Financial Services Act 2010
 

Financial Services Act 2010

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Financial Services Act 2010 List of acts
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CONTENTS

Financial Services Act 2010

2010 CHAPTER 28

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

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 2009

20. 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

 

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]

Be 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:—

Objectives of FSA etc

1 Financial stability objective

(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).

(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—

“Enhancing public understanding of financial matters etc

6A 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.

(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 2006.

3 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 own-initiative 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—

(a) the remuneration of relevant executives of an authorised person, or

(b) 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 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) 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

(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.

(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

(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.

 
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