable excuse to comply with the requirement, it may deal with the defaulter (and, in the case of a body corporate, any director or officer) as if he were in contempt.

(3)“Court” means—

(a)the High Court;

(b)in Scotland, the Court of Session.

233Data protection

In section 31 of the [1998 c. 29.] Data Protection Act 1998 (regulatory activity), after subsection (4), insert—

(4A)Personal data processed for the purpose of discharging any function which is conferred by or under Part XVI of the Financial Services and Markets Act 2000 on the body established by the Financial Services Authority for the purposes of that Part are exempt from the subject information provisions in any case to the extent to which the application of those provisions to the data would be likely to prejudice the proper discharge of the function.

Funding

234Industry funding

(1)For the purpose of funding—

(a)the establishment of the ombudsman scheme (whenever any relevant expense is incurred), and

(b)its operation in relation to the compulsory jurisdiction,

the Authority may make rules requiring the payment to it or to the scheme operator, by authorised persons or any class of authorised person of specified amounts (or amounts calculated in a specified way).

(2)“Specified” means specified in the rules.

Part XVIICollective Investment Schemes

Chapter IInterpretation

235Collective investment schemes

(1)In this Part “collective investment scheme” means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

(2)The arrangements must be such that the persons who are to participate (“participants”) do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions.

(3)The arrangements must also have either or both of the following characteristics—

(a)the contributions of the participants and the profits or income out of which payments are to be made to them are pooled;

(b)the property is managed as a whole by or on behalf of the operator of the scheme.

(4)If arrangements provide for such pooling as is mentioned in subsection (3)(a) in relation to separate parts of the property, the arrangements are not to be regarded as constituting a single collective investment scheme unless the participants are entitled to exchange rights in one part for rights in another.

(5)The Treasury may by order provide that arrangements do not amount to a collective investment scheme—

(a)in specified circumstances; or

(b)if the arrangements fall within a specified category of arrangement.

236Open-ended investment companies

(1)In this Part “an open-ended investment company” means a collective investment scheme which satisfies both the property condition and the investment condition.

(2)The property condition is that the property belongs beneficially to, and is managed by or on behalf of, a body corporate (“BC”) having as its purpose the investment of its funds with the aim of—

(a)spreading investment risk; and

(b)giving its members the benefit of the results of the management of those funds by or on behalf of that body.

(3)The investment condition is that, in relation to BC, a reasonable investor would, if he were to participate in the scheme—

(a)expect that he would be able to realize, within a period appearing to him to be reasonable, his investment in the scheme (represented, at any given time, by the value of shares in, or securities of, BC held by him as a participant in the scheme); and

(b)be satisfied that his investment would be realized on a basis calculated wholly or mainly by reference to the value of property in respect of which the scheme makes arrangements.

(4)In determining whether the investment condition is satisfied, no account is to be taken of any actual or potential redemption or repurchase of shares or securities under—

(a)Chapter VII of Part V of the [1985 c. 6.] Companies Act 1985;

(b)Chapter VII of Part VI of the [S.I. 1986/1032 (N.I. 6.)] Companies (Northern Ireland) Order 1986;

(c)corresponding provisions in force in another EEA State; or

(d)provisions in force in a country or territory other than an EEA state which the Treasury have, by order, designated as corresponding provisions.

(5)The Treasury may by order amend the definition of “an open-ended investment company” for the purposes of this Part.

237Other definitions

(1)In this Part “unit trust scheme” means a collective investment scheme under which the property is held on trust for the participants.

(2)In this Part—

  • “trustee”, in relation to a unit trust scheme, means the person holding the property in question on trust for the participants;

  • “depositary”, in relation to—

    (a)

    a collective investment scheme which is constituted by a body incorporated by virtue of regulations under section 262, or

    (b)

    any other collective investment scheme which is not a unit trust scheme,

    means any person to whom the property subject to the scheme is entrusted for safekeeping;

  • “the operator”, in relation to a unit trust scheme with a separate trustee, means the manager and in relation to an open-ended investment company, means that company;

  • “units” means the rights or interests (however described) of the participants in a collective investment scheme.

(3)In this Part—

  • “an authorised unit trust scheme” means a unit trust scheme which is authorised for the purposes of this Act by an authorisation order in force under section 243;

  • “an authorised open-ended investment company” means a body incorporated by virtue of regulations under section 262 in respect of which an authorisation order is in force under any provision made in such regulations by virtue of subsection (2)(l) of that section;

  • “a recognised scheme” means a scheme recognised under section 264, 270 or 272.

Chapter IIRestrictions on Promotion

238Restrictions on promotion

(1)An authorised person must not communicate an invitation or inducement to participate in a collective investment scheme.

(2)But that is subject to the following provisions of this section and to section 239.

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

(4)Subsection (1) does not apply in relation to—

(a)an authorised unit trust scheme;

(b)a scheme constituted by an authorised open-ended investment company; or

(c)a recognised scheme.

(5)Subsection (1) does not apply to anything done in accordance with rules made by the Authority for the purpose of exempting from that subsection the promotion otherwise than to the general public of schemes of specified descriptions.

(6)The Treasury may by order specify circumstances in which subsection (1) does not apply.

(7)An order under subsection (6) 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.

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

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

(10)“Promotion otherwise than to the general public” includes promotion in a way designed to reduce, so far as possible, the risk of participation by persons for whom participation would be unsuitable.

(11)“Participate”, in relation to a collective investment scheme, means become a participant (within the meaning given by section 235(2)) in the scheme.

239Single property schemes

(1)The Treasury may by regulations make provision for exempting single property schemes from section 238(1).

(2)For the purposes of subsection (1) a single property scheme is a scheme which has the characteristics mentioned in subsection (3) and satisfies such other requirements as are prescribed by the regulations conferring the exemption.

(3)The characteristics are—

(a)that the property subject to the scheme (apart from cash or other assets held for management purposes) consists of—

(i)a single building (or a single building with ancillary buildings) managed by or on behalf of the operator of the scheme, or

(ii)a group of adjacent or contiguous buildings managed by him or on his behalf as a single enterprise,

with or without ancillary land and with or without furniture, fittings or other contents of the building or buildings in question; and

(b)that the units of the participants in the scheme are either dealt in on a recognised investment exchange or offered on terms such that any agreement for their acquisition is conditional on their admission to dealings on such an exchange.

(4)If regulations are made under subsection (1), the Authority may make rules imposing duties or liabilities on the operator and (if any) the trustee or depositary of a scheme exempted by the regulations.

(5)The rules may include, to such extent as the Authority thinks appropriate, provision for purposes corresponding to those for which provision can be made under section 248 in relation to authorised unit trust schemes.

240Restriction on approval of promotion

(1)An authorised person may not approve for the purposes of section 21 the content of a communication relating to a collective investment scheme if he would be prohibited by section 238(1) from effecting the communication himself or from causing it to be communicated.

(2)For the purposes of determining in any case whether there has been a contravention of section 21(1), an approval given in contravention of subsection (1) is to be regarded as not having been given.

241Actions for damages

If an authorised person contravenes a requirement imposed on him by section 238 or 240, section 150 applies to the contravention as it applies to a contravention mentioned in that section.

Chapter IIIAuthorised Unit Trust Schemes

Applications for authorisation

242Applications for authorisation of unit trust schemes

(1)Any application for an order declaring a unit trust scheme to be an authorised unit trust scheme must be made to the Authority by the manager and trustee, or proposed manager and trustee, of the scheme.

(2)The manager and trustee (or proposed manager and trustee) must be different persons.

(3)The application—

(a)must be made in such manner as the Authority may direct; and

(b)must contain or be accompanied by such information as the Authority may reasonably require for the purpose of determining the application.

(4)At any time after receiving an application and before determining it, the Authority may require the applicants to provide it with such further information as it reasonably considers necessary to enable it to determine the application.

(5)Different directions may be given, and different requirements imposed, in relation to different applications.

(6)The Authority may require applicants to present information which they are required to give under this section in such form, or to verify it in such a way, as the Authority may direct.

243Authorisation orders

(1)If, on an application under section 242 in respect of a unit trust scheme, the Authority—

(a)is satisfied that the scheme complies with the requirements set out in this section,

(b)is satisfied that the scheme complies with the requirements of the trust scheme rules, and

(c)has been provided with a copy of the trust deed and a certificate signed by a solicitor to the effect that it complies with such of the requirements of this section or those rules as relate to its contents,

the Authority may make an order declaring the scheme to be an authorised unit trust scheme.

(2)If the Authority makes an order under subsection (1), it must give written notice of the order to the applicant.

(3)In this Chapter “authorisation order” means an order under subsection (1).

(4)The manager and the trustee must be persons who are independent of each other.

(5)The manager and the trustee must each—

(a)be a body corporate incorporated in the United Kingdom or another EEA State, and

(b)have a place of business in the United Kingdom,

and the affairs of each must be administered in the country in which it is incorporated.

(6)If the manager is incorporated in another EEA State, the scheme must not be one which satisfies the requirements prescribed for the purposes of section 264.

(7)The manager and the trustee must each be an authorised person and the manager must have permission to act as manager and the trustee must have permission to act as trustee.

(8)The name of the scheme must not be undesirable or misleading.

(9)The purposes of the scheme must be reasonably capable of being successfully carried into effect.

(10)The participants must be entitled to have their units redeemed in accordance with the scheme at a price—

(a)related to the net value of the property to which the units relate; and

(b)determined in accordance with the scheme.

(11)But a scheme is to be treated as complying with subsection (10) if it requires the manager to ensure that a participant is able to sell his units on an investment exchange at a price not significantly different from that mentioned in that subsection.

244Determination of applications

(1)An application under section 242 must be determined by the Authority before the end of the period of six months beginning with the date on which it receives the completed application.

(2)The Authority may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within twelve months beginning with the date on which it first receives the application.

(3)The applicant may withdraw his application, by giving the Authority written notice, at any time before the Authority determines it.

Applications refused

245Procedure when refusing an application

(1)If the Authority proposes to refuse an application made under section 242 it must give each of the applicants a warning notice.

(2)If the Authority decides to refuse the application—

(a)it must give each of the applicants a decision notice; and

(b)either applicant may refer the matter to the Tribunal.

Certificates

246Certificates

(1)If the manager or trustee of a unit trust scheme which complies with the conditions necessary for it to enjoy the rights conferred by any relevant Community instrument so requests, the Authority may issue a certificate to the effect that the scheme complies with those conditions.

(2)Such a certificate may be issued on the making of an authorisation order in respect of the scheme or at any subsequent time.

Rules

247Trust scheme rules

(1)The Authority may make rules (“trust scheme rules”) as to—

(a)the constitution, management and operation of authorised unit trust schemes;

(b)the powers, duties, rights and liabilities of the manager and trustee of any such scheme;

(c)the rights and duties of the participants in any such scheme; and

(d)the winding up of any such scheme.

(2)Trust scheme rules may, in particular, make provision—

(a)as to the issue and redemption of the units under the scheme;

(b)as to the expenses of the scheme and the means of meeting them;

(c)for the appointment, removal, powers and duties of an auditor for the scheme;

(d)for restricting or regulating the investment and borrowing powers exercisable in relation to the scheme;

(e)requiring the keeping of records with respect to the transactions and financial position of the scheme and for the inspection of those records;

(f)requiring the preparation of periodical reports with respect to the scheme and the provision of those reports to the participants and to the Authority; and

(g)with respect to the amendment of the scheme.

(3)Trust scheme rules may make provision as to the contents of the trust deed, including provision requiring any of the matters mentioned in subsection (2) to be dealt with in the deed.

(4)But trust scheme rules are binding on the manager, trustee and participants independently of the contents of the trust deed and, in the case of the participants, have effect as if contained in it.

(5)If—

(a)a modification is made of the statutory provisions in force in Great Britain or Northern Ireland relating to companies,

(b)the modification relates to the rights and duties of persons who hold the beneficial title to any shares in a company without also holding the legal title, and

(c)it appears to the Treasury that, for the purpose of assimilating the law relating to authorised unit trust schemes to the law relating to companies as so modified, it is expedient to modify the rule-making powers conferred on the Authority by this section,

the Treasury may by order make such modifications of those powers as they consider appropriate.

248Scheme particulars rules

(1)The Authority may make rules (“scheme particulars rules”) requiring the manager of an authorised unit trust scheme—

(a)to submit scheme particulars to the Authority; and

(b)to publish scheme particulars or make them available to the public on request.

(2)“Scheme particulars” means particulars in such form, containing such information about the scheme and complying with such requirements, as are specified in scheme particulars rules.

(3)Scheme particulars rules may require the manager of an authorised unit trust scheme to submit, and to publish or make available, revised or further scheme particulars if there is a significant change affecting any matter—

(a)which is contained in scheme particulars previously published or made available; and

(b)whose inclusion in those particulars was required by the rules.

(4)Scheme particulars rules may require the manager of an authorised unit trust scheme to submit, and to publish or make available, revised or further scheme particulars if—

(a)a significant new matter arises; and

(b)the inclusion of information in respect of that matter would have been required in previous particulars if it had arisen when those particulars were prepared.

(5)Scheme particulars rules may provide for the payment, by the person or persons who in accordance with the rules are treated as responsible for any scheme particulars, of compensation to any qualifying person who has suffered loss as a result of—

(a)any untrue or misleading statement in the particulars; or

(b)the omission from them of any matter required by the rules to be included.

(6)“Qualifying person” means a person who—

(a)has become or agreed to become a participant in the scheme; or

(b)although not being a participant, has a beneficial interest in units in the scheme.

(7)Scheme particulars rules do not affect any liability which any person may incur apart from the rules.

249Disqualification of auditor for breach of trust scheme rules

(1)If it appears to the Authority that an auditor has failed to comply with a duty imposed on him by trust scheme rules, it may disqualify him from being the auditor for any authorised unit trust scheme or authorised open-ended investment company.

(2)Subsections (2) to (5) of section 345 have effect in relation to disqualification under subsection (1) as they have effect in relation to disqualification under subsection (1) of that section.

250Modification or waiver of rules

(1)In this section “rules” means—

(a)trust scheme rules; or

(b)scheme particulars rules.

(2)The Authority may, on the application or with the consent of any person to whom any rules apply, direct that all or any of the rules—

(a)are not to apply to him as respects a particular scheme; or

(b)are to apply to him, as respects a particular scheme, with such modifications as may be specified in the direction.

(3)The Authority may, on the application or with the consent of the manager and trustee of a particular scheme acting jointly, direct that all or any of the rules—

(a)are not to apply to the scheme; or

(b)are to apply to the scheme with such modifications as may be specified in the direction.

(4)Subsections (3) to (9) and (11) of section 148 have effect in relation to a direction under subsection (2) as they have effect in relation to a direction under section 148(2) but with the following modifications—

(a)subsection (4)(a) is to be read as if the words “by the authorised person” were omitted;

(b)any reference to the authorised person (except in subsection (4)(a)) is to be read as a reference to the person mentioned in subsection (2); and

(c)subsection (7)(b) is to be read, in relation to a participant of the scheme, as if the word “commercial” were omitted.

(5)Subsections (3) to (9) and (11) of section 148 have effect in relation to a direction under subsection (3) as they have effect in relation to a direction under section 148(2) but with the following modifications—

(a)subsection (4)(a) is to be read as if the words “by the authorised person” were omitted;

(b)subsections (7)(b) and (11) are to be read as if references to the authorised person were references to each of the manager and the trustee of the scheme;

(c)subsection (7)(b) is to be read, in relation to a participant of the scheme, as if the word “commercial” were omitted;

(d)subsection (8) is to be read as if the reference to the authorised person concerned were a reference to the scheme concerned and to its manager and trustee; and

(e)subsection (9) is to be read as if the reference to the authorised person were a reference to the manager and trustee of the scheme acting jointly.

Alterations

251Alteration of schemes and changes of manager or trustee

(1)The manager of an authorised unit trust scheme must give written notice to the Authority of any proposal to alter the scheme or to replace its trustee.

(2)Any notice given in respect of a proposal to alter the scheme involving a change in the trust deed must be accompanied by a certificate signed by a solicitor to the effect that the change will not affect the compliance of the deed with the trust scheme rules.

(3)The trustee of an authorised unit trust scheme must give written notice to the Authority of any proposal to replace the manager of the scheme.

(4)Effect is not to be given to any proposal of which notice has been given under subsection (1) or (3) unless—

(a)the Authority, by written notice, has given its approval to the proposal; or

(b)one month, beginning with the date on which the notice was given, has expired without the manager or trustee having received from the Authority a warning notice under section 252 in respect of the proposal.

(5)The Authority must not approve a proposal to replace the manager or the trustee of an authorised unit trust scheme unless it is satisfied that, if the proposed replacement is made, the scheme will continue to comply with the requirements of section 243(4) to (7).

252Procedure when refusing approval of change of manager or trustee

(1)If the Authority proposes to refuse approval of a proposal to replace the trustee or manager of an authorised unit trust scheme, it must give a warning notice to the person by whom notice of the proposal was given under section 251(1) or (3).

(2)If the Authority proposes to refuse approval of a proposal to alter an authorised unit trust scheme it must give separate warning notices to the manager and the trustee of the scheme.

(3)To be valid the warning notice must be received by that person before the end of one month beginning with the date on which notice of the proposal was given.

(4)If, having given a warning notice to a person, the Authority decides to refuse approval—

(a)it must give him a decision notice; and

(b)he may refer the matter to the Tribunal.

Exclusion clauses

253Avoidance of exclusion clauses

Any provision of the trust deed of an authorised unit trust scheme is void in so far as it would have the effect of exempting the manager or trustee from liability for any failure to exercise due care and diligence in the discharge of his functions in respect of the scheme.

Ending of authorisation

254Revocation of authorisation order otherwise than by consent

(1)An authorisation order may be revoked by an order made by the Authority if it appears to the Authority that—

(a)one or more of the requirements for the making of the order are no longer satisfied;

(b)the manager or trustee of the scheme concerned has contravened a requirement imposed on him by or under this Act;

(c)the manager or trustee of the scheme has, in purported compliance with any such requirement, knowingly or recklessly given the Authority information which is false or misleading in a material particular;

(d)no regulated activity is being carried on in relation to the scheme and the period of that inactivity began at least twelve months earlier; or

(e)none of paragraphs (a) to (d) applies, but it is desirable to revoke the authorisation order in order to protect the interests of participants or potential participants in the scheme.

(2)For the purposes of subsection (1)(e), the Authority may take into account any matter relating to—

(a)the scheme;

(b)the manager or trustee;

(c)any person employed by or associated with the manager or trustee in connection with the scheme;

(d)any director of the manager or trustee;

(e)any person exercising influence over the manager or trustee;

(f)any body corporate in the same group as the manager or trustee;

(g)any director of any such body corporate;

(h)any person exercising influence over any such body corporate.

255Procedure

(1)If the Authority proposes to make an order under section 254 revoking an authorisation order (“a revoking order”), it must give separate warning notices to the manager and the trustee of the scheme.

(2)If the Authority decides to make a revoking order, it must without delay give each of them a decision notice and either of them may refer the matter to the Tribunal.

256Requests for revocation of authorisation order

(1)An authorisation order may be revoked by an order made by the Authority at the request of the manager or trustee of the scheme concerned.

(2)If the Authority makes an order under subsection (1), it must give written notice of the order to the manager and trustee of the scheme concerned.

(3)The Authority may refuse a request to make an order under this section if it considers that—

(a)the public interest requires that any matter concerning the scheme should be investigated before a decision is taken as to whether the authorisation order should be revoked; or

(b)revocation would not be in the interests of the participants or would be incompatible with a Community obligation.

(4)If the Authority proposes to refuse a request under this section, it must give separate warning notices to the manager and the trustee of the scheme.

(5)If the Authority decides to refuse the request, it must without delay give each of them a decision notice and either of them may refer the matter to the Tribunal.

Powers of intervention

257Directions

(1)The Authority may give a direction under this section if it appears to the Authority that—

(a)one or more of the requirements for the making of an authorisation order are no longer satisfied;

(b)the manager or trustee of an authorised unit trust scheme has contravened, or is likely to contravene, a requirement imposed on him by or under this Act;

(c)the manager or trustee of such a scheme has, in purported compliance with any such requirement, knowingly or recklessly given the Authority information which is false or misleading in a material particular; or

(d)none of paragraphs (a) to (c) applies, but it is desirable to give a direction in order to protect the interests of participants or potential participants in such a scheme.

(2)A direction under this section may—

(a)require the manager of the scheme to cease the issue or redemption, or both the issue and redemption, of units under the scheme;

(b)require the manager and trustee of the scheme to wind it up.

(3)If the authorisation order is revoked, the revocation does not affect any direction under this section which is then in force.

(4)A direction may be given under this section in relation to a scheme in the case of which the authorisation order has been revoked if a direction under this section was already in force at the time of revocation.

(5)If a person contravenes a direction under this section, section 150 applies to the contravention as it applies to a contravention mentioned in that section.

(6)The Authority may, either on its own initiative or on the application of the manager or trustee of the scheme concerned, revoke or vary a direction given under this section if it appears to the Authority—

(a)in the case of revocation, that it is no longer necessary for the direction to take effect or continue in force;

(b)in the case of variation, that the direction should take effect or continue in force in a different form.

258Applications to the court

(1)If the Authority could give a direction under section 257, it may also apply to the court for an order—

(a)removing the manager or the trustee, or both the manager and the trustee, of the scheme; and

(b)replacing the person or persons removed with a suitable person or persons nominated by the Authority.

(2)The Authority may nominate a person for the purposes of subsection (1)(b) only if it is satisfied that, if the order was made, the requirements of section 243(4) to (7) would be complied with.

(3)If it appears to the Authority that there is no person it can nominate for the purposes of subsection (1)(b), it may apply to the court for an order—

(a)removing the manager or the trustee, or both the manager and the trustee, of the scheme; and

(b)appointing an authorised person to wind up the scheme.

(4)On an application under this section the court may make such order as it thinks fit.

(5)The court may, on the application of the Authority, rescind any such order as is mentioned in subsection (3) and substitute such an order as is mentioned in subsection (1).

(6)The Authority must give written notice of the making of an application under this section to the manager and trustee of the scheme concerned.

(7)The jurisdiction conferred by this section may be exercised by—

(a)the High Court;

(b)in Scotland, the Court of Session.

259Procedure on giving directions under section 257 and varying them on Authority’s own initiative

(1)A direction takes effect—

(a)immediately, if the notice given under subsection (3) 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 it relates is no longer open to review.

(2)A direction may be expressed to take effect immediately (or on a specified date) only if the Authority, having regard to the ground on which it is exercising its power under section 257, considers that it is necessary for the direction to take effect immediately (or on that date).

(3)If the Authority proposes to give a direction under section 257, or gives such a direction with immediate effect, it must give separate written notice to the manager and the trustee of the scheme concerned.

(4)The notice must—

(a)give details of the direction;

(b)inform the person to whom it is given of when the direction takes effect;

(c)state the Authority’s reasons for giving the direction and for its determination as to when the direction takes effect;

(d)inform the person to whom it is given that he may make representations to the Authority within such period as may be specified in it (whether or not he has referred the matter to the Tribunal); and

(e)inform him of his right to refer the matter to the Tribunal.

(5)If the direction imposes a requirement under section 257(2)(a), the notice must state that the requirement has effect until—

(a)a specified date; or

(b)a further direction.

(6)If the direction imposes a requirement under section 257(2)(b), the scheme must be wound up—

(a)by a date specified in the notice; or

(b)if no date is specified, as soon as practicable.

(7)The Authority may extend the period allowed under the notice for making representations.

(8)If, having considered any representations made by a person to whom the notice was given, the Authority decides—

(a)to give the direction in the way proposed, or

(b)if it has been given, not to revoke the direction,

it must give separate written notice to the manager and the trustee of the scheme concerned.

(9)If, having considered any representations made by a person to whom the notice was given, the Authority decides—

(a)not to give the direction in the way proposed,

(b)to give the direction in a way other than that proposed, or

(c)to revoke a direction which has effect,

it must give separate written notice to the manager and the trustee of the scheme concerned.

(10)A notice given under subsection (8) must inform the person to whom it is given of his right to refer the matter to the Tribunal.

(11)A notice under subsection (9)(b) must comply with subsection (4).

(12)If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.

(13)This section applies to the variation of a direction on the Authority’s own initiative as it applies to the giving of a direction.

(14)For the purposes of subsection (1)(c), whether a matter is open to review is to be determined in accordance with section 391(8).

260Procedure: refusal to revoke or vary direction

(1)If on an application under section 257(6) for a direction to be revoked or varied the Authority proposes—

(a)to vary the direction otherwise than in accordance with the application, or

(b)to refuse to revoke or vary the direction,

it must give the applicant a warning notice.

(2)If the Authority decides to refuse to revoke or vary the direction—

(a)it must give the applicant a decision notice; and

(b)the applicant may refer the matter to the Tribunal.

261Procedure: revocation of direction and grant of request for variation

(1)If the Authority decides on its own initiative to revoke a direction under section 257 it must give separate written notices of its decision to the manager and trustee of the scheme.

(2)If on an application under section 257(6) for a direction to be revoked or varied the Authority decides to revoke the direction or vary it in accordance with the application, it must give the applicant written notice of its decision.

(3)A notice under this section must specify the date on which the decision takes effect.

(4)The Authority may publish such information about the revocation or variation, in such way, as it considers appropriate.

Chapter IVOpen-ended Investment Companies

262Open-ended investment companies

(1)The Treasury may by regulations make provision for—

(a)facilitating the carrying on of collective investment by means of open-ended investment companies;

(b)regulating such companies.

(2)The regulations may, in particular, make provision—

(a)for the incorporation and registration in Great Britain of bodies corporate;

(b)for a body incorporated by virtue of the regulations to take such form as may be determined in accordance with the regulations;

(c)as to the purposes for which such a body may exist, the investments which it may issue and otherwise as to its constitution;

(d)as to the management and operation of such a body and the management of its property;

(e)as to the powers, duties, rights and liabilities of such a body and of other persons, including—

(i)the directors or sole director of such a body;

(ii)its depositary (if any);

(iii)its shareholders, and persons who hold the beneficial title to shares in it without holding the legal title;

(iv)its auditor; and

(v)any persons who act or purport to act on its behalf;

(f)as to the merger of one or more such bodies and the division of such a body;

(g)for the appointment and removal of an auditor for such a body;

(h)as to the winding up and dissolution of such a body;

(i)for such a body, or any director or depositary of such a body, to be required to comply with directions given by the Authority;

(j)enabling the Authority to apply to a court for an order removing and replacing any director or depositary of such a body;

(k)for the carrying out of investigations by persons appointed by the Authority or the Secretary of State;

(l)corresponding to any provision made in relation to unit trust schemes by Chapter III of this Part.

(3)Regulations under this section may—

(a)impose criminal liability;

(b)confer functions on the Authority;

(c)in the case of provision made by virtue of subsection (2)(l), authorise the making of rules by the Authority;

(d)confer jurisdiction on any court or on the Tribunal;

(e)provide for fees to be charged by the Authority in connection with the carrying out of any of its functions under the regulations (including fees payable on a periodical basis);

(f)modify, exclude or apply (with or without modifications) any primary or subordinate legislation (including any provision of, or made under, this Act);

(g)make consequential amendments, repeals and revocations of any such legislation;

(h)modify or exclude any rule of law.

(4)The provision that may be made by virtue of subsection (3)(f) includes provision extending or adapting any power to make subordinate legislation.

(5)Regulations under this section may, in particular—

(a)revoke the [S.I. 1996/2827.] Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996; and

(b)provide for things done under or in accordance with those regulations to be treated as if they had been done under or in accordance with regulations under this section.

263Amendment of section 716 Companies Act 1985

In section 716(1) of the [1985 c. 6.] Companies Act 1985 (prohibition on formation of companies with more than 20 members unless registered under the Act etc.), after “this Act,” insert “is incorporated by virtue of regulations made under section 262 of the Financial Services and Markets Act 2000”.

Chapter VRecognised Overseas Schemes

Schemes constituted in other EEA States

264Schemes constituted in other EEA States

(1)A collective investment scheme constituted in another EEA State is a recognised scheme if—

(a)it satisfies such requirements as are prescribed for the purposes of this section; and

(b)not less than two months before inviting persons in the United Kingdom to become participants in the scheme, the operator of the scheme gives notice to the Authority of his intention to do so, specifying the way in which the invitation is to be made.

(2)But this section does not make the scheme a recognised scheme if within two months of receiving the notice under subsection (1) the Authority notifies—

(a)the operator of the scheme, and

(b)the authorities of the State in question who are responsible for the authorisation of collective investment schemes,

that the way in which the invitation is to be made does not comply with the law in force in the United Kingdom.

(3)The notice to be given to the Authority under subsection (1)—

(a)must be accompanied by a certificate from the authorities mentioned in subsection (2)(b) to the effect that the scheme complies with the conditions necessary for it to enjoy the rights conferred by any relevant Community instrument;

(b)must contain the address of a place in the United Kingdom for the service on the operator of notices or other documents required or authorised to be served on him under this Act; and

(c)must contain or be accompanied by such other information and documents as may be prescribed.

(4)A notice given by the Authority under subsection (2) must—

(a)give the reasons for which the Authority considers that the law in force in the United Kingdom will not be complied with; and

(b)specify a reasonable period (which may not be less than 28 days) within which any person to whom it is given may make representations to the Authority.

(5)For the purposes of this section a collective investment scheme is constituted in another EEA State if—

(a)it is constituted under the law of that State by a contract or under a trust and is managed by a body corporate incorporated under that law; or

(b)it takes the form of an open-ended investment company incorporated under that law.

(6)The operator of a recognised scheme may give written notice to the Authority that he desires the scheme to be no longer recognised by virtue of this section.

(7)On the giving of notice under subsection (6), the scheme ceases to be a recognised scheme.

265Representations and references to the Tribunal

(1)This section applies if any representations are made to the Authority, before the period for making representations has ended, by a person to whom a notice was given by the Authority under section 264(2).

(2)The Authority must, within a reasonable period, decide in the light of those representations whether or not to withdraw its notice.

(3)If the Authority withdraws its notice the scheme is a recognised scheme from the date on which the notice is withdrawn.

(4)If the Authority decides not to withdraw its notice, it must give a decision notice to each person to whom the notice under section 264(2) was given.

(5)The operator of the scheme to whom the decision notice is given may refer the matter to the Tribunal.

266Disapplication of rules

(1)Apart from—

(a)financial promotion rules, and

(b)rules under section 283(1),

rules made by the Authority under this Act do not apply to the operator, trustee or depositary of a scheme in relation to the carrying on by him of regulated activities for which he has permission in that capacity.

(2)“Scheme” means a scheme which is a recognised scheme by virtue of section 264.

267Power of Authority to suspend promotion of scheme

(1)Subsection (2) applies if it appears to the Authority that the operator of a scheme has communicated an invitation or inducement in relation to the scheme in a manner contrary to financial promotion rules.

(2)The Authority may direct that—

(a)the exemption from subsection (1) of section 238 provided by subsection (4)(c) of that section is not to apply in relation to the scheme; and

(b)subsection (5) of that section does not apply with respect to things done in relation to the scheme.

(3)A direction under subsection (2) has effect—

(a)for a specified period;

(b)until the occurrence of a specified event; or

(c)until specified conditions are complied with.

(4)The Authority may, either on its own initiative or on the application of the operator of the scheme concerned, vary a direction given under subsection (2) if it appears to the Authority that the direction should take effect or continue in force in a different form.

(5)The Authority may, either on its own initiative or on the application of the operator of the recognised scheme concerned, revoke a direction given under subsection (2) if it appears to the Authority—

(a)that the conditions specified in the direction have been complied with; or

(b)that it is no longer necessary for the direction to take effect or continue in force.

(6)If an event is specified, the direction ceases to have effect (unless revoked earlier) on the occurrence of that event.

(7)For the purposes of this section and sections 268 and 269—

(a)the scheme’s home State is the EEA State in which the scheme is constituted (within the meaning given by section 264);

(b)the competent authorities in the scheme’s home State are the authorities in that State who are responsible for the authorisation of collective investment schemes.

(8)“Scheme” means a scheme which is a recognised scheme by virtue of section 264.

(9)“Specified”, in relation to a direction, means specified in it.

268Procedure on giving directions under section 267 and varying them on Authority’s own initiative

(1)A direction under section 267 takes effect—

(a)immediately, if the notice given under subsection (3)(a) 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 it relates is no longer open to review.

(2)A direction may be expressed to take effect immediately (or on a specified date) only if the Authority, having regard to its reasons for exercising its power under section 267, considers that it is necessary for the direction to take effect immediately (or on that date).

(3)If the Authority proposes to give a direction under section 267, or gives such a direction with immediate effect, it must—

(a)give the operator of the scheme concerned written notice; and

(b)inform the competent authorities in the scheme’s home State of its proposal or (as the case may be) of the direction.

(4)The notice must—

(a)give details of the direction;

(b)inform the operator of when the direction takes effect;

(c)state the Authority’s reasons for giving the direction and for its determination as to when the direction takes effect;

(d)inform the operator that he may make representations to the Authority within such period as may be specified in it (whether or not he has referred the matter to the Tribunal); and

(e)inform him of his right to refer the matter to the Tribunal.

(5)The Authority may extend the period allowed under the notice for making representations.

(6)Subsection (7) applies if, having considered any representations made by the operator, the Authority decides—

(a)to give the direction in the way proposed, or

(b)if it has been given, not to revoke the direction.

(7)The Authority must—

(a)give the operator of the scheme concerned written notice; and

(b)inform the competent authorities in the scheme’s home State of the direction.

(8)Subsection (9) applies if, having considered any representations made by a person to whom the notice was given, the Authority decides—

(a)not to give the direction in the way proposed,

(b)to give the direction in a way other than that proposed, or

(c)to revoke a direction which has effect.

(9)The Authority must—

(a)give the operator of the scheme concerned written notice; and

(b)inform the competent authorities in the scheme’s home State of its decision.

(10)A notice given under subsection (7)(a) must inform the operator of his right to refer the matter to the Tribunal.

(11)A notice under subsection (9)(a) given as a result of subsection (8)(b) must comply with subsection (4).

(12)If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.

(13)This section applies to the variation of a direction on the Authority’s own initiative as it applies to the giving of a direction.

(14)For the purposes of subsection (1)(c), whether a matter is open to review is to be determined in accordance with section 391(8).

269Procedure on application for variation or revocation of direction

(1)If, on an application under subsection (4) or (5) of section 267, the Authority proposes—

(a)to vary a direction otherwise than in accordance with the application, or

(b)to refuse the application,

it must give the operator of the scheme concerned a warning notice.

(2)If, on such an application, the Authority decides—

(a)to vary a direction otherwise than in accordance with the application, or

(b)to refuse the application,

it must give the operator of the scheme concerned a decision notice.

(3)If the application is refused, the operator of the scheme may refer the matter to the Tribunal.

(4)If, on such an application, the Authority decides to grant the application it must give the operator of the scheme concerned written notice.

(5)If the Authority decides on its own initiative to revoke a direction given under section 267 it must give the operator of the scheme concerned written notice.

(6)The Authority must inform the competent authorities in the scheme’s home State of any notice given under this section.

Schemes authorised in designated countries or territories

270Schemes authorised in designated countries or territories

(1)A collective investment scheme which is not a recognised scheme by virtue of section 264 but is managed in, and authorised under the law of, a country or territory outside the United Kingdom is a recognised scheme if—

(a)that country or territory is designated for the purposes of this section by an order made by the Treasury;

(b)the scheme is of a class specified by the order;

(c)the operator of the scheme has given written notice to the Authority that he wishes it to be recognised; and

(d)either—

(i)the Authority, by written notice, has given its approval to the scheme’s being recognised; or

(ii)two months, beginning with the date on which notice was given under paragraph (c), have expired without the operator receiving a warning notice from the Authority under section 271.

(2)The Treasury may not make an order designating any country or territory for the purposes of this section unless satisfied—

(a)that the law and practice under which relevant collective investment schemes are authorised and supervised in that country or territory affords to investors in the United Kingdom protection at least equivalent to that provided for them by or under this Part in the case of comparable authorised schemes; and

(b)that adequate arrangements exist, or will exist, for co-operation between the authorities of the country or territory responsible for the authorisation and supervision of relevant collective investment schemes and the Authority.

(3)“Relevant collective investment schemes” means collective investment schemes of the class or classes to be specified by the order.

(4)“Comparable authorised schemes” means whichever of the following the Treasury consider to be the most appropriate, having regard to the class or classes of scheme to be specified by the order—

(a)authorised unit trust schemes;

(b)authorised open-ended investment companies;

(c)both such unit trust schemes and such companies.

(5)If the Treasury are considering whether to make an order designating a country or territory for the purposes of this section—

(a)the Treasury must ask the Authority for a report—

(i)on the law and practice of that country or territory in relation to the authorisation and supervision of relevant collective investment schemes,

(ii)on any existing or proposed arrangements for co-operation between it and the authorities responsible in that country or territory for the authorisation and supervision of relevant collective investment schemes,

having regard to the Treasury’s need to be satisfied as mentioned in subsection (2);

(b)the Authority must provide the Treasury with such a report; and

(c)the Treasury must have regard to it in deciding whether to make the order.

(6)The notice to be given by the operator under subsection (1)(c)—

(a)must contain the address of a place in the United Kingdom for the service on the operator of notices or other documents required or authorised to be served on him under this Act; and

(b)must contain or be accompanied by such information and documents as may be specified by the Authority.

271Procedure

(1)If the Authority proposes to refuse approval of a scheme’s being a recognised scheme by virtue of section 270, it must give the operator of the scheme a warning notice.

(2)To be valid the warning notice must be received by the operator before the end of two months beginning with the date on which notice was given under section 270(1)(c).

(3)If, having given a warning notice, the Authority decides to refuse approval—

(a)it must give the operator of the scheme a decision notice; and

(b)the operator may refer the matter to the Tribunal.

Individually recognised overseas schemes

272Individually recognised overseas schemes

(1)The Authority may, on the application of the operator of a collective investment scheme which—

(a)is managed in a country or territory outside the United Kingdom,

(b)does not satisfy the requirements prescribed for the purposes of section 264,

(c)is not managed in a country or territory designated for the purposes of section 270 or, if it is so managed, is of a class not specified by the designation order, and

(d)appears to the Authority to satisfy the requirements set out in the following provisions of this section,

make an order declaring the scheme to be a recognised scheme.

(2)Adequate protection must be afforded to participants in the scheme.

(3)The arrangements for the scheme’s constitution and management must be adequate.

(4)The powers and duties of the operator and, if the scheme has a trustee or depositary, of the trustee or depositary must be adequate.

(5)In deciding whether the matters mentioned in subsection (3) or (4) are adequate, the Authority must have regard to—

(a)any rule of law, and

(b)any matters which are, or could be, the subject of rules,

applicable in relation to comparable authorised schemes.

(6)“Comparable authorised schemes” means whichever of the following the Authority considers the most appropriate, having regard to the nature of scheme in respect of which the application is made—

(a)authorised unit trust schemes;

(b)authorised open-ended investment companies;

(c)both such unit trust schemes and such companies.

(7)The scheme must take the form of an open-ended investment company or (if it does not take that form) the operator must be a body corporate.

(8)The operator of the scheme must—

(a)if an authorised person, have permission to act as operator;

(b)if not an authorised person, be a fit and proper person to act as operator.

(9)The trustee or depositary (if any) of the scheme must—

(a)if an authorised person, have permission to act as trustee or depositary;

(b)if not an authorised person, be a fit and proper person to act as trustee or depositary.

(10)The operator and the trustee or depositary (if any) of the scheme must be able and willing to co-operate with the Authority by the sharing of information and in other ways.

(11)The name of the scheme must not be undesirable or misleading.

(12)The purposes of the scheme must be reasonably capable of being successfully carried into effect.

(13)The participants must be entitled to have their units redeemed in accordance with the scheme at a price related to the net value of the property to which the units relate and determined in accordance with the scheme.

(14)But a scheme is to be treated as complying with subsection (13) if it requires the operator to ensure that a participant is able to sell his units on an investment exchange at a price not significantly different from that mentioned in that subsection.

(15)Subsection (13) is not to be read as imposing a requirement that the participants must be entitled to have their units redeemed (or sold as mentioned in subsection (14)) immediately following a demand to that effect.

273Matters that may be taken into account

For the purposes of subsections (8)(b) and (9)(b) of section 272, the Authority may take into account any matter relating to—

(a)any person who is or will be employed by or associated with the operator, trustee or depositary in connection with the scheme;

(b)any director of the operator, trustee or depositary;

(c)any person exercising influence over the operator, trustee or depositary;

(d)any body corporate in the same group as the operator, trustee or depositary;

(e)any director of any such body corporate;

(f)any person exercising influence over any such body corporate.

274Applications for recognition of individual schemes

(1)An application under section 272 for an order declaring a scheme to be a recognised scheme must be made to the Authority by the operator of the scheme.

(2)The application—

(a)must be made in such manner as the Authority may direct;

(b)must contain the address of a place in the United Kingdom for the service on the operator of notices or other documents required or authorised to be served on him under this Act;

(c)must contain or be accompanied by such information as the Authority may reasonably require for the purpose of determining the application.

(3)At any time after receiving an application and before determining it, the Authority may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application.

(4)Different directions may be given, and different requirements imposed, in relation to different applications.

(5)The Authority 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 Authority may direct.

275Determination of applications

(1)An application under section 272 must be determined by the Authority before the end of the period of six months beginning with the date on which it receives the completed application.

(2)The Authority may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within twelve months beginning with the date on which it first receives the application.

(3)If the Authority makes an order under section 272(1), it must give written notice of the order to the applicant.

276Procedure when refusing an application

(1)If the Authority proposes to refuse an application made under section 272 it must give the applicant a warning notice.

(2)If the Authority decides to refuse the application—

(a)it must give the applicant a decision notice; and

(b)the applicant may refer the matter to the Tribunal.

277Alteration of schemes and changes of operator, trustee or depositary

(1)The operator of a scheme recognised by virtue of section 272 must give written notice to the Authority of any proposed alteration to the scheme.

(2)Effect is not to be given to any such proposal unless—

(a)the Authority, by written notice, has given its approval to the proposal; or

(b)one month, beginning with the date on which notice was given under subsection (1), has expired without the Authority having given written notice to the operator that it has decided to refuse approval.

(3)At least one month before any replacement of the operator, trustee or depositary of such a scheme, notice of the proposed replacement must be given to the Authority—

(a)by the operator, trustee or depositary (as the case may be); or

(b)by the person who is to replace him.

Schemes recognised under sections 270 and 272

278Rules as to scheme particulars

The Authority may make rules imposing duties or liabilities on the operator of a scheme recognised under section 270 or 272 for purposes corresponding to those for which rules may be made under section 248 in relation to authorised unit trust schemes.

279Revocation of recognition

The Authority may direct that a scheme is to cease to be recognised by virtue of section 270 or revoke an order under section 272 if it appears to the Authority—

(a)that the operator, trustee or depositary of the scheme has contravened a requirement imposed on him by or under this Act;

(b)that the operator, trustee or depositary of the scheme has, in purported compliance with any such requirement, knowingly or recklessly given the Authority information which is false or misleading in a material particular;

(c)in the case of an order under section 272, that one or more of the requirements for the making of the order are no longer satisfied; or

(d)that none of paragraphs (a) to (c) applies, but it is undesirable in the interests of the participants or potential participants that the scheme should continue to be recognised.

280Procedure

(1)If the Authority proposes to give a direction under section 279 or to make an order under that section revoking a recognition order, it must give a warning notice to the operator and (if any) the trustee or depositary of the scheme.

(2)If the Authority decides to give a direction or make an order under that section—

(a)it must without delay give a decision notice to the operator and (if any) the trustee or depositary of the scheme; and

(b)the operator or the trustee or depositary may refer the matter to the Tribunal.

281Directions

(1)In this section a “relevant recognised scheme” means a scheme recognised under section 270 or 272.

(2)If it appears to the Authority that—

(a)the operator, trustee or depositary of a relevant recognised scheme has contravened, or is likely to contravene, a requirement imposed on him by or under this Act,

(b)the operator, trustee or depositary of such a scheme has, in purported compliance with any such requirement, knowingly or recklessly given the Authority information which is false or misleading in a material particular,

(c)one or more of the requirements for the recognition of a scheme under section 272 are no longer satisfied, or

(d)none of paragraphs (a) to (c) applies, but the exercise of the power conferred by this section is desirable in order to protect the interests of participants or potential participants in a relevant recognised scheme who are in the United Kingdom,

it may direct that the scheme is not to be a recognised scheme for a specified period or until the occurrence of a specified event or until specified conditions are complied with.

282Procedure on giving directions under section 281 and varying them otherwise than as requested

(1)A direction takes effect—

(a)immediately, if the notice given under subsection (3) 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 it relates is no longer open to review.

(2)A direction may be expressed to take effect immediately (or on a specified date) only if the Authority, having regard to the ground on which it is exercising its power under section 281, considers that it is necessary for the direction to take effect immediately (or on that date).

(3)If the Authority proposes to give a direction under section 281, or gives such a direction with immediate effect, it must give separate written notice to the operator and (if any) the trustee or depositary of the scheme concerned.

(4)The notice must—

(a)give details of the direction;

(b)inform the person to whom it is given of when the direction takes effect;

(c)state the Authority’s reasons for giving the direction and for its determination as to when the direction takes effect;

(d)inform the person to whom it is given that he may make representations to the Authority within such period as may be specified in it (whether or not he has referred the matter to the Tribunal); and

(e)inform him of his right to refer the matter to the Tribunal.

(5)The Authority may extend the period allowed under the notice for making representations.

(6)If, having considered any representations made by a person to whom the notice was given, the Authority decides—

(a)to give the direction in the way proposed, or

(b)if it has been given, not to revoke the direction,

it must give separate written notice to the operator and (if any) the trustee or depositary of the scheme concerned.

(7)If, having considered any representations made by a person to whom the notice was given, the Authority decides—

(a)not to give the direction in the way proposed,

(b)to give the direction in a way other than that proposed, or

(c)to revoke a direction which has effect,

it must give separate written notice to the operator and (if any) the trustee or depositary of the scheme concerned.

(8)A notice given under subsection (6) must inform the person to whom it is given of his right to refer the matter to the Tribunal.

(9)A notice under subsection (7)(b) must comply with subsection (4).

(10)If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.

(11)This section applies to the variation of a direction on the Authority’s own initiative as it applies to the giving of a direction.

(12)For the purposes of subsection (1)(c), whether a matter is open to review is to be determined in accordance with section 391(8).

Facilities and information in UK

283Facilities and information in UK

(1)The Authority may make rules requiring operators of recognised schemes to maintain in the United Kingdom, or in such part or parts of it as may be specified, such facilities as the Authority thinks desirable in the interests of participants and as are specified in rules.

(2)The Authority may by notice in writing require the operator of any recognised scheme to include such explanatory information as is specified in the notice in any communication of his which—

(a)is a communication of an invitation or inducement of a kind mentioned in section 21(1); and

(b)names the scheme.

(3)In the case of a communication originating outside the United Kingdom, subsection (2) only applies if the communication is capable of having an effect in the United Kingdom.

Chapter VIInvestigations

284Power to investigate

(1)An investigating authority may appoint one or more competent persons to investigate on its behalf—

(a)the affairs of, or of the manager or trustee of, any authorised unit trust scheme,

(b)the affairs of, or of the operator, trustee or depositary of, any recognised scheme so far as relating to activities carried on in the United Kingdom, or

(c)the affairs of, or of the operator, trustee or depositary of, any other collective investment scheme except a body incorporated by virtue of regulations under section 262,

if it appears to the investigating authority that it is in the interests of the participants or potential participants to do so or that the matter is of public concern.

(2)A person appointed under subsection (1) to investigate the affairs of, or of the manager, trustee, operator or depositary of, any scheme (scheme “A”), may also, if he thinks it necessary for the purposes of that investigation, investigate—

(a)the affairs of, or of the manager, trustee, operator or depositary of, any other such scheme as is mentioned in subsection (1) whose manager, trustee, operator or depositary is the same person as the manager, trustee, operator or depositary of scheme A;

(b)the affairs of such other schemes and persons (including bodies incorporated by virtue of regulations under section 262 and the directors and depositaries of such bodies) as may be prescribed.

(3)If the person appointed to conduct an investigation under this section (“B”) considers that a person (“C”) is or may be able to give information which is relevant to the investigation, B may require C—

(a)to produce to B any documents in C’s possession or under his control which appear to B to be relevant to the investigation,

(b)to attend before B, and

(c)otherwise to give B all assistance in connection with the investigation which C is reasonably able to give,

and it is C’s duty to comply with that requirement.

(4)Subsections (5) to (9) of section 170 apply if an investigating authority appoints a person under this section to conduct an investigation on its behalf as they apply in the case mentioned in subsection (1) of that section.

(5)Section 174 applies to a statement made by a person in compliance with a requirement imposed under this section as it applies to a statement mentioned in that section.

(6)Subsections (2) to (4) and (6) of section 175 and section 177 have effect as if this section were contained in Part XI.

(7)Subsections (1) to (9) of section 176 apply in relation to a person appointed under subsection (1) as if—

(a)references to an investigator were references to a person so appointed;

(b)references to an information requirement were references to a requirement imposed under section 175 or under subsection (3) by a person so appointed;

(c)the premises mentioned in subsection (3)(a) were the premises of a person whose affairs are the subject of an investigation under this section or of an appointed representative of such a person.

(8)No person may be required under this section to disclose information or produce a document in respect of which he owes an obligation of confidence by virtue of carrying on the business of banking unless subsection (9) or (10) applies.

(9)This subsection applies if—