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Financial Services (Banking Reform) Act 2013

Section 32: Definition of misconduct

198.Section 32 amends section 66 of FSMA and inserts new sections 66A and 66B into FSMA. Subsection (1)(a) inserts a new subsection (1A) in section 66. Subsection (1A) defines misconduct by reference to section 66A (for the purposes of action by the FCA) and section 66B (for the purposes of action by the PRA). Subsection (1)(b) omits subsections (2), (2A), (6) and (7) of section 66, which contain the existing definitions of misconduct for the purpose of action by the regulators.

199.Subsection (2) inserts sections 66A and 66B into FSMA. Section 66A provides that the FCA may take enforcement action (following standard FSMA procedures) against a person if any of conditions A, B and C apply. Subsection (2) sets out condition A which allows the FCA to take enforcement action against an approved person or an employee of a relevant authorised person who has failed to comply with rules of conduct made by the FCA under section 64A. Subsection (3) sets out condition B which allows the FCA to take enforcement action against an approved person or an employee of a relevant authorised person, if they were knowingly concerned in a breach of a relevant requirement (defined in subsection (4)) by the authorised person for whom they work. Subsection (5) sets out condition C which allows the FCA to take enforcement action against senior managers in a relevant authorised person if a regulatory contravention occurs in a part of the business for which they are responsible. This is subject to subsection (6), which provides that a senior manager will not be guilty of misconduct if he or she can show they took such steps to prevent the contravention as could reasonably be expected of a person in their position. Subsections (7) and (8) provide the definitions of “senior manager”, “approved person” and “employee” (which has the wide meaning given in section 64A, so including persons who are in an equivalent position to an employee).

200.Section 66B makes equivalent provision allowing the PRA to take enforcement action (following standard FSMA procedures) against a person if the same conditions apply.

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