C55C79 Part V Performance of Regulated Activities
Pt. 5 modified (7.11.2018) by The EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (S.I. 2018/1149), regs. 1(2), 23 (with regs. 4, 22, 26(1)(2))
Prohibition orders
C1I1C2C356 Prohibition orders.
F711
The FCA may make a prohibition order if it appears to it that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by—
a
an authorised person,
b
a person who is an exempt person in relation to that activity, or
c
a person to whom, as a result of Part 20, the general prohibition does not apply in relation to that activity.
1A
The PRA may make a prohibition order if it appears to it that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by—
a
a PRA-authorised person, or
b
a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.
2
F77A “prohibition order” is an order prohibiting the individual from performing a specified function, any function falling within a specified description or any function.
3
A prohibition order may relate to—
a
a specified regulated activity, any regulated activity falling within a specified description or all regulated activities;
F78b
all persons falling within subsection (3A) or a particular paragraph of that subsection or all persons within a specified class of person falling within a particular paragraph of that subsection.
F723A
A person falls within this subsection if the person is—
a
an authorised person,
b
an exempt person, or
c
a person to whom, as a result of Part 20, the general prohibition does not apply in relation to a regulated activity.
4
An individual who performs or agrees to perform a function in breach of a prohibition order is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.
5
In proceedings for an offence under subsection (4) it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.
6
F79A person falling within subsection (3A) must take reasonable care to ensure that no function of his, in relation to the carrying on of a regulated activity, is performed by a person who is prohibited from performing that function by a prohibition order.
C47
F737A
If—
a
the FCA proposes to vary or revoke a prohibition order, and
b
as a result of the proposed variation or revocation, an individual—
i
will no longer be prohibited from performing a function of interest to the PRA, or
ii
will be prohibited from performing such a function,
the FCA must consult the PRA before varying or revoking the order.
7B
A function is of interest to the PRA if it is performed in relation to a regulated activity carried on by—
a
a PRA-authorised person, or
b
a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.
7C
The PRA must consult the FCA before varying or revoking a prohibition order.
F76C58
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
“Specified” means specified in the prohibition order.
C6I2C7C7357 Prohibition orders: procedure and right to refer to Tribunal.
C81
If F81a regulator proposes to make a prohibition order it must give the individual concerned a warning notice.
2
The warning notice must set out the terms of the prohibition.
3
If F82a regulator decides to make a prohibition order it must give the individual concerned a decision notice.
4
The decision notice must—
a
name the individual to whom the prohibition order applies;
b
set out the terms of the order; and
c
be given to the individual named in the order.
5
A person against whom a decision to make a prohibition order is made may refer the matter to the Tribunal.
F806
If—
a
the FCA proposes to make a prohibition order, and
b
as a result of the proposed order, an individual will be prohibited from performing a function of interest to the PRA,
the FCA must consult the PRA before giving a warning notice under this section.
7
A function is of interest to the PRA if it is performed in relation to a regulated activity carried on by—
a
a PRA-authorised person, or
b
a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.
8
The PRA must consult the FCA before giving a warning notice under this section.
C9I3C10C7458 Applications relating to prohibitions: procedure and right to refer to Tribunal.
1
This section applies to an application for the variation or revocation of a prohibition order.
2
If the F84appropriate regulator decides to grant the application, it must give the applicant written notice of its decision.
3
If the F84appropriate regulator proposes to refuse the application, it must give the applicant a warning notice.
4
If the F84appropriate regulator decides to refuse the application, it must give the applicant a decision notice.
5
If the F84appropriate regulator gives the applicant a decision notice, he may refer the matter to the Tribunal.
F836
The appropriate regulator” means the regulator to which the application is made.
Approval
C11I4C12C13C1459 Approval for particular arrangements.
C151
An authorised person (“A”) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by A in relation to the carrying on by A of a regulated activity, unless F141that person is acting in accordance with an approval given by the appropriate regulator under this section.
2
An authorised person (“A”) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by a contractor of A in relation to the carrying on by A of a regulated activity, unless F142that person is acting in accordance with an approval given by the appropriate regulator under this section.
F853
“Controlled function”—
a
in relation to the carrying on of a regulated activity by a PRA-authorised person, means a function of a description specified in rules made by the FCA or the PRA, and
b
in relation to the carrying on of a regulated activity by any other authorised person, means a function of a description specified in rules made by the FCA.
4
“The appropriate regulator”—
a
in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA, and
b
in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA with the consent of the FCA.
F1265
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1276
The PRA may specify a description of function under subsection (3)(a) only if, in relation to the carrying on of a regulated activity by a PRA-authorised person, it is satisfied that the function is a senior management function as defined in section 59ZA.
F128F2306A
If—
a
a function of a description specified in rules made by the FCA under subsection (3)(a) or (b) is a controlled function in relation to the carrying on of a regulated activity by a relevant authorised person, and
b
the FCA is satisfied that, in relation to the carrying on of a regulated activity by a relevant authorised person, the function is a senior management function as defined in section 59ZA,
the FCA must designate the function in the rules as a senior management function.
F2306A
If the FCA is satisfied that a function of a description specified in rules made by the FCA under subsection (3)(a) or (b) is a senior management function as defined in section 59ZA, the FCA must designate the function in the rules as a senior management function.
6B
F231If a function of a description specified in rules made by the PRA under subsection (3)(a) is a controlled function in relation to the carrying on of a regulated activity by a relevant authorised person, the PRA must designate the function in the rules as a senior management function.
6C
F231For the meaning of “relevant authorised person”, see section 71A.
F1297
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1297A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1297B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1147C
A regulator may not exercise the power in subsection (3) so as to provide for a function to be a controlled function in relation to the carrying on of the regulated activity of managing an AIF by an AIFM which—
a
is also an AIF;
b
does not manage any AIF other than itself;
c
is a body corporate; and
d
is not a collective investment scheme.
8
Neither subsection (1) nor subsection (2) applies to an arrangement which allows a person to perform a function if the question of whether he is a fit and proper person to perform the function is reserved under any of the single market directives F16or the emission allowance auctioning regulation to an authority in a country or territory outside the United Kingdom.
F869
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
“Arrangement”—
a
means any kind of arrangement for the performance of a function of A which is entered into by A or any contractor of his with another person; and
b
includes, in particular, that other person’s appointment to an office, his becoming a partner or his employment (whether under a contract of service or otherwise).
F13011
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59ZAF115Senior management functions
1
This section has effect for determining whether a function is for the purposes of section 59(6) or (6A) a senior management function.
2
A function is a “senior management function”, in relation to the carrying on of a regulated activity by an authorised person, if—
a
the function will require the person performing it to be responsible for managing one or more aspects of the authorised person's affairs, so far as relating to the activity, and
b
those aspects involve, or might involve, a risk of serious consequences—
i
for the authorised person, or
ii
for business or other interests in the United Kingdom.
3
In subsection (2)(a) the reference to managing one or more aspects of an authorised person's affairs includes a reference to taking decisions, or participating in the taking of decisions, about how one or more aspects of those affairs should be carried on.
59ZBF229Designated senior management functions
For the purposes of this Part the following are “designated senior management functions”—
a
a function of a description specified in rules made by the FCA under section 59(3)(a) or (b) which is designated as a senior management function by the FCA under section 59(6A);
b
a function of a description specified in rules made by the PRA under section 59(3)(a).
59AF17Specifying functions as controlled functions: supplementary
1
The FCA must—
a
keep under review the exercise of its power under section 59(3)(a) to specify any F136senior management function as a controlled function, and
b
exercise that power in a way that it considers will minimise the likelihood that approvals fall to be given by both the FCA and the PRA in respect of the performance by a person of F136senior management functions in relation to the carrying on of a regulated activity by the same PRA-authorised person.
2
The FCA and the PRA must each consult the other before exercising any power under section 59(3)(a).
3
Any reference in this section to the exercise of a power includes its exercise by way of amendment or revocation of provision previously made in the exercise of the power.
F1373A
“Senior management function” has the meaning given by section 59ZA.
4
“Approval” means an approval under section 59.
5
Any expression which is used both in this section and section 59 has the same meaning in this section as in that section.
59ABF189Specifying functions as controlled functions: transitional provision
1
In relation to rules made by the FCA or the PRA under section 59, the power conferred by section 137T(c) to make transitional provision includes in particular power—
a
to provide for anything done under this Part in relation to controlled functions of a particular description to be treated as having been done in relation to controlled functions of a different description;
b
to provide for anything done under this Part (including any application or order made, any requirement imposed and any approval or notice given) to cease to have effect, to continue to have effect, or to continue to have effect with modifications, or subject to time limits or conditions;
c
to provide for rules made by the regulator making the rules under section 59 to apply with modifications;
d
to make saving provision.
2
The Treasury may by regulations make whatever incidental, consequential, transitional, supplemental or saving provision the Treasury consider appropriate in connection with the making of rules by the FCA or the PRA under section 59.
3
Regulations under subsection (2) may—
a
confer functions on the FCA or the PRA (including the function of making rules);
b
modify, exclude or apply (with or without modifications) any primary or subordinate legislation (including any provision of, or made under, this Act).
59BRole of FCA in relation to PRA decisions
1
The FCA may arrange with the PRA that in such cases as may be described in the arrangements the PRA may give approval under section 59 without obtaining the consent of the FCA.
2
Arrangements under this section must be in writing, and must specify the date on which they come into force.
3
The regulators must publish any arrangements under this section in such manner as they think fit.
4
Section 59(4)(b) has effect subject to any arrangements in force under this section.
C16I5C17C18C1960 Applications for approval.
1
An application for the F18appropriate regulator's approval under section 59 may be made by the authorised person concerned.
2
The application must—
a
be made in such manner as the F18appropriate regulator may direct; and
b
contain, or be accompanied by, such information as the F18appropriate regulator may reasonably require.
F1312A
If—
a
the application is for the approval of a person to perform a designated senior management function, F234and
b
F235the authorised person concerned is a relevant authorised person (see section 71A),
the appropriate regulator must require the application to contain, or be accompanied by, a statement setting out the aspects of the affairs of the authorised person concerned which it is intended that the person will be responsible for managing in performing the function.
2B
A statement provided under subsection (2A) is known as a “statement of responsibilities”.
2C
F232In subsection (2A) “designated senior management function” means a function designated as a senior management function under section 59(6A) or (6B).
C20F193
At any time after the application is received and before it is determined, the appropriate regulator may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application or, as the case requires, to decide whether to give consent.
4
5
Different directions may be given, and different requirements imposed, in relation to different applications or categories of application.
6
“The authorised person concerned” includes a person who has applied for permission under F20Part 4A and will be the authorised person concerned if permission is given.
F1326A
F233Subsection (6) applies to references to a relevant authorised person as it applies to references to the authorised person concerned.
F217
The PRA must consult the FCA before—
a
giving a direction under subsection (2)(a) in relation to a class of applicants, or
b
imposing a requirement under subsection (2)(b) on a class of applicants.
8
The PRA must as soon as practicable notify the FCA of the receipt or withdrawal of an application to the PRA, unless the case is one in which by virtue of arrangements under section 59B the consent of the FCA is not required.
9
“The appropriate regulator”—
a
in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA;
b
in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA, and for the purposes of subsection (3) also includes the FCA in cases where the consent of the FCA is required.
60AF138Vetting of candidates by F224relevant authorised persons
1
Before F236a relevantF236an authorised person may make an application for a regulator's approval under section 59, the authorised person must be satisfied that the person in respect of whom the application is made (“the candidate”) is a fit and proper person to perform the function to which the application relates.
2
In deciding that question, the authorised person must have regard, in particular, to whether the candidate, or any person who may perform a function on the candidate's behalf—
a
has obtained a qualification,
b
has undergone, or is undergoing, training,
c
possesses a level of competence, or
d
has the personal characteristics,
required by general rules made by the regulator in relation to persons performing functions of the kind to which the application relates.
3
F237For the meaning of “relevant authorised person”, see section 71A.
I6C21C2261 Determination of applications.
F1461
The regulator to which an application for approval is made under section 60 may grant the application only if—
a
it is satisfied that the person in respect of whom the application is made (“the candidate”) is a fit and proper person to perform the function to which the application relates, or
b
in a case where the application is for approval to perform a designated senior management function F241in relation to the carrying on of a regulated activity by a relevant authorised person (a “relevant seniorF242(a “senior management application”), it is satisfied that the condition in paragraph (a) will be met if the application is granted subject to one or more conditions (as to which, see subsection (2B)).
2
In F148determining the application, F90the regulator may have regard (among other things) to whether the candidate, or any person who may perform a function on his behalf—
a
has obtained a qualification,
b
has undergone, or is undergoing, training, F149...
c
possesses a level of competence, F147or
d
has the personal characteristics,
required by general rules F91made by that regulator in relation to persons performing functions of the kind to which the application relates.
F872A
Subsections (1) and (2) apply in relation to the giving by the FCA of any required consent as they apply in relation to the grant of the application.
F1432B
The regulator to which a F238relevant senior management application is made under section 60 may in particular—
a
grant the application subject to any conditions that the regulator considers appropriate, and
b
grant the application so as to give approval only for a limited period.
2C
A regulator may exercise the power under paragraph (a) or (b) of subsection (2B) only if—
a
where the regulator is the FCA, it appears to the FCA that it is desirable to do so in order to advance one or more of its operational objectives, and
b
where the regulator is the PRA, it appears to the PRA that it is desirable to do so in order to advance any of its objectives.
2D
Consent given by the FCA for the granting of the application may be conditional on the manner in which the PRA exercises its power under subsection (2B).
C23C24C25C75C763
F89The regulator to which an application is made under section 60 must, before the end of the period for consideration, determine whether—
a
to grant the application; or
b
to give a warning notice under section 62(2).
F1443ZA
In the case of a F239relevant senior management application, the reference in subsection (3)(a) to granting the application is a reference to granting it without imposing conditions or limiting the period for which the approval has effect.
F883A
The period for consideration”—
a
in any case where the application under section 60 is made by a person applying for permission under Part 4A (see section 60(6)), means whichever ends last of—
i
the period within which the application for that permission must be determined under section 55V(1) or (2), and
ii
the period of 3 months beginning with the date on which the regulator receives the application under section 60, and
b
in any other case, means the period of 3 months beginning with the date on which the regulator receives the application under section 60.
4
If F92a regulator imposes a requirement under section 60(3), the period for consideration stops running on the day on which the requirement is imposed but starts running again—
a
on the day on which the required information is received by F92a regulator; or
b
if the information is not provided on a single day, on the last of the days on which it is received by F92a regulator.
5
A person who makes an application under section 60 may withdraw his application by giving written notice to the F93regulator to which the application was made at any time before the F94regulator determines it, but only with the consent of—
a
the candidate; and
b
the person by whom the candidate is to be retained to perform the function concerned, if not the applicant.
F1456
F240In this section—
a
“designated senior management function” means a function designated as a senior management function under section 59(6A) or (6B);
b
any reference to a relevant authorised person includes a reference to a person who has applied for permission under Part 4A and will be a relevant authorised person if permission is given.
7
F240For the meaning of “relevant authorised person”, see section 71A.
I7C26C2762 Applications for approval: procedure and right to refer to Tribunal.
1
F95If the regulator to which an application is made under section 60 (“an application”) decides to grant the application, it must give written notice of its decision to each of the interested parties.
2
3
4
5
“The interested parties”, in relation to an application, are—
a
the applicant;
b
the person in respect of whom the application is made (“A”); and
c
the person by whom A’s services are to be retained, if not the applicant.
62AF139Changes in responsibilities of senior managers
1
This section applies where—
a
an authorised person has made an application to the appropriate regulator for approval under section 59 for a person to perform a designated senior management function,
b
the application contained, or was accompanied by, a statement of responsibilities under section 60(2A), and
c
the application has been granted.
2
If, since the granting of the application, there has been any significant change in the aspects of the authorised person's affairs which the person is responsible for managing in performing the function, the authorised person must provide the appropriate regulator with a revised statement of responsibilities.
3
The appropriate regulator may require the authorised person—
a
to provide information which the person is required to give under this section in such form as the appropriate regulator may direct, or
b
to verify such information in such a way as the appropriate regulator may direct.
4
In this section—
“the appropriate regulator” has the same meaning as in section 60 F190, except that the reference in section 60(9)(b) to subsection (3) is to be treated as a reference to subsection (2) of this section;
F243“designated senior management function” means a function designated as a senior management function under section 59(6A) or (6B).
I8C28C29C3063 Withdrawal of approval.
C31F981
The FCA may withdraw an approval under section 59 given by the FCA or the PRA in relation to the performance by a person of a function if the FCA considers that the person is not a fit and proper person to perform the function.
1A
The PRA may withdraw an approval under section 59 in relation to the performance by a person (“A”) of a function if—
a
the PRA gave the approval, or the FCA gave the approval and the function is a F154relevant senior management function performed in relation to the carrying on by a PRA-authorised person of a regulated activity, and
b
the PRA considers that A is not a fit and proper person to perform the function.
F1551B
In subsection (1A) “relevant senior management function” means a function which the PRA is satisfied is a senior management function as defined in section 59ZA (whether or not the function has been designated as such by the FCA).
1C
Before one regulator withdraws an approval given by the other regulator, it must consult the other regulator.
2
When considering whether to withdraw F99an approval, the FCA or the PRA may take into account any matter which could be taken into account in considering an application made under section 60 in respect of the performance of the function to which the approval relates F100(on the assumption, if it is not the case, that the application was one falling to be considered by it).
F1532A
At least once a year each F244relevant authorised person must, in relation to every person in relation to whom an approval has been given on the application of the authorised person—
a
consider whether there are any grounds on which a regulator could withdraw the approval under this section, and
b
if the authorised person is of the opinion that there are such grounds, notify the regulator of those grounds.
F245(For the meaning of “relevant authorised person”, see section 71A.)
C31C323
C33C314
C315
C316
“The interested parties”, in relation to an approval, are—
a
the person on whose application it was given (“A”);
b
the person in respect of whom it was given (“B”); and
c
the person by whom B’s services are retained, if not A.
63ZAF140Variation of senior manager's approval at request of F225relevant authorised person
1
Where an F193approval under section 59 has effect subject to conditions, the authorised person concerned may apply to the appropriate regulator to vary the approval by—
a
varying a condition,
b
removing a condition, or
c
imposing a new condition.
F1911A
Where an approval under section 59 has effect for a limited period, the authorised person concerned may apply to the appropriate regulator to vary the approval by—
a
varying the period for which the approval is to have effect, or
b
removing the limit on the period for which the approval is to have effect.
2
“The appropriate regulator”—
a
in the case of an application for variation of an approval in a way described in subsection (1)(a) or (b), means
ii
if the condition has been varied before (under this section or section 63ZB), whichever of the FCA or the PRA last varied it;
b
in the case of an application for variation of an approval in the way described in subsection (1)(c), means the regulator who gave the approval.
F195c
in the case of an application for variation of an approval in a way described in subsection (1A), means—
i
whichever of the FCA or the PRA imposed the limit on the period for which the approval has effect, or
ii
if the limit has been varied before (under this section or section 63ZB), whichever of the FCA or the PRA last varied it.
3
The PRA must consult the FCA before determining an application under this section, unless the application relates to the variation or removal of a condition F197, or a limit on the period for which an approval has effect, which was imposed (or last varied) by the PRA in exercise of its power under section 63ZB.
4
The regulator to which an application is made under this section must, before the end of the period for consideration, determine whether—
a
to grant the application; or
b
to give a warning notice under section 62(2).
5
“The period for consideration” means the period of 3 months beginning with the date on which the regulator receives the application.
6
The FCA may refuse an application under this section if it appears to the FCA that it is desirable to do so in order to advance one or more of its operational objectives.
7
The PRA may refuse an application under this section if it appears to the PRA that it is desirable to do so in order to advance any of its objectives.
F1927A
An application may not be made under this section for the variation or removal of a condition, or a limit on the period for which an approval has effect, where the condition or limit has effect by virtue of section 66.
8
The following provisions apply to an application made under this section for variation of an approval as they apply to an application for approval made under section 60—
section 60(2) to (8),
section 61(4) and (5),
section 62 F198, but as if in subsections (2), (3) and (4) the words “, or to grant the application subject to conditions or for a limited period (or both)” were omitted.
63ZBVariation of senior manager's approval on initiative of regulator
1
The FCA may vary an approval under section 59 given by the FCA or the PRA for the performance of a designated senior management function in relation to the carrying on of a regulated activity by F257a relevantF257an authorised person if the FCA considers that it is desirable to do so in order to advance one or more of its operational objectives.
2
The PRA may vary an approval under section 59 for the performance of a designated senior management function in relation to the carrying on of a regulated activity by F258a relevantF258an authorised person if—
a
either—
i
the PRA gave the approval, or
ii
the FCA gave the approval and the F259relevant authorised person is a PRA-authorised person, and
b
the PRA considers that it is desirable to do so in order to advance any of its objectives.
3
A regulator may vary an approval by—
a
imposing a condition,
b
varying a condition,
c
removing a condition, F200...
d
e
where the approval has effect for a limited period, varying that period or removing the limit on the period for which the approval is to have effect.
4
Before one regulator varies an approval given by the other regulator, it must consult the other regulator.
F1994A
Before one regulator varies an approval which was last varied by the other regulator, it must consult the other regulator.
5
F260In this section “designated senior management function” means a function designated as a senior management function under section 59(6A) or (6B).
6
F260For the meaning of “relevant authorised person”, see section 71A.
63ZCExercise of power under section 63ZB: procedure
1
This section applies to an exercise, by either regulator, of the power to vary an approval under section 63ZB.
2
A variation takes effect—
a
immediately, if the notice given under subsection (4) states that that is the case,
b
on such date as is specified in the notice, or
c
if no date is specified in the notice, when the matter to which the notice relates is no longer open to review.
3
A variation may be expressed to take effect immediately (or on a specified date) only if the regulator concerned, having regard to the ground on which it is exercising the power to vary, reasonably considers that it is necessary for the variation to take effect immediately (or on that date).
4
If either regulator proposes to vary an approval or varies an approval with immediate effect, it must give each of the interested parties written notice.
5
The notice must—
a
give details of the variation,
b
state the regulator's reasons for the variation,
c
inform the interested parties that each of them may make representations to the regulator within such period as may be specified in the notice (whether or not any of the interested parties has referred the matter to the Tribunal),
d
inform the interested parties of when the variation takes effect, and
e
inform the interested parties of the right of each of them to refer the matter to the Tribunal.
6
“The interested parties”, in relation to an approval, are—
a
the person on whose application it was given (“A”),
b
the person in respect of whom it was given (“B”), and
c
the person by whom B's services are retained, if not A.
7
The regulator giving the notice may extend the period allowed under the notice for making representations.
8
If having considered the representations made by the interested parties, the regulator decides—
a
to vary the approval, or
b
if the variation has taken effect, not to rescind it,
it must give each of the interested parties written notice.
9
If having considered the representations made by the interested parties, the regulator decides—
a
not to vary the approval,
b
to vary the approval in a different way, or
c
if the variation has taken effect, to rescind it,
it must give each of the interested parties written notice.
10
A notice under subsection (8) must inform the interested parties of the right of each of them to refer the matter to the Tribunal.
11
A notice under subsection (9)(b) must comply with subsection (5).
12
If a notice informs the interested parties of the right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.
13
For the purposes of subsection (2)(c), whether a matter is open to review is to be determined in accordance with section 391(8).
14
“Approval” means an approval under section 59.
63ZDF116Statement of policy relating to conditional approval and variation
1
Each regulator must prepare and issue a statement of its policy with respect to—
a
its giving of approval under section 59 subject to conditions or for a limited period only, and
b
its variation under section 63ZA or 63ZB of an approval given under section 59.
2
A regulator may at any time alter or replace a statement issued by it under this section.
3
If a statement issued under this section is altered or replaced by a regulator, the regulator must issue the altered or replacement statement.
4
A statement issued under this section must be published by the regulator concerned in the way appearing to the regulator to be best calculated to bring it to the attention of the public.
5
A regulator may charge a reasonable fee for providing a person with a copy of a statement published under this section.
6
A regulator must, without delay, give the Treasury a copy of any statement which it publishes under this section.
63ZEStatement of policy: procedure
1
Before issuing a statement of policy under section 63ZD, a regulator (“the issuing regulator”) must—
a
consult the other regulator, and
b
publish a draft of the proposed statement in the way appearing to the issuing regulator to be best calculated to bring it to the attention of the public.
2
The duty of the FCA to consult the PRA under subsection (1)(a) applies only in so far as the statement of policy applies to persons whose approval under section 59 relates to the performance of a function designated by the FCA as a senior management function under section 59(6A) in relation to the carrying on by PRA-authorised persons of regulated activities.
3
The draft must be accompanied by notice that representations about the proposal may be made to the issuing regulator within a specified time.
4
Before issuing the proposed statement, the issuing regulator must have regard to any representations made to it in accordance with subsection (3).
5
If the issuing regulator issues the proposed statement it must publish an account, in general terms, of—
a
the representations made to it in accordance with subsection (3), and
b
its response to them.
6
If the statement differs from the draft published under subsection (1) in a way which is in the opinion of the issuing regulator significant, the issuing regulator—
a
must before issuing it carry out any consultation required by subsection (1)(a), and
b
must (in addition to complying with subsection (5)) publish details of the difference.
7
The issuing regulator may charge a reasonable fee for providing a person with a draft published under subsection (1)(b).
8
This section also applies to a proposal to alter or replace a statement.
F15Performance of controlled functions without approval
Ss. 63A-63D and preceding cross-heading inserted (8.6.2010) by Financial Services Act 2010 (c. 28), ss. 11, 26(2)(b)
C5663APower to impose penalties
1
If the F103appropriate regulator is satisfied that—
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
F156b
P, when performing the function, is not acting in accordance with an approval given under section 59.
3
The F103appropriate regulator 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).
C574
C585
For this purpose the F103appropriate regulator 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.
F1045A
The appropriate regulator”—
a
in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA, and
b
in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA.
F1185B
The relevant period” is—
a
in relation to the performance of a controlled function without approval before the day on which this subsection comes into force, the period of 3 years, and
b
in relation to the performance of a controlled function without approval on or after that day, the period of 6 years.
6
Any F105other expression which is used both in this section and section 59 has the same meaning in this section as in that section.
C5663BProcedure and right to refer to Tribunal
1
If F106a regulator 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 F106a regulator 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 F106a regulator decides to impose a penalty on a person under section 63A, the person may refer the matter to the Tribunal.
C5663CStatement of policy
1
F22Each regulator 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
F23Each regulator'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;
b
the extent to which the person could reasonably be expected to have known that a controlled function was performed without approval;
c
the length of the period during which the person performed a controlled function without approval; and
d
whether the person on whom the penalty is to be imposed is an individual.
3
F24Each regulator'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 F25the regulator that has issued the statement 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
6
If a statement issued under this section is altered or F28replaced by a regulator, the regulator must issue the altered or replaced statement.
7
F29A regulator must, without delay, give the Treasury a copy of any statement which it publishes under this section.
8
9
The F32regulator may charge a reasonable fee for providing a person with a copy of the statement.
C5910
In exercising, or deciding whether to exercise, its power under section 63A in the case of any particular person, F33a regulator must have regard to any statement of policy published F34by it under this section and in force at a time when the person concerned performed a controlled function without approval.
C61C69C7863DStatement of policy: procedure
1
2
The draft must be accompanied by notice that representations about the proposal may be made to the F37regulator within a specified time.
3
Before issuing the proposed statement, the F38regulator must have regard to any representations made to it in accordance with subsection (2).
4
If the F39regulator 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
6
7
This section also applies to a proposal to alter or replace a statement.
F223Certification of employees
Ss. 63E, 63F inserted (25.7.2014 for specified purposes, 7.3.2016 for the insertion of s. 63F otherwise, 7.3.2017 in so far as not already in force) by Financial Services (Banking Reform) Act 2013 (c. 33), ss. 29, 148(5); S.I. 2014/1819, art. 2(2)(b); S.I. 2015/490, art. 2(1)(a)(2) (with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660))
63ECertification of employees by F226relevant authorised persons
1
F246A relevantF246An authorised person (“A”) must take reasonable care to ensure that no employee of A performs a specified function under an arrangement entered into by A in relation to the carrying on by A of a regulated activity, unless the employee has a valid certificate issued by A under section 63F.
2
“Specified function”—
a
in relation to the carrying on of a regulated activity by a PRA-authorised person, means a function of a description specified in rules made by the FCA or the PRA, and
b
in relation to the carrying on of a regulated activity by any other authorised person, means a function of a description specified in rules made by the FCA.
3
The FCA may specify a description of function under subsection (2)(a) or (b) only if, in relation to the carrying on of a regulated activity by F247a relevantF247an authorised person of a particular description—
a
b
the FCA is satisfied that the function is nevertheless a significant-harm function.
4
The PRA may specify a description of function under subsection (2)(a) only if, in relation to the carrying on of a regulated activity by a F248relevant PRA-authorised person of a particular description—
a
the function is not a controlled function in relation to the carrying on of that activity by a F248relevant PRA-authorised person of that description, but
b
the PRA is satisfied that the function is nevertheless a significant-harm function.
5
A function is a “significant-harm function”, in relation to the carrying on of a regulated activity by an authorised person, if—
a
the function will require the person performing it to be involved in one or more aspects of the authorised person's affairs, so far as relating to the activity, and
b
those aspects involve, or might involve, a risk of significant harm to the authorised person or any of its customers.
6
Each regulator must—
a
keep under review the exercise of its power under subsection (2) to specify any significant-harm function as a specified function, and
b
exercise that power in a way that it considers will minimise the risk of employees of F249relevant authorised persons performing significant-harm functions which they are not fit and proper persons to perform.
7
Subsection (1) does not apply to an arrangement which allows an employee to perform a function if the question of whether the employee is a fit and proper person to perform the function is reserved under any of the single market directives or the emission allowance auctioning regulation to an authority in a country or territory outside the United Kingdom.
8
In this section—
“controlled function” has the meaning given by section 59(3);
“customer”, in relation to an authorised person, means a person who is using, or who is or may be contemplating using, any of the services provided by the authorised person;
F250“relevant PRA-authorised person” means a PRA-authorised person that is a relevant authorised person.
9
In this section any reference to an employee of a person (“A”) includes a reference to a person who—
a
personally provides, or is under an obligation personally to provide, services to A under an arrangement made between A and the person providing the services or another person, and
b
is subject to (or to the right of) supervision, direction or control by A as to the manner in which those services are provided.
10
F251For the meaning of “relevant authorised person”, see section 71A.
63FIssuing of certificates
1
2
In deciding whether the person is a fit and proper person to perform the function, the F253relevant authorised person must have regard, in particular, to whether the person—
a
has obtained a qualification,
b
has undergone, or is undergoing, training,
c
possesses a level of competence, or
d
has the personal characteristics,
required by general rules made by the appropriate regulator in relation to employees performing functions of that kind.
3
In subsection (2) “the appropriate regulator” means—
a
in relation to employees of PRA-authorised persons, the FCA or the PRA, and
b
in relation to employees of any other authorised person, the FCA.
4
a
state that the authorised person is satisfied that the person is a fit and proper person to perform the function to which the certificate relates, and
b
set out the aspects of the affairs of the authorised person in which the person will be involved in performing the function.
5
A certificate issued under this section is valid for a period of 12 months beginning with the day on which it is issued.
6
If, after having considered whether a person is a fit and proper person to perform a specified function, F255a relevantF255an authorised person decides not to issue a certificate to the person under this section, the authorised person must give the person a notice in writing stating—
a
what steps (if any) the authorised person proposes to take in relation to the person as a result of the decision, and
b
the reasons for proposing to take those steps.
7
8
Expressions used in this section and in section 63E have the same meaning in this section as they have in that section.
F133...
Ss. 64, 65 and cross-heading omitted (25.7.2014 for specified purposes, 7.3.2016 in so far as not already in force) by virtue of Financial Services (Banking Reform) Act 2013 (c. 33), ss. 30(2), 148(5); S.I. 2014/1819, art. 2(2)(c); S.I. 2015/490, art. 2(1)(b) (as amended by S.I. 2015/2055, art. 2(2) and with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660))
F13364 Conduct: statements and codes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F13365 Statements and codes: procedure.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F134Conduct of approved persons and others
Ss. 64A, 64B and cross-heading inserted (25.7.2014 for specified purposes, 7.3.2016 for specified purposes) by Financial Services (Banking Reform) Act 2013 (c. 33), ss. 30(3), 148(5); S.I. 2014/1819, art. 2(2)(c); S.I. 2015/490, art. 2(1)(d) (as inserted by S.I. 2015/2055, art. 2(4) and with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660))
64ARules of conduct
1
If it appears to the FCA to be necessary or expedient for the purpose of advancing one or more of its operational objectives, the FCA may make rules about the conduct of the following persons—
a
persons in relation to whom either regulator has given its approval under section 59;
b
F204c
persons who are directors of authorised persons.
2
If it appears to the PRA to be necessary or expedient for the purpose of advancing any of its objectives, the PRA may make rules about the conduct of the following persons—
a
persons in relation to whom it has given its approval under section 59;
b
persons in relation to whom the FCA has given its approval under section 59 in respect of the performance by them of a relevant senior management function in relation to the carrying on by a PRA-authorised person of a regulated activity;
c
persons who are employees of F262relevant PRA-authorised persons.
F205d
persons who are directors of PRA-authorised persons.
3
In subsection (2)—
F263“relevant PRA-authorised person” means a PRA-authorised person that is a relevant authorised person (see section 71A), and“relevant senior management function” means a function which the PRA is satisfied is a senior management function as defined in section 59ZA (whether or not the function has been designated as such by the FCA).
4
Rules made under this section must relate to the conduct of persons in relation to the performance by them of qualifying functions.
5
In subsection (4) “qualifying function”, in relation to a person, means a function relating to the carrying on of activities (whether or not regulated activities) by—
a
in the case of an approved person, the person on whose application approval was given, F206...
F207ab
in the case of a person who is a director of an authorised person but is not an approved person, that authorised person, and
b
in any other case, the person's employer.
6
In this section any reference to an employee of a person (“P”) includes a reference to a person who—
a
personally provides, or is under an obligation personally to provide, services to P under an arrangement made between P and the person providing the services or another person, and
b
is subject to (or to the right of) supervision, direction or control by P as to the manner in which those services are provided,
and “employer” is to be read accordingly.
F2037
In this section “director”, in relation to an authorised person, means a member of the board of directors, or if there is no such board, the equivalent body responsible for the management of the authorised person concerned.
64BRules of conduct: responsibilities of F227relevant authorised persons
1
This section applies where a regulator makes rules under section 64A (“conduct rules”).
2
Every F264relevant authorised person must—
a
notify all relevant persons of the conduct rules that apply in relation to them, and
b
take all reasonable steps to secure that those persons understand how those rules apply in relation to them.
3
4
In this section “relevant person”, in relation to an authorised person, means—
a
any person in relation to whom an approval is given under section 59 on the application of the authorised person, F209...
b
any employee of the authorised person F210, and
c
any person who is a director of the authorised person.
F2115
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
In this section “employee”, in relation to an authorised person, has the same meaning as in section 64A.
F2086A
In this section “director”, in relation to an authorised person, has the same meaning as in section 64A.
7
F266For the meaning of “relevant authorised person”, see section 71A.
64CF135Requirement for F228relevant authorised persons to notify regulator of disciplinary action
1
If—
a
b
the reason, or one of the reasons, for taking that action is a reason specified in rules made by the appropriate regulator for the purposes of this section,
the F268relevant authorised person must notify that regulator of that fact.
2
“Disciplinary action”, in relation to a person, means any of the following—
a
the issuing of a formal written warning;
b
the suspension or dismissal of the person;
c
the reduction or recovery of any of the person's remuneration.
3
“The appropriate regulator” means—
a
in relation to F269relevant authorised persons that are PRA-authorised persons, the FCA or the PRA;
b
in relation to any other F270relevant authorised persons, the FCA.
4
“Relevant person” has the same meaning as in section 64B.
5
F271For the meaning of “relevant authorised person”, see section 71A.
C34C35C36C37C60C64C71C70C72C7766 Disciplinary powers.
1
F43A regulator may take action against a person under this section F44(whether or not it has given its approval in relation to the person) if—
a
it appears to the F45regulator that he is guilty of misconduct; and
b
the F46regulator is satisfied that it is appropriate in all the circumstances to take action against him.
F1571A
For provision about when a person is guilty of misconduct for the purposes of action by a regulator—
a
see section 66A, in the case of action by the FCA, and
b
see section 66B, in the case of action by the PRA.
F1582
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1642A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
If the F47regulator is entitled to take action under this section against a person, F1it may do one or more of the following——
C38a
impose a penalty on him of such amount as it considers appropriate;
F2aa
suspend, for such period as it considers appropriate, any approval of the performance by him of any function to which the approval relates;
F159ab
impose, for such period as it considers appropriate, any conditions in relation to any such approval which it considers appropriate;
ac
limit the period for which any such approval is to have effect;
b
publish a statement of his misconduct.
F33A
The period for which a suspension or F160condition is to have effect may not exceed two years.
3B
A suspension F166, condition or limitation may have effect in relation to part of a function.
3C
A F167condition may, in particular, be imposed so as to require any person to take, or refrain from taking, specified action.
3D
F48The regulator taking action under this section may—
b
vary a suspension or F170condition so as to reduce the period for which it has effect or otherwise to limit its effect.
F161c
vary a limitation so as to increase the period for which the approval is to have effect.
4
5
For the purposes of subsection (4)—
a
F51a regulator is to be treated as knowing of misconduct if it has information from which the misconduct can reasonably be inferred; and
b
proceedings against a person in respect of misconduct are to be treated as begun when a warning notice is given to him under section 67(1).
F1205ZA
“The relevant period” is—
a
in relation to misconduct which occurs before the day on which this subsection comes into force, the period of 3 years, and
b
in relation to misconduct which occurs on or after that day, the period of 6 years.
F45A
“Approval” means an approval given under section 59.
F1656
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1627
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F58
In relation to any time while a suspension is in force under subsection (3)(aa) in relation to part of a function, any reference in section 59 or 63A to the performance of a function includes the performance of part of a function.
9
If at any time a F163condition imposed under subsection (3)(ab) is contravened, the approval in relation to the person concerned is to be treated for the purposes of sections 59 and 63A as if it had been withdrawn at that time.
C7766AF182Misconduct: action by the FCA
1
For the purposes of action by the FCA under section 66, a person is guilty of misconduct if any of conditions A to C is met in relation to the person.
2
Condition A is that—
a
the person has at any time failed to comply with rules made by the FCA under section 64A, and
3
Condition B is that—
a
the person has at any time been knowingly concerned in a contravention of a relevant requirement by an authorised person, and
4
In this section “relevant requirement” means a requirement—
a
imposed by or under this Act, F171...
F180ab
imposed by the Undertakings for Collective Investment in Transferable Securities Regulations 2011, or
b
imposed by any qualifying EU provision specified, or of a description specified, for the purposes of this subsection by the Treasury by order.
5
Condition C is that—
a
b
there has at that time been (or continued to be) a contravention of a relevant requirement by the authorised person, F183...
c
the senior manager was at that time responsible for the management of any of the authorised person's activities in relation to which the contravention occurred F184, and
d
the senior manager did not take such steps as a person in the senior manager's position could reasonably be expected to take to avoid the contravention occurring (or continuing).
F1856
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
For the purposes of subsection (5)—
“senior manager”, in relation to
F275a relevantF275an authorised person, means a person who has approval under section 59 to perform a designated senior management function in relation to the carrying on by the authorised person of a regulated activity;F276“designated senior management function” means a function designated as a senior management function under section 59(6A) or (6B).
8
In this section—
“approved person”—
- a
means a person in relation to whom an approval is given under section 59, and
- b
in relation to an authorised person, means a person in relation to whom such approval is given on the application of the authorised person;
- a
F216“director”, in relation to an authorised person, has the same meaning as in section 64A;
“employee”, in relation to a person, has the same meaning as in section 64A.
9
F277For the meaning of “relevant authorised person”, see section 71A.
C7766BMisconduct: action by the PRA
1
For the purposes of action by the PRA under section 66, a person is guilty of misconduct if any of conditions A to C is met in relation to the person.
2
Condition A is that—
a
the person has at any time failed to comply with rules made by the PRA under section 64A, and
3
Condition B is that—
a
the person has at any time been knowingly concerned in a contravention of a relevant requirement by a PRA-authorised person, and
b
at that time the person was—
i
an approved person in respect of the performance of a relevant senior management function in relation to the carrying on by the PRA-authorised person of a regulated activity, F219...
F280ii
in the case of a relevant PRA-authorised person, an employee of the authorised person
iii
a director of the PRA-authorised person.
4
In this section “relevant requirement” means a requirement—
a
imposed by or under this Act, or
b
imposed by any qualifying EU provision specified, or of a description specified, for the purposes of this subsection by the Treasury by order.
5
Condition C is that—
a
the person has at any time been a senior manager in relation to a F281relevant PRA-authorised person,
b
there has at that time been (or continued to be) a contravention of a relevant requirement by the authorised person, F186...
c
the senior manager was at that time responsible for the management of any of the authorised person's activities in relation to which the contravention occurred F187, and
d
the senior manager did not take such steps as a person in the senior manager's position could reasonably be expected to take to avoid the contravention occurring (or continuing).
F1886
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
For the purposes of subsection (5)—
“senior manager”, in relation to a
F282relevantPRA-authorised person, means a person who has approval under section 59 to perform a designated senior management function in relation to the carrying on by the authorised person of a regulated activity;F283“designated senior management function” means a function designated as a senior management function under section 59(6A) or (6B).
8
In this section—
“approved person”—
- a
means a person in relation to whom—
- i
the PRA has given its approval under section 59, or
- ii
the FCA has given its approval under section 59 in respect of the performance by the person of a relevant senior management function in relation to the carrying on by a PRA-authorised person of a regulated activity, and
- i
- b
in relation to an authorised person, means a person in relation to whom approval under section 59 is given on the application of the authorised person;
- a
F221“director”, in relation to an authorised person, has the same meaning as in section 64A;
“employee”, in relation to a person, has the same meaning as in section 64A;
F278“relevant PRA-authorised person” means a PRA-authorised person that is a relevant authorised person;“relevant senior management function” means a function which the PRA is satisfied is a senior management function as defined in section 59ZA (whether or not the function has been designated as such by the FCA).
9
F284For the meaning of “relevant authorised person”, see section 71A.
C39C40C41C42C60C65C71C70C72C7767 Disciplinary measures: procedure and right to refer to Tribunal.
1
2
A warning notice about a proposal to impose a penalty must state the amount of the penalty.
F72A
A warning notice about a proposal—
a
to suspend an approval, or
b
to impose a F176condition in relation to the performance of a function,
must state the period for which the suspension or F176condition is to have effect.
F1732B
A warning notice about a proposal to limit the period for which an approval is to have effect must state the length of that period.
3
A warning notice about a proposal to publish a statement must set out the terms of the statement.
C434
5
A decision notice about the imposition of a penalty must state the amount of the penalty.
F95A
A decision notice about—
a
the suspension of an approval, or
b
the imposition of a F178condition in relation to the performance of a function,
must state the period for which the suspension or F178condition is to have effect.
F1745B
A decision notice about limiting the period for which an approval is to have effect must state the length of that period.
6
A decision notice about the publication of a statement must set out the terms of the statement.
7
F118
Approval” means an approval given under section 59.
9
“Other interested parties”, in relation to F111a person (“A”) in relation to whom approval has been given, are—
a
the person on whose application the approval was given (“B”); and
b
the person by whom A's services are retained, if not B.
F112...
C44C45C46C60C66C71C70C72C7768 Publication.
After a statement under section 66 is published, F113the regulator publishing it must send a copy of it to the person concerned and to any person to whom a copy of the decision notice was given.
C47C48C49C50C60C62C67C71C70C72C7769 Statement of policy.
1
F52Each regulator must prepare and issue a statement of its policy with respect to—
b
the amount of penalties under that section; F125...
d
the period for which approvals under section 59 are to have effect as a result of a limitation under section 66.
2
F53A regulator's policy in determining what the amount of a penalty should be F13, or what the period for which a suspension or restriction is to have effect should be, must include having regard to—
a
the seriousness of the misconduct in question in relation to the nature of the principle or requirement concerned;
b
the extent to which that misconduct was deliberate or reckless; and
c
whether F14the person against whom action is to be taken is an individual.
3
4
If a statement issued under this section is altered or F56replaced by a regulator, the regulator must issue the altered or replacement statement.
5
F57A regulator must, without delay, give the Treasury a copy of any statement which it publishes under this section.
6
7
The F60regulator may charge a reasonable fee for providing a person with a copy of the statement.
8
C51C52C53C54C60C63C68C71C70C72C7770 Statements of policy: procedure.
1
2
The draft must be accompanied by notice that representations about the proposal may be made to the F65regulator within a specified time.
3
Before issuing the proposed statement, the F66regulator must have regard to any representations made to it in accordance with subsection (2).
4
If the F67regulator 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
6
7
This section also applies to a proposal to alter or replace a statement.
Breach of statutory duty
I971 Actions for damages.
1
A contravention of section 56(6) or 59(1) or (2) is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.
2
In prescribed cases, a contravention of that kind which would be actionable at the suit of a private person is actionable at the suit of a person who is not a private person, subject to the defences and other incidents applying to actions for breach of statutory duty.
3
“Private person” has such meaning as may be prescribed.
F117 “Relevant authorised person”
S. 71A and cross-heading inserted (25.7.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), ss. 33, 148(5); S.I. 2014/1819, art. 2(1)(d)
71AMeaning of “relevant authorised person”
F2851
In this Part “relevant authorised person” means a UK institution which—
a
meets condition A or B, and
b
is not an insurer.
2
Condition A is that the institution has permission under Part 4A to carry on the regulated activity of accepting deposits.
3
Condition B is that—
a
the institution is an investment firm,
b
it has permission under Part 4A to carry on the regulated activity of dealing in investments as principal, and
c
when carried on by it, that activity is a PRA-regulated activity.
4
The Treasury may by order provide that authorised persons falling within any of the following descriptions are “relevant authorised persons” for the purposes of this Part—
a
non-UK institutions (or non-UK institutions of a specified description) that are credit institutions;
b
non-UK institutions that are investment firms of a specified description.
“Specified” means specified in the order.
5
If the Treasury propose to make an order under subsection (4) they must consult—
a
the FCA,
b
the PRA,
c
any organisations that appear to them to be representative of interests substantially affected by the proposals, and
d
any other persons that they consider appropriate.
6
In this section—
a
“UK institution” means an institution which is incorporated in, or formed under the law of any part of, the United Kingdom;
b
“non-UK institution” means an institution that is not a UK institution;
c
“credit institution” means any credit institution as defined in Article 4.1(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council;
d
“insurer” means an institution which is authorised under this Act to carry on the regulated activity of effecting or carrying out contracts of insurance as principal.
7
Subsections (2), (3) and (6)(d) are to be read in accordance with Schedule 2, taken with any order under section 22.
F222Removal of directors and senior executives and appointment of temporary manager
Ss. 71B-71I and cross-heading inserted (16.12.2016) by The Bank Recovery and Resolution Order 2016 (S.I. 2016/1239), arts. 1(2), 32
71BRemoval of directors and senior executives
1
If the appropriate regulator is satisfied that the conditions in section 71D(1) and (2) are met in relation to a relevant firm, the appropriate regulator may require the firm to remove—
a
any person who is a director of the firm;
b
any person who is a senior executive of the firm.
2
If the appropriate regulator imposes a requirement under subsection (1), the regulator may also require the relevant firm—
a
to replace a director or senior executive who has been removed, and
b
to take any step needed to give effect to the replacement, including, where necessary, calling a general meeting of the firm’s shareholders or members.
71CTemporary manager
1
If the appropriate regulator is satisfied—
a
in the case of a relevant firm, that the conditions in section 71D(1), (2) and (4) are met in relation to that firm, or
b
in the case of a parent undertaking which is not a relevant firm, that the conditions in section 71D(1) and (4) are met in relation to that parent undertaking,
the appropriate regulator may appoint a person to act (or one or more persons to act jointly) as a temporary manager of that firm or that parent undertaking.
2
Where the appropriate regulator makes an appointment under subsection (1) in relation to a parent undertaking which is not a relevant firm, the regulator may also require the undertaking to remove—
a
all of its directors;
b
all of its senior executives.
3
A temporary manager may be appointed under subsection (1)—
a
to replace the directors of a relevant firm or a parent undertaking where they have been removed in compliance with a requirement imposed under section 71B or subsection (2), or
b
to work with the directors of a relevant firm or a parent undertaking.
4
A temporary manager has the functions specified in the instrument of appointment (see section 71F).
5
The functions which may be specified include (amongst other things)—
a
ascertaining the financial position of the relevant firm or the parent undertaking;
b
managing the business or part of the business of the relevant firm or the parent undertaking in order to preserve or restore the financial position of the firm or the parent undertaking;
c
taking measures to restore the prudent management of the relevant firm or the parent undertaking;
d
any function of the directors.
6
The temporary manager may, with the consent of the appropriate regulator—
a
require the directors to call a general meeting of the shareholders or members of the relevant firm or the parent undertaking, or
b
in the case where all of the directors have been removed in compliance with a requirement imposed under section 71B or subsection (2), call a general meeting of the shareholders or members of the relevant firm or the parent undertaking.
7
The temporary manager may propose business for consideration at the general meeting.
8
If the temporary manager is being appointed to work with the directors, the appropriate regulator—
a
may require the directors not to exercise specified functions during the period of appointment;
b
may require the directors to consult the temporary manager, or obtain the consent of the temporary manager, before taking specified decisions or specified action.
“Specified” means specified in the requirement.
71DSections 71B and 71C: conditions
1
The condition in this subsection is met in relation to a relevant firm or a parent undertaking if—
a
there is a deterioration in the financial situation of the relevant firm or the parent undertaking which is a significant deterioration, or
b
there is a serious infringement by the relevant firm or the parent undertaking of—
i
a relevant requirement, or
ii
its memorandum or articles of association or other constituent instrument.
2
The condition in this subsection is met in relation to a relevant firm if it is not reasonably likely that the deterioration would be reversed or the infringement would be brought to an end by any measure of a kind described in Article 27(1) of the recovery and resolution directive which could be taken by the appropriate regulator under the provisions listed in subsection (3).
3
The provisions mentioned in subsection (2) are—
a
section 55J (variation or cancellation on initiative of regulator),
b
section 55L (imposition of requirements by FCA),
c
section 55M (imposition of requirements by PRA),
d
section 55PB (requirements relating to general meetings),
e
section 56 (prohibition orders),
f
section 63 (withdrawal of approval),
g
section 63ZA (variation of senior manager’s approval at request of authorised person),
h
section 63ZB (variation of senior manager’s approval on initiative of regulator),
i
section 63A (power to impose penalties),
j
section 66 (disciplinary powers),
k
Part 12A (powers exercisable in relation to parent undertakings), or
l
Part 14 (disciplinary measures).
4
The condition in this subsection is met if the following action would not be sufficient to reverse the deterioration or bring the infringement to an end—
a
in the case of a relevant firm, the imposition of one or more requirements under section 71B (removal and replacement of directors and senior executives); or
b
in the case of a parent undertaking which is not a relevant firm, the exercise of any of the appropriate regulator’s powers under Part 12A.
5
For the purposes of this section—
a
“relevant requirement” has the meaning given in section 204A;
b
a deterioration in the financial situation of the relevant firm or the parent undertaking is significant if—
i
in the case of a relevant firm, or a parent undertaking which is an authorised person, it no longer satisfies, or is likely to fail to satisfy, the threshold conditions relating to its financial resources which apply to it under Schedule 6;
ii
in the case of a parent undertaking which is not an authorised person, the deterioration threatens the viability of the parent undertaking.
71ETemporary manager: further provisions in relation to the appointment
1
Before appointing a person to act as a temporary manager, the appropriate regulator must be satisfied that the person—
a
has the qualifications, ability and knowledge to carry out the functions to be given to the temporary manager, and
b
would not be subject to any conflict of interest as a result of the appointment.
2
A person may not be appointed to act as a temporary manager for a period longer than one year, but is eligible for re-appointment (or further re-appointment) if subsection 71C(1) continues to apply in relation to the relevant firm or parent undertaking.
3
The appropriate regulator may vary the terms of the appointment of a temporary manager, or remove the temporary manager, at any time.
4
A temporary manager is not liable for damages in respect of anything done in good faith for the purposes of or in connection with the functions of the appointment (subject to section 8 of the Human Rights Act 1998).
71FTemporary manager: instrument of appointment
1
The power in section 71C(1) is to be exercised by an instrument of appointment.
2
The instrument of appointment must—
a
specify the functions of the temporary manager,
b
specify the date on which the appointment of the temporary manager has effect,
c
specify the period for which the temporary manager is appointed, and
d
make provision for the resignation and replacement of the person who is appointed as the temporary manager.
3
The instrument of appointment may—
a
require the temporary manager to consult the appropriate regulator or other specified person before exercising specified functions,
b
specify particular matters on which the appropriate regulator or other specified person must be consulted, and
c
provide that the temporary manager is not to exercise specified functions without the consent of the appropriate regulator or other specified person.
4
The instrument of appointment may require the temporary manager to make reports to the appropriate regulator, at specified times or intervals, on—
a
the financial position of the relevant firm or the parent undertaking,
b
the actions taken by the temporary manager during the course of the temporary manager’s appointment,
c
any other specified matters.
5
In subsections (3) and (4), “specified” means specified in the instrument of appointment.
6
The instrument of appointment may provide for the payment of remuneration and allowances to a temporary manager.
7
Provision under subsection (6) may provide that the amounts are—
a
to be paid by the appropriate regulator, or
b
to be determined by the appropriate regulator and paid by the relevant firm or the parent undertaking.
8
If a temporary manager—
a
is appointed to replace the directors of the relevant firm or the parent undertaking, or
b
is appointed to work with the directors of the relevant firm or the parent undertaking and has the power to represent that firm or parent undertaking,
the appropriate regulator must publish the instrument of appointment on its website.
71GRight to refer matters to the Tribunal
1
A relevant firm which is aggrieved by—
a
the imposition of a requirement on that firm under section 71B, or
b
the appointment, or the terms of the appointment, of a person to act as a temporary manager of that firm under section 71C(1),
may refer the matter to the Tribunal.
2
A parent undertaking which is aggrieved by—
a
the imposition of a requirement on that parent undertaking under section 71C(2), or
b
the appointment, or the terms of the appointment, of a person to act as a temporary manager of that parent undertaking under section 71C(1),
may refer the matter to the Tribunal.
3
A director (or a former director) of a relevant firm or a parent undertaking who is aggrieved by the imposition of a requirement on that director under section 71C(8) may refer the matter to the Tribunal.
4
A director or senior executive (or a former director or senior executive) of a relevant firm or a parent undertaking who is aggrieved by the imposition of a requirement on that firm or parent undertaking under section 71B or 71C(2) may refer the matter to the Tribunal.
71HRemoval of directors and senior executives and appointment of temporary manager: procedure
1
A requirement under section 71B or 71C(2) or (8) or the appointment of a temporary manager under section 71C(1) may be expressed to take effect immediately or on a specified date only if the appropriate regulator, having regard to the grounds for imposing the requirement or making the appointment, reasonably considers that it is necessary for the requirement or the appointment to take effect immediately or on that date.
2
If either regulator proposes to impose a requirement on a relevant firm under section 71B or a parent undertaking under section 71C(2), or imposes such a requirement with immediate effect, it must give written notice—
a
to that firm or parent undertaking, and
b
to each of the directors or senior executives to whom the requirement relates (“the interested parties”).
3
If either regulator—
a
proposes to appoint a person to act as a temporary manager under section 71C or to vary the terms on which such a person is appointed, or
b
makes such an appointment or variation with immediate effect,
the regulator must give written notice to the relevant firm or the parent undertaking concerned.
4
If either regulator proposes to impose a requirement on the directors under section 71C(8), or imposes such a requirement with immediate effect, the regulator must give written notice to each director.
5
A notice given under subsection (2) must—
a
give details of the requirement,
b
identify each of the directors or senior executives to whom the requirement relates,
c
give the regulator’s reasons for imposing the requirement—
i
in the case of a notice given to the relevant firm or the parent undertaking, in relation to each interested party;
ii
in the case of a notice given to an interested party, in relation to that interested party,
d
inform the relevant firm or the parent undertaking and the interested parties that each of them may make representations to the regulator within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal),
e
state when the requirement takes effect, and
f
inform the relevant firm or the parent undertaking and each of the interested parties of their right to refer the matter to the Tribunal.
6
A notice given under subsection (3) must—
a
state when the appointment or variation takes effect, and be accompanied by the instrument, or revised instrument, of appointment,
b
give the regulator’s reasons for making the appointment or variation,
c
inform the relevant firm or the parent undertaking that it may make representations to the regulator within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), and
d
inform the relevant firm or the parent undertaking of its right to refer the matter to the Tribunal.
7
A notice given under subsection (4) must—
a
give details of the requirement,
b
give the regulator’s reasons for imposing the requirement,
c
state when the requirement takes effect,
d
inform the director that the director may make representations to the regulator within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), and
e
inform the director of the director’s right to refer the matter to the Tribunal.
8
The regulator may extend the period allowed by the notice given under subsection (2), (3) or (4) for making representations.
9
If, having considered any representations made by a person to whom notice (the “original notice”) has been given under subsection (2), (3) or (4), the regulator decides—
a
to impose the requirement, make the appointment or vary the terms of an appointment in accordance with the original notice, or
b
not to rescind the imposition of any such requirement or the making of any such appointment or variation which has already taken effect,
the regulator must give written notice to each person to whom the original notice was given.
10
A notice under subsection (9) must inform the person to whom it is given of the right of that person to refer the matter to the Tribunal and give an indication of the procedure on such a reference.
11
If, having considered any representations made by a person to whom notice (the “original notice”) has been given under subsection (2), (3) or (4), the regulator decides—
a
to impose a requirement, make an appointment or a vary the terms of an appointment in a way that is different from the requirement, appointment or variation described in the original notice,
b
not to impose the requirement, make the appointment or vary the terms of an appointment in accordance with the original notice, or
c
to rescind the imposition of any such requirement, or the making of any such appointment or variation that has already taken effect,
the regulator must give written notice to each person to whom the original notice was given.
12
A notice under subsection (11)(a) about the imposition of a requirement under section 71B or 71C(2) must comply with subsection (5).
13
A notice under subsection (11)(a) about the appointment of a person as a temporary manager or the variation of the terms of the appointment of a person as a temporary manager must comply with subsection (6).
14
A notice under subsection (11)(a) about the imposition of a requirement under section 71C(8) must comply with subsection (7).
15
In this section, any reference to “appointment” includes “re-appointment”.
71ISections 71B to 71H: interpretation
1
For the purposes of sections 71B to 71H “relevant firm” means—
a
a bank as defined in section 2 of the Banking Act 2009,
b
a building society as defined in section 119 of the Building Societies Act 1986, or
c
an investment firm as defined in section 258A of the Banking Act 2009.
2
For the purposes of sections 71C to 71H, “parent undertaking” means an institution, financial holding company or mixed financial holding company which—
a
is incorporated in, or formed under the law of, any part of the United Kingdom,
b
is an EEA parent, and
c
either—
i
has a subsidiary which is an institution, or
ii
holds a participation (within the meaning given by Article 4.1(35) of the capital requirements regulation) in an institution.
3
For the purposes of subsection (2), an institution, financial holding company or mixed financial holding company is an EEA parent if it is not itself the subsidiary of an institution, financial holding company or mixed financial holding company set up in any EEA state.
4
In subsections (2) and (3)—
“institution” means a credit institution or an investment firm as defined in Article 2.1(2) and 2.1(3) of the recovery and resolution directive;
“financial holding company” and “mixed financial holding company” have the meanings given in Article 4.1(20) and 4.1(21) of the capital requirements regulation.
5
For the purposes of sections 71B to 71H—
“appropriate regulator” means—
- a
in relation to a PRA-authorised person, the PRA,
- b
in relation to any other authorised person, the FCA,
- c
in relation to a parent undertaking that is not an authorised person—
- i
the PRA, where the PRA is the consolidating supervisor in relation to that undertaking;
- ii
the FCA, where the FCA is the consolidating supervisor in relation to that undertaking;
- i
- a
“consolidating supervisor” means the competent authority responsible for the exercise of supervision on the basis of the consolidated situation (within the meaning of Article 4.1(47) of the capital requirements regulation) of an institution which is an EEA parent;
“director” includes, in relation to an undertaking which has no board of directors, a member of the equivalent management body responsible for the management of the undertaking concerned;
“the recovery and resolution directive” means Directive 2014/59/EU of the European Parliament and of the Council of 15th May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms;
“senior executive”, in relation to a relevant firm or a parent undertaking, means a person who—
- a
exercises executive functions within that firm or that undertaking; and
- b
is responsible, and directly accountable to the directors, for the day to day management of that firm or that undertaking.
- a
Pt. 5 modified (1.12.2001) by S.I. 2001/3592, arts. 1(2), 114(3)(a), 128(3)(a) (with art. 23(2))