Schedule 1: the Financial Services Authority
749.Part I of this Schedule sets out requirements for the Authority’s constitution and imposes certain obligations on it. Part II deals with the status of the Authority. Parts III and IV concern the Authority’s powers to raise fees and impose penalties and certain other matters. Part IV gives the Authority and those who work for it limited immunity from suit.
Part I: General
Paragraph 2: Constitution
750.This paragraph requires the Authority to have a chairman and a governing body which includes the chairman. Both the chairman and the members of the governing body must be appointed and be liable to removal from office by the Treasury.
751.Sub-paragraph (4) provides for the acts of the Authority still to be valid irrespective of a vacancy in the office of chairman or any defect in an appointment to the governing body. This is to prevent the Authority’s rules, and any action it takes in pursuit of its functions, being rendered invalid purely as a result of such a vacancy or defect.
Paragraph 3: Non-executive members of the governing body
752.This paragraph provides that the Authority’s governing body must include a majority of non-executive members and requires there to be a committee of the non-executive members of the governing body, the chairman of which is to be appointed by the Treasury.
Paragraph 4: Functions of the non-executive committee
753.The functions of the non-executive members are not restricted by the non-executive committee. The non-executive committee has three specified functions. These are:
keeping under review the efficiency and economy with which the Authority uses its resources;
keeping under review its internal financial controls; and
determining the remuneration of the chairman and the executive members of the governing body.
754.The committee’s function of keeping the Authority’s economic and efficient use of its resources under review must be undertaken by the whole committee. However, the function of reviewing internal financial controls and determining the remuneration of the chairman and executive members of the governing body may be performed by a sub-committee.
Paragraph 5: Arrangements for discharging functions
755.This paragraph allows the Authority’s functions, with the exception of its legislative functions, to be delegated below the level of the governing body. The legislative functions are rule-making, giving general guidance, issuing statements, issuing codes, and giving directions.
Paragraph 6: Monitoring and enforcement
756.This paragraph requires the Authority to maintain arrangements for monitoring compliance with, and enforcing requirements imposed by or under, the Act. The Authority may arrange for monitoring, but not enforcement, to be delegated to another body or person which it believes is competent, which might include, for example, a professional body. If it does so, the Authority remains responsible for ensuring that proper monitoring arrangements are in place.
Paragraph 7: Arrangements for the investigation of complaints
757.The Authority is required to put in place a scheme, the “complaints scheme”, for the prompt, independent investigation of complaints made against it. These might typically be complaints about maladministraton by the Authority.
758.Sub-paragraphs (1), (2) and (3) require the Authority to establish a complaints scheme and appoint an independent investigator, whose appointment and removal will be subject to the approval of the Treasury.
759.Sub-paragraph (4) requires the investigator be appointed on terms and conditions reasonably designed to ensure his independence from the Authority and to ensure that complaints will be investigated under the scheme without favouring the Authority.
760.Sub-paragraphs (5) to (9) and (14) provide for the Authority to consult on its proposals for the complaints scheme.
761.Sub-paragraph (10) to (13) provide that the Authority is required to publish details of the complaints scheme and the powers of the independent investigator. The Authority may charge a reasonable fee for providing a person with a copy of details published under this paragraph.
Paragraph 8: Investigation of complaints
762.This paragraph is concerned with the operation of the complaints scheme. The Authority may decide not to investigate a complaint in accordance with the scheme where it considers that the complaint would more appropriately be dealt with in another way, for example by reference to the Tribunal.
763.Under sub-paragraph (2), the Authority is required to ensure that the independent investigator has the means at his disposal to conduct a full investigation of complaints referred to him, and the investigator can publish his report if he considers that the matter ought to be brought to the attention of the public. The investigator may, under sub-paragraphs (3) and (4), choose to investigate complaints in accordance with the scheme which the Authority has, itself, declined to pursue. If a report is critical of the Authority, sub-paragraphs (6) and (7) require the Authority to inform the investigator and the complainant of the steps it proposes to take in response, and the investigator may require the Authority to publish all or part of that response. Sub-paragraph (5) requires that the scheme allows the investigator to recommend that the Authority makes a compensatory payment to the complainant or remedies the matter, or both. Sub-paragraph (9) prevents an officer or employee of the Authority from investigating a complaint on the investigator’s behalf.
Paragraph 9: Records
764.The Authority must have satisfactory arrangements for recording its decisions and for the safe-keeping of those records which it considers should be preserved.
Paragraph 10: Annual report
765.This requires the Authority to report at least once a year to the Treasury on the discharge of its functions and, in particular, the extent to which the statutory objectives have been met and its regulatory principles under section 2(3) have been taken into account and such other matters as directed by the Treasury. It also requires the Treasury to lay the report before Parliament.
766.Sub-paragraph (2) requires that the report of the Authority must be accompanied by a report by the non-executive members of the governing body and allows the Treasury to direct that any other reports or information, including material prepared by third parties such as an auditor’s report, also accompany it.
767.Sub-paragraphs (4) to (6) allow the Treasury to direct the Authority to comply with provisions of the Companies Act which would otherwise not apply to it dealing with accounts and their audit. The direction may modify provisions under that Act in their application to the Authority. This is to ensure that the Authority is required to prepare audited accounts which are open to inspection irrespective of any exemptions which are made under that Act which would otherwise apply to the Authority.
Paragraph 11: Annual public meeting
768.The Authority must hold an annual public meeting to consider the most recent report of the Authority, within three months of its publication. The meeting should allow for a general discussion of the contents of the annual report and give those attending an opportunity to put questions to the Authority on the discharge of its functions. Paragraph 12 requires the Authority to publish a report of the proceedings of the meeting.
Part II: Status
Paragraphs 14 and 15: Exemption from requirement of “limited” in Authority’s name
769.The Authority is a company limited by guarantee. These paragraphs exempt the Authority from having to include “limited” in its name, as would normally be required under the Companies Act. They also provide for the Secretary of State to remove that exemption if it is inappropriate for it to continue.
Part III: Fees
Paragraph 16: Penalties
770.This paragraph provides that in determining its policy with regard to the level of penalties to impose under powers in the Act, the Authority may take no account of its expenses or anticipated expenses. It clarifies that there is to be no link or incentive to fund the Authority by levying penalties on the regulated community.
771.Sub-paragraph (2) requires the Authority to operate a scheme to ensure that penalties paid to the Authority are to be applied for the benefit of authorised persons. The Authority is required to consult on these arrangements.
Paragraph 17: Fees
772.This provides for a rule-making power for the Authority to raise fees for what it does in the discharge of its functions under the Act. It may use the fees to meet its expenses, to repay borrowing incurred in preparing for the assumption of functions under the Act and by virtue of the Bank of England Act 1998 and to maintain adequate reserves.
773.The Authority may not take into account any penalties which it has received, or expects to receive, in setting the fees under the Act.
Paragraph 18: Services for which fees may not be charged
774.Fees may not be charged when a person gives notice of their intention to exercise passporting rights under Schedule 3 or to persons approved under the employed persons regime in Part V.
Part IV: Miscellaneous
Paragraph 19: Exemption from liability in damages
775.This paragraph provides immunity for the Authority and its staff from actions for damages except where they act in bad faith or where damages are sought under the Human Rights Act 1998. Similar immunity is granted to the independent investigator appointed under paragraph 7.
Paragraph 20: Disqualification for membership of House of Commons
776.Serving members of the Authority’s board are disqualified from membership of the House of Commons. Paragraph 19 makes similar provision in respect of the Northern Ireland Assembly. Provision in respect of the Scottish Parliament and the Welsh Assembly are made respectively in the Scotland Act 1998 and the Government of Wales Act 1998.
