Powers to require information
Section 18: Information relating to financial stability
198.This section inserts new sections 165A-165C and 169A into FSMA providing the FSA with new powers to require a person to provide specified information.
New section 165A: Authority’s power to require information: financial stability
199.Subsection (1) provides that the FSA may, by giving written notice, require that a person provides the FSA with information or documents described in the notice.
200.Subsection (2) sets out the categories of people who may be required to provide information or documents under subsection (1). They include the owners or managers of investment funds and any persons connected to them. Section 165A(2)(d) confers on the Treasury a power to prescribe further categories of persons in respect of which the power under section 165A(1) may be exercised.
201.Subsection (3) sets out the test which will enable the FSA to require information: the FSA must consider that the information or documents in question are or might be, relevant to the stability of one or more aspects of the financial system.
202.Subsection (4) provides an additional test where a requirement is being imposed on a service provider or a person who is connected with a service provider. In this case, no requirement may be imposed unless the FSA considers that a failure by the provider to provide all or part of the services is likely to pose a serious threat to the stability of the financial system.
203.Subsection (5) gives the FSA power to determine the place at which, and the time within which, the information must be provided. The FSA must allow a reasonable period for the provision of the information.
204.Subsection (6) gives the FSA power to determine the form in which information must be provided to them.
205.Subsection (7) gives the FSA power to require any information provided to be verified or authenticated, by, for example, a firm’s auditors.
206.Subsection (8) and (9) defines “relevant investment fund” for the purposes of this section, and sets out the other definitions used.
207.Subsection (10) defines “connected person” for the purposes of this section. .
New section 165B: Safeguards etc in relation to exercise of power under section 165A
208.This section sets out the procedural safeguards which will apply to the exercise of the power in new section 165A. Under subsection (1) the FSA must give a person on whom it proposes to impose a requirement written notice in advance.
209.Under subsection (2) the written notice must give the FSA’s reasons for proposing to impose the requirement; and specify a reasonable timescale within which the person may make representations to the FSA. Once this period has expired, the FSA must, under subsection (3) decide within a reasonable period whether the requirement should be imposed.
210.Subsection (4) provides that subsections (1), (2) and (3) do not apply where the FSA is satisfied that it is necessary for the information to be provided urgently.
211.Subsection (5) requires the FSA to give its reasons when it imposes a requirement under this section.
212.Subsection (6) requires the FSA to prepare a statement of its policy with respect to the exercise of the power conferred by section 165A. Under subsections (7) and (8) this statement requires the approval of the Treasury and must be published. Under subsection (9), this power may not be exercised before the statement has been approved and published.
New section 165C: Orders under section 165A(2)(d)
213.Section 165C sets out the conditions under which the Treasury may exercise the power given in section 165A(2)(d) to add a further category of persons who may be required to provide information under section 165A, and the procedure to be followed. Under subsection (1) the Treasury may only make such an order if it considers that the activities carried on by the prescribed person or the failure to carry on those activities (or any part of them), might pose a serious threat to the stability of the financial system.
214.Subsection (2) provides the general rule that an order made under section 165A(2)(d) will be subject to the normal affirmative resolution procedure, being laid in draft and approved by a resolution of each House.
215.Subsections (3) to (7) provide, as an exception to this rule, that where the Treasury considers that it is necessary, an order under section 165A(2)(d) will be subject to a modified form of the affirmative resolution procedure under which it must be laid before Parliament after being made and ceases to have effect at the end of a period of 28 days unless it is approved by a resolution of each House before the end of that period.
216.Subsection (8) ensures that no order under section 165A(2)(d) will be treated as a hybrid instrument for the purposes of the Standing Orders of either House of Parliament.
New section 169A: Support of overseas regulator with respect to financial stability
217.Subsection (1) provides that the FSA may exercise a corresponding section 165A power at the request of an overseas regulator.
218.Subsection (2) defines “overseas regulator” for the purposes of this section.
219.Subsection (3) defines “corresponding section 165A power” as a modified form of the power given in section 165A, with references to the stability of the financial system referring to the financial system operating in the country, or in a territory (such as Gibraltar or the Channel Islands) of the overseas regulator, and the reference to the UK in section 165A being replaced by a reference to that country or territory.
220.Subsection (4) sets out which provisions of section 165A are to apply to the corresponding section 165A power given in relation to overseas regulators.
221.Subsection (5) defines “financial system” for the purposes of this section.
