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1 Financial Services Act 2010 CHAPTER 28 CONTENTS Objectives of FSA etc 1 Financial stability objective 2 Enhancing public understanding of financial matters etc 3 Meeting FSA s regulatory objectives Remuneration of executives of authorised persons 4 Executives remuneration reports 5 Executives remuneration reports: supplementary 6 Rules made by FSA about remuneration Recovery and resolution plans 7 Rules made by FSA about recovery and resolution plans Short selling 8 Power of FSA to prohibit, or require disclosure of, short selling FSA s disciplinary powers 9 Suspending permission to carry on regulated activities etc 10 Removal of restriction on imposing a penalty and cancelling authorisation 11 Performance of controlled function without approval 12 Approved persons guilty of misconduct 13 Publication of decision notices Measures to protect consumers 14 Consumer redress schemes 15 Restrictions on provision of credit card cheques
2 ii Financial Services Act 2010 (c. 28) Financial Services Compensation Scheme 16 Contribution to costs of special resolution regime 17 Power to require FSCS manager to act in relation to other schemes Powers to require information 18 Information relating to financial stability 19 Asset protection scheme etc Banking Act Services forming part of recognised inter-bank payment systems 21 Minor amendments of provision made by Banking Act 2009 Director of Savings 22 Administration of court funds by Director of Savings General 23 Orders or regulations 24 Minor and consequential amendments 25 Extent 26 Commencement 27 Short title Schedule 1 Further provision about the consumer financial education body Schedule 2 Minor and consequential amendments Part 1 Amendments of Financial Services and Markets Act 2000 Part 2 Amendments of other legislation
3 ELIZABETH II c. 28 Financial Services Act CHAPTER 28 An Act to make provision amending the Financial Services and Markets Act 2000, including provision about financial education, and other provision about financial services and markets; and to make provision for the administration of court funds by the Director of Savings. [8th April 2010] B E 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: 1 Financial stability objective Objectives of FSA etc (1) The Financial Services and Markets Act 2000 is amended as follows. (2) In section 2(2) (the FSA s regulatory objectives), after paragraph (a) insert (ab) financial stability;. (3) After section 3 insert 3A Financial stability (1) The financial stability objective is: contributing to the protection and enhancement of the stability of the UK financial system. (2) In considering that objective the Authority must have regard to (a) the economic and fiscal consequences for the United Kingdom of instability of the UK financial system; (b) the effects (if any) on the growth of the economy of the United Kingdom of anything done for the purpose of meeting that objective; and (c) the impact (if any) on the stability of the UK financial system of events or circumstances outside the United Kingdom (as well as in the United Kingdom).
4 2 Financial Services Act 2010 (c. 28) (3) The Authority must, consulting the Treasury, determine and review its strategy in relation to the financial stability objective. 2 Enhancing public understanding of financial matters etc (1) The Financial Services and Markets Act 2000 is amended as follows. (2) In section 2 (the FSA s general duties) (a) in subsection (2) (the FSA s regulatory objectives), omit paragraph (b) (which provides that public awareness is one of those objectives), and (b) in subsection (3) (matters to which FSA must have regard in discharging its general functions), after paragraph (g) insert (h) the desirability of enhancing the understanding and knowledge of members of the public of financial matters (including the UK financial system). (3) Omit section 4 (public awareness). (4) In section 5(2) (the protection of consumers), after paragraph (b) insert (ba) any information which the consumer financial education body has provided to the Authority in the exercise of the consumer financial education function;. (5) After section 6 insert 6A Enhancing public understanding of financial matters etc Enhancing public understanding of financial matters etc (1) The Authority must establish a body corporate ( the consumer financial education body ) whose function ( the consumer financial education function ) is to enhance (a) the understanding and knowledge of members of the public of financial matters (including the UK financial system); and (b) the ability of members of the public to manage their own financial affairs. (2) The consumer financial education function includes, in particular (a) promoting awareness of the benefits of financial planning; (b) promoting awareness of the financial advantages and disadvantages in relation to the supply of particular kinds of goods or services; (c) promoting awareness of the benefits and risks associated with different kinds of financial dealing (which includes informing the Authority and other bodies of those benefits and risks); (d) the publication of educational materials or the carrying out of other educational activities; and (e) the provision of information and advice to members of the public. (3) Schedule 1A makes further provision about the consumer financial education body. (6) After Schedule 1 insert the Schedule 1A set out in Schedule 1 to this Act.
5 Financial Services Act 2010 (c. 28) 3 (7) If members of staff of the FSA are transferred to the consumer financial education body, the transfer is to be regarded for the purposes of TUPE as a relevant transfer, whether or not it would otherwise be so regarded. (8) In subsection (7) the consumer financial education body has the same meaning as in section 6A of the Financial Services and Markets Act 2000, the FSA means the Financial Services Authority, and TUPE means the Transfer of Undertakings (Protection of Employment) Regulations Meeting FSA s regulatory objectives (1) The Financial Services and Markets Act 2000 is amended as follows. (2) In section 44(3) (refusal of application by authorised person to vary or cancel its Part IV permission), for the words from to it to the end substitute to it that it is desirable to refuse the application in order to meet any of its regulatory objectives. (3) In section 45 (variation or cancellation of Part IV permissions: FSA s owninitiative power) (a) in subsection (1), for paragraph (c) substitute (c) it is desirable to exercise the power in order to meet any of its regulatory objectives., and (b) after that subsection insert (1A) For the purposes of subsection (1)(c) it does not matter whether there is a relationship between the authorised person and the persons whose interests will be protected by the exercise of the power under this section. (4) In section 138(1) and (1A) (general rule-making power), for protecting the interests of consumers substitute meeting any of its regulatory objectives. (5) In section 194 (general grounds on which power of intervention is exercisable) (a) in subsection (1), for paragraph (c) substitute (c) it is desirable to exercise the power in order to meet any of its regulatory objectives., and (b) after that subsection insert (1A) For the purposes of subsection (1)(c) it does not matter whether there is a relationship between the incoming firm and the persons whose interests will be protected by the exercise of the power of intervention. Remuneration of executives of authorised persons 4 Executives remuneration reports (1) The Treasury may make provision by regulations about the preparation, approval and disclosure of executives remuneration reports. (2) An executives remuneration report is a report containing information about
6 4 Financial Services Act 2010 (c. 28) (a) (b) the remuneration of relevant executives of an authorised person, or anything connected with the remuneration of relevant executives of an authorised person. (3) The following are relevant executives of an authorised person (a) officers of the authorised person, (b) employees of the authorised person who fall within a prescribed description, and (c) other individuals who have a prescribed connection with the authorised person. (4) The individuals who may fall within subsection (3)(c) include any description of (a) individuals who provide services, or whose services are provided (directly or indirectly), to the authorised person, or (b) individuals who are officers or employees of a member of the same group as the authorised person. (5) Regulations under this section may apply in relation to a prescribed description of authorised person. (6) Regulations under this section are subject to affirmative resolution procedure. 5 Executives remuneration reports: supplementary (1) Regulations under section 4 may, in particular, make provision as to (a) the information that must be contained in an executives remuneration report, (b) how information is to be set out in the report, and (c) what is to be the auditable part of the report. (2) The information that may be required to be contained in an executives remuneration report includes (a) information corresponding to information that could be required by regulations under section 421 of the Companies Act 2006 to be contained in a directors remuneration report, and (b) information comparing the remuneration of relevant executives of an authorised person with the remuneration of employees of the authorised person who fall within a prescribed description. (3) Regulations under section 4 may, in particular, make provision (a) for the filing of executives remuneration reports with the registrar of companies for any part of the United Kingdom or with the FSA, and (b) for the publication by the FSA of reports filed with it. (4) Regulations under section 4 may apply any provision made by or under the Companies Act 2006 relating to directors remuneration reports, subject to such exceptions, adaptations and modifications as the Treasury consider appropriate. (5) The provisions that may be applied include provisions creating offences; but the regulations may not impose a liability for an offence which is more onerous than the liability for the offence under the applied provision. (6) Regulations under section 4 may provide that any requirement imposed on an authorised person by the regulations is to be treated for the purposes of
7 Financial Services Act 2010 (c. 28) 5 prescribed provisions of the Financial Services and Markets Act 2000 as if it had been imposed on the person by a provision of that Act. (7) For the purposes of section 4 and this section authorised person has the same meaning as in the Financial Services and Markets Act 2000 (see section 31), the FSA means the Financial Services Authority, group has the same meaning as in the Financial Services and Markets Act 2000 (see section 421), officer (a) in relation to a partnership, means a partner, and (b) in relation to a body corporate whose affairs are managed by its members, means a member, and prescribed means specified in, or determined in accordance with, regulations under section 4. 6 Rules made by FSA about remuneration In the Financial Services and Markets Act 2000, after section 139 insert 139A General rules about remuneration (1) The Authority must exercise its power to make general rules so as to make rules requiring each authorised person (or each authorised person of a specified description) to have, and act in accordance with, a remuneration policy. (2) A remuneration policy is a policy about the remuneration by the authorised person of (a) officers, (b) employees, and (c) other persons, of a specified description. (3) The rules must secure that any remuneration policy that an authorised person is required by the rules to have is consistent with (a) the effective management of risks; and (b) the Implementation Standards. (4) When making rules about remuneration policies, the Authority must have regard to any other international standards about the remuneration of individuals working in the financial sector (or certain such individuals). (5) The Treasury may direct the Authority to consider whether the remuneration policies of authorised persons specified in the direction (or of authorised persons of a description so specified) comply with requirements imposed by the rules as to the contents of the policies. (6) Before giving a direction under subsection (5), the Treasury must consult the Authority. (7) If the Authority considers that a remuneration policy fails to make provision which complies with the requirements mentioned in subsection (5), the Authority must take such steps as it considers appropriate to deal with the failure.
8 6 Financial Services Act 2010 (c. 28) (8) The steps that the Authority may take include requiring the remuneration policy to be revised. (9) General rules may (a) prohibit persons (or persons of a specified description) from being remunerated in a specified way; (b) provide that any provision of an agreement that contravenes such a prohibition is void; and (c) provide for the recovery of any payment made, or other property transferred, in pursuance of a provision that is void by virtue of paragraph (b). (10) A prohibition may be imposed under subsection (9)(a) only for the purpose of ensuring that the provision of remuneration is consistent with (a) the effective management of risks; or (b) the Implementation Standards. (11) A provision that, at the time the rules are made, is contained in an agreement made before that time may not be rendered void under subsection (9)(b) unless it is subsequently amended so as to contravene a prohibition under subsection (9)(a). (12) In this section the Implementation Standards means the Implementation Standards for Principles for Sound Compensation Practices, issued by the Financial Stability Board on 25 September 2009; and specified (except in subsection (5)) means specified by the rules. (13) References to the Implementation Standards or to international standards of a kind mentioned in subsection (4) are to standards that are for the time being in force. Recovery and resolution plans 7 Rules made by FSA about recovery and resolution plans (1) In the Financial Services and Markets Act 2000, after section 139A (which is inserted by section 6 above) insert 139B Rules about recovery plans (1) The Authority must exercise its power to make general rules so as to make rules requiring each authorised person (or each authorised person of a specified description) to prepare, and keep up-to-date, a recovery plan. (2) A recovery plan is a document containing information within subsection (3) or (4) of a specified description. (3) Information is within this subsection if it relates to action to be taken to secure that, in the event of specified circumstances affecting the carrying on of the business (or any part of the business) of the authorised person (a) the business of the authorised person, or
9 Financial Services Act 2010 (c. 28) 7 (b) a specified part of the business of the authorised person, is capable of being carried on (whether or not by the authorised person and whether or not in the same way as previously). (4) Information is within this subsection if it would facilitate the carrying on of the business (or any part of the business) of the authorised person by any other person. (5) The Authority must consider whether each recovery plan makes satisfactory provision in relation to the matters required by the rules to be covered by the plan. (6) If the Authority considers that a recovery plan fails to make satisfactory provision in relation to any such matter, the Authority must take such steps as it considers appropriate to deal with the failure. (7) The steps that the Authority may take include requiring the recovery plan to be revised. (8) The authorised persons subject to general rules about recovery plans must include authorised persons in relation to whom any power under Part 1 of the Banking Act 2009 (special resolution regime) is exercisable. (9) Before preparing a draft of general rules about recovery plans having effect in relation to those persons, the Authority must consult (a) the Treasury; and (b) the Bank of England. 139C Rules about resolution plans (1) The Authority must exercise its power to make general rules so as to make rules requiring each authorised person (or each authorised person of a specified description) to prepare, and keep up-to-date, a resolution plan. (2) A resolution plan is a document containing information within subsection (3) or (4) of a specified description. (3) Information is within this subsection if it relates to action to be taken in the event of (a) circumstances arising in which it is likely that the business (or any part of the business) of the authorised person will fail; or (b) the failure of the business (or any part of the business) of the authorised person. (4) Information is within this subsection if it would facilitate anything falling to be done by any person in consequence of that failure. (5) An example of information within subsection (4) is information that, in the event of that failure, would facilitate (a) planning by the Treasury in relation to the possible exercise of any of their powers under Part 1 of the Banking Act 2009; or (b) planning by the Bank of England in relation to the possible exercise of any of its powers under Part 1, 2 or 3 of that Act. (6) The Authority must consider whether each resolution plan makes satisfactory provision in relation to the matters required by the rules to be covered by the plan.
10 8 Financial Services Act 2010 (c. 28) (7) If the Authority considers that a resolution plan fails to make satisfactory provision in relation to any such matter, the Authority must take such steps as it considers appropriate to deal with the failure. (8) The steps that the Authority may take include requiring the resolution plan to be revised. (9) The authorised persons subject to general rules about resolution plans must include authorised persons in relation to whom any power under Part 1 of the Banking Act 2009 is exercisable. (10) Before preparing a draft of general rules about resolution plans having effect in relation to those persons, the Authority must consult (a) the Treasury; and (b) the Bank of England. 139D Sections 139B and 139C: interpretation (1) In sections 139B and 139C any reference to the taking of action includes the taking of action by (a) the authorised person; (b) any other person in the same group as the authorised person; or (c) a partnership of which the authorised person is a member. (2) In subsection (1)(b) the definition of group in section 421 applies with the omission of subsection (1)(e) and (f) of that section. (3) For the purposes of section 139C the cases in which the business (or any part of the business) of the authorised person is to be regarded as having failed include (a) the insolvency or bankruptcy of the authorised person; (b) the authorised person entering into administration; and (c) a power under Part 1 of the Banking Act 2009 being exercised in relation to the authorised person. (4) In sections 139B and 139C references to the business of an authorised person include the business of (a) any person in the same group as the authorised person; and (b) a partnership of which the authorised person is a member; and, accordingly, references in subsection (3)(a) to (c) of this section to the authorised person include any person within paragraph (a) or (b). (5) In sections 139B and 139C specified means specified in general rules. (6) In this section administration includes administration under Part 3 of the Banking Act 2009; insolvency includes insolvency under Part 2 of that Act. 139E Rules about recovery and resolution plans: supplementary provision (1) General rules about recovery or resolution plans may, in particular (a) impose a requirement on authorised persons to collect, and keep up-to-date, information of a description specified in the rules; and
11 Financial Services Act 2010 (c. 28) 9 (b) make provision as to the inclusion in the plans of information in respect of the steps to be taken to ensure compliance with that requirement. (2) If the Authority considers that an authorised person has contravened that requirement, the Authority may require the authorised person to appoint a skilled person to collect or update the information in question. (3) References in this section to a skilled person are to a person (a) nominated or approved by the Authority; and (b) appearing to the Authority to have the skills necessary to collect or update the information in question. (4) The skilled person may require any person to provide all such assistance as the skilled person may reasonably require to collect or update the information in question. (5) A requirement imposed by subsection (4) 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 Court of Session Act (6) A contractual or other requirement imposed on a person ( P ) to keep any information in confidence does not apply if (a) the information is or may be relevant to anything required to be done as a result of section 139B or 139C or this section; (b) an authorised person or a skilled person requests or requires P to provide the information for the purpose of securing that those things are done; and (c) the Authority has approved the making of the request or the imposition of the requirement before it is made or imposed. (7) An authorised person may provide information (whether received under subsection (6) or otherwise) that would otherwise be subject to a contractual or other requirement to keep in confidence if it is provided for the purposes of anything required to be done as a result of section 139B or 139C or this section. (8) General rules about recovery or resolution plans may, in particular, make provision about the form of the plans. (9) When making general rules about recovery or resolution plans, the Authority must have regard to any international standards about documents whose purpose corresponds to the purpose of recovery or resolution plans. 139F Special provision in relation to resolution plans (1) In the case of resolution plans required to be prepared by general rules, the Authority must consult (a) the Treasury, and (b) the Bank of England ( the Bank ), about the adequacy of the plans so far as relating to any matter which may be relevant to the exercise by the Treasury or the Bank of any power under Part 1, 2 or 3 of the Banking Act 2009.
12 10 Financial Services Act 2010 (c. 28) (2) After being consulted under subsection (1) (a) the Treasury or the Bank may notify the Authority that, in the opinion of the Treasury or the Bank, a resolution plan fails to make satisfactory provision in relation to any such matter; and (b) if the Treasury or the Bank give a notification under paragraph (a), the Treasury or the Bank must give reasons for being of that opinion to the Authority. (3) The Authority must have regard to any notification given under paragraph (a) of subsection (2) before considering whether any resolution plan makes satisfactory provision in relation to any such matter. (4) If (a) a notification is given under that paragraph, but (b) the Authority is nonetheless of the opinion that the resolution plan makes satisfactory provision in relation to any such matter, the Authority must give reasons for being of that opinion to the person who gave the notification. (2) The Treasury may by order require the FSA to make, by a date specified in the order, recovery plan rules, or resolution plan rules, which impose requirements on authorised persons who are of a description specified in the order. (3) Before making an order under subsection (2), the Treasury must consult the FSA. (4) An order under subsection (2) is subject to negative resolution procedure. (5) In this section the FSA means the Financial Services Authority, recovery plan rules means general rules imposing requirements of a kind mentioned in section 139B(1) of the Financial Services and Markets Act 2000, and resolution plan rules means general rules imposing requirements of a kind mentioned in section 139C(1) of that Act. Short selling 8 Power of FSA to prohibit, or require disclosure of, short selling In the Financial Services and Markets Act 2000, after Part 8 insert PART 8A SHORT SELLING 131B Short selling rules Short selling rules (1) The Authority may make rules prohibiting in specified cases persons from engaging in short selling in relation to relevant financial
13 Financial Services Act 2010 (c. 28) 11 instruments (or relevant financial instruments of a specified description). (2) The Authority may make rules requiring (a) a person who has engaged in short selling in relation to relevant financial instruments (or relevant financial instruments of a specified description), or (b) an authorised person of a specified description who has acted on behalf of such a person, to disclose in specified cases specified information, or information of a specified description, about the short selling. (3) Rules under subsection (2) may specify the time by which, and the way in which, the disclosure must be made (and may in particular provide for the information to be disclosed to the Authority or published in a specified way). (4) Rules under subsection (2) may apply in relation to short selling engaged in before the rules are made where the resulting short position is still open when the rules are made. (5) The reference to a short position being open is to be read in accordance with provision made by the rules. (6) Rules under this section may apply to short selling wholly outside the United Kingdom by persons outside the United Kingdom, but only in so far as the rules relate to UK financial instruments. (7) The description of relevant financial instruments that may be specified by the rules includes relevant financial instruments issued by a specified person. (8) Rules under this section are referred to in this Part as short selling rules. (9) The Authority must, when making short selling rules, have regard to any international agreement as to measures to be taken in respect of short selling. 131C Short selling rules: definitions etc (1) This section supplements section 131B. (2) The cases in which a person ( S ) engages in short selling in relation to a financial instrument (a shorted instrument ) include any case where (a) S enters into a transaction which creates, or relates to, another financial instrument; and (b) the effect (or one of the effects) of the transaction is to confer a financial advantage on S in the event of a decrease in the price or value of the shorted instrument. (3) Financial instrument has the meaning given by Article 4.1(17) of the markets in financial instruments directive. (4) Relevant financial instrument means a financial instrument that (a) is admitted to trading on a regulated market or on any other prescribed market in an EEA State; or
14 12 Financial Services Act 2010 (c. 28) (b) has such other connection with a market in an EEA State as may be specified. (5) Specified means specified by short selling rules. (6) UK financial instrument means a financial instrument that is admitted to trading on a market in the United Kingdom. (7) In the case of a financial instrument that is admitted to trading on (a) a market in the United Kingdom or another EEA State, and (b) one or more markets in a country or territory, or countries or territories, anywhere else in the world, short selling rules may apply in relation to trading on both or all markets. (8) In any case where (a) a financial instrument ( instrument A ) is admitted to trading on a market in the United Kingdom or another EEA State, (b) another financial instrument ( instrument B ) is admitted to trading on one or more markets in a country or territory, or countries or territories, anywhere else in the world, and (c) the price or value of instrument A depends on the price or value of instrument B (or vice versa), short selling rules may apply in relation to trading on both or all markets. (9) In subsection (4)(a) regulated market has the meaning given by Article 4.1(14) of the markets in financial instruments directive. (10) References in this section to a market in a country or territory are to a market situated or operating in the country or territory. 131D Short selling rules: procedure in urgent cases (1) The Authority may make short selling rules (and may subsequently amend those rules) without complying with section 155 (consultation in relation to proposed rules) if it considers that it is necessary to do so, in order to (a) maintain confidence in the UK financial system; or (b) protect the stability of the UK financial system. (2) Any rules made by virtue of subsection (1) ( emergency rules ) cease to have effect at the end of the period of three months beginning with the day on which the rules are made ( the relevant day ); but this is subject as follows. (3) The Authority may direct that emergency rules are to cease to have effect at the end of a period (not exceeding six months beginning with the relevant day) specified in the direction. (4) A direction under subsection (3) may be made only if, immediately before the end of the period mentioned in subsection (2), the Authority considers that it is necessary to do so, in order to (a) maintain confidence in the UK financial system; or (b) protect the stability of the UK financial system.
15 Financial Services Act 2010 (c. 28) 13 (5) Such a direction 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. (6) Nothing in subsection (2) or (3) prevents the Authority from revoking emergency rules before the end of the periods referred to there. 131E Power to require information Power to require information (1) The Authority may, by notice in writing, require a person ( P ) (a) to provide specified information or information of a specified description; or (b) to produce specified documents or documents of a specified description. (2) This section applies only to information and documents that the Authority reasonably requires for the purpose of determining whether P, or a person connected with P, has contravened any provision of short selling rules. (3) Information or documents required under this section 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. (4) The Authority may require any information provided under this section to be provided in such form as it may reasonably require. (5) The Authority may require (a) any information provided, whether in a document or otherwise, to be verified in such manner as it may reasonably require; or (b) any document produced to be authenticated in such manner as it may reasonably require. (6) In this section specified means specified in the notice. (7) For the purposes of this section a person is connected with another person ( P ) if the person is or has at any relevant time been (a) a member of P s group; (b) a controller of P; (c) any other member of a partnership of which P is a member; or (d) in relation to P, a person mentioned in Part 1 of Schedule 15 (reading references in that Part to the authorised person as references to P). 131F Power to require information: supplementary (1) If the Authority has power under section 131E 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 section 131E, the Authority may
16 14 Financial Services Act 2010 (c. 28) (a) (b) take copies of or extracts from the document; or require the person producing the document, or any relevant person, to provide an explanation of the document. (3) In subsection (2)(b) 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. (4) If a person who is required under section 131E to produce a document fails to do so, the Authority may require the person to state, to the best of the person s knowledge and belief, where the document is. (5) A lawyer may be required under section 131E to provide the name and address of the lawyer s client. (6) A person ( P ) may not be required under section 131E to disclose information or produce a document in respect of which P owes an obligation of confidence by virtue of carrying on the business of banking unless (a) P 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; or (c) the person to whom the obligation of confidence is owed consents to the disclosure or production. (7) If a person claims a lien on a document, its production under section 131E does not affect the lien. Breach of short selling rules etc 131G Power to impose penalty or issue censure (1) This section applies if the Authority is satisfied that a person has contravened (a) any provision of short selling rules; or (b) any requirement imposed on the person under section 131E or 131F. (2) The Authority may impose a penalty of such amount as it considers appropriate on (a) the person who contravened the provision or requirement; or (b) any person who was knowingly concerned in the contravention. (3) It may, instead of imposing a penalty on a person, publish a statement censuring the person.
17 Financial Services Act 2010 (c. 28) 15 (4) The Authority may not take action against a person under this section after the end of the limitation period unless, before the end of that period, it has given a warning notice to the person under section 131H. (5) The limitation period means the period of three years beginning with the first day on which the Authority knew of the contravention. (6) For this purpose the Authority is to be treated as knowing of a contravention if it has information from which the contravention can reasonably be inferred. 131H Procedure and right to refer to Tribunal (1) If the Authority proposes to take action against a person under section 131G, it must give the person 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 131G, it must give the person 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 131G, the person may refer the matter to the Tribunal. 131I Duty on publication of statement After a statement under section 131G(3) is published, the Authority must send a copy of the statement to (a) the person in respect of whom it is made; and (b) any person to whom a copy of the decision notice was given under section 393(4). 131J Imposition of penalties under section 131G: statement of policy (1) The Authority must prepare and issue a statement of its policy with respect to (a) the imposition of penalties under section 131G; 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 contravention; (b) the extent to which the 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.
18 16 Financial Services Act 2010 (c. 28) (4) If a statement issued under this section is altered or replaced, the Authority must issue the altered or replaced 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, a power under section 131G in the case of any particular contravention, the Authority must have regard to any statement of policy published under this section and in force at a time when the contravention occurred. 131K Statement of policy: procedure (1) Before issuing a statement under section 131J, 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. FSA s disciplinary powers 9 Suspending permission to carry on regulated activities etc In Part 14 of the Financial Services and Markets Act 2000 (disciplinary measures), after section 206 insert 206A Suspending permission to carry on regulated activities etc (1) If the Authority considers that an authorised person has contravened a relevant requirement imposed on the person, it may
19 Financial Services Act 2010 (c. 28) 17 (a) (b) suspend, for such period as it considers appropriate, any permission which the person has to carry on a regulated activity; or impose, for such period as it considers appropriate, such limitations or other restrictions in relation to the carrying on of a regulated activity by the person as it considers appropriate. (2) In subsection (1) permission means any permission that the authorised person has, whether given (or treated as given) by the Authority or conferred by any provision of this Act; relevant requirement means a requirement imposed (a) by or under this Act; or (b) by any directly applicable Community regulation made under the markets in financial instruments directive. (3) The period for which a suspension or restriction is to have effect may not exceed 12 months. (4) A suspension may relate only to the carrying on of an activity in specified circumstances. (5) A restriction may, in particular, be imposed so as to require the person concerned to take, or refrain from taking, specified action. (6) The Authority may (a) withdraw a suspension or restriction; or (b) vary a suspension or restriction so as to reduce the period for which it has effect or otherwise to limit its effect. (7) The power under this section may (but need not) be exercised so as to have effect in relation to all the regulated activities that the person concerned carries on. (8) Any one or more of the powers under (a) subsection (1)(a) and (b) of this section, and (b) sections 205 and 206, may be exercised in relation to the same contravention. 10 Removal of restriction on imposing a penalty and cancelling authorisation In section 206 of the Financial Services and Markets Act 2000 (financial penalties), omit subsection (2) (which prevents the FSA from imposing a penalty under that section as well as withdrawing a person s authorisation under section 33). 11 Performance of controlled function without approval In the Financial Services and Markets Act 2000, after section 63 insert 63A Performance of controlled functions without approval Power to impose penalties (1) If the Authority is satisfied that
20 18 Financial Services Act 2010 (c. 28) 63B (a) a person ( P ) has at any time performed a controlled function without approval, and (b) at that time P knew, or could reasonably be expected to have known, that P was performing a controlled function without approval, it may impose a penalty on P of such amount as it considers appropriate. (2) For the purposes of this section P performs a controlled function without approval at any time if at that time (a) P performs a controlled function under an arrangement entered into by an authorised person ( A ), or by a contractor of A, in relation to the carrying on by A of a regulated activity; and (b) the performance by P of the function was not approved under section C (3) The Authority may not impose a penalty under this section after the end of the limitation period unless, before the end of that period, it has given a warning notice to the person concerned under section 63B(1). (4) The limitation period means the period of three years beginning with the first day on which the Authority knew that the person concerned had performed a controlled function without approval. (5) For this purpose the Authority is to be treated as knowing that a person has performed a controlled function without approval if it has information from which that can reasonably be inferred. (6) Any expression which is used both in this section and section 59 has the same meaning in this section as in that section. Procedure and right to refer to Tribunal (1) If the Authority proposes to impose a penalty on a person under section 63A, it must give the person a warning notice. (2) A warning notice must state the amount of the penalty. (3) If the Authority decides to impose a penalty on a person under section 63A, it must give the person a decision notice. (4) A decision notice must state the amount of the penalty. (5) If the Authority decides to impose a penalty on a person under section 63A, the person may refer the matter to the Tribunal. Statement of policy (1) The Authority must prepare and issue a statement of its policy with respect to (a) the imposition of penalties under section 63A; and (b) the amount of penalties under that section. (2) The Authority s policy in determining whether a penalty should be imposed, and what the amount of a penalty should be, must include having regard to (a) the conduct of the person on whom the penalty is to be imposed;
21 Financial Services Act 2010 (c. 28) 19 (b) (c) (d) the extent to which the person could reasonably be expected to have known that a controlled function was performed without approval; the length of the period during which the person performed a controlled function without approval; and whether the person on whom the penalty is to be imposed is an individual. (3) The Authority s policy in determining whether a penalty should be imposed on a person must also include having regard to the appropriateness of taking action against the person instead of, or in addition to, taking action against an authorised person. (4) A statement issued under this section must include an indication of the circumstances in which the Authority would expect to be satisfied that a person could reasonably be expected to have known that the person was performing a controlled function without approval. (5) The Authority may at any time alter or replace a statement issued under this section. (6) If a statement issued under this section is altered or replaced, the Authority must issue the altered or replaced statement. (7) The Authority must, without delay, give the Treasury a copy of any statement which it publishes under this section. (8) 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. (9) The Authority may charge a reasonable fee for providing a person with a copy of the statement. (10) In exercising, or deciding whether to exercise, its power under section 63A in the case of any particular person, the Authority must have regard to any statement of policy published under this section and in force at a time when the person concerned performed a controlled function without approval. 63D Statement of policy: procedure (1) Before issuing a statement under section 63C, 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.
22 20 Financial Services Act 2010 (c. 28) (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. 12 Approved persons guilty of misconduct (1) Section 66 of the Financial Services and Markets Act 2000 (performance of regulated activities: disciplinary powers) is amended as follows. (2) In subsection (3) (a) in the opening words, for it may substitute it may do one or more of the following, and (b) after paragraph (a) (but before the or at the end of it) insert (aa) suspend, for such period as it considers appropriate, any approval of the performance by him of any function to which the approval relates; (ab) impose, for such period as it considers appropriate, such limitations or other restrictions in relation to the performance by him of any function to which any approval relates as it considers appropriate;. (3) After that subsection insert (3A) (3B) (3C) (3D) The period for which a suspension or restriction is to have effect may not exceed two years. A suspension or restriction may have effect in relation to part of a function. A restriction may, in particular, be imposed so as to require any person to take, or refrain from taking, specified action. The Authority may (a) withdraw a suspension or restriction; or (b) vary a suspension or restriction so as to reduce the period for which it has effect or otherwise to limit its effect. (4) In subsection (4), for two years substitute three years. 13 Publication of decision notices (1) Section 391 of the Financial Services and Markets Act 2000 (publication) is amended as follows. (2) In subsection (1) (which prevents the FSA and the person to whom a warning or decision notice is given or copied from publishing the notice or any details concerning it), omit or decision notice.
23 Financial Services Act 2010 (c. 28) 21 (3) After that subsection insert (1A) A person to whom a decision notice is given or copied may not publish the notice or any details concerning it unless the Authority has published the notice or those details. (4) In subsection (4) (duty of FSA to publish information about a final notice), before final notice insert decision notice or. Measures to protect consumers 14 Consumer redress schemes (1) In the Financial Services and Markets Act 2000, for section 404 (and the italic cross-heading before it) substitute 404 Consumer redress schemes Consumer redress schemes (1) This section applies if (a) it appears to the Authority that there may have been a widespread or regular failure by relevant firms to comply with requirements applicable to the carrying on by them of any activity; (b) it appears to it that, as a result, consumers have suffered (or may suffer) loss or damage in respect of which, if they brought legal proceedings, a remedy or relief would be available in the proceedings; and (c) it considers that it is desirable to make rules for the purpose of securing that redress is made to the consumers in respect of the failure (having regard to other ways in which consumers may obtain redress). (2) Relevant firms means (a) authorised persons; or (b) payment service providers. (3) The Authority may make rules requiring each relevant firm (or each relevant firm of a specified description) which has carried on the activity on or after the specified date to establish and operate a consumer redress scheme. (4) A consumer redress scheme is a scheme under which the firm is required to take one or more of the following steps in relation to the activity. (5) The firm must first investigate whether, on or after the specified date, it has failed to comply with the requirements mentioned in subsection (1)(a) that are applicable to the carrying on by it of the activity. (6) The next step is for the firm to determine whether the failure has caused (or may cause) loss or damage to consumers. (7) If the firm determines that the failure has caused (or may cause) loss or damage to consumers, it must then