Part XVIIIRecognised investment exchanges, clearing houses , CSDs and other parties

F1CHAPTER 2APerformance of functions of recognised bodies

Disciplinary action by appropriate regulator

309Z2Power to take disciplinary action for misconduct

(1)

Subsection (2) applies if—

(a)

it appears to the appropriate regulator that a person is guilty of misconduct (see section 309Z3), and

(b)

the appropriate regulator is satisfied that it is appropriate in all the circumstances to take action against the person.

(2)

The appropriate regulator may do one or more of the following—

(a)

publish a statement of the person’s misconduct;

(b)

impose a penalty on the person of such amount as the appropriate regulator considers appropriate;

(c)

suspend an approval of the performance of a function by the person under section 309G for such period as the appropriate regulator considers appropriate;

(d)

impose such conditions as the appropriate regulator considers appropriate in relation to such an approval for such period as the appropriate regulator considers appropriate;

(e)

limit the period for which such an approval is to have effect.

(3)

Where the appropriate regulator takes action described in subsection (2)(c), (d) or (e)—

(a)

it may not suspend an approval for more than 2 years;

(b)

it may not impose conditions which have effect for more than 2 years;

(c)

it may impose a condition so as to, among other things, require a person to take, or refrain from taking, specified action;

(d)

it may impose a suspension, condition or limitation that has effect in relation to part of a function.

(4)

The appropriate regulator that has taken action described in subsection (2)(c), (d) or (e) may (at any time)—

(a)

withdraw a suspension, condition or limitation;

(b)

vary a suspension or condition so as to reduce the period for which it has effect or otherwise to limit its effect;

(c)

vary a limitation so as to increase the period for which the approval is to have effect.

(5)

The appropriate regulator may not take action under this section after the end of the period of 6 years beginning with the first day on which the appropriate regulator knew of the misconduct unless, before the end of that period, it gave a warning notice to the person concerned under section 309Z4.

(6)

For the purposes of subsection (5), the appropriate regulator is to be treated as knowing of misconduct if it has information from which the misconduct can reasonably be inferred.

(7)

When a suspension is in force under subsection (2)(c) in relation to part of a function, the references in section 309G and 309U to the performance of a function include the performance of part of a function.

(8)

If at any time a condition imposed under subsection (2)(d) is contravened, the approval in relation to the person concerned is to be treated for the purposes of sections 309G and 309U as if it had been withdrawn at that time.

309Z3Meaning of “misconduct”

(1)

For the purposes of section 309Z2, a person is guilty of misconduct if any of conditions A to C is met.

(2)

Condition A is that—

(a)

the person has at any time failed to comply with rules made under section 309Z1, and

(b)

at that time the person was—

(i)

a Part 18 approved person,

(ii)

an employee of a relevant recognised body, or

(iii)

a director of a relevant recognised body.

(3)

Condition B is that—

(a)

the person has at any time after the passing of this Act been knowingly concerned in a contravention by a relevant recognised body of a relevant requirement, and

(b)

at that time the person was—

(i)

a Part 18 approved person in relation to the relevant recognised body,

(ii)

an employee of the relevant recognised body, or

(iii)

a director of the relevant recognised body.

(4)

Condition C is that—

(a)

the person has at any time been a Part 18 approved person in relation to a relevant recognised body,

(b)

at that time there was, or continued to be, a contravention by the body of a relevant requirement,

(c)

the person was at that time responsible for the management of any of the body’s activities in relation to which the contravention occurred, and

(d)

the person did not take such steps as a person in that position could reasonably be expected to take to avoid the contravention occurring or continuing.

(5)

In this section—

“Part 18 approved person”—

(a)

means a person in relation to whom an approval is given under section 309G, and

(b)

in relation to a relevant recognised body, means a person in relation to whom such approval is given on the application of the relevant recognised body;

“relevant requirement” has the meaning given by section 312E(2) and (3).

309Z4Procedure for disciplinary action

(1)

If the appropriate regulator proposes to take action against a person under section 309Z2, it must—

(a)

give the person a warning notice, and

(b)

in the case of proposed action under section 309Z2(2)(c), (d) or (e), give each of the other interested parties a warning notice.

(2)

A warning notice under this section about a proposal to publish a statement of a person’s misconduct must set out the terms of the statement.

(3)

A warning notice under this section about a proposal to impose a penalty must state the amount of the penalty.

(4)

A warning notice under this section about—

(a)

a proposal to suspend an approval given under section 309G, or

(b)

a proposal to impose a condition in relation to such an approval,

must state the period for which the suspension or condition is to have effect.

(5)

A warning notice under this section about a proposal to limit the period for which an approval under section 309G is to have effect must state the length of that period.

(6)

If the appropriate regulator decides to take action against a person under section 309Z2, it must—

(a)

give the person a decision notice, and

(b)

in the case of proposed action under section 309Z2(2)(c), (d) or (e), give each of the other interested parties a copy of the decision notice.

(7)

A decision notice under this section about the publication of a statement of a person’s misconduct must set out the terms of the statement.

(8)

A decision notice under this section about the imposition of a penalty must state the amount of the penalty.

(9)

A decision notice under this section about—

(a)

the suspension of an approval given under section 309G, or

(b)

the imposition of a condition in relation to such an approval,

must state the period for which the suspension or condition is to have effect.

(10)

A decision notice under this section about limiting the period for which an approval under section 309G is to have effect must state the length of that period.

(11)

If the appropriate regulator decides to take action against a person under section 309Z2—

(a)

the person may refer the matter to the Tribunal, and

(b)

in the case of proposed action under section 309Z2(2)(c), (d) or (e), each of the other interested parties may also refer the matter to the Tribunal.

(12)

After a statement of a person’s misconduct is published under section 309Z2, the appropriate regulator must send a copy of it to—

(a)

the person concerned, and

(b)

any person to whom a copy of the decision notice was given.

(13)

In this section—

“Part 18 approved person”, in relation to a relevant recognised body, has the meaning given by section 309Z3(5);

“the other interested parties”, in relation to a Part 18 approved person in relation to a relevant recognised body, are—

(a)

the relevant recognised body, and

(b)

the person by whom the Part 18 approved person’s services are retained, if different from the relevant recognised body.

309Z5Statement of policy about disciplinary action

(1)

The appropriate regulator must prepare and issue a statement of its policy with respect to—

(a)

the imposition of penalties, suspensions, conditions or limitations under section 309Z2,

(b)

the amount of penalties under that section,

(c)

the period for which suspensions or conditions under that section are to have effect, and

(d)

the period for which approvals under section 309G are to have effect as a result of a limitation under section 309Z2.

(2)

The appropriate regulator’s policy in determining what the amount of a penalty should be, or what the period for which a suspension or restriction is to have effect should be, must include having regard to—

(a)

the seriousness of the misconduct in question,

(b)

the extent to which that misconduct was deliberate or reckless, and

(c)

whether the person against whom action is to be taken is an individual.

(3)

The appropriate regulator—

(a)

may alter or replace a statement issued under this section, and

(b)

if it does so, must issue the altered or replacement statement.

(4)

In exercising, or deciding whether to exercise, its power under section 309Z2 in the case of particular misconduct, the appropriate regulator must have regard to any statement of policy published under this section and in force at the time when the misconduct in question occurred.

309Z6Procedure for statement of policy about disciplinary action

(1)

Before the appropriate regulator issues a statement under section 309Z5(1) or (3), it must publish a draft of the proposed statement in the way appearing to it to be best calculated to bring it to the attention of the public.

(2)

The draft statement must be accompanied by a notice stating that representations about the proposal may be made to the appropriate regulator within a period specified in the notice.

(3)

Before issuing the proposed statement, the appropriate regulator must have regard to any representations made to it in accordance with subsection (2).

(4)

If the appropriate regulator issues the proposed statement it must publish the following in the way appearing to the appropriate regulator to be best calculated to bring it to the attention of the public—

(a)

the statement,

(b)

an account, in general terms, of the representations made to the appropriate regulator in accordance with subsection (2) and the appropriate regulator’s response to them, and

(c)

if the statement differs from the draft published under subsection (1) in a way which the appropriate regulator considers significant, details of the difference.

(5)

The appropriate regulator may charge a reasonable fee for providing a person with—

(a)

a copy of a draft statement published under subsection (1), or

(b)

a copy of a statement published under subsection (4)(a).

(6)

The appropriate regulator must, without delay, give the Treasury a copy of any statement which it publishes under subsection (4)(a).