Financial Services and Markets Act 2000 Explanatory Notes

  • Explanatory Notes Table of contents
  1. Introduction

  2. Summary

  3. Background

    1. Financial Services Overview

    2. Regulatory Framework

    3. Consultation and scrutiny

  4. Interpretation

    1. Notices

    2. GLOSSARY OF TERMS USED IN THE EXPLANATORY NOTES

  5. The Act

  6. Commentary on Sections

    1. Part I: the Regulator

      1. Section 1: The Financial Services Authority

      2. Section 2: The Authority’s general duties

      3. Section 5: The protection of consumers

      4. Section 6: The reduction of financial crime

      5. Section 7: Duty of Authority to follow principles of good governance

      6. Section 8: The Authority’s general duty to consult

      7. Section 11: Duty to consider representations by the Panels

      8. Section 12: Reviews

      9. Section 13: Right to obtain documents and information

      10. Section 14: Cases in which the Treasury may arrange independent inquiries

      11. Section 15: Power to appoint person to hold an inquiry

      12. Section 16: Powers of appointed person and procedure

      13. Section 17: Conclusion of inquiry

      14. Section 18: Obstruction and contempt

    2. Part Ii: Regulated and Prohibited Activities

      1. Section 19: The general prohibition

      2. Section 20: Authorised persons acting without permission

      3. Section 21: Restrictions on financial promotion

      4. Section 22: The classes of activity and categories of investment

      5. Section 23: Contravention of the general prohibition

      6. Section 24: False claims to be authorised or exempt

      7. Section 25: Contravention of section 21

      8. Section 26: Agreements made by unauthorised persons

      9. Section 27: Agreements made through unauthorised persons

      10. Section 28: Agreements made unenforceable by section 26 or 27

      11. Section 29: Accepting deposits in breach of the general prohibition

      12. Section 30: Enforceability of agreements resulting from unlawful communications

    3. Part Iii: Authorisation and Exemption

      1. Section 32: Partnerships and unincorporated associations

      2. Section 33: Withdrawal of authorisation by the Authority

      3. Section 34: firms

      4. Section 35: Treaty firms

      5. Section 36: Persons authorised as a result of paragraph 1(4) of Schedule 5

      6. Section 37: Exercise of rights by UK firms

      7. Section 38: Exemption orders

      8. Section 39: Exemption of appointed representatives

    4. Part Iv: Permission to Carry on Regulated Activities

      1. Section 40: Application for permission

      2. Section 41: The threshold conditions

      3. Section 42: Giving permission

      4. Section 43: Imposition of requirements

      5. Section 44: Variation at request of authorised person

      6. Section 45: Variation on the Authority’s own initiative

      7. Section 46: Variation of permission on acquisition of control

      8. Section 47: Exercise of power in support of overseas regulator

      9. Section 48: Prohibitions and restrictions

      10. Section 49: Persons connected with an applicant

      11. Section 50: Authority’s duty to consider other permissions

      12. Section 51: Applications under this Part

      13. Section 52: Determination of applications

      14. Section 53: Exercise of own initiative power: procedure

      15. Section 54: Cancellation of Part IV permission: procedure

      16. Section 55: Right to refer matters to the Tribunal

    5. Part V: Performance of Regulated Activities

      1. Section 56: Prohibition orders

      2. Section 59: Approval for particular arrangements

      3. Section 60: Applications for approval

      4. Section 61: Determination of applications

      5. Section 63: Withdrawal of approval

      6. Section 64: Conduct: statements and code

      7. Section 65: Statements and codes: procedure

      8. Section 66: Disciplinary powers

      9. Section 69: Statement of policy

      10. Section 70: Statements of policy: procedure

      11. Section 71: Actions for damages

    6. Part Vi: Official Listing

      1. Section 72: The

      2. Section 73: General duty of the

      3. Section 74: The official list

      4. Section 75: Applications for listing

      5. Section 77: Discontinuance and suspension of listing

      6. Section 78: Discontinuance and suspension: procedure

      7. Section 79: Listing particulars and other documents

      8. Section 80: General duty of disclosure in listing particulars

      9. Section 81: Supplementary listing particulars

      10. Section 82: Exemptions from disclosure

      11. Section 83: Registration of listing particulars

      12. Section 84: Prospectuses

      13. Section 85: Publication of prospectuses

      14. Section 87: Approval of prospectus where no application for listing

      15. Section 88: Sponsors

      16. Section 89:  Public censure of sponsor

      17. Section 90: Compensation for false or misleading particulars

      18. Section 91: Penalties for breach of listing rules

      19. Section 95: Competition scrutiny

      20. Section 96: Obligations of issuers of listed securities

      21. Section 97:  Appointment by of persons to carry out investigations

      22. Section 98: Advertisements in connection with listing applications

      23. Section 100: Penalties

      24. Section 102: Exemption from liability in damages

    7. Part Vii: Control of Business Transfers

      1. Section 104: Control of business transfers

      2. Section 105: Insurance business transfer schemes

      3. Section 106: Banking business transfer schemes

      4. Section 107: Application for order sanctioning transfer scheme

      5. Section 108: Requirements on applicants

      6. Section 109: Scheme reports

      7. Section 110: Right to participate in proceedings

      8. Section 107: Sanction of the court for business transfer schemes

      9. Section 112: Effect of order sanctioning business transfer scheme

      10. Section 113:  Appointment of actuary in relation to reduction of benefits

      11. Section 114: Rights of certain policyholders

      12. Section 115:  Certificate for the purpose of insurance business transfers overseas

      13. Section 116: Effect of insurance business transfers authorised in other States

      14. Section 117:  Power to modify this Part

    8. Part Viii: Penalties for Market Abuse

      1. Section 118: Market abuse

      2. Section 119: The code

      3. Section 120: Provisions included in the Authority’s code by reference to the City Code

      4. Section 122: Effect of the code

      5. Section 123: Power to impose penalties in cases of market abuse

      6. Section 124: Statement of policy

      7. Section 128: Suspension of investigations

      8. Section 129: Power of court to impose penalty in cases of market abuse

      9. Section 130: Guidance

    9. Part Ix: Hearings and Appeals

      1. Section 132: The Financial Services and Markets Tribunal

      2. Section 133: Proceedings: general provision

      3. Section 134: Legal assistance scheme

      4. Section 135: Provisions of the legal assistance scheme

      5. Section 136: Funding of the legal assistance scheme

      6. Section 137: Appeal on a point of law

    10. Part X: Rules and Guidance

      1. Chapter I: Rule-Making Powers

        1. Section 138: General rule-making power

        2. Section 139: Miscellaneous ancillary matters

        3. Section 141: Insurance business rules

        4. Section 142: Insurance business: regulations supplementing Authority’s rules

        5. Section 143: Endorsement of codes

        6. Section 144: Price stabilising rules

        7. Section 145: Financial promotion rules

        8. Section 147: Control of information rules

        9. Section 148: Modification or waiver of rules

        10. Section 149: Evidential provisions

        11. Section 150: Actions for damages

        12. Section 151: Limits on effect of contravening rules

        13. Section 152: Notification of rules to the Treasury

        14. Section 153: Rule-making instruments

        15. Section 155: Consultation

        16. Section 156: General supplementary powers

      2. Chapter II: Guidance

        1. Section 157: Guidance

      3. Chapter III: Competition Scrutiny

        1. Section 160: Reports by the Director General of Fair Trading

        2. Section 161: Power of Director to request information

        3. Section 162: Consideration by the Competition Commission

        4. Section 163: Role of the Treasury

        5. Section 164: The Competition Act 1998

    11. Part Xi: Information Gathering & Investigations

      1. Section 165: Authority’s power to require information

      2. Section 166: Reports by skilled persons

      3. Section 167: Appointment of persons to carry out general investigations

      4. Section 168: Appointment of persons to carry out investigations in particular cases

      5. Section 169: Investigations in support of overseas regulator

      6. Section 170: Investigations: general

      7. Section 171: Powers of persons appointed under section 167

      8. Section 172: Additional power of persons appointed under section 168(1) or (4)

      9. Section 173: Powers of persons appointed as a result of section 168(2)

      10. Section 174: Admissibility of statements made to investigators

      11. Section 175: Information and documents: supplemental provisions

      12. Section 176: Entry of premises under warrant

      13. Section 177: Offences

    12. Part Xii: Control Over Authorised Persons

      1. Section 178: Obligation to notify the Authority

      2. Section 179: Acquiring control

      3. Section 180: Increasing control

      4. Section 181: Reducing control

      5. Section 182: Notification

      6. Section 183: Duty of Authority in relation to notice of control

      7. Section 184: Approval of acquisition of control

      8. Section 185: Conditions attached to approval

      9. Section 186: Objection to acquisition of control

      10. Section 187: Objection to existing control

      11. Section 188: Notices of objection under section 187: procedure

      12. Section 189: Improperly acquired shares

      13. Section 190: Notification

      14. Section 191: Offences under this Part

      15. Section 192: Power to change definitions of control

    13. Part Xiii: Incoming Firms: Intervention by Authority

      1. Section 194: General grounds on which power of intervention is exercisable

      2. Section 195: Exercise of power in support of overseas regulator

      3. Section 196: The power of intervention

      4. Section 197: Procedure on exercise of power of intervention

      5. Section 198: Power to apply to the court for injunction in respect of certain overseas insurance companies

      6. Section 199: Additional procedure for firms in certain cases

      7. Section 200: Rescission and variation of requirements

      8. Section 201: Effect of certain requirements on other persons

      9. Section 202: Contravention of a requirement imposed under this Part

      10. Section 203: Powers to prohibit the carrying on of Consumer Credit Act business

    14. Part Xiv: Disciplinary Measures

      1. Section 205: Public censure

      2. Section 206: Financial penalties

      3. Section 207: Proposal to take disciplinary measures

      4. Section 208: Decision notice

      5. Section 209: Publication

      6. Section 210: Statements of policy

      7. Section 211: Statements of policy: procedure

    15. Part Xv: the Financial Services Compensation Scheme

      1. Section 212: The scheme manager

      2. Section 213: The compensation scheme

      3. Section 214: General

      4. Section 215: Rights of the scheme in relevant person’s insolvency

      5. Section 216: Continuity of long-term insurance policies

      6. Section 217: Insurers in financial difficulties

      7. Section 219: Scheme manager’s power to require information

      8. Section 220: Scheme manager’s power to inspect information held by liquidator

      9. Section 221: Powers of court where information required

      10. Section 222: Statutory immunity

      11. Section 223: Management expenses

    16. Part Xvi: the Ombudsman Scheme

      1. Section 225: The scheme and the scheme operator

      2. Section 226: Compulsory jurisdiction

      3. Section 227: Voluntary jurisdiction

      4. Section 228: Determination under the compulsory jurisdiction

      5. Section 229: Awards

      6. Section 230: Costs

      7. Section 231: Ombudsman’s power to require information

      8. Section 232: Powers of court where information required

      9. Section 233: Data protection

      10. Section 234: Industry funding

    17. Part Xvii: Collective Investment Schemes

      1. Chapter I: Interpretation

        1. Section 236: Open-ended investment companies

      2. Chapter II: Restrictions on promotion

        1. Section 238: Restrictions on promotion

        2. Section 239: Single property schemes

        3. Section 240: Restriction on approval of promotion

        4. Section 241: Actions for damages

      3. Chapter III: Authorised unit trust schemes

        1. Section 242: Applications for authorisation of unit trust schemes

        2. Section 243: Authorisation orders

        3. Section 244: Determination of applications

        4. Section 245: Procedure when refusing an application

        5. Section 246: Certificates

        6. Section 247: Trust scheme rules

        7. Section 248: Scheme particulars rules

        8. Section 249: Disqualification of auditor for breach of trust scheme rules

        9. Section 250: Modification or waiver of rules

        10. Section 251: Alteration of schemes and changes of manager or trustee

        11. Section 252: Procedure when refusing approval of change of manager or trustee

        12. Section 253: Avoidance of exclusion clauses

        13. Section 254: Revocation of authorisation order otherwise than by consent

        14. Section 255: Procedure

        15. Section 256: Requests for revocation of authorisation order

        16. Section 257: Directions

        17. Section 258: Applications to the court

        18. Section 259: Procedure in giving directions under section 257 and varying them on Authority’s own initiative

        19. Section 260: Procedure: refusal to revoke or vary direction

        20. Section 261: Procedure: revocation of direction and grant of request for variation

      4. Chapter IV: Open-ended investment companies

        1. Section 262: Open-ended investment companies

        2. Section 263: Amendment of section 716 Companies Act 1985

      5. Chapter V: Recognised overseas schemes

        1. Section 264: Schemes constituted in other States

        2. Section 265: Representations and references to the Tribunal

        3. Section 266: Disapplication of rules

        4. Section 267: Power of authority to suspend promotion of scheme

        5. Section 268: Procedure in giving directions under section 267 and varying them on Authority’s own initiative

        6. Section 269: Procedure on application for variation or revocation of direction

        7. Section 270: Schemes authorised in designated countries or territories

        8. Section 271: Procedure

        9. Section 272: Individually recognised overseas schemes

        10. Section 273: Matters that may be taken into account

        11. Section 274: Applications for recognition of individual schemes

        12. Section 275: Determination of applications

        13. Section 276: Procedure when refusing an application

        14. Section 277: Alteration of schemes and changes of operator, trustee or depository

        15. Section 278: Rules as to scheme particulars

        16. Section 279: Revocation of recognition

        17. Section 280: Procedure

        18. Section 281: Directions

        19. Section 282: Procedure on giving directions under section 281 and varying them otherwise than as requested

        20. Section 283: Facilities and information in the UK

      6. Chapter VI: Investigations

        1. Section 284: Power to investigate

    18. Part Xviii: Recognised Investment Exchanges and Clearing Houses

      1. Chapter I: Exemption

        1. Section 285: Exemption for recognised investment exchanges and clearing houses

        2. Section 286: Qualification for recognition

        3. Section 287: Application by an investment exchange

        4. Section 288: Application by a clearing house

        5. Section 289: Applications: supplementary

        6. Section 290: Recognition orders

        7. Section 291: Liability in relation to recognised body’s regulatory functions

        8. Section 292: Overseas investment exchanges and overseas clearing houses

        9. Section 293: Notification requirements

        10. Section 294: Modification or waiver of rules

        11. Section 295: Notification: overseas investment exchanges and overseas clearing houses

        12. Section 296: Authority’s power to give directions

        13. Section 297: Revoking recognition

        14. Section 298: Directions and revocation: procedure

        15. Section 299: Complaints about recognised bodies

        16. Section 300: Extension of functions of Tribunal

        17. Section 301: Supervision of certain contracts

      2. Chapter II: Competition Scrutiny

        1. Section 302: Interpretation

        2. Section 303: Initial report by Director

        3. Section 304: Further reports by Director

        4. Section 305: Investigations by Director

        5. Section  306: Consideration by Competition Commission

        6. Section 307: Recognition orders: role of the Treasury

        7. Section 308: Directions by the Treasury

        8. Section 309: Statements by the Treasury

      3. Chapter III: Exclusion from the Competition Act 1998

        1. Section 311: The Chapter I prohibition

        2. Section 312: The Chapter II prohibition

    19. Part Xix: Lloyd’s

      1. Section 314: Authority’s general duty

      2. Section 315: The Society: authorisation and permission

      3. Section 316: Direction by Authority

      4. Section 317: The core provisions

      5. Section 318: Exercise of powers through the Council

      6. Section 319: Consultation

      7. Section 320: Former underwriting members

      8. Section 321: Requirements imposed under 320

      9. Section 322: Rules applicable to former underwriting members

      10. Section 323: Transfer schemes

    20. Part Xx: Provision of Financial Services by Members of the Professions

      1. Section 325: Authority’s general duty

      2. Section 326: Designation of professional bodies

      3. Section 327: Exemption from the general prohibition

      4. Section 328: Directions in relation to the general prohibition

      5. Section 329: Orders in relation to the general prohibition

      6. Section 330: Consultation

      7. Section 331: Procedure on making or varying orders under section 329

      8. Section 332: Rules in relation to persons to whom the general prohibition does not apply

      9. Section 333: False claims to be a person to whom the general prohibition does not apply

    21. Part Xxi: Mutual Societies

    22. Part Xxii: Auditors and Actuaries

      1. Section 340: Appointment

      2. Section 342: Information given by auditor or actuary to the Authority

      3. Section 343: Information given by auditor or actuary to the Authority: persons with close links

      4. Section 344: Duty of auditor or actuary resigning to give notice

      5. Section 345: Disqualification

      6. Section 346: Provision of false or misleading information to auditor or actuary

    23. Part Xxiii: Public Record, Disclosure of Information and Co-Operation

      1. Section 347: The record of authorised persons

      2. Section 348: Restrictions on disclosure of confidential information by Authority

      3. Section 349: Exceptions from section 348

      4. Section 350: Disclosure of information by the Inland Revenue

      5. Section 350: Competition information

      6. Section 352: Offences

      7. Section 353: Removal of other restrictions on disclosure

      8. Section 354: Authority’s duty to cooperate with others

    24. Part Xxiv: Insolvency

      1. Voluntary arrangements

        1. Section 356: Authority’s powers to participate in proceedings: company voluntary arrangements

        2. Section 357: Authority’s powers to participate in proceedings: individual voluntary arrangements

        3. Section 358: Authority’s powers to participate in proceedings: trust deeds for creditors in Scotland

      2. Administration orders

        1. Section 359: Petitions

        2. Section 360: Insurers

        3. Section 362: Authority’s powers to participate in proceedings

      3. Receivership

        1. Section 363: Authority’s powers to participate in proceedings

      4. Voluntary winding up

        1. Section 365: Authority’s powers to participate in proceedings

        2. Section 366: Insurers carrying on long-term business

      5. Winding up by the court

        1. Section 367: Winding-up petitions

        2. Section 368: Winding-up petitions: and Treaty firms

        3. Section 371: Authority’s powers to participate in proceedings

      6. Bankruptcy

        1. Section 372: Petitions

        2. Section 374: Authority’s powers to participate in proceedings

      7. Provisions against debt avoidance

        1. Section 375: Authority’s right to apply for an order

      8. Supplemental provisions concerning insurers

        1. Section 376: Continuation of contracts of long-term insurance where insurer in liquidation

        2. Section 377: Reducing the value of contracts instead of winding up

        3. Section 378: Treatment of assets on winding up

        4. Section 379: Winding-up rules

    25. Part Xxv: Injunctions and Restitution

      1. Section 380: Injunctions

      2. Section 381: Injunctions in cases of market abuse

      3. Section 382: Restitution orders

      4. Section 383: Restitution orders in cases of market abuse

      5. Section 384: Power of Authority to require restitution

      6. Section 385: Warning notices

      7. Section 386: Decision notices

    26. Part Xxvi: Notices

      1. Section 387: Warning notices

      2. Section 388: Decision notices

      3. Section 389: Notices of discontinuance

      4. Section 390: Final notices

      5. Section 391: Publication

      6. Section 392: Application of sections 393 and 394

      7. Section 393: Third party rights

      8. Section 394: Access to Authority material

      9. Section 395: The Authority’s procedures

      10. Section 396: Statements under section 395

    27. Part Xxvii: Offences

      1. Section 397: Misleading statements and practices

      2. Section 398: Misleading the Authority: residual cases

      3. Section 399: Misleading the Director General of Fair Trading

      4. Section 400: Offences by bodies corporate

      5. Section 401: Proceedings for offences

      6. Section 402: Power of the Authority to institute proceedings for certain other offences

      7. Section 403: Jurisdiction and procedure in respect of certain offences

    28. Part Xxviii: Miscellaneous

      1. Section 404: Schemes for reviewing past business

        1. Reciprocity powers

      2. Section 405: Directions

      3. Section 407: Consequences of a direction under section 405

      4. Section 408: EFTA firms

      5. Section 409: Gibraltar

      6. Section 410: International obligations

      7. Section 411: Tax treatment of levies and repayments

      8. Section 412: Gaming contracts

      9. Section 413: Protected items

      10. Section 414: Service of notices

      11. Section 415: Jurisdiction in civil proceedings

      12. Section 416: Provisions relating to industrial assurance and certain other enactments

    29. Part Xxix: Interpretation

      1. Section 418: Carrying on regulated activities in the United Kingdom

      2. Section 419: Carrying on regulated activities by way of business

      3. Section 420: Parent and subsidiary undertaking

    30. Part Xxx: Supplemental

      1. Section 426: Consequential and supplementary provision

      2. Section 427: Transitional provisions

      3. Section 429: Parliamentary control of statutory instruments

    31. Schedule 1: the Financial Services Authority

      1. Part I: General

        1. Paragraph 2: Constitution

        2. Paragraph 3: Non-executive members of the governing body

        3. Paragraph 4: Functions of the non-executive committee

        4. Paragraph 5: Arrangements for discharging functions

        5. Paragraph 6: Monitoring and enforcement

        6. Paragraph 7: Arrangements for the investigation of complaints

        7. Paragraph 8: Investigation of complaints

        8. Paragraph 9: Records

        9. Paragraph 10: Annual report

        10. Paragraph 11: Annual public meeting

      2. Part II: Status

        1. Paragraphs 14 and 15: Exemption from requirement of “limited” in Authority’s name

      3. Part III: Fees

        1. Paragraph 16: Penalties

        2. Paragraph 17: Fees

        3. Paragraph 18: Services for which fees may not be charged

      4. Part IV: Miscellaneous

        1. Paragraph 19: Exemption from liability in damages

        2. Paragraph 20: Disqualification for membership of House of Commons

    32. Schedule  2: Regulated Activities

    33. Schedule 3: Eea Passport Rights

    34. Schedule 4: Treaty Rights

    35. Schedule 5: Persons Concerned in Collective Investment Schemes

    36. Schedule 6: Threshold Conditions

      1. Part I: Part IV Permission

        1. Paragraph 1: Legal Status

        2. Paragraph 2: Location of offices

        3. Paragraph 3: Close links

        4. Paragraph 4: Adequate resources

        5. Paragraph 5: Suitability

      2. Part II: Authorisation

      3. Part III: Additional conditions

    37. Schedule 7: the Authority as Competent Authority for Part Vi

      1. Paragraph 1: General

      2. Paragraph 2: The Authority's general functions

      3. Paragraph 3: Duty to consult

      4. Paragraph 4: Rules

      5. Paragraph 5: Statements of policy

      6. Paragraphs 6 and 7: Penalties and fees

      7. Paragraph 8: Exemption from liability in damages

    38. Schedule 8: Transfer of Functions under Part Vi

    39. Schedule 9: Non-Listing Prospectuses

    40. Schedule 10: Compensation: Exemptions

    41. Schedule 11: Offers of Securities

    42. Schedule 12: Transfer Schemes: Certificates

    43. Schedule 13: the Financial Services and Markets Tribunal

      1. Paragraph 2: President

      2. Paragraph 3: Panels

      3. Paragraph 4: Terms of office

      4. Paragraphs 8 to 10: Sittings and procedure

      5. Paragraph 11: Evidence

      6. Paragraph 12: Decisions of Tribunal

      7. Paragraph 13: Costs

    44. Schedule 14: Role of the Competition Commission

      1. Paragraph 1: Provision of information by Treasury

      2. Paragraph 2: Consideration of matters arising on a report

      3. Paragraph 3: Applied provisions

      4. Paragraph 4: Publication of reports

    45. Schedule 15: Information and Investigations: Connected Persons

    46. Schedule 16: Prohibitions and Restrictions Imposed by the Director General of Fair Trading

    47. Schedule 17: the Ombudsman Scheme

      1. Paragraph 3: Constitution

      2. Paragraph 6: Status

      3. Paragraph 7: Annual Report

      4. Paragraph 8: Guidance

      5. Paragraph 9: Budget

      6. Paragraph 10: Exemption from liability in damages

      7. Paragraph 11: Privilege

      8. Paragraph 13: Authority’s procedural rules

      9. Paragraph 14: The scheme operator’s rules

      10. Paragraph 18: Terms of reference to the scheme

      11. Paragraph 19: Delegation by and to other schemes

    48. Schedule 20: Transitional Provisions and Savings

  7. Commencement

  8. Hansard References

  • Explanatory Notes Table of contents

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