C8 Part XVIIIF237Recognised investment exchanges, clearing houses and CSDs
Pt. 18 applied in part (with modifications) (12.12.2011) by The Recognised Auction Platforms Regulations 2011 (S.I. 2011/2699), reg. 7, Sch. 2 (as amended (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), reg. 1, Sch. para. 37 (with regs. 7(4), 9(1)))
Chapter I Exemption
General
285F238Exemption for recognised bodies etc.
1
In this Act—
a
“recognised investment exchange” means an investment exchange in relation to which a recognition order is in force;
F185b
“recognised clearing house” means—
i
a central counterparty in relation to which a recognition order is in force (in this Part referred to as a “recognised central counterparty”), or
ii
a clearing house which provides clearing services in the United Kingdom without doing so as a central counterparty, and in relation to which a recognition order is in force;
c
“EEA central counterparty” means a person established in an EEA State other than the United Kingdom who has been authorised by the competent authority of that State as a central counterparty pursuant to Article 17 of the EMIR regulation; F241...
d
“third country central counterparty” means a person established in a State which is not an EEA State who has been recognised by ESMA as a central counterparty pursuant to Article 25 of the EMIR regulation.
F242e
“recognised CSD” means a central securities depository in relation to which a recognition order is in force;
f
“EEA CSD” means a person established in an EEA State other than the United Kingdom who has been authorised by the competent authority of that State as a central securities depository pursuant to Article 16 of the CSD regulation; and
g
“third country CSD” means a central securities depository established in a State which is not an EEA State which has been recognised by ESMA pursuant to Article 25 of the CSD regulation.
2
A recognised investment exchange is exempt from the general prohibition as respects any regulated activity—
a
which is carried on as a part of the exchange’s business as an investment exchange; or
F182b
which is carried on for the purposes of, or in connection with, the provision by the exchange of services designed to facilitate the provision of clearing services by another person.
3
F183A recognised clearing house which is not a recognised central counterparty is exempt from the general prohibition as respects any regulated F184activity—
a
which is carried on for the purposes of, or in connection with, the provision of clearing services by the clearing house, or
b
which is carried on for the purposes of, or in connection with, the provision by the clearing house of services designed to facilitate the provision of clearing services by another person.
F3313ZA
Subsections (2) and (3) do not apply in respect of the regulated activity specified in article 63S of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (administering a benchmark).
F1803A
A recognised central counterparty is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, the services or activities specified in its recognition order.
3B
An EEA central counterparty is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, the services or activities specified in its authorisation granted pursuant to Article 17 of the EMIR regulation.
3C
A third country central counterparty is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, the services or activities specified in its recognition by ESMA pursuant to Article 25 of the EMIR regulation.
F2403D
A recognised CSD is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with—
a
the core services listed in Section A of the Annex to the CSD regulation which the central securities depository is authorised to provide pursuant to Article 16 or 19(1)(a) or (c) of that regulation, or
b
any non-banking-type ancillary services listed in or permitted under Section B of that Annex which the central securities depository is authorised to provide, including services notified under Article 19 of the CSD regulation.
3E
An EEA CSD is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, the services and activities covered by its authorisation granted pursuant to Article 16 of the CSD regulation (including additional services authorised or notified under Article 19 of that regulation).
3F
But where Article 23(2) of the CSD regulation applies to an EEA CSD, the EEA CSD is exempt from the general prohibition as mentioned in subsection (3E) only if Article 23(6) of that regulation is complied with.
3G
A third country CSD is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, the services and activities covered by its recognition by ESMA pursuant to Article 25 of the CSD regulation.
3H
But a recognised CSD, an EEA CSD or a third country CSD is not exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, any banking-type ancillary service listed in or permitted under Section C of the Annex to the CSD regulation.
F1814
The Treasury may by order amend paragraph (b) of subsection (2) or (3).
285AF27F239Powers exercisable in relation to recognised bodies
1
For the purposes of this Part, the FCA is “the appropriate regulator” in relation to recognised investment exchanges.
2
For the purposes of this Part, the Bank of England is “the appropriate regulator” in relation to recognised clearing houses F245, recognised CSDs and EEA CSDs.
3
In Schedule 17A—
a
b
Part 2 applies certain provisions of this Act in relation to the Bank of England in consequence of the conferring of functions on the Bank under this Part of this Act;
c
d
Part 4 makes provision about fees.
286 Qualification for recognition.
1
The Treasury may make regulations setting out the requirements—
a
b
which, if a recognition order is made, it must continue to satisfy if it is to remain a recognised body.
2
But if regulations contain provision as to the default rules of an investment exchange F247, clearing house or central securities depository, or as to proceedings taken under such rules by such a body, they require the approval of the Secretary of State.
3
“Default rules” means rules of an investment exchange F248, clearing house or central securities depository which provide for the taking of action in the event of a person’s appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts connected with the exchange F248, clearing house or central securities depository.
4
“Market contract” means—
a
b
such other kind of contract as may be prescribed.
F3074A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F3074B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F3074C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F3074D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F3074E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F284F
Regulations under subsection (1) may confer power on the appropriate regulator to make rules for the purposes of the regulations or of any specified provision made by the regulations.
5
Requirements resulting from this section are referred to in this Part as “recognition requirements”.
F16
In the case of an investment exchange, requirements resulting from this section are in addition to requirements which must be satisfied by the exchange as a result of section 290(1A) before F31the FCA may make a recognition order declaring the exchange to be a recognised investment exchange.
Applications for recognition
I1287 Application by an investment exchange.
1
Any body corporate or unincorporated association may apply to F32the FCA for an order declaring it to be a recognised investment exchange for the purposes of this Act.
2
The application must be made in such manner as F33the FCA may direct and must be accompanied by—
a
a copy of the applicant’s rules;
b
a copy of any guidance issued by the applicant;
c
the required particulars; and
d
such other information as F33the FCA may reasonably require for the purpose of determining the application.
3
The required particulars are—
a
particulars of any arrangements which the applicant has made, or proposes to make, for the provision F34by another person of clearing services in respect of transactions effected on the exchange;
b
c
a programme of operations which includes the types of business the applicant proposes to undertake and the applicant's proposed organisational structure;
d
such particulars of the persons who effectively direct the business and operations of the exchange as F36the FCA may reasonably require;
e
such particulars of the ownership of the exchange, and in particular of the identity and scale of interests of the persons who are in a position to exercise significant influence over the management of the exchange, whether directly or indirectly, as F37the FCA may reasonably require.
F34
Subsection (3)(c) to (e) does not apply to an application by an overseas applicant.
287AF308Application by an investment exchange: persons connected with an applicant
1
Subsection (2) applies where—
a
a body corporate or unincorporated association (“A”) makes an application under section 287 for an order declaring it to be a recognised investment exchange; and
b
A is—
i
connected with an EEA credit institution or EEA insurance undertaking; or
ii
controlled by a person who also controls an EEA credit institution or EEA insurance undertaking.
2
Before making a recognition order declaring A to be a recognised investment exchange under section 290, the FCA must consult the competent authority responsible for the supervision of the EEA credit institution or EEA insurance undertaking.
3
A is connected with an EEA credit institution or EEA insurance undertaking if—
a
A is a subsidiary undertaking of the EEA credit institution or EEA insurance undertaking; or
b
A is a subsidiary undertaking of a parent undertaking of the EEA credit institution or EEA insurance undertaking.
4
In this section—
“control” has the same meaning as in Article 4.1.35(b) (definitions) of the markets in financial instruments directive;
“EEA credit institution” means a credit institution (as defined by Article 4.1.27 of the markets in financial instruments directive) authorised in another EEA State under the capital requirements directive;
“EEA insurance undertaking” means an insurance undertaking (as defined by Article 13.1 of the Solvency 2 Directive) authorised in another EEA State.
I2288 Application by a clearing house.
F249A1
This section applies only in relation to an application by a clearing house.
F1871
A body corporate or unincorporated association which is established in the United Kingdom may, where it intends to provide clearing services as a central counterparty, apply to the Bank of England in accordance with Article 17 of the EMIR regulation for an order granting authorisation for the purposes of that Article and declaring it to be a recognised central counterparty for the purposes of this Act.
1A
A body corporate or unincorporated association may, where it intends to provide clearing services in the United Kingdom without doing so as a central counterparty, apply to the Bank of England for an order declaring it to be for the purposes of this Act a recognised clearing house which is not a recognised central counterparty.
2
F188An application under subsection (1A) must be made in such manner as F38the Bank of England may direct and must be accompanied by—
a
a copy of the applicant’s rules;
b
a copy of any guidance issued by the applicant;
c
the required particulars; and
d
such other information as F39the Bank may reasonably require for the purpose of determining the application.
3
The required particulars are—
a
if the applicant makes, or proposes to make, clearing arrangements with a recognised investment exchange, particulars of those arrangements;
b
if the applicant proposes to provide clearing services F40or services falling within section 285(3)(b) for persons other than recognised investment exchanges, particulars of the criteria which it will apply when determining to whom it will provide those services.
288AF233Application by a central securities depository
Where a legal person which is established in the United Kingdom intends—
a
to operate a securities settlement system referred to in point (3) of Section A of the Annex to the CSD regulation, and
b
to provide at least one other core service listed in Section A of that Annex,
it may apply to the Bank of England in accordance with Article 17 of the CSD regulation and any directly applicable EU regulation made under that Article for an order granting authorisation for the purposes of Article 16 of that regulation and declaring it to be a recognised CSD for the purposes of this Act.
289 Applications: supplementary.
1
At any time after receiving an application and before determining it, F41the appropriate regulator may require the applicant to provide such further information as it reasonably considers necessary to enable it to determine the application.
2
3
Different directions may be given, or requirements imposed, by F143the appropriate regulator with respect to different applications.
F1894
In relation to an application under section 288(1), this section does not apply to information which can be required under Article 17 of the EMIR regulation.
F2505
In relation to an application under section 288A, this section applies only in relation to information which the Bank of England may require in connection with recognition requirements which do not derive from the CSD regulation or any directly applicable EU regulation made under the CSD regulation.
I3290 Recognition orders.
F1911
If it appears to the appropriate regulator that the applicant satisfies the recognition requirements applicable in its case, the regulator may—
a
where the application is made under section 287, make a recognition order declaring the applicant to be a recognised investment exchange;
b
where the application is made under section 288(1) and Article 17 of the EMIR regulation allows authorisation to be granted, make a recognition order (“a central counterparty recognition order”) granting authorisation for the purposes of that Article and declaring the applicant to be a recognised central counterparty; F255...
c
where the application is made under section 288(1A), make a recognition order declaring the applicant to be a recognised clearing house which is not a recognised central counterparty F254; or
d
where the application is made under section 288A, make a recognition order (a “CSD recognition order”) granting authorisation for the purposes of Article 16 of the CSD regulation and declaring the applicant to be a recognised CSD.
F41A
In the case of an application for an order declaring the applicant to be a recognised investment exchange, the reference in subsection (1) to the recognition requirements applicable in its case includes a reference to requirements contained in any directly applicable F309EU regulation made under the markets in financial instruments directive F310or the markets in financial instruments regulation.
1B
In the case mentioned in subsection (1A), the application must be determined by F42the FCA before the end of the period of six months beginning with the date on which it receives the completed application.
1C
Subsection (1B) does not apply in the case of an application by an overseas applicant.
F1901D
A central counterparty recognition order must specify the services or activities linked to clearing which the applicant may provide or perform and the classes of financial instruments covered by the order.
F2511E
A CSD recognition order must specify—
a
the core services listed in Section A of the Annex to the CSD regulation which the applicant is authorised to provide pursuant to Article 16 or 19(1)(a) or (c) of that regulation, and
b
any non-banking-type ancillary services listed in or permitted under Section B of that Annex which the applicant is authorised to provide, including services notified under Article 19 of the CSD regulation.
1F
A CSD recognition order must also record the terms of any of the following authorisations granted to the CSD under the CSD regulation or notifications made by the CSD under that regulation—
a
an authorisation under Article 19(1) of the CSD regulation to outsource a core service under Article 30 of that regulation,
b
an authorisation under Article 19(1)(d) of the CSD regulation (settlement of cash leg of securities settlement system in the books of another settlement agent),
c
an authorisation under Article 19(1)(e) of the CSD regulation (setting up interoperable link),
d
a notification under Article 19(5) of the CSD regulation (other CSD links),
e
an authorisation under Article 54 or 56 of the CSD regulation to provide (in accordance with Article 54(2)(a) or (b)) any banking-type ancillary service listed in or permitted under Section C of the Annex to that regulation, and
f
an authorisation to provide investment services and activities in addition to the services explicitly listed in Sections A and B of the Annex to the CSD regulation.
F432
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
4
A recognition order must specify a date on which it is to take effect.
F2524A
If the Bank of England has not made a decision in relation to an application under section 288A within six months of that application being complete, the applicant may refer the matter to the Tribunal.
4B
For the purposes of subsection (4A), an application is “complete” when the Bank of England informs the applicant that it is complete pursuant to Article 17(3) of the CSD regulation.
5
Section 298 has effect in relation to a decision to refuse to make a recognition order F193in respect of an investment exchange or a clearing house which is not a central counterparty—
a
as it has effect in relation to a decision to revoke such an order; and
b
as if references to a recognised body were references to the applicant.
F2535A
Section 298 has effect in relation to a decision to refuse an application under section 288A—
a
as it has effect in relation to a decision to make a revocation order under section 297(1B); and
b
as if references to a recognised body were references to the applicant.
F456
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1947
Where—
a
a body corporate or unincorporated association has made an application under section 288(1), and
b
the Bank of England has determined that application in accordance with Article 17 of the EMIR regulation,
any previous recognition order under section 290(1)(c) or 292(2)(b) shall cease to be valid.
290ZAF211Variation of central counterparty recognition order
1
On an application made to it in accordance with Article 15 of the EMIR regulation, the Bank of England may in accordance with Article 17 of that regulation vary a central counterparty recognition order by specifying an additional service or activity or class of financial instruments.
2
Where Article 20(5) of the EMIR regulation applies, the Bank of England may vary a central counterparty recognition order by removing a service or activity or class of financial instruments from those specified in the order.
3
The Bank of England may at any time vary a central counterparty recognition order for the purpose of correcting an error in, or omission from, the order.
290ZBF234Variation of CSD recognition order
1
Where the Bank of England—
a
grants an authorisation in accordance with Article 19(1), 54 or 56 of the CSD regulation,
b
receives a notification under Article 19 of that regulation, or
c
decides to withdraw authorisation for a service, activity or financial instrument in accordance with Article 20(4) or 57(4) of that regulation,
the Bank of England must vary the CSD recognition order accordingly.
2
Where an authorisation to provide investment services and activities in addition to the services explicitly listed in Sections A and B of the Annex to the CSD regulation is granted, varied or withdrawn, the Bank of England must vary the CSD recognition order accordingly.
3
The Bank of England may at any time vary a CSD recognition order for the purpose of correcting an error in, or omission from, the order.
290AF5Refusal of recognition on ground of excessive regulatory provision
1
F46The appropriate regulator must not make a recognition order if it appears to F47it that an existing or proposed regulatory provision of the applicant in connection with—
a
the applicant's business as an investment exchange, F48...
b
the provision by the applicant of clearing services, F49or
c
the provision by the applicant of services falling within section 285(2)(b) or (3)(b),
imposes or will impose an excessive requirement on the persons affected (directly or indirectly) by it.
2
The reference in section 290(1) (making of recognition order) to satisfying the applicable recognition requirements shall be read accordingly.
3
Expressions used in subsection (1) above that are defined for the purposes of section 300A (power of F50appropriate regulator to disallow excessive regulatory provision) have the same meaning as in that section.
4
The provisions of section 300A(3) and (4) (determination whether regulatory provision excessive) apply for the purposes of this section as for the purposes of section 300A.
5
Section 298 has effect in relation to a decision under this section to refuse a recognition order—
a
as it has effect in relation to a decision to revoke such an order, and
b
as if references to a recognised body were references to the applicant.
F1956
This section does not apply to an application for recognition as an overseas investment exchange, an overseas clearing house F256, a recognised central counterparty or a recognised CSD.
C1C2291 Liability in relation to recognised body’s regulatory functions.
1
A recognised body and its officers and staff are not to be liable in damages for anything done or omitted in the discharge of the recognised body’s regulatory functions unless it is shown that the act or omission was in bad faith.
2
But subsection (1) does not prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the M3Human Rights Act 1998.
3
“Regulatory functions” means the functions of the recognised body so far as relating to, or to matters arising out of, the obligations to which the body is subject under or by virtue of this Act.
I4292 Overseas investment exchanges and overseas clearing houses.
1
An application under section 287 or F197288(1A) by an overseas applicant must contain the address of a place in the United Kingdom for the service on the applicant of notices or other documents required or authorised to be served on it under this Act.
2
If it appears to F51the appropriate regulator that an overseas applicant satisfies the requirements of subsection (3) it may make a recognition order declaring the applicant to be—
a
a recognised investment exchange;
b
a recognised clearing house F198which is not a central counterparty.
3
The requirements are that—
F311a
investors are afforded protection equivalent to that which they would be afforded if the body concerned were required to comply with—
i
recognition requirements, other than any such requirements which are expressed in regulations under section 286 not to apply for the purposes of this paragraph, and
ii
requirements contained in any directly applicable EU regulation made under the markets in financial instruments directive or the markets in financial instruments regulation;
b
there are adequate procedures for dealing with a person who is unable, or likely to become unable, to meet his obligations in respect of one or more market contracts connected with the investment exchange or clearing house;
c
the applicant is able and willing to co-operate with F144the appropriate regulator by the sharing of information and in other ways;
d
adequate arrangements exist for co-operation between F145the appropriate regulator and those responsible for the supervision of the applicant in the country or territory in which the applicant’s head office is situated.
4
In considering whether it is satisfied as to the requirements mentioned in subsection (3)(a) and (b), F146the appropriate regulator is to have regard to—
a
the relevant law and practice of the country or territory in which the applicant’s head office is situated;
b
the rules and practices of the applicant.
5
In relation to an overseas applicant and a body or association declared to be a recognised investment exchange or recognised clearing house by a recognition order made by virtue of subsection (2)—
a
the reference in section 313(2) to recognition requirements is to be read as a reference to matters corresponding to the matters in respect of which provision is made in the recognition requirements;
b
sections 296(1) and 297(2) have effect as if the requirements mentioned in section 296(1)(a) and section 297(2)(a) were those of subsection (3)(a), (b), and (c) of this section;
c
section 297(2) has effect as if the grounds on which a recognition order may be revoked under that provision included the ground that in the opinion of F147the appropriate regulator arrangements of the kind mentioned in subsection (3)(d) no longer exist.
F1966
Where a recognised clearing house is authorised as an EEA central counterparty or recognised as a third country central counterparty, any previous recognition order under section 290(1)(c) or 292(2)(b) shall cease to be valid.
F12Publication of information by recognised investment exchange
S. 292A and cross-heading inserted (1.4.2007 for certain purposes and 1.11.2007 otherwise) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007 (S.I. 2007/126), regs. 1(2), 3(2), Sch. 2 para. 5
292APublication of information by recognised investment exchange
1
A recognised investment exchange must as soon as practicable after a recognition order is made in respect of it publish such particulars of the ownership of the exchange as the F52FCA may reasonably require.
2
The particulars published under subsection (1) must include particulars of the identity and scale of interests of the persons who are in a position to exercise significant influence over the management of the exchange, whether directly or indirectly.
3
If an ownership transfer takes place in relation to a recognised investment exchange, the exchange must as soon as practicable after becoming aware of the transfer publish such particulars relating to the transfer as the F148FCA may reasonably require.
4
”Ownership transfer”, in relation to an exchange, means a transfer of ownership which gives rise to a change in the persons who are in a position to exercise significant influence over the management of the exchange, whether directly or indirectly.
5
A recognised investment exchange must publish such particulars of any decision it makes to suspend or remove a financial instrument from trading on a regulated market operated by it as the F149FCA may reasonably require.
6
The F150FCA may determine the manner of publication under subsections (1), (3) and (5) and the timing of publication under subsection (5).
7
This section does not apply to an overseas investment exchange.
Supervision
I5293 Notification requirements.
1
The F53appropriate regulator may make rules requiring a recognised body to give it—
a
notice of such events relating to the body as may be specified; and
b
such information in respect of those events as may be specified.
2
The rules may also require a recognised body to give the F53appropriate regulator, at such times or in respect of such periods as may be specified, such information relating to the body as may be specified.
3
An obligation imposed by the rules extends only to a notice or information which the F53appropriate regulator may reasonably require for the exercise of its functions under this Act F259or F332for the purposes ofDirective 2016/1148/EU of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security network and information systems across the Union.
4
The rules may require information to be given in a specified form and to be verified in a specified manner.
5
If a recognised body—
a
alters or revokes any of its rules or guidance, or
b
makes new rules or issues new guidance,
it must give written notice to the F54appropriate regulator without delay.
F2575A
In relation to a recognised CSD, in subsection (5), “guidance” means guidance issued, or any recommendation made, in writing or other legible form and intended to have continuing effect, by the recognised CSD to—
a
all or any class of its members, or
b
persons using or seeking to use its services,
with respect to any of the services or activities specified in its recognition order.
6
If a recognised investment exchange makes a change—
a
in the arrangements it makes for the provision F55by another person of clearing services in respect of transactions effected on the exchange, or
b
in the criteria which it applies when determining to whom it will provide F56services falling within section 285(2)(b),
it must give written notice to F57the FCA and the Bank of England without delay.
7
If a recognised clearing house makes a change—
a
in the recognised investment exchanges for whom it provides clearing services F58or services falling within section 285(3)(b), or
b
in the criteria which it applies when determining to whom (other than recognised investment exchanges) it will provide clearing services F59or services falling within section 285(3)(b),
it must give written notice to F60the Bank of England and the FCA without delay.
F2587A
In subsections (1) and (2), “recognised body” includes an EEA CSD.
8
Subsections (5) to (7) do not apply to an overseas investment exchange or an overseas clearing house.
9
“Specified” means specified in F61the appropriate regulator's rules.
293AF62Information: compliance with EU requirements
F2601
The appropriate regulator may require a recognised body to give the appropriate regulator such information as the appropriate regulator reasonably requires in order to satisfy itself that the body is complying with any qualifying EU provision that is specified, or of a description specified, for the purposes of this section by the Treasury by order.
F2612
The Bank of England may require an EEA CSD which provides any services referred to in the Annex to the CSD regulation in the United Kingdom to give the Bank reports on those services and statistical information relating to those services, at such times or in respect of such periods as may be specified by the Bank.
3
A requirement under subsection (2) extends only to information which the Bank may reasonably require for the exercise of its functions under the CSD regulation or any directly applicable EU regulation made under the CSD regulation.
C3I6294 Modification or waiver of rules.
1
The F63appropriate regulator may, on the application or with the consent of a recognised body, direct that rules made under section 293 or 295—
a
are not to apply to the body; or
b
are to apply to the body with such modifications as may be specified in the direction.
2
An application must be made in such manner as the F151appropriate regulator may direct.
3
Subsections (4) to (6) apply to a direction given under subsection (1).
4
The F152appropriate regulator may not give a direction unless it is satisfied that—
a
compliance by the recognised body with the rules, or with the rules as unmodified, would be unduly burdensome or would not achieve the purpose for which the rules were made; and
b
the direction would not result in undue risk to persons whose interests the rules are intended to protect.
5
A direction may be given subject to conditions.
6
The F153appropriate regulator may—
a
revoke a direction; or
b
vary it on the application, or with the consent, of the recognised body to which it relates.
F2627
In this section, “recognised body”, in relation to rules made under section 293, includes an EEA CSD.
I7295 Notification: overseas investment exchanges and overseas clearing houses.
1
At least once a year, every overseas investment exchange and overseas clearing house must provide F64the appropriate regulator with a report.
2
The report must contain a statement as to whether any events have occurred which are F65likely to affect the appropriate regulator's assessment of whether it is satisfied as to the requirements set out in section 292(3).
3
The report must also contain such information as may be specified in rules made by F66the appropriate regulator.
F674
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
295AF235On-site inspection of EEA CSDs
1
For the purposes of Article 24(1) of the CSD regulation (co-operation in relation to branches of EEA CSDs), the Bank of England may, on giving reasonable notice and at any reasonable time, carry out an on-site inspection of any branch maintained by an EEA CSD in the United Kingdom.
2
Before carrying out an on-site inspection under subsection (1), the Bank of England must inform the competent authority of the EEA State in which the EEA CSD is established.
3
The Bank of England’s power under subsection (1) is enforceable, on the application of the Bank of England, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
C4C16296F78Appropriate regulator's power to give directions.
1
This section applies if it appears to F68the appropriate regulator that a recognised body—
a
has failed, or is likely to fail, to satisfy the recognition requirements; or
b
has failed to comply with any other obligation imposed on it by or under this Act.
F61A
This section also applies F69if it appears to the appropriate regulator that a recognised body has failed, or is likely to fail, to comply with any obligation imposed on it by F265or under any F70directly applicable EU regulation specified (or of a description specified) in an order made by the Treasury.
F2631B
This section also applies in the circumstances described in the second sub-paragraph of Article 24(5) of the CSD regulation if it appears to the Bank of England that it is appropriate to give a direction to an EEA CSD in relation to any services referred to in the Annex to the CSD regulation which the EEA CSD provides in the United Kingdom, in order to ensure its compliance with obligations arising from the CSD regulation or any directly applicable EU regulation made under the CSD regulation.
2
F71The regulator concerned may direct F266the recognised body or EEA CSD to take specified steps for the purpose of securing the body’s compliance with—
a
the recognition requirements; or
b
any obligation of the kind in question.
F72A
In the case of F72a recognised body other than an overseas investment exchange or overseas clearing house, those steps may include—
a
the granting to F73the regulator concerned of access to the premises of F74the body for the purpose of inspecting—
i
those premises; or
ii
any documents on the premises which appear to F73the regulator concerned to be relevant for the purpose mentioned in subsection (2);
b
the suspension of the carrying on of any regulated activity by F75the body for the period specified in the direction.
F2642B
In the case of an EEA CSD, the steps mentioned in subsection (2) may include—
a
the granting to the Bank of England of access to any premises of the EEA CSD situated in the United Kingdom for the purpose of inspecting—
i
those premises; or
ii
any documents on the premises which appear to the Bank of England to be relevant for the purpose mentioned in subsection (2)(b);
b
the suspension for the period specified in the direction of the carrying on in the United Kingdom by the EEA CSD of any activity in respect of which the EEA CSD is exempt from the general prohibition.
3
4
The fact that a rule made by a recognised body has been altered in response to a direction given by F77an appropriate regulator does not prevent it from being subsequently altered or revoked by the recognised body.
296AF212Additional power to direct F216recognised central counterparties
1
The Bank of England may direct a F217recognised central counterparty to take, or refrain from taking, specified action if the Bank is satisfied that it is necessary to give the direction, having regard to the public interest in—
a
protecting and enhancing the stability of the UK financial system,
b
maintaining public confidence in the stability of the UK financial system,
c
d
maintaining and enhancing the financial resilience of the F219recognised central counterparty.
2
The direction may, in particular—
a
specify the time for compliance with the direction,
b
require the rules of the F219recognised central counterparty to be amended, and
c
override such rules (whether generally or in their application to a particular case).
3
The direction may not require the F219recognised central counterparty—
a
to take any steps for the purpose of securing its compliance with—
i
the recognition requirements, or
ii
any obligation of a kind mentioned in section 296(1)(b) or (1A), or
b
to accept a transfer of property, rights or liabilities of another F219recognised central counterparty.
4
If the direction is given in reliance on section 298(7) the Bank must, within a reasonable time of giving the direction, give the F219recognised central counterparty a statement of its reasons—
a
for giving the direction, and
b
for relying on section 298(7).
5
The direction is enforceable, on the application of the Bank, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
6
The Bank may revoke a direction given under this section.
C5297 Revoking recognition.
1
F1991A
A central counterparty recognition order may be revoked by an order made by the Bank of England in accordance with Article 20 of the EMIR regulation.
F2671B
A CSD recognition order may be revoked by an order made by the Bank of England in accordance with Article 20 of the CSD regulation.
2
If it appears to F80the appropriate regulator that a recognised body F202which is not a recognised central counterpartyF269or a recognised CSD—
a
is failing, or has failed, to satisfy the recognition requirements, or
b
is failing, or has failed, to comply with any other obligation imposed on it by or under this Act,
it may make an order revoking the recognition order for that body even though the body does not wish the order to be made.
F82A
If it appears to F81the appropriate regulator that a recognised body F200which is not a recognised central counterpartyF268or a recognised CSDF82...—
a
has not carried on the business of an investment exchange F83or (as the case may be) of a clearing house during the period of twelve months beginning with the day on which the recognition order took effect in relation to it,
b
has not carried on the business of an investment exchange F84or (as the case may be) of a clearing house at any time during the period of six months ending with the relevant day, or
c
has failed, or is likely to fail, to comply with any obligation imposed on it by a F85directly applicable EU regulation specified (or of a description specified) in an order made by the Treasury,
it may make an order revoking the recognition order for that body even though the body does not wish the order to be made.
2B
The “relevant day”, for the purposes of paragraph (b) of subsection (2A), is the day on which the power to make an order under that subsection is exercised.
2C
Subsection (2A) does not apply to an overseas investment exchange F86or overseas clearing house.
F2292D
If it appears to the Bank of England that a recognised central counterparty F270or a recognised CSD has failed, or is likely to fail, to comply with an obligation imposed on it by or under Article 4 or 15 of the SFT regulation it may make an order revoking the recognition order for that body even though the body does not wish the order to be made.
3
An order under this section (“a revocation order”) must specify the date on which it is to take effect.
4
In the case of a revocation order made under subsection (2) F9or (2A), the specified date must not be earlier than the end of the period of three months beginning with the day on which the order is made.
5
A revocation order may contain such transitional provisions as F87the appropriate regulator thinks necessary or expedient.
F246
Where F88the appropriate regulator makes an order revoking the recognition order for a body that is a recognised investment exchange, it must notify ESMA.
C6I8C10C19298 Directions and revocation: procedure.
1
Before giving a direction under section 296 F89or 296A, or making a revocation order under section F274297(1B), (2),F231(2A) or (2D), F92the appropriate regulator must—
a
give written notice of its intention to do so to the recognised body concerned;
F203b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F204c
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
A notice under subsection (1) must—
a
state why F93the appropriate regulator intends to give the direction or make the order; and
b
draw attention to the right to make representations conferred by subsection (3).
3
Before the end of the period for making representations—
a
the recognised body,
F205b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F206c
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
may make representations to F94the appropriate regulator.
F2074
The period for making representations is such period as is specified in the notice (which may, in any particular case, be extended by the appropriate regulator).
5
In deciding whether to—
a
give a direction, or
b
make a revocation order,
F95the appropriate regulator must have regard to any representations made in accordance with subsection (3).
6
When F96the appropriate regulator has decided whether to give a direction under section 296 F90or 296A or to make the proposed revocation order, it must—
aa
in the case of a direction under section 296 given to a recognised CSD or an EEA CSD or a revocation order under section 297(1B), give the recognised CSD or EEA CSD reasons for its decision.
F208b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F2306A
If the appropriate regulator—
a
gives a direction under section 296 to a recognised body because it has failed, or is likely to fail, to comply with an obligation imposed on it by or under Article 4 or 15 of the SFT regulation;
F276aa
gives any other direction under section 296 to a recognised CSD;
ab
gives a direction under section 296 to an EEA CSD;
ac
makes a revocation order under section 297(1B);
b
makes a revocation order under section 297(2A)(c) because a recognised body has failed, or is likely to fail, to comply with an obligation imposed on it by or under Article 4 or 15 of the SFT regulation; or
c
makes a revocation order under section 297(2D),
the body concerned may refer the matter to the Tribunal.
7
If F97the appropriate regulatorF209reasonably considers it necessary to do so, it may give a direction under section 296 F91or 296A—
a
without following the procedure set out in this section; or
b
if F97the appropriate regulator has begun to follow that procedure, regardless of whether the period for making representations has expired.
F2727A
Subsection (7) does not apply in relation to a direction given to a recognised CSD or EEA CSD under section 296.
7B
But in the circumstances described in the second sub-paragraph of Article 24(5) of the CSD regulation, the Bank of England may give a direction to an EEA CSD under section 296 without following the procedure set out in subsections (1) to (5).
8
If F98the appropriate regulator has, in relation to a particular matter, followed the procedure set out in subsections (1) to (5), it need not follow it again if, in relation to that matter, it decides to take action other than that specified in its notice under subsection (1).
F2739
In this section, “recognised body” includes an EEA CSD.
299 Complaints about recognised bodies.
1
The F99appropriate regulator must make arrangements for the investigation of any relevant complaint about a recognised body.
2
“Relevant complaint” means a complaint which the F154appropriate regulator considers is relevant to the question of whether the body concerned should remain a recognised body.
300 Extension of functions of Tribunal.
1
If the Treasury are satisfied that the condition mentioned in subsection (2) is satisfied, they may by order confer functions on the Tribunal with respect to disciplinary proceedings—
a
of one or more investment exchanges in relation to which a recognition order under section 290 is in force or of such investment exchanges generally, F279...
b
of one or more clearing houses in relation to which a recognition order under that section is in force or of such clearing houses generally F278or
c
of one or more central securities depositories in relation to which a recognition order under that section is in force or of such central securities depositories generally.
2
The condition is that it is desirable to exercise the power conferred under subsection (1) with a view to ensuring that—
a
decisions taken in disciplinary proceedings with respect to which functions are to be conferred on the Tribunal are consistent with—
i
decisions of the Tribunal in cases arising under Part VIII; and
ii
decisions taken in other disciplinary proceedings with respect to which the Tribunal has functions as a result of an order under this section; or
b
the disciplinary proceedings are in accordance with the Convention rights.
3
An order under this section may modify or exclude any provision made by or under this Act with respect to proceedings before the Tribunal.
4
“Disciplinary proceedings” means proceedings under the rules of an investment exchange F277, clearing house or central securities depository in relation to F228a contravention of Article 14 (prohibition of insider dealing and of unlawful disclosure of inside information) or Article 15 (prohibition of market manipulation) of the market abuse regulation by a person subject to the rules.
5
“The Convention rights” has the meaning given in section 1 of the M5Human Rights Act 1998.
F13Power to disallow excessive regulatory provision
S. 300A and cross-heading inserted (20.12.2006) by Investment Exchanges and Clearing Houses Act 2006 (c. 55), ss. 1, 5(2) (with s. 5(3))
300APower of F101appropriate regulator to disallow excessive regulatory provision
1
This section applies where a recognised body proposes to make any regulatory provision in connection F100with—
a
its business as an investment exchange,
b
the provision by it of clearing services, or
c
the provision by it of services falling within section 285(2)(b) or (3)(b).
2
If it appears to the F102appropriate regulator—
a
that the proposed provision will impose a requirement on persons affected (directly or indirectly) by it, and
b
that the requirement is excessive,
the F102appropriate regulator may direct that the proposed provision must not be made.
3
A requirement is excessive if—
a
it is not required under F10EU law or any enactment or rule of law in the United Kingdom, and
b
either—
i
it is not justified as pursuing a reasonable regulatory objective, or
ii
it is disproportionate to the end to be achieved.
4
In considering whether a requirement is excessive the F103appropriate regulator must have regard to all the relevant circumstances, including—
a
the effect of existing legal and other requirements,
b
the global character of financial services and markets and the international mobility of activity,
c
the desirability of facilitating innovation, and
d
the impact of the proposed provision on market confidence.
5
In this section “requirement” includes any obligation or burden.
6
Any provision made in contravention of a direction under this section is of no effect.
300BF11Duty to notify proposal to make regulatory provision
1
A recognised body that proposes to make any regulatory provision must give written notice of the proposal to the F104appropriate regulator without delay.
2
The F104appropriate regulator may by rules under section 293 (notification requirements)—
a
specify descriptions of regulatory provision in relation to which, or circumstances in which, the duty in subsection (1) above does not apply, or
b
provide that the duty applies only to specified descriptions of regulatory provision or in specified circumstances.
3
The F104appropriate regulator may also by rules under that section—
a
make provision as to the form and contents of the notice required, and
b
require the body to provide such information relating to the proposal as may be specified in the rules or as the F104appropriate regulator may reasonably require.
300CRestriction on making provision before F105appropriate regulator decides whether to act
1
Where notice of a proposal to make regulatory provision is required to be given to the F155appropriate regulator under section 300B, the provision must not be made—
a
before that notice is given, or
b
subject to the following provisions of this section, before the end of the initial period.
2
The initial period is—
a
the period of 30 days beginning with the day on which the F156appropriate regulator receives notice of the proposal, or
b
if any consultation period announced by the body in relation to the proposal ends after that 30-day period, the end of the consultation period.
3
4
If—
a
before the end of the initial period the F158appropriate regulator notifies the body that it is not calling in the proposal, or
b
the initial period ends without the F159appropriate regulator having notified the body that it is calling in the proposal,
the body may then make the proposed provision.
5
Any provision made in contravention of this section is of no effect.
300DConsideration by F114appropriate regulator whether to disallow proposed provision
1
This section applies where the F106appropriate regulator notifies a recognised body that it is calling in a proposal to make regulatory provision.
2
The F106appropriate regulator must publish a notice—
a
giving details of the proposed provision,
b
stating that it has called in the proposal in order to consider whether to disallow it, and
c
specifying a period during which representations with respect to that question may be made to it.
3
The F106appropriate regulator may extend the period for making representations.
4
The F106appropriate regulator must notify the body of its decision whether to disallow the provision not later than 30 days after the end of the period for making representations, and must publish the decision and the reasons for it.
5
The body must not make the provision unless and until—
a
the F107appropriate regulator notifies it of its decision not to disallow it, or
b
the 30-day period specified in subsection (4) ends without the F108appropriate regulator having notified any decision.
6
If F109the appropriate regulator notifies the body of its decision to disallow the provision and that decision is questioned in legal proceedings—
a
the body must not make the provision until those proceedings, and any proceedings on appeal, are finally determined,
b
7
Any provision made in contravention of subsection (5) or (6) is of no effect.
300EPower to disallow excessive regulatory provision: supplementary
1
In sections 300A to 300D—
a
“regulatory provision” means any rule, guidance, arrangements, policy or practice, and
b
references to making provision shall be read accordingly as including, as the case may require, issuing guidance, entering into arrangements or adopting a policy or practice.
2
For the purposes of those sections a variation of a proposal is treated as a new proposal.
3
Other matters
301 Supervision of certain contracts.
1
The Secretary of State and the Treasury, acting jointly, may by regulations provide for—
a
Part VII of the M6Companies Act 1989 (financial markets and insolvency), and
b
Part V of the M7Companies (No. 2)(Northern Ireland) Order 1990,
to apply to relevant contracts as it applies to contracts connected with a recognised body.
2
“Relevant contracts” means contracts of a prescribed description in relation to which settlement arrangements are provided by a person for the time being included in a list (“the list”) maintained by F115the Bank of England for the purposes of this section.
3
Regulations may be made under this section only if the Secretary of State and the Treasury are satisfied, having regard to the extent to which the relevant contracts concerned are contracts of a kind dealt in by persons supervised by F116the FCA or the Bank of England, that it is appropriate for the arrangements mentioned in subsection (2) to be supervised by F117the Bank.
4
The approval of the Treasury is required for—
a
the conditions set by the F118Bank of England for admission to the list; and
b
the arrangements for admission to, and removal from, the list.
5
If the Treasury withdraw an approval given by them under subsection (4), all regulations made under this section and then in force are to be treated as suspended.
6
But if—
a
the F119Bank of England changes the conditions or arrangements (or both), and
b
the Treasury give a fresh approval under subsection (4),
the suspension of the regulations ends on such date as the Treasury may, in giving the fresh approval, specify.
7
The F120Bank of England must—
a
publish the list as for the time being in force; and
b
provide a certified copy of it to any person who wishes to refer to it in legal proceedings.
8
A certified copy of the list is evidence (or in Scotland sufficient evidence) of the contents of the list.
9
A copy of the list which purports to be certified by or on behalf of the F121Bank of England is to be taken to have been duly certified unless the contrary is shown.
10
Regulations under this section may, in relation to a person included in the list—
a
apply (with such exceptions, additions and modifications as appear to the Secretary of State and the Treasury to be necessary or expedient) such provisions of, or made under, this Act as they consider appropriate;
F22CHAPTER 1ACONTROL OVER RECOGNISED INVESTMENT EXCHANGE
Pt. 18 Ch. 1A substituted (21.3.2009) by virtue of The Financial Services and Markets Act 2000 (Controllers) Regulations 2009 (S.I. 2009/534), reg. 5, Sch. 2 (with reg. 8)
Notices of acquisitions of control over recognised investment exchanges
301AObligation to notify F122the FCA: acquisitions of control
1
A person who decides to acquire or increase control over a recognised investment exchange must give F160the FCA notice in writing before making the acquisition.
2
A person who acquires or increases control over a recognised investment exchange in circumstances where notice is not required under subsection (1) must give F161the FCA notice in writing before the end of 14 days beginning with—
a
the day the person acquired or increased the control; or
b
if later, the day on which the person first became aware that the control had been acquired or increased.
3
For the purposes of calculations relating to this section, the holding of shares or voting power by a person (“A1”) includes any shares or voting power held by another (“A2”) if A1 and A2 are acting in concert.
4
A notice given under this section is a “section 301A notice” and a person giving notice is a “section 301A notice-giver”.
F2205
Nothing in this Chapter applies to an overseas investment exchange.
301BRequirements for section 301A notices
1
A section 301A notice must be in such form, include such information and be accompanied by such documents as the F123FCA may reasonably require.
2
The F123FCA must publish a list of its requirements as to the form, information and accompanying documents for a section 301A notice.
3
The F123FCA may impose different requirements for different cases and may vary or waive requirements in particular cases.
301CAcknowledgment of receipt
1
The F124FCA must acknowledge receipt of a section 301A notice in writing before the end of the second working day following receipt.
2
If the F162FCA receives an incomplete section 301A notice it must inform the section 301A notice-giver as soon as reasonably practicable.
Acquiring and increasing control
301DAcquiring and increasing control
1
For the purposes of this Chapter, a person (“A”) acquires control over a recognised investment exchange (“B”) if any of the cases in subsection (2) begin to apply.
2
The cases are where A holds—
a
20% or more of the shares in B or in a parent undertaking of B (“P”);
b
20% or more of the voting power in B or P; or
c
shares or voting power in B or P as a result of which A is able to exercise significant influence over the management of B.
3
For the purposes of this Chapter, a person (“A”) increases control over a recognised investment exchange (“B”) whenever—
a
the percentage of shares which A holds in B or in a parent undertaking of B (“P”) increases from less than 50% to 50% or more;
b
the percentage of voting power A holds in B or P increases from less than 50% to 50% or more; or
c
A becomes a parent undertaking of B.
301EDisregarded holdings
1
For the purpose of section 301D, shares and voting power that a person holds in a recognised investment exchange (“B”) or in a parent undertaking of B (“P”) are disregarded in the following circumstances.
2
Shares held only for the purposes of clearing and settling within a short settlement cycle are disregarded.
3
Shares held by a custodian or its nominee in a custodian capacity are disregarded, provided that the custodian or nominee is only able to exercise voting power represented by the shares in accordance with instructions given in writing.
4
Shares representing no more than 5% of the total voting power in B or P held by an investment firm are disregarded, provided that it—
a
holds the shares in the capacity of a market maker (as defined in article F3124.1.7 of the markets in financial instruments directive);
b
is authorised by its home state regulator under the markets in financial instruments directive; and
c
neither intervenes in the management of B or P nor exerts any influence on B or P to buy the shares or back the share price.
5
Shares held by a credit institution or investment firm in its trading book are disregarded, provided that—
a
the shares represent no more than 5% of the total voting power in B or P; and
b
F226... the voting power is not exercised nor otherwise used to intervene in the management of B or P.
6
Shares held by a credit institution or an investment firm are disregarded, provided that—
a
the shares are held as a result of performing the investment services and activities of—
i
underwriting a share issue; or
ii
placing shares on a firm commitment basis in accordance with Annex I, section A.6 of the markets in financial instruments directive; and
b
the credit institution or investment firm—
i
does not exercise voting power represented by the shares or otherwise intervene in the management of the issuer; and
ii
retains the holding for a period of less than one year.
7
Where a management company (as defined in F14Article 2.1(b) of the UCITS directive) and its parent undertaking both hold shares or voting power, each may disregard holdings of the other, provided that each exercises its voting power independently of the other.
8
But subsection (7) does not apply if the management company—
F222a
manages holdings for its parent undertaking or a controlled undertaking of the parent undertaking;
b
has no discretion as to the exercise of the voting power attached to such holdings; and
c
may only exercise the voting power in relation to such holdings under direct or indirect instruction from—
i
the parent undertaking; or
F223ii
a controlled undertaking of the parent undertaking.
9
Where an investment firm and its parent undertaking both hold shares or voting power, the parent undertaking may disregard holdings managed by the investment firm on a client by client basis and the investment firm may disregard holdings of the parent undertaking, provided that the investment firm—
a
has permission to provide portfolio management;
b
exercises its voting power independently from the parent undertaking; and
c
may only exercise the voting power under instructions given in writing, or has appropriate mechanisms in place for ensuring that individual portfolio management services are conducted independently of any other services.
F2279A
Shares acquired for stabilisation purposes in accordance with Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC as regards exemptions for buy-back programmes and stabilisation of financial instruments are disregarded, provided that the voting power attached to those shares is not exercised or otherwise used to intervene in the management of B or P.
F22110
For the purposes of this section, an undertaking is a controlled undertaking of the parent undertaking if it is controlled by the parent undertaking; and for this purpose the question of whether one undertaking controls another is to be determined in accordance with section 89J(4) and (5).
Assessment procedure
301FAssessment: general
1
Where the F125FCA receives a section 301A notice, it must—
a
determine whether to approve the acquisition to which it relates; or
b
propose to object to the acquisition.
2
In making its determination the F125FCA must—
a
consider the suitability of the section 301A notice-giver and the financial soundness of the acquisition in order to ensure the sound and prudent management of the recognised investment exchange in question; and
b
have regard to the likely influence that the section 301A notice-giver will have on the recognised investment exchange.
3
The F125FCA may only object to an acquisition if it is not satisfied that the approval requirement is met.
4
The approval requirement is that the acquisition in question by the notice-giver does not pose a threat to the sound and prudent management of any financial market operated by the recognised investment exchange.
301GAssessment: Procedure
1
2
The F127FCA must inform the section 301A notice-giver in writing of—
a
the duration of the assessment period; and
b
its expiry date.
3
The F127FCA must, within two working days of acting under section 301F (and in any event no later than the expiry date of the assessment period)—
a
notify the section 301A notice-giver that it has determined to approve the acquisition; or
b
in the case of a proposed objection to an acquisition, give a warning notice.
4
The F127FCA is treated as having approved the acquisition if, at the expiry of the assessment period, it has neither—
a
given notice under subsection (3); nor
b
informed the section 301A notice-giver that the notice is incomplete.
5
If the F127FCA decides to object to an acquisition it must give the section 301A notice-giver a decision notice.
6
Following receipt of a decision notice under this section, the section 301A notice-giver may refer F128the FCA's decision to the Tribunal.
301HDuration of approval
1
Approval of an acquisition is effective for such period as F129the FCA may specify in writing.
2
Where F163the FCA has specified a period under subsection (1), it may extend the period.
3
Where F164the FCA has not specified a period, the approval is effective for one year beginning with the date—
a
of the notice given under section 301G(3)(a);
b
on which F164the FCA is treated as having given approval under section 301G(5); or
c
of a decision on a reference to the Tribunal which results in the person receiving approval.
Enforcement procedures
301IObjections by the F130FCA
1
The F130FCA may object to a person's control over a recognised investment exchange in any of the circumstances specified in subsection (2).
2
The circumstances are that the F130FCA reasonably believes that—
a
the person acquired or increased control without giving notice under section 301A in circumstances where notice was required; and
b
there are grounds for objecting to control on the basis of the approval requirement in section 301F(4).
3
If the F130FCA proposes to object to a person's control over a recognised investment exchange, it must give that person a warning notice.
4
If the F130FCA decides to object to a person's control over a UK authorised person, it must give that person a decision notice.
5
A person to whom the F130FCA gives a decision notice under this section may refer the matter to the Tribunal.
301JRestriction notices
1
The F131FCA may give notice in writing (a “restriction notice”) to a person in the following circumstances.
2
The circumstances are that—
a
the person has control over a recognised investment exchange by virtue of holding shares or voting power; and
b
in relation to the shares or voting power, the F165FCA has given the person a warning notice or a decision notice under section 301G or 301I or a final notice which confirms a decision notice given under section 301G or 301I.
3
In a restriction notice, the F166FCA may direct that shares or voting power to which the notice relates are, until further notice, subject to one or more of the following restrictions—
a
except by court order, an agreement to transfer or a transfer of any such shares or voting power or, in the case of unissued shares, any agreement to transfer or transfer of the right to be issued with them, is void;
b
no voting power is to be exercisable;
c
no further shares are to be issued in pursuance of any right of the holder of any such shares or voting power or in pursuance of any offer made to their holder;
d
except in a liquidation, no payment is to be made of any sums due from the body corporate on any such shares, whether in respect of capital or otherwise.
4
A restriction notice takes effect—
a
immediately; or
b
on such date as may be specified in the notice.
5
A restriction notice does not extinguish rights which would be enjoyable but for the notice.
6
A copy of the restriction notice must be served on—
a
the recognised investment exchange in question; and
b
in the case of shares or voting power held in a parent undertaking of a recognised investment exchange, the parent undertaking.
7
A person to whom the F167FCA gives a restriction notice may refer the matter to the Tribunal.
301KOrders for sale of shares
1
The court may, on the application of F132the FCA, order the sale of shares or the disposition of voting power in the following circumstances.
2
The circumstances are that—
a
a person has control over a recognised investment exchange by virtue of holding the shares or voting power; and
b
the acquisition or continued holding of the shares or voting power by that person is in contravention of a final notice which confirms a decision notice given under section 301G or section 301I.
3
Where the court orders the sale of shares or disposition of voting power it may—
a
if a restriction notice has been given in relation to the shares or voting power, order that the restrictions cease to apply; and
b
make any further order.
4
Where the court makes an order under this section, it must take into account the level of holding that the person would have been entitled to acquire, or to continue to hold, without contravening the final notice.
5
If shares are sold or voting power disposed of in pursuance of an order under this section, any proceeds, less the costs of the sale or disposition, must be paid into court for the benefit of the persons beneficially interested in them; and any such person may apply to the court for payment of a whole or part of the proceeds.
6
The jurisdiction conferred by this section may be exercised by the High Court and the Court of Session.
Offences
301LOffences under this Chapter
1
A person who fails to comply with an obligation to notify F133the FCA under section 301A(1) or (2) is guilty of an offence.
2
3
A person who makes an acquisition in contravention of a warning notice or a decision notice given under section 301G or a final notice which confirms a decision notice under that section is guilty of an offence.
4
A person who makes an acquisition after F135the FCA's approval for the acquisition has ceased to be effective by virtue of section 301H is guilty of an offence.
5
A person who provides information to F136the FCA which is false in a material particular is guilty of an offence.
6
A person who breaches a direction contained in a restriction notice given under section 301J is guilty of an offence.
7
A person guilty of an offence under subsection (1), (2) or (4) to (6) is liable—
a
on summary conviction to a fine not exceeding the statutory maximum; or
b
on conviction on indictment, to a fine.
8
A person guilty of an offence under subsection (3) is liable—
a
on summary conviction, to a fine not exceeding the statutory maximum; or
b
on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both.
9
It is a defence for a person charged with an offence under subsection (1) in relation to section 301A(2) to show that the person had, at the time of the alleged offence, no knowledge of the act or circumstances by virtue of which the duty to notify F137the FCA arose.
Interpretation
301MInterpretation
1
In this Chapter—
“acquisition” means the acquisition of control or of an increase in control over a recognised investment exchange;
“credit institution” means—
- a
a credit institution authorised under the F224capital requirements directive; or
- b
an institution which would satisfy the requirements for authorisation as a credit institution under that directive if it had its registered office (or if it does not have a registered office, its head office) in an EEA State; and
- a
“shares” and “voting power” have the same meaning as in section 422.
2
For the purposes of this Chapter, a “working day” is a day other than—
a
a Saturday or a Sunday; or
b
a day which is a bank holiday in England and Wales under the Banking and Financial Dealings Act 1971.
Chapter II Competition Scrutiny
F178302 Interpretation.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Role of F18Office of Fair Trading
S. 303: cross-heading substituted (1.4.2003) by Enterprise Act 2002 (c. 40), ss. 278, 279, Sch. 25 para. 40(10)(f); S.I. 2003/766, art. 2, Sch. (with art. 3)
F178303 Initial report by F15OFT.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F178304 Further reports by F16OFT.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F178305 Investigations by F17OFT.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Role of Competition Commission
F178306 Consideration by Competition Commission.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Role of the Treasury
F178307 Recognition orders: role of the Treasury.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F178308 Directions by the Treasury.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F178309 Statements by the Treasury.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F178310 Procedure on exercise of certain powers by the Treasury.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter III Exclusion from the Competition Act 1998
F179311 The Chapter I prohibition.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F179312 The Chapter II prohibition.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C7F23CHAPTER 3APASSPORT RIGHTS
Pt. 18 Ch. 3A (ss. 312A-312D) inserted (1.4.2007 for certain purposes and 1.11.2007 otherwise) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007 (S.I. 2007/126), regs. 1(2), 3(2), Sch. 2 para. 15 (with reg. 5)
Pt. 18 Ch. 3A applied (with modifications) (12.12.2011) by The Recognised Auction Platforms Regulations 2011 (S.I. 2011/2699), reg. 8, Sch. 3 (as amended (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 5 para. 14(1) (with reg. 7))
EEA market operators in United Kingdom
312AExercise of passport rights by EEA market operator
1
An EEA market operator may, in pursuance of the right under the applicable provision, make arrangements in the United Kingdom to facilitate access to, or use of, a specified F313trading venue operated by it if—
a
the operator has given its home state regulator notice of its intention to make such arrangements; and
b
the home state regulator has given F138the FCA notice of the operator's intention.
2
In making arrangements under subsection (1), the operator is exempt from the general prohibition as respects any regulated activity which is carried on as a part of its business of operating the F314venue in question, or in connection with, or for the purposes of, that business.
3
”Specified” means specified in the notice referred to in subsection (1)(a).
4
This section does not apply to an overseas investment exchange.
312B Removal of passport rights from EEA market operator
1
The F139FCA may prohibit an EEA market operator from making or, as the case may be, continuing arrangements in the United Kingdom, in pursuance of the applicable provision, to facilitate access to, or use of, a F315trading venue operated by the operator if—
a
the F139FCA has clear and demonstrable grounds for believing that the operator has contravened a relevant requirement, and
b
the F139FCA has first complied with subsections (3) to (9).
2
A requirement is relevant if it is imposed—
a
by the operator's home state regulator in the implementation of the markets in financial instruments directive or any F19EU legislation made under that directive;
b
F317c
by the markets in financial instruments regulation; or
d
by any directly applicable EU regulation made under that directive or that regulation
3
The F168FCA must notify the operator and its home state regulator of its finding under subsection (1)(a).
4
The notice to the home state regulator under subsection (3) must—
a
request that the home state regulator take all appropriate measures for the purpose of ensuring that the operator puts an end to the contravention; and
b
state that the F169FCA proposes to exercise the power under subsection (1) if the operator continues the contravention.
5
The F170FCA may not exercise the power under subsection (1) unless satisfied—
a
either—
i
that the home state regulator has failed or refused to take measures for the purpose mentioned in subsection (4)(a); or
ii
that the measures taken by the home state regulator have proved inadequate for that purpose; and
b
that the operator is acting in a manner which is clearly prejudicial to the interests of investors in the United Kingdom or the orderly functioning of the financial markets.
6
If the F171FCA is satisfied as mentioned in subsection (5), it must give written notice to—
a
the operator, and
b
the home state regulator,
of its intention to exercise the power under subsection (1).
7
A notice under subsection (6) must—
a
state why the F172FCA intends to exercise its power under subsection (1), and
b
in the case of the notice to the operator, inform the operator that it may make representations to the F173FCA before the end of the representation period.
8
The representation period is—
a
the period of two months beginning with the date on which the notice is given to the operator; or
b
such longer period as the F174FCA may allow in a particular case.
9
If, having considered any representations made by the operator, the F175FCA decides to exercise the power under subsection (1), it must—
a
notify the operator in writing that it will be prohibited from making or, as the case may be, continuing the arrangements mentioned in that subsection from the date specified in the notice; and
b
notify the home state regulator of the action to be taken in relation to the operator.
10
11
The exemption conferred on an operator by section 312A(2) ceases to apply if the F175FCA exercises the power under subsection (1) in relation to the operator.
12
The right to make the arrangements mentioned in subsection (1) may be reinstated in relation to the operator (together with the exemption mentioned in subsection (11)) if the F176FCA is satisfied that the contravention which led to the F176FCA exercising the power under subsection (1) has been remedied.
F2613
If the F177FCA is satisfied as mentioned in subsection (5), it may refer the matter to ESMA (and ESMA may act in accordance with the powers conferred on it under Article 19 of Regulation ( EU ) No. 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority)).
Recognised investment exchanges operating in EEA States (other than the United Kingdom)
312CExercise of passport rights by recognised investment exchange
1
Subject to subsection (4), a recognised investment exchange may, in pursuance of the right under the applicable provision, make arrangements in an EEA State (other than the United Kingdom) to facilitate access to, or use of, a F318trading venue operated by the exchange (“the relevant arrangements”).
2
The exchange must give the F140FCA written notice of its intention to make the relevant arrangements which—
a
describes the arrangements, and
b
identifies the EEA State in which it intends to make them.
3
The F140FCA must, within one month of receiving a notice under subsection (2), send a copy of it to the host state regulator.
4
The exchange may not make the relevant arrangements until the F140FCA has complied with subsection (3).
5
Subsection (6) applies if the F140FCA receives a request for information—
a
b
under the third sub-paragraph of Article F32153.6 of that directive (in the case of relevant arrangements relating to a regulated market),
from the host state regulator.
6
The F140FCA must, as soon as reasonably practicable, comply with the request.
7
”Host state regulator” means the competent authority (within the meaning of Article F3224.1.26 of the markets in financial instruments directive) of the EEA State in which the exchange intends to make, or has made, the relevant arrangements.
8
This section does not apply to an overseas investment exchange.
Interpretation
312DInterpretation of Chapter 3A
In this Chapter—
“the applicable provision” means—
- a
in the case of arrangements relating to a multilateral trading facility, F323or an organised trading facility, Article 34.6 of the markets in financial instruments directive; and
- b
in the case of arrangements relating to a regulated market, the first sub-paragraph of Article F32453.6 of that directive;
- a
“EEA market operator” means a person who is a market operator (within the meaning of Article F3254.1.18 of the markets in financial instruments directive) whose home state is an EEA State other than the United Kingdom;
“home state”, in relation to an EEA market operator, means the EEA State in which it has its registered office, or if it has no registered office, its head office;
“home state regulator” means the competent authority (within the meaning of Article F3264.1.26 of the markets in financial instruments directive) of the EEA State which is the home state in relation to the EEA market operator concerned.
F29CHAPTER 3BDisciplinary measures
Pt. 18 Ch. 3B inserted (24.1.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), ss. 33, 122(3) (with Sch. 20); S.I. 2013/113, art. 2(1)(b)(c), Sch. Pts. 2, 3; S.I. 2013/423, art. 3, Sch.
C9C11312EPublic censure
1
If the appropriate regulator considers that a recognised body has contravened a relevant requirement imposed on the body, it may publish a statement to that effect.
F2801A
In the circumstances described in the second sub-paragraph of Article 24(5) of the CSD regulation, if the Bank of England considers that an EEA CSD has contravened a relevant requirement imposed on it, it may publish a statement to that effect.
2
Where the FCA is the appropriate regulator, a requirement is a “relevant requirement” for the purposes of this Chapter if it is—
a
a requirement that is imposed by or under any provision of this Part that relates to a recognised investment exchange,
b
a requirement that is imposed under any other provision of this Act by the FCA that relates to a recognised investment exchange,
c
a requirement that is imposed by a qualifying EU provision specified, or of a description specified, for the purposes of this subsection by the Treasury by order, or
d
a requirement that is imposed by this Act and whose contravention constitutes an offence that the FCA has power to prosecute under this Act (see section 401).
3
Where the Bank of England is the appropriate regulator, a requirement is a “relevant requirement” for the purposes of this Chapter if it is—
a
a requirement that is imposed by or under any provision of this Part that relates to a recognised clearing house F281, a recognised CSD or an EEA CSD,
b
a requirement that is imposed under any other provision of this Act by the Bank,
c
a requirement that is imposed by F282or under a qualifying EU provision specified, or of a description specified, for the purposes of this subsection by the Treasury by order, or
d
a requirement that is imposed by this Act and whose contravention constitutes an offence that the Bank has power to prosecute under this Act (see section 401, as applied by paragraph 31 of Schedule 17A).
C9C12312FFinancial penalties
F2831
If the appropriate regulator considers that a recognised body has contravened a relevant requirement imposed on the body, it may impose on the body a penalty, in respect of the contravention, of such amount as it considers appropriate.
F2842
In the circumstances described in the second sub-paragraph of Article 24(5) of the CSD regulation, if the Bank of England considers that an EEA CSD has contravened a relevant requirement imposed on it, it may impose on it a penalty, in respect of the contravention, of such amount as it considers appropriate.
312FAF236Central securities depositories: further disciplinary measures
1
If the Bank of England considers that a contravention by a recognised CSD of a relevant requirement occurred with the consent or connivance of, or was attributable to any neglect on the part of, a member of the management body or other person who effectively controls the business of the recognised CSD, the Bank of England may do one or both of the following—
a
publish a statement to that effect;
b
impose on that person a penalty, in respect of the contravention, of such amount as it considers appropriate.
2
If the Bank of England considers that a member of the management body or other person who effectively controls the business of a recognised CSD is responsible for a contravention by the central securities depository of a relevant requirement, it may do one or more of the following—
a
publish a statement to that effect;
b
impose on that person a penalty, in respect of the contravention, of such amount as it considers appropriate;
c
prohibit that person from holding an office or position involving responsibility for taking decisions about the management of the recognised CSD.
3
A prohibition under subsection (2)(c) may apply—
a
for a specified period,
b
until further notice, or
c
for repeated serious contraventions, permanently.
4
The Bank of England may, on the application of the person subject to a prohibition under subsection (2)(c), vary or revoke the prohibition.
5
In the circumstances described in the second sub-paragraph of Article 24(5) of the CSD regulation, this section applies in relation to an EEA CSD as it applies in relation to a recognised CSD.
C9C13312GProposal to take disciplinary measures
F2861
If the appropriate regulator proposes to impose a sanction—
a
on a recognised body under section 312E or 312F, or
b
on a person under section 312FA,
it must give the body or person (as the case may be) a warning notice.
2
A warning notice about a proposal to publish a statement must set out the terms of the statement.
3
A warning notice about a proposal to impose a penalty must state the amount of the penalty.
F2854
A warning notice about a proposal to impose a prohibition must specify the extent of the prohibition.
5
In this section, “recognised body” includes an EEA CSD.
C9C14312HDecision notice
F2891
If the appropriate regulator decides to impose a sanction—
a
on a recognised body under section 312E or 312F, or
b
on a person under section 312FA,
it must give the body or person (as the case may be) a decision notice.
2
In the case of a statement, the decision notice must set out the terms of the statement.
3
In the case of a penalty, the decision notice must state the amount of the penalty.
F2873A
In the case of a prohibition, the decision notice must specify the extent of the prohibition.
3B
The sanction which the appropriate regulator decides to impose may differ from that proposed in the warning notice.
F2904
If the appropriate regulator decides to impose a sanction—
a
on a recognised body under section 312E or 312F, or
b
on a person under section 312FA,
the body or person (as the case may be) may refer the matter to the Tribunal.
F2885
In this section, “recognised body” includes an EEA CSD.
C9C15312IPublication
After an appropriate regulator publishes a statement under section 312E F291or 312FA, it must send a copy of the statement to—
a
the recognised body F292, EEA CSD or person concerned, and
b
any person to whom a copy of the decision notice was given under section 393(4).
C17312JStatement of policy
1
Each appropriate regulator must prepare and issue a statement of its policy with respect to—
a
c
the period for which prohibitions under section 312FA are to have effect.
2
An appropriate regulator's policy in determining what the amount of a penalty should be F297, or what the period for which a prohibition is to have effect should be, must include having regard to—
a
the seriousness of the contravention in question in relation to the nature of the requirement concerned, F298...
b
the extent to which that contravention was deliberate or reckless F299; and
c
whether the person against whom action is to be taken is an individual.
3
An appropriate regulator may at any time alter or replace a statement issued by it under this section.
4
If a statement issued by an appropriate regulator under this section is altered or replaced, the regulator must issue the altered or replacement statement.
5
In exercising, or deciding whether to exercise, its power under section 312F F300or 312FA in the case of any particular contravention, an appropriate regulator must have regard to any statement of policy published by it under this section and in force at a time when the contravention in question occurred.
6
A statement issued by an appropriate regulator under this section must be published by the regulator in the way appearing to the regulator to be best calculated to bring it to the attention of the public.
7
An appropriate regulator may charge a reasonable fee for providing a person with a copy of the statement.
8
An appropriate regulator must, without delay, give the Treasury a copy of any statement which it publishes under this section.
C18312KStatement of policy: procedure
1
Before issuing a statement under section 312J, an appropriate regulator must publish a draft of the proposed statement in the way appearing to the regulator to be best calculated to bring it to the attention of the public.
2
The draft must be accompanied by notice that representations about the proposal may be made to the regulator within a specified time.
3
Before issuing the proposed statement, the regulator must have regard to any representations made to it in accordance with subsection (2).
4
If the regulator issues the proposed statement it must publish an account, in general terms, of—
a
the representations made to it in accordance with subsection (2), and
b
its response to them.
5
If the statement differs from the draft published under subsection (1) in a way which is, in the opinion of the regulator, significant, the regulator must (in addition to complying with subsection (4)) publish details of the difference.
6
An appropriate regulator may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1).
7
This section also applies to a proposal to alter or replace a statement.
Chapter IV
Interpretation
313 Interpretation of Part XVIII.
1
In this Part—
“application” means an application for a recognition order made under section 287 F302, 288 or 288A;
“applicant” means a F303person who has applied for a recognition order;
F215...
F213“central counterparty” means a body corporate or unincorporated association which interposes itself between the counterparties to the contracts traded on one or more financial markets, becoming the buyer to every seller and the seller to every buyer;
F213“central counterparty recognition order” means a recognition order made under section 290(1)(b);
F213“clearing”, in relation to a central counterparty, means the process of establishing positions, including the calculation of net obligations and ensuring that financial instruments, cash, or both, are available to secure the exposures arising from those positions; and “clearing services”, in relation to a central counterparty, is to be read accordingly;
F306“CSD recognition order” means a recognition order made under section 290(1)(d);
F306“EEA CSD” has the meaning given in section 285;
F213“the EMIR regulation” means Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories, and any reference to the requirements contained in that Regulation includes a reference to requirements contained in any directly applicable EU regulation made under its provisions;
F20“multilateral trading facility” has the meaning given in Article F3274.1.22 of the markets in financial instruments directive;
F328“organised trading facility” has the meaning given in Article 4.1.23 of the markets in financial instruments directive;
F225...
“overseas applicant” means a body corporate or association which has neither its head office nor its registered office in the United Kingdom and which has applied for a recognition order;
“overseas investment exchange” means a body corporate or association which has neither its head office nor its registered office in the United Kingdom and in relation to which a recognition order is in force;
F214“overseas clearing house” means a body corporate or association which is not a central counterparty and has neither its head office nor its registered office in the United Kingdom and in relation to which a recognition order is in force;
“recognised body” means a recognised investment exchange F304, a recognised clearing house or a recognised CSD;
F213“recognised central counterparty” has the meaning given in section 285;
“recognised clearing house” has the meaning given in section 285;
F306“recognised CSD” has the meaning given in section 285;
“recognised investment exchange” has the meaning given in section 285;
“recognition order” means an order made under section 290 or 292;
“recognition requirements” has the meaning given by section 286;
F21“regulated market” has the meaning given in Article F3294.1.21 of the markets in financial instruments directive;
“remedial direction” has the meaning given in section 308(8);
“revocation order” has the meaning given in section 297.
F330“trading venue” means a multilateral trading facility, a regulated market or an organised trading facility.
F215...
F3011A
For the purposes of this Part, a clearing house does not include a central securities depository.
2
References in this Part to rules of an investment exchange (or a clearing house F305or central securities depository) are to rules made, or conditions imposed, by the investment exchange (or the clearing house F305or central securities depository) with respect to—
a
recognition requirements;
b
admission of persons to, or their exclusion from the use of, its facilities; or
c
matters relating to its constitution.
3
References in this Part to guidance issued by an investment exchange are references to guidance issued, or any recommendation made, in writing or other legible form and intended to have continuing effect, by the investment exchange to—
a
all or any class of its members or users, or
b
persons seeking to become members of the investment exchange or to use its facilities,
with respect to any of the matters mentioned in subsection (2)(a) to (c).
4
References in this Part to guidance issued by a clearing house are to guidance issued, or any recommendation made, in writing or other legible form and intended to have continuing effect, by the clearing house to—
a
all or any class of its members, or
b
persons using or seeking to use its services,
with respect to the provision by it or its members of clearing services F141or services falling within section 285(3)(b).
Pt. 18 heading substituted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), regs. 1, 2(8) (with regs. 7(4), 9(1))