Financial Services and Markets Act 2023

PART 4 U.K. Removal of directors and senior managers

Removal of directors and senior managers U.K.

5 (1) If the Bank is satisfied that the conditions in paragraph 7(1) and (2) are met in relation to a CCP, the Bank may require the CCP to remove—

(a) any person who is a director of the CCP;

(b) any person who is a senior manager of the CCP.

(2) If the Bank imposes a requirement under sub-paragraph (1), the Bank may also require the CCP—

(a) to replace a director or senior manager who has been removed, and

(b) to take any step needed to give effect to the replacement, including, where necessary, calling a general meeting of the CCP’s shareholders or, if the CCP is an unincorporated association, its members.

(3) If the Bank is satisfied that the condition in paragraph 7(5) is met in relation to a person who is a director of a CCP, the Bank may require that CCP to remove that person from the board of directors.

(4) Nothing in this Schedule affects the powers under Article 31 of EMIR or paragraphs 45 and 58.

Commencement Information

I1 Sch. 11 para. 5 not in force at Royal Assent, see s. 86(3)

I2 Sch. 11 para. 5 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Temporary manager U.K.

6 (1) If the Bank is satisfied that the conditions in paragraph 7(1), (2) and (4) are met in relation to a CCP, the Bank may appoint a person to act (or more than one persons to act jointly) as a temporary manager of that CCP.

(2) A temporary manager may be appointed under sub-paragraph (1)—

(a) to replace the directors of a CCP where they have been removed in compliance with a requirement imposed under paragraph 5, or

(b) to work with the directors of a CCP.

(3) A temporary manager has the functions specified in the instrument of appointment (see paragraph 9).

(4) The functions which may be specified include (amongst other things)—

(a) ascertaining the financial position of the CCP;

(b) managing the business or part of the business of the CCP in order to preserve or restore the financial position of the CCP;

(c) taking measures to restore the prudent management of the CCP;

(d) any functions of the directors.

(5) The temporary manager may, with the consent of the Bank—

(a) require the directors to call a general meeting of the shareholders, or in the case of an unincorporated association, the members of the CCP, or

(b) in the case where all of the directors have been removed in compliance with a requirement imposed under paragraph 5, call a general meeting of the shareholders of the CCP or, if the CCP is an unincorporated association, the members of the CCP.

(6) The temporary manager may propose business for consideration at the general meeting.

(7) If the temporary manager is being appointed to work with the directors, the Bank—

(a) may require the directors not to exercise specified functions during the period of appointment;

(b) may require the directors to consult the temporary manager, or obtain the consent of the temporary manager, before taking such decisions or actions as may be specified in the requirement.

Commencement Information

I3 Sch. 11 para. 6 not in force at Royal Assent, see s. 86(3)

I4 Sch. 11 para. 6 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Paragraphs 5 and 6: conditions U.K.

7 (1) The condition in this sub-paragraph is met if—

(a) there is a significant deterioration in the financial situation of the CCP, or

(b) there is a serious infringement by the CCP of—

(i) a relevant requirement, or

(ii) its rules.

(2) The condition in this sub-paragraph is met if it is not reasonably likely that the deterioration would be reversed or the infringement would be brought to an end by any measure which could be taken by the Bank under the provisions listed in sub-paragraph (3).

(3) The provisions mentioned in sub-paragraph (2) are—

(a) section 296 or 296A of FSMA 2000 (power to direct CCPs);

(b) paragraph 13 (power to impose stay on distributions).

(4) The condition in this sub-paragraph is met if the imposition of one or more requirements under paragraph 5 (removal and replacement of directors and senior managers) would not be sufficient to reverse the deterioration or bring the infringement to an end.

(5) The condition in this sub-paragraph is met in relation to a director of a CCP, if the director—

(a) is no longer of sufficiently good repute to perform their duties,

(b) no longer possesses sufficient knowledge, skills, experience, honesty, integrity or independence of mind to perform their duties, or

(c) is no longer able to commit sufficient time to perform their duties.

(6) For the purposes of this paragraph—

(a) “relevant requirement” means a requirement imposed by or under—

(i) FSMA 2000;

(ii) EMIR;

(iii) another enactment (or provision of an enactment) specified in regulations made by the Treasury;

(b) a deterioration in the financial situation of a CCP is significant if the deterioration places the CCP at risk of meeting condition 1 under paragraph 17.

(7) Regulations under this paragraph are subject to the negative procedure.

Commencement Information

I5 Sch. 11 para. 7 not in force at Royal Assent, see s. 86(3)

I6 Sch. 11 para. 7 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Temporary manager: further provisions in relation to the appointment U.K.

8 (1) Before appointing a person to act as a temporary manager, the Bank must be satisfied that the person—

(a) has the qualifications, ability and knowledge to carry out the functions to be given to the temporary manager, and

(b) would not be subject to a conflict of interest as a result of the appointment.

(2) A person may not be appointed to act as a temporary manager for a period longer than one year, but is eligible for re-appointment (or further re-appointment) if paragraph 6(1) continues to apply in relation to the CCP.

(3) The Bank may vary the terms of the appointment of a temporary manager, or remove the temporary manager, at any time.

(4) A temporary manager is not liable for damages in respect of anything done in good faith for the purposes of or in connection with the functions of the appointment (subject to section 8 of the Human Rights Act 1998).

Commencement Information

I7 Sch. 11 para. 8 not in force at Royal Assent, see s. 86(3)

I8 Sch. 11 para. 8 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Temporary manager: instrument of appointment U.K.

9 (1) The power in paragraph 6(1) is to be exercised by an instrument of appointment.

(2) The instrument of appointment must—

(a) specify the functions of the temporary manager,

(b) specify the date on which the appointment of the temporary manager has effect,

(c) specify the period for which the temporary manager is appointed, and

(d) make provision for the resignation and replacement of the person who is appointed as the temporary manager.

(3) The instrument of appointment may—

(a) require the temporary manager to consult the Bank or other specified person before exercising specified functions,

(b) specify particular matters on which the Bank or other specified person must be consulted, and

(c) provide that the temporary manager is not to exercise specified functions without the consent of the Bank or other specified person.

(4) The instrument of appointment may require the temporary manager to make reports to the Bank, at specified times or intervals, on—

(a) the financial position of the CCP,

(b) the actions taken by the temporary manager during the course of the temporary manager‘s appointment, and

(c) any other specified matters.

(5) The instrument of appointment may provide for the payment of remuneration and allowances to a temporary manager.

(6) Provision under sub-paragraph (5) may provide that the amounts are—

(a) to be paid by the Bank, or

(b) to be determined by the Bank and paid by the CCP.

(7) If a temporary manager—

(a) is appointed to replace the directors of the CCP, or

(b) is appointed to work with the directors of the CCP and has the power to represent the CCP,

the Bank must publish the instrument of appointment on its website.

Commencement Information

I9 Sch. 11 para. 9 not in force at Royal Assent, see s. 86(3)

I10 Sch. 11 para. 9 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Right to refer matters to the Tribunal U.K.

10 (1) A CCP which is aggrieved by one of the following may refer the matter to the Tribunal—

(a) the imposition of a requirement on that CCP under paragraph 5, or

(b) the appointment, or the terms of the appointment, of a person to act as a temporary manager of that CCP under paragraph 6.

(2) A director or senior manager (or a former director or senior manager) of a CCP who is aggrieved by the imposition of a requirement on that CCP under paragraph 5 may refer the matter to the Tribunal.

(3) A director (or a former director) of a CCP who is aggrieved by the imposition of a requirement on that director under paragraph 6(7) may refer the matter to the Tribunal.

Commencement Information

I11 Sch. 11 para. 10 not in force at Royal Assent, see s. 86(3)

I12 Sch. 11 para. 10 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Removal of directors and senior managers and appointment of temporary manager: procedure U.K.

11 (1) A requirement under paragraph 5 or 6(7) or the appointment of a temporary manager under paragraph 6(1) may be expressed to take effect immediately or on a specified date only if the Bank, having regard to the grounds for imposing the requirement or making the appointment, reasonably considers that it is necessary for the requirement or the appointment to take effect immediately or on that date.

(2) If the Bank proposes to impose a requirement on a CCP under paragraph 5 or imposes such a requirement with immediate effect, it must give written notice—

(a) to that CCP, and

(b) to each of the directors or senior managers to whom the requirement relates.

(3) If the Bank—

(a) proposes to appoint a person to act as a temporary manager under paragraph 6 or to vary the terms on which such a person is appointed, or

(b) makes such an appointment or variation with immediate effect,

the Bank must give written notice to the CCP.

(4) If the Bank proposes to impose a requirement on the directors under paragraph 6(7), or imposes such a requirement with immediate effect, the Bank must give written notice to each director.

(5) If, having considered any representations made by a person to whom notice (the “original notice”) has been given (see paragraph 12), the Bank decides—

(a) to impose the requirement, make the appointment or vary the terms of an appointment in accordance with the original notice, or

(b) not to rescind the imposition of any such requirement or the making of any such appointment or variation which has already taken effect,

the Bank must give written notice to each person to whom the original notice was given.

(6) A written notice under sub-paragraph (5) must inform the person to whom it is given of the right of that person to refer the matter to the Tribunal and give an indication of the procedure on such a reference.

(7) If, having considered any representations made by a person to whom the original notice has been given (see paragraph 12), the Bank decides—

(a) to impose a requirement, make an appointment or vary the terms of an appointment in a way that is different from the requirement, appointment or variation described in the original notice,

(b) not to impose the requirement, make the appointment or vary the terms of an appointment in accordance with the original notice, or

(c) to rescind the imposition of any such requirement, or the making of any such appointment or variation that has already taken effect,

the Bank must give written notice to each person to whom the original notice was given.

Commencement Information

I13 Sch. 11 para. 11 not in force at Royal Assent, see s. 86(3)

I14 Sch. 11 para. 11 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Removal of directors and senior managers and appointment of temporary manager: notice requirements U.K.

12 (1) A notice under paragraph 11(2) must—

(a) give details of the requirement,

(b) identify each of the directors or senior managers to whom the requirement relates (“the interested parties”),

(c) give the Bank’s reasons for imposing the requirement—

(i) in the case of a notice given to the CCP, in relation to each interested party;

(ii) in the case of a notice given to an interested party, in relation to that interested party,

(d) inform the CCP and the interested parties that each of them may make representations to the Bank within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal),

(e) state when the requirement takes effect, and

(f) inform the CCP and each of the interested parties of their right to refer the matter to the Tribunal.

(2) A notice given under paragraph 11(3) must—

(a) state when the appointment or variation takes effect, and be accompanied by the instrument, or revised instrument, of appointment,

(b) give the Bank’s reasons for making the appointment or variation,

(c) inform the CCP that it may make representations to the Bank within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), and

(d) inform the CCP of its right to refer the matter to the Tribunal.

(3) A notice given under paragraph 11(4) must—

(a) give details of the requirement,

(b) give the Bank’s reasons for imposing the requirement,

(c) state when the requirement takes effect,

(d) inform the director that the director may make representations to the Bank within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), and

(e) inform the director of the director’s right to refer the matter to the Tribunal.

(4) The Bank may extend the period allowed by the notice given under paragraph 11(2), (3) or (4) for making representations.

(5) A notice under paragraph 11(7)(a) about the imposition of a requirement under paragraph 5 must comply with sub-paragraph (1).

(6) A notice under paragraph 11(7)(a) about the appointment of a person as a temporary manager or the variation of the terms of the appointment of a person as a temporary manager must comply with sub-paragraph (2).

(7) A notice under paragraph 11(7)(a) about the imposition of a requirement under paragraph 6(7) must comply with sub-paragraph (3).

(8) In this paragraph, any reference to “appointment” includes re-appointment.

Commencement Information

I15 Sch. 11 para. 12 not in force at Royal Assent, see s. 86(3)

I16 Sch. 11 para. 12 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

Temporary restriction on remuneration U.K.

13 (1) The Bank may by direction restrict or prohibit for a specified period discretionary payments to specified employees of a CCP or specified shareholders of a CCP.

(2) The power under sub-paragraph (1) may be exercised only if—

(a) a stabilisation power is not being exercised in relation to the CCP,

(b) at least one of the conditions in sub-paragraph (3) is met, and

(c) the condition in sub-paragraph (4) is met.

(3) The conditions in this sub-paragraph are—

(a) there is or is likely soon to be a significant deterioration in the financial situation of the CCP (within the meaning given by paragraph 7(6));

(b) there is a material risk of a threat to the ability of the CCP to maintain critical clearing services;

(c) there is a risk of a significant disruption to the operation of the CCP;

(d) the operation of the CCP poses a risk to the financial stability of the United Kingdom.

(4) The condition in this sub-paragraph is that the exercise of the power is necessary or desirable having regard to the public interest in—

(a) the stability of the UK financial system, or

(b) the continuity of critical clearing services.

(5) The Bank must prepare and publish a statement of its policy with respect to the giving of directions under this paragraph.

(6) The Bank may alter or replace a statement of policy published under this paragraph.

(7) The Bank must publish a statement as altered or replaced under sub-paragraph (6).

(8) No directions may be given under this paragraph before the statement of policy under sub-paragraph (5) has been published.

(9) The specified period for the purposes of sub-paragraph (1) must not exceed 5 years.

(10) Directions under this paragraph—

(a) must be given in writing to the employees or shareholders that the directions apply to;

(b) may be varied or revoked.

(11) In this paragraph “discretionary payments” means payments, made otherwise than under a contractual obligation, of any of the following—

(a) equity remuneration;

(b) dividend payments;

(c) share buy-backs;

(d) variable remuneration including, where an employee is a senior manager, bonuses, discretionary pension benefits and severance payments.

Commencement Information

I17 Sch. 11 para. 13 not in force at Royal Assent, see s. 86(3)

I18 Sch. 11 para. 13(1)-(4)(8)-(11) in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)

I19 Sch. 11 para. 13(5)-(7) in force at 29.8.2023 by S.I. 2023/779, reg. 4(ddd)(ii)

Restriction on remuneration: review and revocation U.K.

14 (1) This paragraph applies where a direction has been given under paragraph 13(1) in relation to a CCP.

(2) The Bank must, at least once every 3 months after giving the direction, carry out a review of whether the requirements for the exercise of the power continue to be met.

(3) If at any time the Bank becomes aware that the requirements for the exercise of the power cease to be met, the Bank must revoke the direction with immediate effect.

(4) The direction ceases to have effect if a stabilisation power is exercised in respect of the CCP.

Commencement Information

I20 Sch. 11 para. 14 not in force at Royal Assent, see s. 86(3)

I21 Sch. 11 para. 14 in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)