The general rule
1 (1) A person offers securities to the public in the United Kingdom if—
(a) to the extent that the offer is made to persons in the United Kingdom, it is made to the public; and
(b) the offer is not an exempt offer.
(2) For this purpose, an offer which is made to any section of the public, whether selected—
(a) as members or debenture holders of a body corporate,
(b) as clients of the person making the offer, or
(c) in any other manner,
is to be regarded as made to the public.
Exempt offers
2 (1) For the purposes of this Schedule, an offer of securities is an “exempt offer” if, to the extent that the offer is made to persons in the United Kingdom—
(a) the condition specified in any of paragraphs 3 to 24A is satisfied in relation to the offer; or
(b) the condition specified in one relevant paragraph is satisfied in relation to part, but not the whole, of the offer and, in relation to each other part of the offer, the condition specified in a different relevant paragraph is satisfied.
(2) The relevant paragraphs are 3 to 8, 12 to 18 and 21.
Offers for business purposes
3 The securities are offered to persons—
(a) whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses, or
(b) who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses,
or are otherwise offered to persons in the context of their trades, professions or occupations.
Offers to limited numbers
4 (1) The securities are offered to no more than fifty persons.
(2) In determining whether this condition is satisfied, the offer is to be taken together with any other offer of the same securities which was—
(a) made by the same person;
(b) open at any time within the period of 12 months ending with the date on which the offer is first made; and
(c) not an offer to the public in the United Kingdom by virtue of this condition being satisfied.
(3) For the purposes of this paragraph—
(a) the making of an offer of securities to trustees or members of a partnership in their capacity as such, or
(b) the making of such an offer to any other two or more persons jointly,
is to be treated as the making of an offer to a single person.
Clubs and associations
5 The securities are offered to the members of a club or association (whether or not incorporated) and the members can reasonably be regarded as having a common interest with each other and with the club or association in the affairs of the club or association and in what is to be done with the proceeds of the offer.
Restricted circles
6 (1) The securities are offered to a restricted circle of persons whom the offeror reasonably believes to be sufficiently knowledgeable to understand the risks involved in accepting the offer.
(2) In determining whether a person is sufficiently knowledgeable to understand the risks involved in accepting an offer of securities, any information supplied by the person making the offer is to be disregarded, apart from information about—
(a) the issuer of the securities; or
(b) if the securities confer the right to acquire other securities, the issuer of those other securities.
Underwriting agreements
7 The securities are offered in connection with a genuine invitation to enter into an underwriting agreement with respect to them.
Offers to public authorities
8 (1) The securities are offered to a public authority.
(2) “Public authority” means—
(a) the government of the United Kingdom;
(b) the government of any country or territory outside the United Kingdom;
(c) a local authority in the United Kingdom or elsewhere;
(d) any international organisation the members of which include the United Kingdom or another EEA State; and
(e) such other bodies, if any, as may be specified.
Maximum consideration
9 (1) The total consideration payable for the securities cannot exceed 40,000 euros (or an equivalent amount).
(2) In determining whether this condition is satisfied, the offer is to be taken together with any other offer of the same securities which was—
(a) made by the same person;
(b) open at any time within the period of 12 months ending with the date on which the offer is first made; and
(c) not an offer to the public in the United Kingdom by virtue of this condition being satisfied.
(3) An amount (in relation to an amount denominated in euros) is an “equivalent amount” if it is an amount of equal value, calculated at the latest practicable date before (but in any event not more than 3 days before) the date on which the offer is first made, denominated wholly or partly in another currency or unit of account.
Minimum consideration
10 (1) The minimum consideration which may be paid by any person for securities acquired by him pursuant to the offer is at least 40,000 euros (or an equivalent amount).
(2) Paragraph 9(3) also applies for the purposes of this paragraph.
Securities denominated in euros
11 (1) The securities are denominated in amounts of at least 40,000 euros (or an equivalent amount).
(2) Paragraph 9(3) also applies for the purposes of this paragraph.
Takeovers
12 (1) The securities are offered in connection with a takeover offer.
(2) “Takeover offer” means—
(a) an offer to acquire shares in a body incorporated in the United Kingdom which is a takeover offer within the meaning of the takeover provisions (or would be such an offer if those provisions applied in relation to any body corporate);
(b) an offer to acquire all or substantially all of the shares, or of the shares of a particular class, in a body incorporated outside the United Kingdom; or
(c) an offer made to all the holders of shares, or of shares of a particular class, in a body corporate to acquire a specified proportion of those shares.
(3) “The takeover provisions” means—
(a) Part XIIIA of the Companies Act 1985; or
(b) in relation to Northern Ireland, Part XIVA of the Companies (Northern Ireland) Order 1986.
(4) For the purposes of sub-paragraph (2)(b), any shares which the offeror or any associate of his holds or has contracted to acquire are to be disregarded.
(5) For the purposes of sub-paragraph (2)(c), the following are not to be regarded as holders of the shares in question—
(a) the offeror;
(b) any associate of the offeror; and
(c) any person whose shares the offeror or any associate of the offeror has contracted to acquire.
(6) “Associate” has the same meaning as in—
(a) section 430E of the Companies Act 1985; or
(b) in relation to Northern Ireland, Article 423E of the Companies (Northern Ireland) Order 1986.
Mergers
13 The securities are offered in connection with a merger (within the meaning of Council Directive No. 78/855/EEC).
Free shares
14 (1) The securities are shares and are offered free of charge to any or all of the holders of shares in the issuer.
(2) “Holders of shares” means the persons who at the close of business on a date—
(a) specified in the offer, and
(b) falling within the period of 60 days ending with the date on which the offer is first made,
were holders of such shares.
Exchange of shares
15 The securities—
(a) are shares, or investments of a specified kind relating to shares, in a body corporate, and
(b) are offered in exchange for shares in the same body corporate,
and the offer cannot result in any increase in the issued share capital of the body corporate.
Qualifying persons
16 (1) The securities are issued by a body corporate and are offered—
(a) by the issuer, by a body corporate connected with the issuer or by a relevant trustee;
(b) only to qualifying persons; and
(c) on terms that a contract to acquire any such securities may be entered into only by the qualifying person to whom they were offered or, if the terms of the offer so permit, any qualifying person.
(2) A person is a “qualifying person”, in relation to an issuer, if he is a genuine employee or former employee of the issuer or of another body corporate in the same group or the wife, husband, widow, widower or child or stepchild under the age of eighteen of such an employee or former employee.
(3) In relation to an issuer of securities, “connected with” has such meaning as may be prescribed.
(4) “Group” and “relevant trustee” have such meaning as may be prescribed.
Convertible securities
17 (1) The securities result from the conversion of convertible securities and listing particulars (or a prospectus) relating to the convertible securities were (or was) published in the United Kingdom under or by virtue of Part VI or such other provisions applying in the United Kingdom as may be specified.
(2) “Convertible securities” means securities of a specified kind which can be converted into, or exchanged for, or which confer rights to acquire, other securities.
(3) “Conversion” means conversion into or exchange for, or the exercise of rights conferred by the securities to acquire, other securities.
Charities
18 The securities are issued by—
(a) a charity within the meaning of—
(i) section 96(1) of the Charities Act 1993, or
(ii) section 35 of the Charities Act (Northern Ireland) 1964,
(b) a recognised body within the meaning of section 1(7) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990,
(c) a housing association within the meaning of—
(i) section 5(1) of the Housing Act 1985,
(ii) section 1 of the Housing Associations Act 1985, or
(iii) Article 3 of the Housing (Northern Ireland) Order 1992,
(d) an industrial or provident society registered in accordance with—
(i) section 1(2)(b) of the Industrial and Provident Societies Act 1965, or
(ii) section 1(2)(b) of the Industrial and Provident Societies Act 1969, or
(e) a non-profit making association or body, recognised by the country or territory in which it is established, with objectives similar to those of a body falling within any of paragraphs (a) to (c),
and the proceeds of the offer will be used for the purposes of the issuer’s objectives.
Building societies etc.
19 The securities offered are shares which are issued by, or ownership of which entitles the holder to membership of or to obtain the benefit of services provided by—
(a) a building society incorporated under the law of, or of any part of, the United Kingdom;
(b) any body incorporated under the law of, or of any part of, the United Kingdom relating to industrial and provident societies or credit unions; or
(c) a body of a similar nature established in another EEA State.
Euro-securities
20 (1) The securities offered are Euro-securities and no advertisement relating to the offer is issued in the United Kingdom, or is caused to be so issued—
(a) by the issuer of the Euro-securities;
(b) by any credit institution or other financial institution through which the Euro-securities may be acquired pursuant to the offer; or
(c) by any body corporate which is a member of the same group as the issuer or any of those institutions.
(2) But sub-paragraph (1) does not apply to an advertisement of a prescribed kind.
(3) “Euro-securities” means investments which—
(a) are to be underwritten and distributed by a syndicate at least two of the members of which have their registered offices in different countries or territories;
(b) are to be offered on a significant scale in one or more countries or territories, other than the country or territory in which the issuer has its registered office; and
(c) may be acquired pursuant to the offer only through a credit institution or other financial institution.
(4) “Credit institution” means a credit institution as defined in Article 1(1)(a) of the banking consolidation directive.
(5) “Financial institution” means a financial institution as defined in Article 1 of the banking consolidation directive.
(6) “Underwritten” means underwritten by whatever means, including by acquisition or subscription, with a view to resale.
Same class securities
21 The securities are of the same class, and were issued at the same time, as securities in respect of which a prospectus has been published under or by virtue of—
(a) Part VI;
(b) Part III of the Companies Act 1985; or
(c) such other provisions applying in the United Kingdom as may be specified.
Short date securities
22 The securities are investments of a specified kind with a maturity of less than one year from their date of issue.
Government and public securities
23 (1) The securities are investments of a specified kind creating or acknowledging indebtedness issued by or on behalf of a public authority.
(2) “Public authority” means—
(a) the government of the United Kingdom;
(b) the government of any country or territory outside the United Kingdom;
(c) a local authority in the United Kingdom or elsewhere;
(d) any international organisation the members of which include the United Kingdom or another EEA State; and
(e) such other bodies, if any, as may be specified.
Non-transferable securities
24 The securities are not transferable.
Units in a collective investment scheme
24A The securities are units (as defined by section 237(2)) in a collective investment scheme.
General definitions
25 For the purposes of this Schedule—
“shares” has such meaning as may be specified; and
“specified” means specified in an order made by the Treasury.
Sections 111(2) and 115.
Part I Insurance Business Transfer Schemes
1 For the purposes of section 111(2) the appropriate certificate, in relation to an insurance business transfer scheme, is a certificate under paragraph 2.
Certificates as to margin of solvency
2 (1) A certificate under this paragraph is to be given—
(a) by the relevant authority; or
(b) in a case in which there is no relevant authority, by the appropriate regulator.
(2) A certificate given under sub-paragraph (1)(a) is one certifying that, taking the proposed transfer into account—
(a) the transferee possesses, or will possess before the scheme takes effect, the necessary margin of solvency; or
(b) there is no necessary margin of solvency applicable to the transferee.
(3) A certificate under sub-paragraph (1)(b) is one certifying that the appropriate regulator has received from the authority which it considers to be the authority responsible for supervising persons who effect or carry out contracts of insurance in the place to which the business is to be transferred certification that, taking the proposed transfer into account—
(a) the transferee possesses or will possess before the scheme takes effect the margin of solvency required under the law applicable in that place; or
(b) there is no such margin of solvency applicable to the transferee .
(4) “Necessary margin of solvency” means the margin of solvency required in relation to the transferee, taking the proposed transfer into account, under the law which it is the responsibility of the relevant authority to apply.
(5) “Margin of solvency” means the excess of the value of the assets of the transferee over the amount of its liabilities.
(6) “Relevant authority” means—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) if the transferee is a Swiss general insurer, the authority responsible in Switzerland for supervising persons who effect or carry out contracts of insurance;
(c) if the transferee is an authorised person not falling within paragraph ... (b) —
(i) the PRA, if the transferee is a PRA-authorised person with a Part 4A permission ...;
(ii) the FCA, if the transferee is a person with a Part 4A permission ... but is not a PRA-authorised person.
(7) In sub-paragraph (6), any reference to a transferee of a particular description includes a reference to a transferee who will be of that description if the proposed scheme takes effect.
(7A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) “Swiss general insurer” means a body—
(a) whose head office is in Switzerland;
(b) which has permission to carry on regulated activities consisting of the effecting and carrying out of contracts of general insurance; and
(c) whose permission is not restricted to the effecting or carrying out of contracts of reinsurance.
(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates as to consultation
3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates as to consent
3A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates as to long-term business
4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates as to general business
5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates as to legality and as to consent
5A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interpretation of Part I
6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II Banking Business Transfer Schemes
7 For the purposes of section 111(2) the appropriate certificate, in relation to a banking business transfer scheme, is a certificate under paragraph 8.
Certificates as to financial resources
8 (1) A certificate under this paragraph is one given by the relevant authority and certifying that, taking the proposed transfer into account, the transferee possesses, or will possess before the scheme takes effect, adequate financial resources.
(2) “Relevant authority” means—
(a) if the transferee is a PRA-authorised person with a Part 4A permission ..., the PRA;
(aa) if the transferee is a person with Part 4A permission ... but is not a PRA-authorised person, the FCA;
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) if the transferee does not fall within paragraph (a) or (aa), the authority responsible for the supervision of the transferee’s business in the place in which the transferee has its head office.
(3) In sub-paragraph (2), any reference to a transferee of a particular description of person includes a reference to a transferee who will be of that description if the proposed banking business transfer scheme takes effect.
Certificates as to consent of home state regulator
9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 2A Reclaim fund business transfer schemes
Certificate as to financial resources
9A (1) For the purposes of section 111(2) the appropriate certificate, in relation to a reclaim fund business transfer scheme, is a certificate given by the relevant regulator certifying that, taking the proposed transfer into account, the transferee possesses, or will possess before the scheme takes effect, adequate financial resources.
(2) In this paragraph the “relevant regulator” means—
(a) if the transferee is a PRA-authorised person, the PRA;
(b) in any other case, the FCA.
PART 2B Ring-fencing transfer schemes
Appropriate certificates
9B For the purposes of section 111(2) the appropriate certificates, in relation to a ring-fencing transfer scheme, are—
(a) a certificate given by the PRA certifying its approval of the application, and
(b) a certificate under paragraph 9C.
Certificate as to financial resources
9C (1) A certificate under this paragraph is one given by the relevant authority and certifying that, taking the proposed transfer into account, the transferee possesses, or will possess before the scheme takes effect, adequate financial resources.
(2) “Relevant authority” means—
(a) if the transferee is a PRA-authorised person with a Part 4A permission ..., the PRA;
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) if the transferee does not fall within paragraph (a) ... but is subject to regulation in a country or territory outside the United Kingdom, the authority responsible for the supervision of the transferee's business in the place in which the transferee has its head office;
(d) in any other case, the FCA.
(3) In sub-paragraph (2), any reference to a transferee of a particular description includes a reference to a transferee who will be of that description if the proposed ring-fencing transfer scheme takes effect.
Certificate as to consent of home state regulator
9D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III Insurance business transfers effected outside the United Kingdom
10 (1) This paragraph applies to a proposal to execute under provisions corresponding to Part VII in a country or territory other than the United Kingdom an instrument transferring all the rights and obligations of the transferor under general or long-term insurance policies, or under such descriptions of such policies as may be specified in the instrument, to the transferee if the condition in sub-paragraph (4) is met in relation to it.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) The transferor is a Swiss general insurer and the transferee is a UK authorised person as defined in section 105(8).
(5) In relation to a proposed transfer to which this paragraph applies, the regulator which supervises the transferee's margin of solvency may, if it is satisfied that the transferee possesses the necessary margin of solvency, issue a certificate to that effect.
(6) “Necessary margin of solvency” means the margin of solvency which the transferee, taking the proposed transfer into account, is required by the FCA or the PRA to maintain.
(7) “Swiss general insurer” has the same meaning as in paragraph 2.
(8) “General policy” means a policy evidencing a contract which, if it had been effected by the transferee, would have constituted the carrying on of a regulated activity consisting of the effecting of contracts of general insurance.
(9) “Long-term policy” means a policy evidencing a contract which, if it had been effected by the transferee, would have constituted the carrying on of a regulated activity consisting of the effecting of contracts of long-term insurance.
Part I General
Interpretation
1 In this Schedule—
“panel of chairmen” means the panel established under paragraph 3(1);
“lay panel” means the panel established under paragraph 3(4);
“rules” means rules made by the Lord Chancellor under section 132.
Part II The Tribunal
President
2 (1) The Lord Chancellor must appoint one of the members of the panel of chairmen to preside over the discharge of the Tribunal’s functions.
(2) The member so appointed is to be known as the President of the Financial Services and Markets Tribunal (but is referred to in this Act as “the President”).
(3) The Lord Chancellor may appoint one of the members of the panel of chairmen to be Deputy President.
(4) The Deputy President is to have such functions in relation to the Tribunal as the President may assign to him.
(5) The Lord Chancellor may not appoint a person to be the President or Deputy President unless that person—
(a) satisfies the judicial-appointment eligibility condition on a 7-year basis;
(b) is an advocate or solicitor in Scotland of at least 7 years’ standing; or
(c) is—
(i) a member of the Bar of Northern Ireland of at least 7 years’ standing; or
(ii) a solicitor of the Court of Judicature of Northern Ireland of at least 7 years’ standing.
(6) If the President (or Deputy President) ceases to be a member of the panel of chairmen, he also ceases to be the President (or Deputy President).
(7) The functions of the President may, if he is absent or is otherwise unable to act, be discharged—
(a) by the Deputy President; or
(b) if there is no Deputy President or he too is absent or otherwise unable to act, by a person appointed for that purpose from the panel of chairmen by the Lord Chancellor.
(8) The Lord Chancellor may appoint a person under sub-paragraph (7)(b) only after consulting the following—
(a) the Lord Chief Justice of England and Wales;
(b) the Lord President of the Court of Session;
(c) the Lord Chief Justice of Northern Ireland.
(9) The Lord Chief Justice of England and Wales may nominate a judicial office holder (as defined in section 109(4) of the Constitutional Reform Act 2005) to exercise his functions under this paragraph.
(10) The Lord President of the Court of Session may nominate a judge of the Court of Session who is a member of the First or Second Division of the Inner House of that Court to exercise his functions under this paragraph.
(11) The Lord Chief Justice of Northern Ireland may nominate any of the following to exercise his functions under this paragraph—
(a) the holder of one of the offices listed in Schedule 1 to the Justice (Northern Ireland) Act 2002;
(b) a Lord Justice of Appeal (as defined in section 88 of that Act).
Panels
3 (1) The Lord Chancellor must appoint a panel of persons for the purposes of serving as chairmen of the Tribunal.
(2) A person is qualified for membership of the panel of chairmen if—
(a) he satisfies the judicial-appointment eligibility condition on a 5-year basis;
(b) he is an advocate or solicitor in Scotland of at least 5 years’ standing; or
(c) he is—
(i) a member of the Bar of Northern Ireland of at least 5 years’ standing; or
(ii) a solicitor of the Court of Judicature of Northern Ireland of at least 5 years’ standing.
(3) The panel of chairmen must include at least one member who is a person of the kind mentioned in sub-paragraph (2)(b).
(4) The Lord Chancellor must also appoint a panel of persons who appear to him to be qualified by experience or otherwise to deal with matters of the kind that may be referred to the Tribunal.
Terms of office etc
4 (1) Subject to the provisions of this Schedule, each member of the panel of chairmen and the lay panel is to hold and vacate office in accordance with the terms of his appointment.
(2) The Lord Chancellor may remove a member of either panel (including the President) on the ground of incapacity or misbehaviour.
(2A) The Lord Chancellor may remove a person under sub-paragraph (2) only with the concurrence of the appropriate senior judge.
(2B) The appropriate senior judge is the Lord Chief Justice of England and Wales, unless—
(a) the person to be removed exercises functions wholly or mainly in Scotland, in which case it is the Lord President of the Court of Session, or
(b) the person to be removed exercises functions wholly or mainly in Northern Ireland, in which case it is the Lord Chief Justice of Northern Ireland.
(3) A member of either panel—
(a) may at any time resign office by notice in writing to the Lord Chancellor;
(b) is eligible for re-appointment if he ceases to hold office.
Remuneration and expenses
5 The Lord Chancellor may pay to any person, in respect of his service—
(a) as a member of the Tribunal (including service as the President or Deputy President), or
(b) as a person appointed under paragraph 7(4),
such remuneration and allowances as he may determine.
Staff
6 (1) The Lord Chancellor may appoint such staff for the Tribunal as he may determine.
(2) The remuneration of the Tribunal’s staff is to be defrayed by the Lord Chancellor.
(3) Such expenses of the Tribunal as the Lord Chancellor may determine are to be defrayed by the Lord Chancellor.
Part III Constitution of Tribunal
7 (1) On a reference to the Tribunal, the persons to act as members of the Tribunal for the purposes of the reference are to be selected from the panel of chairmen or the lay panel in accordance with arrangements made by the President for the purposes of this paragraph (“the standing arrangements”).
(2) The standing arrangements must provide for at least one member to be selected from the panel of chairmen.
(3) If while a reference is being dealt with, a person serving as member of the Tribunal in respect of the reference becomes unable to act, the reference may be dealt with by—
(a) the other members selected in respect of that reference; or
(b) if it is being dealt with by a single member, such other member of the panel of chairmen as may be selected in accordance with the standing arrangements for the purposes of the reference.
(4) If it appears to the Tribunal that a matter before it involves a question of fact of special difficulty, it may appoint one or more experts to provide assistance.
Part IV Tribunal Procedure
8 For the purpose of dealing with references, or any matter preliminary or incidental to a reference, the Tribunal must sit at such times and in such place or places as the Lord Chancellor may direct , after consulting the President of the Financial Services and Markets Tribunal,.
9 Rules made by the Lord Chancellor under section 132 may, in particular, include provision—
(a) as to the manner in which references are to be instituted;
(b) for the holding of hearings in private in such circumstances as may be specified in the rules;
(c) as to the persons who may appear on behalf of the parties;
(d) for a member of the panel of chairmen to hear and determine interlocutory matters arising on a reference;
(e) for the suspension of decisions of the Authority which have taken effect;
(f) as to the withdrawal of references;
(g) as to the registration, publication and proof of decisions and orders.
Practice directions
10 The President of the Tribunal may give directions as to the practice and procedure to be followed by the Tribunal in relation to references to it.
Evidence
11 (1) The Tribunal may by summons require any person to attend, at such time and place as is specified in the summons, to give evidence or to produce any document in his custody or under his control which the Tribunal considers it necessary to examine.
(2) The Tribunal may—
(a) take evidence on oath and for that purpose administer oaths; or
(b) instead of administering an oath, require the person examined to make and subscribe a declaration of the truth of the matters in respect of which he is examined.
(3) A person who without reasonable excuse—
(a) refuses or fails—
(i) to attend following the issue of a summons by the Tribunal, or
(ii) to give evidence, or
(b) alters, suppresses, conceals or destroys, or refuses to produce a document which he may be required to produce for the purposes of proceedings before the Tribunal,
is guilty of an offence.
(4) A person guilty of an offence under sub-paragraph (3)(a) is liable on summary conviction to a fine not exceeding the statutory maximum.
(5) A person guilty of an offence under sub-paragraph (3)(b) is liable—
(a) on summary conviction, to a fine not exceeding the statutory maximum;
(b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine or both.
Decisions of Tribunal
12 (1) A decision of the Tribunal may be taken by a majority.
(2) The decision must—
(a) state whether it was unanimous or taken by a majority;
(b) be recorded in a document which—
(i) contains a statement of the reasons for the decision; and
(ii) is signed and dated by the member of the panel of chairmen dealing with the reference.
(3) The Tribunal must—
(a) inform each party of its decision; and
(b) as soon as reasonably practicable, send to each party and, if different, to any authorised person concerned, a copy of the document mentioned in sub-paragraph (2).
(4) The Tribunal must send the Treasury a copy of its decision.
Costs
13 (1) If the Tribunal considers that a party to any proceedings on a reference has acted vexatiously, frivolously or unreasonably it may order that party to pay to another party to the proceedings the whole or part of the costs or expenses incurred by the other party in connection with the proceedings.
(2) If, in any proceedings on a reference, the Tribunal considers that a decision of the Authority which is the subject of the reference was unreasonable it may order the Authority to pay to another party to the proceedings the whole or part of the costs or expenses incurred by the other party in connection with the proceedings.
SCHEDULE 15 Information and Investigations: Connected Persons
Sections 165(11) and 171(4).
Part I Rules for Specific Bodies
Corporate bodies
1 If the authorised person (“BC”) is a body corporate, a person who is or has been—
(a) an officer or manager of BC or of a parent undertaking of BC;
(b) an employee of BC;
(c) an agent of BC or of a parent undertaking of BC.
Partnerships
2 If the authorised person (“PP”) is a partnership, a person who is or has been a member, manager, employee or agent of PP.
Unincorporated associations
3 If the authorised person (“UA”) is an unincorporated association of persons which is neither a partnership nor an unincorporated friendly society, a person who is or has been an officer, manager, employee or agent of UA.
Friendly societies
4 (1) If the authorised person (“FS”) is a friendly society, a person who is or has been an officer, manager or employee of FS.
(2) In relation to FS, “officer” and “manager” have the same meaning as in section 119(1) of the Friendly Societies Act 1992.
Building societies
5 (1) If the authorised person (“BS”) is a building society, a person who is or has been an officer or employee of BS.
(2) In relation to BS, “officer” has the same meaning as it has in section 119(1) of the Building Societies Act 1986.
Individuals
6 If the authorised person (“IP”) is an individual, a person who is or has been an employee or agent of IP.
Application to sections 171 and 172
7 For the purposes of sections 171 and 172, if the person under investigation is not an authorised person the references in this Part of this Schedule to an authorised person are to be taken to be references to the person under investigation.
Part II Additional Rules
8 A person who is, or at the relevant time was, the partner, manager, employee, agent, appointed representative, banker, auditor, actuary or solicitor of—
(a) the person under investigation (“A”);
(b) a parent undertaking of A;
(c) a subsidiary undertaking of A;
(d) a subsidiary undertaking of a parent undertaking of A; or
(e) a parent undertaking of a subsidiary undertaking of A.
Section 225(4).
Part I General
Interpretation
1 In this Schedule—
...
...
“ombudsman” means a person who is a member of the panel; and
“the panel” means the panel established under paragraph 4.
Part II The Scheme Operator
Duty of FCA
2 (1) The FCA must take such steps as are necessary to ensure that the body corporate established by the Financial Services Authority under this Schedule as originally enacted is, at all times, capable of exercising the functions conferred on the scheme operator by or under this Act.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) The following functions of the FCA fall within this sub-paragraph—
(a) making rules for the purposes of section 226;
(b) approving rules made for the purposes of section 227;
(c) specifying an amount under section 229(4);
(d) approving rules made under section 230;
(e) taking steps under sub-paragraph (1);
(f) appointing or removing members of the board under paragraph 3(2);
(g) taking steps under paragraph 3A(1);
(h) making rules under paragraph 7(3);
(i) making rules under paragraph 13;
(j) consenting to scheme rules under paragraph 14(7), other than rules relating to fees;
(k) approving the fixing, variation, addition or removal of standard terms under paragraph 18, other than terms relating to the making of payments to the scheme operator; and
(l) approving arrangements under paragraph 19(3).
Constitution
3 (1) The constitution of the scheme operator must provide for it to have—
(a) a chairman; and
(b) a board (which must include the chairman) whose members are the scheme operator’s directors.
(2) The chairman and other members of the board must be persons appointed, and liable to removal from office, by the FCA (acting, in the case of the chairman, with the approval of the Treasury).
(3) But the terms of their appointment (and in particular those governing removal from office) must be such as to secure their independence from the FCA in the operation of the scheme.
(4) The function of making voluntary jurisdiction rules under section 227 ... and the functions conferred by paragraphs 4, 5, 7, 9 , 9A or 14 may be exercised only by the board.
(5) The validity of any act of the scheme operator is unaffected by—
(a) a vacancy in the office of chairman; or
(b) a defect in the appointment of a person as chairman or as a member of the board.
Relationship with FCA
3A (1) The scheme operator and the FCA must each take such steps as it considers appropriate to co-operate with the other in the exercise of their functions under this Part of this Act.
(2) The scheme operator and the FCA must prepare and maintain a memorandum describing how they intend to comply with sub-paragraph (1).
(3) The scheme operator must ensure that the memorandum as currently in force is published in the way appearing to the scheme operator to be best calculated to bring it to the attention of the public.
The panel of ombudsmen
4 (1) The scheme operator must appoint and maintain a panel of persons, appearing to it to have appropriate qualifications and experience, to act as ombudsmen for the purposes of the scheme.
(2) A person’s appointment to the panel is to be on such terms (including terms as to the duration and termination of his appointment and as to remuneration) as the scheme operator considers—
(a) consistent with the independence of the person appointed; and
(b) otherwise appropriate.
The Chief Ombudsman
5 (1) The scheme operator must appoint one member of the panel to act as Chief Ombudsman.
(2) The Chief Ombudsman is to be appointed on such terms (including terms as to the duration and termination of his appointment) as the scheme operator considers appropriate.
Status
6 (1) The scheme operator is not to be regarded as exercising functions on behalf of the Crown.
(2) The scheme operator’s ... officers and staff are not to be regarded as Crown servants.
(3) Appointment as Chief Ombudsman or to the panel or as a deputy ombudsman does not confer the status of Crown servant.
Annual reports
7 (1) At least once a year—
(a) the scheme operator must make a report to the FCA on the discharge of its functions; and
(b) the Chief Ombudsman must make a report to the FCA on the discharge of his functions.
(2) Each report must distinguish between functions in relation to the scheme’s compulsory jurisdiction ... and functions in relation to its voluntary jurisdiction.
(3) Each report must also comply with any requirements specified in rules made by the FCA.
(4) The scheme operator must publish each report in the way it considers appropriate.
(5) The Treasury may—
(a) require the scheme operator to comply with any provisions of the Companies Act 2006 about accounts and their audit which would not otherwise apply to it, or
(b) direct that any provision of that Act about accounts and their audit is to apply to the scheme operator with such modifications as are specified in the direction, whether or not the provision would otherwise apply to the scheme manager.
(6) Compliance with any requirement under sub-paragraph (5)(a) or (b) is enforceable by injunction or, in Scotland, an order for specific performance under section 45 of the Court of Session Act 1988.
(7) Proceedings under sub-paragraph (6) may be brought only by the Treasury.
Audit of accounts
7A (1) The scheme operator must send a copy of its annual accounts to the Comptroller and Auditor General as soon as is reasonably practicable.
(2) The Comptroller and Auditor General must—
(a) examine, certify and report on accounts received under this paragraph, and
(b) send a copy of the certified accounts and the report to the Treasury.
(3) The Treasury must lay the copy of the certified accounts and the report before Parliament.
(4) The scheme operator must send a copy of the certified accounts and the report to the FCA.
(5) Except as provided by paragraph 7(5), the scheme operator is exempt from the requirements of Part 16 of the Companies Act 2006 (audit), and its balance sheet must contain a statement to that effect.
(6) In this paragraph “annual accounts” has the meaning given by section 471 of the Companies Act 2006.
Information, advice and guidance
8 The scheme operator may publish such information, guidance or advice as it considers appropriate and may charge for it or distribute it free of charge.
Budget
9 (1) The scheme operator must, before the start of each of its financial years, adopt an annual budget which has been approved by the FCA.
(2) The scheme operator may, with the approval of the FCA, vary the budget for a financial year at any time after its adoption.
(3) The annual budget must include an indication of—
(a) the distribution of resources deployed in the operation of the scheme, and
(b) the amounts of income of the scheme operator arising or expected to arise from the operation of the scheme,
distinguishing between the scheme’s compulsory ... and voluntary jurisdiction.
Annual plan
9A (1) The scheme operator must in respect of each of its financial years prepare an annual plan.
(2) The plan must be prepared before the start of the financial year.
(3) An annual plan in respect of a financial year must make provision about the use of the resources of the scheme operator.
(4) The plan may include material relating to periods longer than the financial year in question.
(5) Before preparing an annual plan, the scheme operator must consult such persons (if any) as the scheme operator considers appropriate.
(6) The scheme operator must publish each annual plan in the way it considers appropriate.
Exemption from liability in damages
10 (1) No person is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of any functions under this Act in relation to the compulsory jurisdiction ....
(2) Sub-paragraph (1) does not apply—
(a) if the act or omission is shown to have been in bad faith; or
(b) so as to 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 Human Rights Act 1998.
Privilege
11 For the purposes of the law relating to defamation, proceedings in relation to a complaint which is subject to the compulsory jurisdiction ... are to be treated as if they were proceedings before a court.
Part III The Compulsory Jurisdiction
Introduction
12 This Part of this Schedule applies only in relation to the compulsory jurisdiction.
FCA's ... rules
13 (1) The FCA must make rules providing that a complaint is not to be entertained unless —
(a) the complainant has referred it under the ombudsman scheme before the applicable time limit (determined in accordance with the rules) has expired , or
(b) in the case of a complaint other than a relevant complaint within the meaning of section 404B, the respondent agrees that the complaint should be entertained despite the complainant having referred it under the ombudsman scheme after the applicable time limit has expired.
(2) The rules may provide that an ombudsman may extend that time limit in specified circumstances.
(3) The FCA may make rules providing that a complaint is not to be entertained (except in specified circumstances) if the complainant has not previously communicated its substance to the respondent and given him a reasonable opportunity to deal with it.
(4) The FCA may make rules requiring an authorised person , an electronic money issuer within the meaning of the Electronic Money Regulations 2011 or a payment service provider within the meaning of the Payment Services Regulations 2017, who may become subject to the compulsory jurisdiction as a respondent to establish such procedures as the FCA considers appropriate for the resolution of complaints which—
(a) may be referred to the scheme; and
(b) arise out of activity to which the FCA's powers under Part 9A do not apply.
The scheme operator’s rules
14 (1) The scheme operator must make rules, to be known as “scheme rules”, which are to set out the procedure for reference of complaints and for their investigation, consideration and determination by an ombudsman.
(2) Scheme rules may, among other things—
(a) specify matters which are to be taken into account in determining whether an act or omission was fair and reasonable;
(b) provide that a complaint may, in specified circumstances, be dismissed without consideration of its merits;
(c) provide for the reference of a complaint, in specified circumstances and with the consent of the complainant, to another body with a view to its being determined by that body instead of by an ombudsman;
(d) make provision as to the evidence which may be required or admitted, the extent to which it should be oral or written and the consequences of a person’s failure to produce any information or document which he has been required (under section 231 or otherwise) to produce;
(e) allow an ombudsman to fix time limits for any aspect of the proceedings and to extend a time limit;
(f) provide for certain things in relation to the reference, investigation or consideration (but not determination) of a complaint to be done by a member of the scheme operator’s staff instead of by an ombudsman;
(fa) allow the correction of any clerical mistake in the written statement of a determination made by an ombudsman;
(fb) provide that any irregularity arising from a failure to comply with any provisions of the scheme rules does not of itself render a determination void;
(g) make different provision in relation to different kinds of complaint.
(3) The circumstances specified under sub-paragraph (2)(b) may include the following—
(a) the ombudsman considers the complaint frivolous or vexatious;
(b) legal proceedings have been brought concerning the subject-matter of the complaint and the ombudsman considers that the complaint is best dealt with in those proceedings; or
(c) the ombudsman is satisfied that there are other compelling reasons why it is inappropriate for the complaint to be dealt with under the ombudsman scheme.
(3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) If the scheme operator proposes to make any scheme rules it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of persons appearing to it to be likely to be affected.
(5) The draft must be accompanied by a statement that representations about the proposals may be made to the scheme operator within a time specified in the statement.
(6) Before making the proposed scheme rules, the scheme operator must have regard to any representations made to it under sub-paragraph (5).
(7) The consent of the FCA is required before any scheme rules may be made.
Fees
15 (1) Scheme rules may require a respondent or other persons of a specified description to pay to the scheme operator such fees as may be specified in the rules.
(2) The rules may, among other things—
(a) provide for the scheme operator to reduce or waive a fee in a particular case;
(b) set different fees for different stages of the proceedings on a complaint;
(c) provide for fees to be refunded in specified circumstances;
(d) make different provision for different kinds of complaint.
(3) The reference in sub-paragraph (1) to persons of a specified description is a reference to such descriptions of persons as may be specified in regulations made by the Treasury.
(4) The power conferred by sub-paragraph (3) to specify descriptions of persons may not be exercised so as to provide for eligible complainants to fall within a specified description of persons.
(5) The reference in sub-paragraph (4) to “eligible complainants” is a reference to complainants who are eligible in relation to the compulsory or voluntary jurisdiction of the ombudsman scheme (see section 226(6) and 227(7)).
(6) Before making regulations under sub-paragraph (3) the Treasury must consult the scheme operator.
Enforcement of money awards
16 A money award, including interest, which has been registered in accordance with scheme rules may—
(a) if the county court so orders in England and Wales, be recovered under section 85 of the County Courts Act 1984 (or otherwise) as if it were payable under an order of that court;
(b) be enforced in Northern Ireland as a money judgment under the Judgments Enforcement (Northern Ireland) Order 1981;
(c) be enforced in Scotland by the sheriff, as if it were a judgment or order of the sheriff and whether or not the sheriff could himself have granted such judgment or order.
Part 3A The consumer credit jurisdiction
Part IV The Voluntary Jurisdiction
Introduction
17 This Part of this Schedule applies only in relation to the voluntary jurisdiction.
Terms of reference to the scheme
18 (1) Complaints are to be dealt with and determined under the voluntary jurisdiction on standard terms fixed by the scheme operator with the approval of the FCA.
(2) Different standard terms may be fixed with respect to different matters or in relation to different cases.
(3) The standard terms may, in particular—
(a) require the making of payments to the scheme operator by participants in the scheme of such amounts, and at such times, as may be determined by the scheme operator;
(b) make provision as to the award of costs on the determination of a complaint.
(4) The scheme operator may not vary any of the standard terms or add or remove terms without the approval of the FCA.
(5) The standard terms may include provision to the effect that (unless acting in bad faith) none of the following is to be liable in damages for anything done or omitted in the discharge or purported discharge of functions in connection with the voluntary jurisdiction—
(a) the scheme operator;
(b) any member of its governing body;
(c) any member of its staff;
(d) any person acting as an ombudsman for the purposes of the scheme.
Delegation by and to other schemes
19 (1) The scheme operator may make arrangements with a relevant body—
(a) for the exercise by that body of any part of the voluntary jurisdiction of the ombudsman scheme on behalf of the scheme; or
(b) for the exercise by the scheme of any function of that body as if it were part of the voluntary jurisdiction of the scheme.
(2) A “relevant body” is one which the scheme operator is satisfied—
(a) is responsible for the operation of a broadly comparable scheme (whether or not established by statute) for the resolution of disputes; and
(b) in the case of arrangements under sub-paragraph (1)(a), will exercise the jurisdiction in question in a way compatible with the requirements imposed by or under this Act in relation to complaints of the kind concerned.
(3) Such arrangements require the approval of the FCA.
Voluntary jurisdiction rules: procedure
20 (1) If the scheme operator makes voluntary jurisdiction rules, it must give a copy to the FCA without delay.
(2) If the scheme operator revokes any such rules, it must give written notice to the FCA without delay.
(3) The power to make voluntary jurisdiction rules is exercisable in writing.
(4) Immediately after making voluntary jurisdiction rules, the scheme operator must arrange for them to be printed and made available to the public.
(5) The scheme operator may charge a reasonable fee for providing a person with a copy of any voluntary jurisdiction rules.
Verification of the rules
21 (1) The production of a printed copy of voluntary jurisdiction rules purporting to be made by the scheme operator—
(a) on which is endorsed a certificate signed by a member of the scheme operator’s staff authorised by the scheme operator for that purpose, and
(b) which contains the required statements,
is evidence (or in Scotland sufficient evidence) of the facts stated in the certificate.
(2) The required statements are—
(a) that the rules were made by the scheme operator;
(b) that the copy is a true copy of the rules; and
(c) that on a specified date the rules were made available to the public in accordance with paragraph 20(4).
(3) A certificate purporting to be signed as mentioned in sub-paragraph (1) is to be taken to have been duly signed unless the contrary is shown.
Consultation
22 (1) If the scheme operator proposes to make voluntary jurisdiction rules, it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of the public.
(2) The draft must be accompanied by—
(a) an explanation of the proposed rules; and
(b) a statement that representations about the proposals may be made to the scheme operator within a specified time.
(3) Before making any voluntary jurisdiction rules, the scheme operator must have regard to any representations made to it in accordance with sub-paragraph (2)(b).
(4) If voluntary jurisdiction rules made by the scheme operator differ from the draft published under sub-paragraph (1) in a way which the scheme operator considers significant, the scheme operator must publish a statement of the difference.
SCHEDULE 17A Further provision in relation to exercise of Part 18 functions , or other FMI functions, by Bank of England
Section 285A
Part 1 Co-operation between appropriate regulators
Memorandum of understanding between appropriate regulators and PRA
1 (1) The appropriate regulators must prepare and maintain a memorandum describing how they intend to work together in exercising their functions in relation to persons who are recognised bodies.
(2) The memorandum must in particular make provision about—
(a) the need for each party when exercising a function in relation to any person (“A”) who is a recognised body, or any member of A's group, to have regard to the exercise (or possible exercise) of any function by the other party in relation to A or any member of A's group;
(b) the role of each party in cases where they are both exercising functions in relation to the same persons;
(c) the obtaining and disclosure of information;
(d) the co-ordination by the parties of the exercise of their powers to appoint competent persons under Part 11 (information gathering and investigations) to conduct investigations on their behalf.
(3) In this paragraph any reference to a function is to any function whether conferred by or under any provision of this Part of this Act or any other provision of this Act or otherwise.
2 (1) The FCA and the PRA must prepare and maintain a memorandum describing how they intend to work together in exercising their functions in relation to persons who are recognised bodies and who—
(a) are PRA-authorised persons; or
(b) are members of a group of which a member is a PRA-authorised person.
(2) The memorandum must in particular make provision about—
(a) the need for each party when exercising a function in relation to any person (“A”) who is a recognised body, or any member of A's group, to have regard to the exercise (or possible exercise) of any function by the other party in relation to A or any member of A's group;
(b) the role of each party in cases where they are both exercising functions in relation to the same persons;
(c) the obtaining and disclosure of information;
(d) the co-ordination by the parties of the exercise of their powers to appoint competent persons under Part 11 (information gathering and investigations) to conduct investigations on their behalf.
(3) In this paragraph any reference to a function is to any function whether conferred by or under any provision of this Part of this Act or any other provision of this Act or otherwise.
3 The parties to a memorandum under paragraph 1 or 2 must review the memorandum at least once in each calendar year.
4 The parties to a memorandum under paragraph 1 or 2 must give the Treasury a copy of the memorandum and any revised memorandum.
5 The Treasury must lay before Parliament a copy of any document received by them under paragraph 4.
6 The parties to a memorandum under paragraph 1 or 2 must ensure that the memorandum as currently in force is published in the way appearing to them to be best calculated to bring it to the attention of the public.
6A (1) If the Bank makes a Part 18 prohibition order relating to an individual, the Bank must—
(a) provide the FCA with information falling within section 347(2)(f) in relation to the order, and
(b) where the FCA has notified the Bank that it considers it appropriate to include in the record maintained under section 347 information of a certain description, disclose to the FCA such information of that description relating to the order or the individual as the Bank has in its possession.
(2) The duty to provide information under sub-paragraph (1)—
(a) does not apply to information which the Bank reasonably believes is in the possession of the FCA;
(b) does not require or authorise the disclosure of information whose disclosure is prohibited by or under section 348;
(c) is without prejudice to any other power of the Bank to disclose information.
Notification by FCA of action in relation to recognised clearing houses
7 The FCA must notify the Bank of England of any direction given by it under section 128 to a recognised clearing house or a recognised CSD (market abuse: suspension of investigations).
8 The FCA must notify the Bank of England of any requirement imposed by it under section 313A on a recognised clearing house (power to require suspension or removal of financial instruments from trading).
Part 2 Application of provisions of this Act in relation to Bank of England
Introduction
9 (1) The provisions of this Act mentioned in this Part of this Schedule are to apply in relation to the Bank of England in accordance with the provision made by this Part of this Schedule.
(2) In any case where sub-paragraph (1) applies—
(a) any reference in this Act to the FCA or the PRA which is contained in, or relates to, any of those provisions (however expressed) is to be read as a reference to the Bank; and
(b) this Act has effect with any other necessary modifications.
Public consultations
9A (1) Section 1RB (requirements in connection with public consultations) applies in relation to the Bank but as if, in subsection (4), after “proposals” there were inserted “in connection with the carrying on by the Bank of its FMI functions.
(2) For this purpose, paragraph 9(2)(a) does not apply so far as relating to the following references in section 1RB—
(a) in subsection (2), the reference after “statutory panels of” to the FCA and the PRA;
(b) in subsection (5)(a), the reference to the FCA;
(c) in subsection (5)(b), the reference to the PRA.
Requirements
9B (1) The powers conferred by section 55L(3) (FCA own-initiative power to impose requirements on authorised persons) are exercisable by the Bank to impose requirements on a relevant FMI entity.
(2) In this paragraph “relevant FMI entity” means—
(a) a recognised central counterparty,
(b) a recognised CSD, or
(c) a systemic third country CCP as defined by section 300G(7).
(3) The power under sub-paragraph (1) is exercisable only if it appears to the Bank that either (or both) of the following conditions is met.
(4) The first condition is that it is desirable to exercise the power in order to advance the Financial Stability Objective.
(5) The second condition is that the relevant FMI entity—
(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.
(6) The power conferred by sub-paragraph (1) may not be exercised so as to restrict or prohibit discretionary payments to employees or shareholders of a recognised central counterparty (and for this purpose “discretionary payment” has the meaning given by paragraph 13(11) of Schedule 11 to the Financial Services and Markets Act 2023 and “employee” has the meaning given by paragraph 154 of that Schedule).
(7) The powers conferred by section 55L(5) (FCA power to impose requirements on application of authorised persons with Part 4A permission) are exercisable by the Bank to impose requirements on a relevant FMI entity on the application of that entity.
(8) A power conferred by this paragraph is exercisable whether or not there is a relationship between the entity in relation to which it is exercised and the persons whose interests will be protected by its exercise.
(9) The following provisions apply in relation to requirements imposed by the Bank under this paragraph as they apply in relation to requirements imposed by the FCA under section 55L, with the modifications in sub-paragraph (10)—
(a) section 55L(6) (power to refuse application to impose etc requirements);
(b) section 55N (further provision in relation to requirements);
(c) section 55P (prohibitions and restrictions);
(d) section 55Q (exercise of power in support of overseas regulator);
(e) section 55R(1) (persons connected with applicant);
(f) section 55U(3) to (8) (applications for requirement to be imposed etc);
(g) section 55V(1) to (6) (determination of applications);
(h) section 55X(2) and (4)(f) (warning and decision notices on refusal of applications);
(i) section 55Y (exercise of own-initiative power: procedure);
(j) section 55Z3(1) and (2) (right to refer matters to the Tribunal).
(10) The modifications are—
(a) any reference to the FCA is to be read as a reference to the Bank;
(b) any references to own-initiative powers are to be read as references to the power conferred by sub-paragraph (1);
(c) any references to an authorised person are to be read as references to relevant FMI entities;
(d) in section 55L(6), the reference to the FCA’s operational objectives is to be read as a reference to the Bank’s Financial Stability Objective;
(e) section 55N has effect as if the reference to regulated activities in subsection (2) were a reference to activities in respect of which a recognition order is in force.
Rules
10 (1) The following provisions of Part 9A of this Act are to apply in relation to rules made by the Bank under any provision made by or under this Act—
(a) section 137T (general supplementary powers);
(b) sections 138A and 138B (modification or waiver of rules), but with the omission of subsection (5) of section 138A, subsection (4) of section 138B, and, apart from in relation to rules made under section 300F, subsection (4)(b) of section 138A;
(ba) section 138BA (disapplication or modification of rules in individual cases);
(c) section 138C (evidential provisions);
(d) section 138D (actions for damages), but with the omission of subsections (2) and (3), and any references to those subsections;
(e) section 138E (limits on effect of contravening rules);
(ea) section 138EA (matters to consider when making rules);
(f) section 138F (notification of rules) but with the omission of subsections (1A) and (2);
(g) section 138G (rule-making instruments);
(h) section 138H (verification of rules);
(i) section 138J (consultation), but with the omission of subsections (1)(a), (2)(c) and (5)(b); ...
(ia) section 138JA(2), (3) (4), (10) and (11) (duties in relation to PRA Cost Benefit Analysis Panel);
(ib) section 138JB (statement of policy in relation to cost benefit analyses);
(j) section 138L (consultation: general exemptions), but with the omission of subsection (1);
(k) section 141A (power to make consequential amendments of references to rules);
(l) section 141B (power to consequentially amend enactments).
(2) Any reference in any of those provisions to an authorised person is to be read as a reference to a recognised clearing house ... or a recognised CSD or other persons in respect of whom FMI functions are exercised.
(2A) Section 137T has effect as if, in paragraph (b), for “the other regulator” there were substituted “the FCA or the PRA”.
(2B) Section 138A has effect as if the reference in subsection (4)(b) to any of the regulator’s objectives were a reference to the Bank’s Financial Stability Objective.
(2C) Section 138BA has effect as if subsection (3)(b) and (c) were omitted.
(2D) Section 138EA(5) has effect as if, for paragraphs (a) and (b), there were substituted “complying with a recommendation of the Financial Policy Committee of the Bank of England under section 9O of the Bank of England Act 1998 (making of recommendations within the Bank).
(3) Section 138J(2)(d) has effect in relation to rules proposed to be made by the Bank as if the reference to the compatibility of the proposed rules with the provisions mentioned in section 138J(2)(d) were a reference to their compatibility with the Bank's financial stability objective.
(3A) Section 138J(8A) has effect as if, in paragraph (a), for sub-paragraphs (i) and (ii) there were substituted “be prejudicial to advancing the Financial Stability Objective, or”.
(4) Section 138L(2) has effect as if for paragraphs (a) and (b) there were substituted “be prejudicial to financial stability”.
(4A) Sub-paragraphs (1) to (4) do not apply in relation to rules made by the Bank under section 312M (in relation to which see paragraph 10A).
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10A The following provisions of Part 9A of this Act are to apply in relation to rules made by the Bank under section 312M, subject to the modifications specified in this subsection—
(a) section 137T (general supplementary powers) as if—
(i) the reference in paragraph (a) to “authorised persons, activity or investment” were a reference to “critical third parties or services”, and
(ii) for paragraph (b) there were substituted—
(b) may make provision by reference to rules made by the FCA or PRA or standards issued by any other person, as those rules or standards have effect from time to time,
;
(b) sections 138A and 138B (modification or waiver of rules) as if—
(i) the reference in subsection (4)(b) of section 138A to any of regulator’s objectives were a reference to the Bank’s Financial Stability Objective,
(ii) subsection (5) of section 138A were omitted, and
(iii) subsection (4) of section 138B were omitted;
(c) section 138BA (disapplication or modification of rules in individual cases) as if subsection (3)(b) and (c) were omitted;
(d) section 138C (evidential provisions);
(e) section 138E (limits on effect of contravening rules);
(f) section 138EA (matters to consider when making rules) as if, for paragraphs (a) and (b) of subsection (5), there were substituted “complying with a recommendation of the Financial Policy Committee of the Bank of England under section 9O of the Bank of England Act 1998 (making of recommendations within the Bank).”;
(g) section 138F (notification of rules) as if subsections (1A) and (2) were omitted;
(h) section 138G (rule-making instruments);
(i) section 138H (verification of rules);
(j) section 138J (consultation) as if—
(i) the reference in subsection (1)(a) to the “FCA” were a reference to the “FCA and the PRA”;
(ii) the reference in subsection (2)(d) to the compatibility of the proposed rules with the provisions mentioned in that subsection were a reference to their compatibility with the Bank’s Financial Stability Objective; and
(iii) in subsection (8A), in paragraph (a), for sub-paragraphs (i) and (ii) there were substituted “be prejudicial to advancing the Financial Stability Objective, or”;
(k) section 138JA(2), (3) (4), (10) and (11) (duty to consult PRA Cost Benefit Analysis Panel);
(l) section 138JB (statement of policy in relation to cost benefit analyses);
(m) section 138L (consultation: general exemptions) as if—
(i) subsection (1) were omitted, and
(ii) in subsection (2) for paragraphs (a) and (b) there were substituted “be prejudicial to financial stability.”;
(n) section 141A (power to make consequential amendments of references to rules);
(o) section 141B (power to consequentially amend enactments).
Information gathering and investigations
11 (1) The powers conferred by section 165(1) and (3) (power to require information) are exercisable by the Bank or (as the case may be) its officers to impose requirements on—
(a) a recognised clearing house;
(aa) a recognised CSD;
(ab) a third country CSD, in relation to any services referred to in the Annex to the CSD regulation which the third country CSD provides in the United Kingdom;
(ac) a third country central counterparty and any person to whom that central counterparty has outsourced operational functions, services or activities.
(b) a person who for the purposes of section 165 is connected with a recognised clearing house , a third country central counterparty or a recognised CSD (as the case may be).
(2) The information or documents that the Bank may require to be provided or produced are limited to—
(a) information or documents reasonably required in connection with the exercise by the Bank of functions conferred on it by or under this Part of this Act;
(b) information or documents reasonably required in connection with the exercise by the Bank of any of its other functions in pursuance of its financial stability objective; ...
(c) information or documents which the Bank reasonably considers may enable or assist the FCA in discharging functions conferred on the FCA by or under this Act ; and
(d) information or documents reasonably required in connection with the exercise by the Bank of its functions—
(i) under—
(aa) the EMIR regulation,
(bb) the CSD regulation,
(cc) any EU regulation originally made under the CSD Regulation which is assimilated direct legislation, or
(dd) any subordinate legislation made under the CSD Regulation on or after IP completion day;
(ii) in connection with Article 4 or 15 of the SFT regulation; or
(iii) under any subordinate legislation made under the SFT regulation on or after IP completion day.
(3) In consequence of the provision made by sub-paragraph (2), section 165(4) is not to apply in relation to section 165(1) and (3) as applied by this paragraph.
12 The power conferred by section 166 (reports by skilled person) is exercisable by the Bank as if references in that section to an authorised person were to a recognised clearing house, third country central counterparty or a recognised CSD.
12A (1) Section 166A applies in relation to rules made by the Bank under section 300F.
(2) For this purpose any reference in section 166A to an authorised person is to be read as a reference to a relevant FMI entity (as defined by paragraph 9B(2)).
13 (1) The powers conferred by section 167 (appointment of persons to carry out general investigations) are exercisable by the Bank as if references in that section to an authorised person were to any recognised clearing house other than an overseas clearing house or to any Tier 2 third country central counterparty or to any recognised CSD.
(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) In addition to the powers conferred by section 171, a person conducting an investigation under section 167 as a result of this paragraph is to have the powers conferred by sections 172 and 173 (and for this purpose the references in those sections to an investigator are to be read accordingly).
14 (1) The power conferred by section 168(5) (appointment of persons to carry out investigations in particular cases) is exercisable by the Bank.
(2) That power is exercisable if it appears to the Bank that there are circumstances suggesting that—
(a) a clearing house or a central securities depository may be guilty of ... an offence under prescribed regulations relating to money laundering;
(b) a clearing house or a central securities depository person may have contravened a rule made by the Bank under this Part of this Act;
(c) a clearing house or a central securities depository may have contravened the recognition requirements;
(d) a clearing house or a central securities depository may have contravened any qualifying provision that is specified, or of a description specified, for the purposes of this sub-paragraph by the Treasury by order;
(e) a clearing house or a central securities depository may have breached the general prohibition.
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g) a person may be guilty of an offence under section 398(1), as applied by paragraph 30 of this Schedule;
(h) a Tier 2 third country central counterparty may have contravened the requirements of the EMIR regulation.
(i) an individual may not be a fit and proper person to perform functions in relation to an activity carried on by a relevant recognised body;
(j) an individual may have performed, or agreed to perform, a function in breach of a Part 18 prohibition order;
(k) a relevant recognised body may have failed to comply with section 309F(1);
(l) a relevant recognised body may have failed to comply with section 309G(1);
(m) a person in relation to whom the Bank has given approval under section 309G may not be a fit and proper person to perform the function to which that approval relates;
(n) a person may have performed a designated senior management function without approval under section 309G (see section 309U(3));
(o) a person may be guilty of misconduct for the purposes of section 309Z2.
(3) In addition to the powers conferred by section 171, a person conducting an investigation under section 168(5) as a result of this paragraph is to have the powers conferred by sections 172 and 173 (and for this purpose the references in those sections to an investigator are to be read accordingly).
15 An overseas regulator may, in accordance with section 169, request the Bank to exercise the power conferred by section 165 (as applied by paragraph 11 of this Schedule).
16 The power to give information under section 176(1) (entry of premises under warrant) is exercisable by the Bank, or an investigator appointed by the Bank, as if the reference to the second set of conditions were omitted.
Powers in relation to parent undertakings
17 (1) The following provisions of Part 12A of this Act are to apply in relation to the Bank—
(a) section 192C (power to direct qualifying parent undertaking);
(b) section 192D (requirements that may be imposed);
(c) section 192E (direction: procedure);
(d) section 192G (references to Tribunal);
(e) section 192H (statement of policy);
(f) section 192I (statement of policy: procedure);
(g) section 192J (rules requiring provision of information);
(h) sections 192K to 192N (enforcement).
(2) For the purposes of those provisions section 192B (meaning of “qualifying parent undertaking”) is to apply as if the reference in subsection (1) to a qualifying authorised person or recognised UK investment exchange were a reference to a recognised clearing house other than an overseas clearing house or to a recognised CSD.
(3) Section 192C has effect as if—
(a) the general condition in subsection (2) were that the Bank considers that it is desirable to give the direction for the purpose of the effective regulation of one or more recognised clearing houses or recognised CSDs in the group of the qualifying parent undertaking,
(b) subsections (3) and (4) were omitted, and
(c) the reference in subsection (5)(a) to authorised persons or recognised investment exchanges were a reference to recognised clearing houses or recognised CSDs.
(4) Section 192E has effect as if the reference in subsection (1) to an authorised person or recognised investment exchange were a reference to a recognised clearing house or a recognised CSD.
(5) Section 192I has effect as if subsection (1)(a) required consultation with the FCA.
(6) Before the Bank gives a notice under section 192E(1) or (8)(b)—
(a) if the notice relates to the parent undertaking of an authorised person or recognised investment exchange, the Bank must consult the FCA, and
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auditors
18 (1) Section 342 (information given by auditor to a regulator) applies in relation to a relevant auditor as if—
(a) the references in that section to a recognised investment exchange were to a recognised clearing house or a recognised CSD,
(b) in the case of an auditor of a recognised clearing house or a recognised CSD which is also an authorised person or recognised investment exchange, the references to a regulator included the Bank, and
(c) in the case of an auditor of a recognised clearing house or a recognised CSD not falling within paragraph (b), the references to a regulator were to the Bank.
(2) A “relevant auditor” is a person who is, or has been, an auditor of a recognised clearing house or a recognised CSD appointed under or as a result of a statutory provision , the EMIR regulation or the CSD regulation.
19 (1) Section 343 (information given by auditor: person with close links) applies in relation to a relevant auditor as if—
(a) the references in that section to a recognised investment exchange were to a recognised clearing house or a recognised CSD,
(b) in the case of an auditor of a recognised clearing house or a recognised CSD which is an authorised person or which is a recognised investment exchange, the references to a regulator included the Bank, and
(c) in the case of an auditor of a recognised clearing house or a recognised CSD not falling within paragraph (b), the references to a regulator were to the Bank.
(2) A “relevant auditor” is a person who—
(a) is, or has been, an auditor of a recognised clearing house or a recognised CSD appointed under or as a result of a statutory provision , the EMIR regulation or the CSD regulation, and
(b) is, or has been, an auditor of a person who has close links with the recognised clearing house or the recognised CSD.
20 Section 344 (duty of auditor resigning to give notice) applies to an auditor to whom section 342 applies (whether by virtue of paragraph 18 or otherwise) as if—
(a) the references in that section to a recognised investment exchange were to a recognised clearing house or a recognised CSD,
(b) in the case of an auditor of a recognised clearing house or a recognised CSD which is neither an authorised person nor a recognised investment exchange, the reference in the definition of “the appropriate regulator” to the FCA were a reference to the Bank,
(c) in the case of an auditor of a recognised clearing house or a recognised CSD which is a PRA-authorised person, the reference in the definition of “the appropriate regulator” to the PRA were a reference to the PRA and the Bank, and
(d) in the case, not falling within paragraph (c), of an auditor of a recognised clearing house or a recognised CSD which is an authorised person or which is a recognised investment exchange, the reference in the definition of “the appropriate regulator” to the FCA were a reference to the FCA and the Bank.
21 Sections 345A to 345E apply to auditors to whom section 342 applies only by virtue of paragraph 18 as if—
(a) the references in those sections to an auditor or actuary to whom section 342 applies were to an auditor to whom section 342 applies by virtue of paragraph 18,
(b) the references in those sections to a PRA-authorised person were to a recognised clearing house or a recognised CSD,
(c) in a case where the Bank disqualifies a person from being an auditor of a recognised clearing house or a recognised CSD that is also a recognised investment exchange, section 345A(5)(a) required the Bank to notify the FCA, and
(d) the references in sections 345D and 345E to a regulator included the Bank.
Public record and disclosure of information
22 Section 347 (record of authorised persons, recognised investment exchanges, etc),.
(a) so far as it relates to recognised investment exchanges, applies in relation to the Bank as if references in that section to a recognised investment exchange were to a recognised clearing house , third country central counterparty , a third country CSD or a recognised CSD
(b) so far as it relates to approved persons, applies in relation to the Bank as if references in that section to an approved person were to a person in relation to whom the Bank has given approval under section 309G.
23 (1) Sections 348 to 350 and 353 (disclosure of information) apply in relation to information received by the Bank for the purposes of, or in the discharge of, any of its functions under Chapter 3C of Part 18 of this Act, any of its functions relating to recognised clearing houses or recognised CSDs or any of its functions under the EMIR regulation , the CSD regulation , any EU regulation originally made under the CSD regulation which is assimilated direct legislation, or any subordinate legislation made under the CSD regulation on or after IP completion day.
(2) Paragraph 9(2)(a) does not apply to the reference to the PRA in section 348(8).
Co-operation
23A Section 354B (co-operation) applies in relation to the Bank for the purposes of, or in the discharge of, any of its functions under—
(a) the EMIR regulation;
(b) the CSD regulation;
(c) the SFT regulation;
(d) any EU regulation, originally made under the CSD regulation or the SFT regulation, which is assimilated direct legislation; or
(e) any subordinate legislation (within the meaning of the Interpretation Act 1978) made under the CSD regulation, or the SFT regulation, on or after IP completion day.
Insolvency
24 (1) The following provisions of Part 24 of this Act are to apply in relation to the Bank—
(za) sections 355A and 355B (powers to participate in proceedings under Part 26A of the Companies Act 2006);
(a) section 356 (powers to participate in proceedings: company voluntary arrangements);
(b) section 358 (powers to participate in proceedings: trust deeds for creditors in Scotland);
(c) section 359 (administration order);
(d) section 362 (powers to participate in administration proceedings);
(e) section 362A (consent to appointment of administrator);
(f) section 363 (powers to participate in proceedings: receivership);
(g) section 365 (powers to participate in proceedings: voluntary winding-up);
(h) section 367 (winding-up petitions);
(i) section 371 (powers to participate in proceedings: winding-up).
(2) Those provisions are to apply as if any reference to an authorised person or recognised investment exchange (other than the reference to “an authorised person” in section 355B(2)(a)) were a reference to a recognised clearing house or a recognised CSD.
25 (1) In the case of any regulated activity which is carried on for the purposes of, or in connection with, the provision of clearing services, the reference to the FCA in section 375(1) is to be read as including a reference to the Bank.
(2) In the case of any regulated activity which is carried on for the purposes of, or in connection with, the provision of any service mentioned in section 285(3D), the reference to the FCA in section 375(1) is to be read as including a reference to the Bank.
Injunctions and restitution
26 (1) The power to make an application under section 380(1), (2) or (3) (injunctions) is exercisable by the Bank.
(2) For the purposes of the application, any reference in that section to a relevant requirement is to—
(a) a requirement that is imposed by or under any provision of this Part of this Act that relates to a recognised clearing house or a recognised CSD (and for this purpose a prohibition imposed under section 312FA(2)(c) (prohibition on person holding office etc. with a central securities depository) is treated as a requirement);
(aa) a requirement that is imposed on a critical third party by the Bank by or under any provision of Chapter 3C of this Part of this Act;
(b) a requirement that is imposed under any other provision of this Act by the Bank;
(c) a requirement that is imposed by any qualifying provision that is specified, or of a description specified, for the purposes of this sub-paragraph 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).
27 (1) The power to make an application under section 382(1) (restitution order) is exercisable by the Bank.
(2) For the purposes of the application, any reference in that section to a relevant requirement is to be read in accordance with paragraph 26(2) of this Schedule (subject to sub-paragraph (3)).
(3) The power to make an application under section 382(1) is not exercisable by the Bank in respect of the contravention of a requirement imposed by or under Article 4 or 15 of the SFT regulation.
28 (1) The power conferred by section 384(5) (power of FCA to require restitution order) is exercisable by the Bank.
(2) That power is exercisable if the Bank is satisfied that a recognised clearing house , a recognised CSD or a critical third party has contravened a relevant requirement, or been knowingly concerned in the contravention of a relevant requirement, and—
(a) that profits have accrued to the recognised clearing house , the recognised CSD or the critical third party as a result of the contravention; or
(b) that one or more persons have suffered loss or been otherwise adversely affected as a result of the contravention.
(3) For the purposes of that power, “relevant requirement” is to be read in accordance with paragraph 26(2) of this Schedule (subject to sub-paragraph (3A)).
(3A) The power conferred by section 384(5) is not exercisable by the Bank in respect of the contravention of a requirement imposed by or under Article 4 or 15 of the SFT regulation.
(4) Where this paragraph applies, section 384(5) and (6) are to have effect as if—
(a) any reference to the person concerned were a reference to the recognised clearing house , the recognised CSD or the critical third party; and
(b) any reference to subsection (1) were a reference to sub-paragraph (2) of this paragraph.
Notices
29 The provisions of Part 26 of this Act (notices) apply,
(a) in relation to a warning or decision notice given by the Bank under section 55X(2) or (4), 192L, 309C, 309D, 309M, 309P, 309V, 309Z4, 312G , 312H or 312S as they apply in relation to such a notice given by the FCA under that section.
(b) in relation to a notice under section 309R(5), (8) or (10)(b) as they apply in relation to such a notice given by the FCA under those provisions.
Offences
30 Section 398 (misleading the FCA: residual cases) applies to information given to the Bank in purported compliance with—
(a) a requirement that is imposed by or under any provision of Part 18 of this Act that relates to a recognised clearing house , a third country central counterparty or a recognised CSD;
(aa) a requirement that is imposed by or under any provision of Chapter 3C of Part 18 of this Act that relates to critical third parties;
(b) a requirement that is imposed under any other provision of this Act by the Bank; or
(c) a requirement that is imposed by any qualifying provision specified, or of a description specified, for the purposes of this paragraph by the Treasury by order.
31 (1) Section 401 (proceedings for an offence) applies to the Bank as if for the purposes of subsections (2)(a) and (3)(a) of that section the Bank were an appropriate regulator in respect of each of the following offences—
(a) an offence under section 177(3) where the investigation is being, or is likely to be, conducted on behalf of the Bank;
(b) an offence under section 177(4) where the requirement is imposed by the Bank;
(c) an offence under section 177(6) where the warrant is issued as a result of information on oath given by the Bank or a person appointed by it to conduct an investigation on its behalf;
(ca) an offence under section 309E;
(d) an offence under section 398(1) where the information was given to the Bank.
(2) Section 401(3B) has effect subject to the provision made by this paragraph (so that the FCA is not the appropriate regulator for the purposes of subsections (2)(a) and (3)(a) in respect of the above offences).
International obligations
31A (1) The following provisions of Part 28 of this Act apply in relation to the exercise by the Bank of its FMI functions with the modifications in sub-paragraphs (2) and (3)—
(a) section 409A (consultation in relation to deference decisions), and
(b) section 409B (notification in relation to international trade obligations).
(2) Section 409A applies as if—
(a) in subsection (4), in paragraph (b), for the words after “proposes to” to the end there were substituted “exercise any of its other FMI functions”;
(b) in subsection (6)(a), the reference to the duty imposed by section 138J were a reference to that duty as it applies in relation to the Bank under paragraph 10(1) of this Schedule;
(c) in subsection (9), for paragraphs (a) to (f) there were substituted “in order to comply with a recommendation of the Financial Policy Committee of the Bank of England under section 9O of the Bank of England Act 1998 (making of recommendations within the Bank).”;
(d) subsections (7) and (10) were omitted.
(3) Section 409B applies as if—
(a) in subsection (4), in paragraph (b), for the words after “proposes to” to the end there were substituted “exercise any of its other FMI functions”;
(b) in subsection (5)(a), the reference to the duty imposed by section 138J were a reference to that duty as it applies in relation to the Bank under paragraph 10(1) of this Schedule;
(c) in subsection (8), for paragraphs (a) to (c) there were substituted “in order to comply with a recommendation of the Financial Policy Committee of the Bank of England under section 9O of the Bank of England Act 1998 (making of recommendations within the Bank).”;
(d) subsections (6) and (9) were omitted.
Transitional provisions
31B Section 427 (transitional provisions), so far as it relates to an order under section 426 which makes provision in connection with this Part of this Act, applies in relation to the Bank.
Records
32 Paragraph 17 of Schedule 1ZB (records) applies in relation to the recording of decisions made by the Bank in the exercise of its functions relating to recognised clearing houses , third country central counterparties, recognised CSDs , critical third parties and third country CSDs.
Annual report
33 Paragraph 19 of Schedule 1ZB (annual report by PRA) applies in relation to the Bank, but—
(a) as if for paragraphs (a) to (fb) of sub-paragraph (1) there were substituted—
(a) the discharge of its functions relating to recognised clearing houses , third country central counterparties, recognised CSDs , critical third parties and third country CSDs,
(b) the extent to which, in its opinion, in discharging those functions its Financial Stability Objective and its objective under section 30D(2) of the Bank of England Act 1998 have been advanced,
(c) the efforts it has made to engage with persons (other than those mentioned in paragraph (a)) appearing to the Bank to have an interest in the discharge of those functions, and
(d) the results of that engagement,”, and
(b) as if sub-paragraphs (1A), (1B), (3) and (6) were omitted.
Other reports
33A Paragraph 21A of Schedule 1ZB (other reports by PRA) applies in relation to the Bank, but as if—
(a) the reference in sub-paragraph (1)(a) to paragraphs (a) to (f) of paragraph 19(1) were a reference to those paragraphs as substituted in relation to the Bank under paragraph 33 of this Schedule;
(b) the reference in sub-paragraph (1)(b) to such other matters were a references to such other matters so far as relating to the exercise of the Bank’s FMI functions;
(c) the reference in sub-paragraph (5)(b) to section 348 were a reference to that section as it applies in relation to the Bank under paragraph 23 of this Schedule.
Engagement with Parliamentary Committees
33B (1) Paragraph 36 of Schedule 1ZB (PRA engagement with Parliamentary Committees) applies in relation to the Bank, but as if—
(a) in sub-paragraph (2)(a), the reference to section 138J were a reference to that section as it applies in relation to the Bank under paragraph 10(1) of this Schedule;
(b) in sub-paragraph (2)(b), the reference to a proposal were to a proposal so far as relating to the exercise of the Bank’s FMI functions;
(c) in sub-paragraph (2)(c), the reference to general functions were a reference to the Bank’s FMI functions;
(d) in sub-paragraph (4)(a), the reference to the PRA’s objectives were a reference to the Financial Stability Objective and the Bank’s secondary innovation objective (see section 30D(2) of the Bank of England Act 1998);
(e) in sub-paragraph (4)(b), the reference to section 3B were a reference to section 30E of the Bank of England Act 1998;
(f) in sub-paragraph (4)(c), the reference to section 138EA were a reference to that section as it applies in relation to the Bank under paragraph 10(1) of this Schedule;
(g) in sub-paragraph (5A)(b)(ii) and (c)(ii), the references to the PRA being notified were references to the Bank being notified.
(2) Paragraph 37 of Schedule 1ZB applies in relation to the Bank, but as if, in sub-paragraph (2), after “the draft of any proposals” there were inserted “so far as relating to the exercise by the Bank of its FMI functions”.
Part 3 Winding up, administration or insolvency of recognised clearing houses
Notice to Bank of England of preliminary steps
34 (1) An application for an administration order in respect of a recognised clearing house or a recognised CSD may not be determined unless the conditions below are satisfied.
(2) A petition for a winding up order in respect of a recognised clearing house or a recognised CSD may not be determined unless the conditions below are satisfied.
(3) A resolution for voluntary winding up of a recognised clearing house or a recognised CSD may not be made unless the conditions below are satisfied.
(4) An administrator of a recognised clearing house or a recognised CSD may not be appointed unless the conditions below are satisfied.
(5) Condition 1 is that the Bank of England has been notified—
(a) by the applicant for an administration order, that the application has been made,
(b) by the petitioner for a winding up order, that the petition has been presented,
(c) by the recognised clearing house or the recognised CSD, that a resolution for voluntary winding up may be made, or
(d) by the person proposing to appoint an administrator, of the proposed appointment.
(6) Condition 2 is that a copy of the notice complying with Condition 1 has been filed (in Scotland, lodged) with the court (and made available for public inspection by the court).
(7) Condition 3 is that—
(a) the period of 2 weeks, beginning with the day on which the notice is received, has ended, or
(b) the Bank of England has informed the person who gave the notice that—
(i) it has no objection to the order, resolution or appointment being made, and
(ii) it does not intend to exercise a stabilisation power under Schedule 11 to the Financial Services and Markets Act 2023.
(8) Arranging for the giving of notice in order to satisfy Condition 1 can be a step with a view to minimising the potential loss to a recognised clearing house's or a recognised CSD’s creditors for the purpose of section 214 of the Insolvency Act 1986 (wrongful trading).
(9) In this paragraph “the court” means—
(a) in England and Wales, the High Court,
(b) in Scotland, the Court of Session, and
(c) in Northern Ireland, the High Court.
Power to give directions to insolvency practitioner
35 (1) This paragraph applies where a person has been appointed to act as an insolvency practitioner (within the meaning of section 388 of the Insolvency Act 1986 or Article 3 of the Insolvency (Northern Ireland) Order 1989) in relation to a company which is, or has been, a recognised clearing house or a recognised CSD.
(2) The Bank of England may give directions to the person if satisfied that it is desirable to give the directions, having regard to the public interest in—
(a) protecting and enhancing the stability of the UK financial system,
(b) protecting and enhancing public confidence in the stability of the UK financial system, ...
(c) in the case of a company which is, or has been, a recognised clearing house, maintaining the continuity of ... clearing services and
(d) in the case of a company which is, or has been, a recognised CSD, maintaining the continuity of the services referred to in section 285(3D).
(3) Before giving directions the Bank of England must consult—
(a) the Treasury, and
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) the FCA.
(4) Directions are enforceable, on an application by 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.
(5) A person is not liable for damages in respect of action or inaction in accordance with directions.
(6) The immunity does not extend to action or inaction—
(a) in bad faith, or
(b) in contravention of section 6(1) of the Human Rights Act 1998.
Part 4 Fees
36 (1) The Bank of England may, in connection with the discharge of any of its qualifying functions, require recognised clearing houses, ... third country central counterparties, recognised CSDs ... or settlement internalisers (as defined in point (11) of Article 2(1) of the CSD regulation) to pay fees to the Bank.
(2) The “qualifying functions” of the Bank are—
(a) its functions under or as a result of this Part of this Act, ...
(b) its functions under or as a result of a qualifying provision that is specified, or of a description specified, for the purposes of this sub-paragraph by the Treasury by order; ...
(ba) its functions under or as a result of regulations made under section 8 of the European Union (Withdrawal) Act 2018; and
(c) its functions under or as a result of Part 7 of the Companies Act 1989.
(3) The power of the Bank to set fees includes power to set fees for the purpose of meeting expenses incurred by it or the FCA—
(a) in preparation for the exercise of functions by the Bank under this Part of this Act, ...
(b) for the purpose of facilitating the exercise by the Bank of those functions or otherwise in connection with their exercise by it or
(c) in preparation for the exercise of functions by the Bank under Article 9(1) of the CSD regulation.
(4) It is irrelevant when the expenses were incurred (and, in particular, it is irrelevant if expenses were incurred by the FCA at a time when it was known as the Financial Services Authority).
(5) The power conferred by this paragraph may not be used to require a fee to be paid by any person whose application under section 309I for approval under section 309G has been granted.
37 Any fee which is owed to the Bank under paragraph 36 may be recovered as a debt due to the Bank.
Sections 334, 336 and 338.
Part I Friendly Societies
The Friendly Societies Act 1974 (c.46)
1 Omit sections 4 (provision for separate registration areas) and 10 (societies registered in one registration area carrying on business in another).
2 In section 7 (societies which may be registered), in subsection (2)(b), for “in the central registration area or in Scotland” substitute “ in the United Kingdom, the Channel Islands or the Isle of Man ”.
3 In section 11 (additional registration requirements for societies with branches), omit “and where any such society has branches in more than one registration area, section 10 above shall apply to that society”.
4 In section 99(4) (punishment of fraud etc and recovery of property misapplied), omit “in the central registration area”.
The Friendly Societies Act 1992 (c.40)
5 Omit sections 31 to 36A (authorisation of friendly societies business).
6 In section 37 (restrictions on combinations of business), omit subsections (1), (1A) and (7A) to (9).
7 Omit sections 38 to 43 (restrictions on business of certain authorised societies).
8 Omit sections 44 to 50 (regulation of friendly societies business).
Part II Friendly Societies: Subsidiaries and Controlled Bodies
Interpretation
9 In this Part of this Schedule—
“the 1992 Act” means the Friendly Societies Act 1992; and
“section 13” means section 13 of that Act.
Qualifying bodies
10 (1) Subsections (2) to (5) of section 13 (incorporated friendly societies allowed to form or acquire control or joint control only of qualifying bodies) cease to have effect.
(2) As a result, omit—
(a) subsections (8) and (11) of that section, and
(b) Schedule 7 to the 1992 Act (activities which may be carried on by a subsidiary of, or body jointly controlled by, an incorporated friendly society).
Bodies controlled by societies
11 In section 13(9) (defined terms), after paragraph (a) insert—
(aa) an incorporated friendly society also has control of a body corporate if the body corporate is itself a body controlled in one of the ways mentioned in paragraph (a)(i), (ii) or (iii) by a body corporate of which the society has control;
.
Joint control by societies
12 In section 13(9), after paragraph (c) insert—
(cc) an incorporated friendly society also has joint control of a body corporate if—
(i) a subsidiary of the society has joint control of the body corporate in a way mentioned in paragraph (c)(i), (ii) or (iii);
(ii) a body corporate of which the society has joint control has joint control of the body corporate in such a way; or
(iii) the body corporate is controlled in a way mentioned in paragraph (a)(i), (ii) or (iii) by a body corporate of which the society has joint control;
.
Acquisition of joint control
13 In section 13(9), in the words following paragraph (d), after “paragraph (c)” insert “ or (cc) ”.
Amendment of Schedule 8 to the 1992 Act
14 (1) Schedule 8 to the 1992 Act (provisions supplementing section 13) is amended as follows.
(2) Omit paragraph 3(2).
(3) After paragraph 3 insert—
3A (1) A body is to be treated for the purposes of section 13(9) as having the right to appoint to a directorship if—
(a) a person’s appointment to the directorship follows necessarily from his appointment as an officer of that body; or
(b) the directorship is held by the body itself.
(2) A body (“B”) and some other person (“P”) together are to be treated, for the purposes of section 13(9), as having the right to appoint to a directorship if—
(a) P is a body corporate which has directors and a person’s appointment to the directorship follows necessarily from his appointment both as an officer of B and a director of P;
(b) P is a body corporate which does not have directors and a person’s appointment to the directorship follows necessarily from his appointment both as an officer of B and as a member of P’s managing body; or
(c) the directorship is held jointly by B and P.
(3) For the purposes of section 13(9), a right to appoint (or remove) which is exercisable only with the consent or agreement of another person must be left out of account unless no other person has a right to appoint (or remove) in relation to that directorship.
(4) Nothing in this paragraph is to be read as restricting the effect of section 13(9).
(4) In paragraph 9 (exercise of certain rights under instruction by, or in the interests of, incorporated friendly society) insert at the end “ or in the interests of any body over which the society has joint control ”.
Consequential amendments
15 (1) Section 52 of the 1992 Act is amended as follows.
(2) In subsection (2), omit paragraph (d).
(3) In subsection (3), for “(4) below” substitute “ (2) ”.
(4) For subsection (4) substitute—
(4) A court may not make an order under subsection (5) unless it is satisfied that one or more of the conditions mentioned in subsection (2) are satisfied.
(5) In subsection (5), omit the words from “or, where” to the end.
References in other enactments
16 References in any provision of, or made under, any enactment to subsidiaries of, or bodies jointly controlled by, an incorporated friendly society are to be read as including references to bodies which are such subsidiaries or bodies as a result of any provision of this Part of this Schedule.
Part III Building Societies
The Building Societies Act 1986 (c.53)
17 Omit section 9 (initial authorisation to raise funds and borrow money).
18 Omit Schedule 3 (supplementary provisions about authorisation).
Part V Credit Unions
The Credit Unions Act 1979 (c.34)
21 In section 6 (minimum and maximum number of members), omit subsections (2) to (6).
22 In section 11 (loans), omit subsections (2) and (6).
23 Omit sections 11B (loans approved by credit unions), 11C (grant of certificates of approval) and 11D (withdrawal of certificates of approval).
24 In section 12, omit subsections (4) and (5).
25 In section 14, omit subsections (2), (3), (5) and (6).
26 In section 28 (offences), omit subsection (2).
Part I Persons and functions for the purposes of section 351
1 The Table set out after this paragraph has effect for the purposes of section 351(3)(b).
Table
Person | Function
1. The Commission. | Any function of the Commission under Community law relating to competition.
2. The Comptroller and Auditor General. | Any function of his.
3. A Minister of the Crown. | Any function of his under a specified enactment.
4. Director General of Telecommunications. | Any function of his under a specified enactment.
5. Director General of Gas Supply | Any function of his under a specified enactment
6. The Director General of Gas for Northern Ireland. | Any function of his under a specified enactment.
7. The Director General of Electricity Supply. | Any function of his under a specified enactment.
8. The Director General of Electricity Supply for Northern Ireland. | Any function of his under a specified enactment.
9. The Director General of Water Services. | Any function of his under a specified enactment.
10. The Civil Aviation Authority. | Any function of that authority under a specified enactment.
11. The Rail Regulator. | Any function of his under a specified enactment.
12. The Director General of Fair Trading. | Any function of his under a specified enactment.
13. The Competition Commission. | Any function of the Competition Commission under a specified enactment.
14. The Authority. | Any function of the Authority under a specified enactment.
15. A person of a description specified in an order made by the Treasury. | Any function of his which is specified in the order.
Part II The enactments
1 The Fair Trading Act 1973
2 The Consumer Credit Act 1974
3 The Estate Agents Act 1979
4 The Competition Act 1980
5 The Telecommunications Act 1984
6 The Airports Act 1986
7 The Gas Act 1986
8 The Control of Misleading Advertisements Regulations 1988
9 The Electricity Act 1989
10 The Broadcasting Act 1990
11 The Water Industry Act 1991
12 The Electricity (Northern Ireland) Order 1992
13 The Railways Act 1993
14 Part IV of the Airports (Northern Ireland) Order 1994
15 The Gas (Northern Ireland) Order 1996
16 The EC Competition (Articles 88 and 89) Enforcement Regulations 1996
17 The Unfair Terms in Consumer Contracts Regulations 1999
18 This Act.
19 An enactment specified for the purposes of this paragraph in an order made by the Treasury.
Section 377G
Application of Schedule
1 (1) This Schedule applies where—
(a) a write-down order has been made under section 377A in relation to an insurer, and
(b) one or more persons have been appointed under section 377G to act as the manager of the order.
(2) Where only one person acts as the manager, a reference in this Schedule to “the manager” is to that person.
(3) Where two or more persons act jointly as the manager—
(a) a reference in this Schedule to the manager is a reference to those persons acting jointly;
(b) where an offence of omission is committed by the manager, each of the persons appointed to act jointly—
(i) commits the offence, and
(ii) may be proceeded against and punished individually.
(4) Where persons act jointly in respect of only some of the functions of the manager, sub-paragraph (3) applies only in relation to those functions.
(5) Where two or more persons act concurrently as the manager, a reference in this Schedule to the manager is a reference to any of the persons appointed (or any combination of them).
(6) In this Schedule, “creditor” includes a contingent or prospective creditor.
Status of the manager
2 The manager is an officer of the court.
Monitoring the insurer’s affairs
3 (1) The manager must monitor the insurer’s affairs for the purpose of forming a view as to whether—
(a) it remains the case that the write-down order is reasonably likely to lead to a better outcome for the insurer’s policyholders and other creditors (taken as a whole) than if the write-down order were not in effect, or
(b) that will remain the case, or once again be the case, if the directors of the insurer were to take certain action or refrain from taking certain action.
(2) If the manager forms the view mentioned in sub-paragraph (1)(b), the manager may make such recommendations to the directors of the insurer as the manager thinks appropriate.
(3) In forming a view mentioned in sub-paragraph (1), the manager is entitled to rely on information provided by the insurer, unless the manager has reason to doubt its accuracy.
(4) If directed to do so by the FCA or the PRA, the manager must provide a report to that regulator on such matters relating to the insurer’s affairs, and at such intervals, as that regulator may specify.
Application by manager to revoke or vary a write-down order
4 (1) This paragraph applies if the manager forms the view that it is in the interests of the insurer’s policyholders and other creditors (taken as a whole) for the write-down order to be—
(a) revoked, or
(b) varied in one or more respects.
(2) The manager must apply to the court for such orders (whether under section 377I or otherwise) as the manager thinks likely to achieve the best outcome for the insurer’s policyholders and other creditors (taken as a whole).
(3) In forming the view mentioned in sub-paragraph (1), the manager may have regard, among other things—
(a) to whether recommendations under paragraph 3(2) have been made (and if so, whether they have been acted upon);
(b) to whether recommendations, or further recommendations, under paragraph 3(2) could be made (and if so, the likelihood that they will be acted upon).
Provision of information and assistance to the manager
5 (1) The manager may require a relevant person to provide such information or assistance as the manager may reasonably require for the purpose of carrying out the manager’s functions.
(2) Each of the following is a “relevant person” for these purposes—
(a) a director of the insurer, or of a body corporate in the same group as the insurer;
(b) an employee of the insurer, or of a body corporate in the same group as the insurer;
(c) a person providing a service to the insurer, or to a body corporate in the same group as the insurer;
(d) a person who has at any relevant time been a person falling within paragraph (a), (b) or (c).
(3) A relevant person must comply with a requirement under this paragraph to provide information as soon as is practicable.
(4) The obligation imposed by sub-paragraph (3) is enforceable, on the application of the manager—
(a) by an injunction, or
(b) in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
Application by manager for directions
6 The manager may apply to the court for directions about the carrying out of the manager’s functions.
Challenges to the manager’s actions
7 (1) Any of the following persons may apply to the court on the ground that an act, omission or decision of the manager has unfairly harmed the interests of the applicant—
(a) a director of the insurer;
(b) a shareholder of the insurer;
(c) a policyholder or other creditor of the insurer;
(d) any other person affected by the write-down order.
(2) Any of the following persons may apply to the court on the ground that an act, omission or decision of the manager is not in the interests of the insurer’s policyholders and other creditors (taken as a whole)—
(a) the FCA;
(b) the PRA;
(c) the scheme manager of the Financial Services Compensation Scheme (see section 212(1));
(d) a provisional liquidator of the insurer.
(3) Before making an application under sub-paragraph (2)—
(a) the FCA must consult the PRA;
(b) the PRA must consult the FCA;
(c) the scheme manager of the Financial Services Compensation Scheme must notify the FCA and the PRA.
(4) On an application under this paragraph the court may—
(a) confirm, reverse or modify any act or decision of the manager,
(b) give the manager directions, or
(c) make such other order as the court thinks appropriate (but may not, under this paragraph, order the manager to pay any compensation).
(5) Where an application under this paragraph relates to a failure by the manager to apply to the court for the variation or termination of the write-down order, the court may treat the application as an application for an order under section 377I made by a person entitled to apply for an order under that section.
SCHEDULE 19B Further provision about write-down orders
Section 377J
PART 1 Restrictions on enforcement
Application of this Part of this Schedule
1 (1) This Part of this Schedule applies in relation to an insurer—
(a) during the period—
(i) beginning with the date on which an application is made for a write-down order in relation to the insurer, and
(ii) ending with the date on which the order is made or the application is withdrawn or dismissed;
(b) during the period—
(i) beginning with the date on which a write-down order is made in relation to the insurer, and
(ii) ending with the last day of the period of six months beginning with the day on which the write-down order takes effect (see section 377A(3)(a));
(c) during such further period as the court may order.
(2) This Part of this Schedule ceases to apply—
(a) where the court orders that it should cease to apply (and in accordance with the terms of the order), or
(b) where the write-down order ceases to have effect (because, in accordance with section 377H, each reduction in the value of a liability of the insurer ceases to have effect).
(3) The court—
(a) may make an order under sub-paragraph (1)(c) or (2)(a) only on an application by a person mentioned in sub-paragraph (4);
(b) may not specify in an order under sub-paragraph (1)(c) a period longer than six months (but may make one or more further such orders).
(4) The persons are—
(a) a person entitled to make an application for a write-down order in relation to the insurer (see section 377C(1));
(b) a person appointed under section 377G to act as the manager of the write-down order;
(c) a provisional liquidator of the insurer;
(d) the FCA.
(5) Before making an application for an order under this Part of this Schedule—
(a) a person other than the PRA or the Treasury must consult the PRA;
(b) the PRA must consult the FCA.
Moratorium on proceedings
2 (1) Where this Part of this Schedule applies in relation to an insurer, except with the permission of the court—
(a) no step may be taken to enforce security over the insurer’s property;
(b) no step may be taken to repossess goods in the insurer’s possession under a hire-purchase agreement;
(c) a landlord may not exercise a right of forfeiture by peaceable re-entry in relation to premises let to the insurer;
(d) in Scotland, a landlord may not exercise a right of irritancy in relation to premises let to the insurer;
(e) no legal process (including legal proceedings, execution, distress or diligence) may be instituted, carried out or continued against the insurer or its property.
(2) Where the court gives permission for something to be done that would otherwise be prevented by this paragraph, it may impose a condition on, or a requirement in connection with, the permission.
(3) In this paragraph, “landlord” includes a person to whom rent is payable.
Exceptions
3 (1) This Part of this Schedule does not apply in relation to—
(a) arrangements entered into after the date on which this Part of this Schedule first applied in relation to the insurer;
(b) employment tribunal proceedings or any legal process arising out of such proceedings;
(c) proceedings, not within paragraph (b), involving a claim between an employer and a worker.
(2) Nothing in this Part of this Schedule—
(a) prevents the FCA or the PRA from exercising a function it has in relation to the insurer or any other person;
(b) prevents a consumer from taking steps to enforce a money award or direction under section 229 or 404B.
(3) Nothing in this Part of this Schedule affects the operation of—
(a) Part 7 of the Companies Act 1989 (financial markets and insolvency);
(b) the Financial Markets and Insolvency Regulations 1996 (S.I. 1996/1469);
(c) the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979);
(d) the Financial Collateral Arrangements (No.2) Regulations 2003 (S.I. 2003/3226).
(4) The Treasury may by regulations amend sub-paragraph (3).
(5) In this paragraph—
“agency worker” has the meaning given by section 13(2) of the Employment Relations Act 1999;
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions;
“employer”—
in relation to an agency worker, has the meaning given by section 13(2) of the Employment Relations Act 1999;
otherwise, has the meaning given by section 230(4) of the Employment Rights Act 1996;
“worker” means an individual who is—
a worker within the meaning of section 230(3) of the Employment Rights Act 1996, or
an agency worker.
PART 2 Dealing with assets etc
Application of this Part of this Schedule
4 This Part of this Schedule applies while a write-down order has effect in relation to one or more liabilities of an insurer.
Dealing with assets
5 The insurer may not dispose of, or otherwise deal with, any of its assets (whether in the United Kingdom or elsewhere) except—
(a) in the ordinary way of the insurer’s business, or
(b) with the consent of the PRA.
Paying variable remuneration
6 The insurer may not pay variable remuneration that is not regulated by a collective bargaining agreement, except with the consent of the PRA.
Distributions
7 The insurer may not make a distribution, within the meaning of Part 23 of the Companies Act 2006, except with the consent of the PRA.
PART 3 Treatment of written-down liabilities for certain purposes
Application of this Part of this Schedule
8 (1) This Part of this Schedule applies in relation to a liability of an insurer while the value of the liability is reduced under a write-down order.
(2) Where the write-down order is varied, this Part of this Schedule applies as if references to the write-down order were to the order as varied.
Relevant insolvency provisions
9 (1) In determining the value of the liability for the purposes of a relevant insolvency provision, no account is to be taken of the contingent or prospective value of the liability, or interest on the liability, arising from any expectation that the write-down order will be varied, further varied or cease to have effect (whether in relation to the liability or generally).
(2) The relevant insolvency provisions are—
(a) section 123 of the 1986 Act or Article 103 of the 1989 Order, or any statutory provision which applies that section or that Article;
(b) Article 11 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency 2);
(c) PRA rules applicable to non-directive insurers, within the meaning given by the Rulebook made by the PRA under this Act (as that Rulebook has effect from time to time).
(3) The Treasury may by regulations amend sub-paragraph (2).
Reinsurance contracts
10 (1) This paragraph applies where—
(a) the liability is a liability under a contract of insurance the insurer carries out as principal (“contract A”), and
(b) the insurer enters into a reinsurance contract under which contract A, or any liability under contract A, is reinsured (“contract B”).
(2) In determining the value of the liability for the purposes of contract B, no account is to be taken of the reduction in value of the liability under the write-down order.
PART 4 Interest
11 (1) This Part of this Schedule applies where—
(a) the value of a liability of an insurer is reduced under a write-down order,
(b) while the write-down order has effect in relation to the liability, an amount of the liability is due and payable (or would be due and payable but for the write-down order), and
(c) the amount remains due and payable after the reduction ceases to have effect.
(2) The amount carries statutory interest, within the meaning of the Late Payment of Commercial Debts (Interest) Act 1998, for the period—
(a) beginning with the date on which the write-down order took effect or, if later, the date on which the amount became due and payable (or would have become due and payable but for the write-down order), and
(b) ending with the day on which the amount is paid.
(3) Where a write-down order is varied, this section applies as if references to the write-down order were to the order as varied.
SCHEDULE 19C Insurers in financial difficulties: enforcement of contracts
Section 377K
PART 1 Introductory
Application of this Schedule
1 This Schedule applies in relation to an insurer while the insurer is in financial difficulties.
“Financial difficulties”
2 (1) An insurer is in “financial difficulties” for the purposes of this Schedule if—
(a) Part 1 of Schedule 19B (write-down orders: restrictions on enforcement) has effect in relation to the insurer (see paragraph 1(1) and (2) of that Schedule);
(b) the insurer is in administration, within the meaning of Schedule B1 to the 1986 Act or Schedule B1 to the 1989 Order, or awaiting administration;
(c) a petition for the winding up of the insurer has been presented and has not been withdrawn or determined.
(2) For the purposes of sub-paragraph (1)(b), an insurer is awaiting administration while an application for an administration order in respect of the insurer has been made to the court and—
(a) the application has not yet been granted or dismissed, or
(b) the application has been granted but the administration order has not yet taken effect.
(3) For the purposes of this Schedule, an insurer “enters into financial difficulties”—
(a) in a case to which sub-paragraph (1)(a) applies, on the date on which Part 1 of Schedule 19B first has effect in relation to the insurer;
(b) in a case to which sub-paragraph (1)(b) applies, on the date on which the application for the administration order is made to the court;
(c) in a case to which sub-paragraph (1)(c) applies, on the date on which the winding-up petition is presented.
PART 2 Policyholder surrender rights
Restriction on policyholder surrender rights
3 (1) Where this Schedule applies in relation to an insurer, the total value of a policyholder’s rights under a relevant contract of insurance which the policyholder may surrender in a relevant period must not exceed the surrender limit for that period.
(2) For these purposes—
“relevant contract of insurance” means a contract of long-term insurance which is not a contract in respect of which the following conditions are met—
the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity;
the contract has no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium;
the contract makes no provision for its conversion or extension in a manner which would result in it ceasing to comply with either of the above conditions;
“relevant period” means—
the period of 12 months beginning with the date on which the insurer entered into financial difficulties, and
each subsequent period of 12 months;
“surrender limit”, in relation to a relevant contract of insurance and relevant period, is an amount equal to 5% of the total surrender value of the contract on the day on which the relevant period began.
Switching rights
4 (1) This paragraph applies where the value of a right under a relevant contract of insurance is wholly or partly determined by reference to property of any description.
(2) The reference in paragraph 3(1) to the surrender of rights by a policyholder includes the exercise by the policyholder of a contractual right to change the property by reference to which the value of a right is (wholly or partly) determined.
Consent to exceed surrender limit
5 (1) Paragraph 3(1) does not apply if, or to the extent that, consent for the surrender of an amount that would exceed the surrender limit for the relevant period has been given by—
(a) the court,
(b) a relevant office-holder, or
(c) where there is no relevant office-holder, the insurer.
(2) For these purposes, “relevant office-holder” means—
(a) a provisional liquidator of the insurer;
(b) an administrator of the insurer;
(c) a person appointed to act as the manager of a write-down order that has effect in relation to the insurer.
(3) The court, a relevant office-holder or the insurer (as the case may be) may give consent under sub-paragraph (1) only if satisfied that not doing so would cause the policyholder hardship.
(4) Where a provisional liquidator of an insurer has been appointed, the manager of a write-down order that has effect in relation to the insurer must obtain the consent of the provisional liquidator before giving consent under sub-paragraph (1).
(5) As soon as reasonably practicable after giving consent under sub-paragraph (1), a relevant office-holder or the insurer must notify the PRA.
PART 3 Termination etc of relevant contracts
Relevant contracts
6 (1) For the purposes of this Part of this Schedule, a contract to which an insurer is a party is a “relevant contract” if it is—
(a) a contract for the supply of goods or services to the insurer,
(b) a financial contract, or
(c) a reinsurance contract under which contracts of insurance the insurer carries out as principal are reinsured.
(2) “Financial contract” means—
(a) a contract for the provision of financial services consisting of—
(i) lending (including the factoring and financing of commercial transactions),
(ii) financial leasing, or
(iii) providing guarantees or commitments;
(b) a securities contract, including—
(i) a contract for the purchase, sale or loan of a security or group or index of securities;
(ii) an option on a security or group or index of securities;
(iii) a repurchase or reverse repurchase transaction on any such security, group or index;
(c) a commodities contract, including—
(i) a contract for the purchase, sale or loan of a commodity or group or index of commodities for future delivery;
(ii) an option on a commodity or group or index of commodities;
(iii) a repurchase or reverse repurchase transaction on any such commodity, group or index;
(d) a futures or forwards contract, including a contract (other than a commodities contract) for the purchase, sale or transfer of a commodity or property of any other description, service, right or interest for a specified price at a future date;
(e) a swap agreement, including—
(i) a swap or option relating to interest rates, spot or other foreign exchange agreements, currency, an equity index or equity, a debt index or debt, commodity indexes or commodities, weather, emissions or inflation;
(ii) a total return, credit spread or credit swap;
(iii) any agreement or transaction similar to an agreement that is referred to in sub-paragraph (i) or (ii) and is the subject of recurrent dealing in the swaps or derivatives markets.
(3) But a master agreement for any contract or agreement referred to in sub-paragraph (2) is not a relevant contract for the purposes of this Part of this Schedule.
(4) For the purposes of sub-paragraph (2), “commodities” includes—
(a) units recognised for compliance with the requirements of EU Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading,
(b) allowances under paragraph 5 of Schedule 2 to the Climate Change Act 2008 relating to a trading scheme dealt with under Part 1 of that Schedule (schemes limiting activities relating to emissions of greenhouse gas), and
(c) renewables obligation certificates issued—
(i) by the Gas and Electricity Markets Authority under an order made under section 32B of the Electricity Act 1989, or
(ii) by the Northern Ireland Authority for Utility Regulation under the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)) and pursuant to an order made under Articles 52 to 55F of that Order.
Restriction on termination etc
7 (1) Where this Schedule applies in relation to an insurer, a provision of a relevant contract, entered into by the insurer before the insurer first enters into financial difficulties, ceases to have effect if, and to the extent that, under the provision—
(a) the contract would terminate, a supply would cease, or any other thing would occur, because the insurer is in financial difficulties, or
(b) another party to the contract would be entitled to terminate the contract, cease a supply, or do any other thing, because the insurer is in financial difficulties.
(2) Where—
(a) under a provision of a relevant contract, another party to the contract is entitled to terminate the contract, cease a supply, or do any other thing because of an event occurring before the insurer was in financial difficulties, and
(b) the entitlement arises before the insurer was in financial difficulties,
the entitlement may not be exercised while the insurer is in financial difficulties.
(3) A supplier of goods or services to an insurer must not—
(a) make it a condition of a supply of goods or services, while the insurer is in financial difficulties, that any outstanding charges in respect of a supply made to the insurer before the insurer is in financial difficulties are paid, or
(b) do anything which has that effect.
Consent to terminate relevant contracts
8 (1) Sub-paragraph (2) applies where—
(a) a provision of a relevant contract ceases to have effect under paragraph 7(1), or
(b) an entitlement under a provision of a relevant contract is not exercisable under paragraph 7(2).
(2) A party to the contract (other than the insurer) may terminate the contract, or do another thing in relation to the contract, if consent to terminate the contract or do that other thing (as the case may be) has been given by—
(a) the court,
(b) a relevant office holder, or
(c) where there is no relevant office-holder, the insurer.
(3) For these purposes, “relevant office-holder” means an administrator or provisional liquidator of the insurer (but does not include a person appointed to act as the manager of a write-down order that has effect in relation to the insurer).
(4) The court, a relevant office-holder or the insurer (as the case may be) may give consent under sub-paragraph (2) only if satisfied that not doing so would cause hardship to any person.
(5) As soon as reasonably practicable after giving consent under sub-paragraph (2), a relevant office-holder or the insurer must notify the PRA.
PART 4 Exclusions and disapplication of this Schedule
Exclusions
9 (1) Nothing in this Schedule affects the operation of—
(a) Part 7 of the Companies Act 1989 (financial markets and insolvency);
(b) the Financial Markets and Insolvency Regulations 1996 (S.I. 1996/1469);
(c) the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979);
(d) the Financial Collateral Arrangements (No.2) Regulations 2003 (S.I. 2003/3226).
(2) Nothing in this Schedule affects any protected arrangements within the meaning of section 48P of the Banking Act 2009.
Disapplication of this Schedule by the court
10 (1) The court may order that this Schedule, or a specified provision of this Schedule—
(a) does not apply (insofar as it would otherwise) in relation to one or more contracts to which the insurer is a party, or
(b) applies with specified modifications in relation to one or more such contracts.
(2) An order under this paragraph—
(a) must specify the contracts to which it applies;
(b) may specify all of the contracts to which the insurer is a party (and to which one or more provisions of this Schedule would otherwise apply).
(3) For the purposes of an order under this paragraph—
“contract” includes a contract of insurance;
“specified” means specified or described in the order.
(4) The court may make an order under this paragraph only if satisfied that one or more of the following grounds is made out—
(a) not making the order would be likely to cause hardship to any person (other than the insurer);
(b) where the insurer is in financial difficulties by virtue of paragraph 2(1)(a) (write-down order), making the order is reasonably likely to lead to a better outcome for the insurer’s policyholders and other creditors (taken as a whole) than not making the order;
(c) where the insurer is in financial difficulties by virtue of paragraph 2(1)(b) (administration), making the order is reasonably likely to promote the purpose of administration.
(5) The “purpose of administration” means—
(a) where the insurer is in, or is awaiting, administration under Part 2 of the 1986 Act (as modified, in relation to insurers, by the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2010 (S.I. 2010/3023)), an objective specified in paragraph 3 or 3A of Schedule B1 to the 1986 Act;
(b) where the insurer is in, or is awaiting, administration under Part 3 of the 1989 Order (as modified, in relation to insurers, by the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Northern Ireland) Order 2007 (S.I. 2007/846)), an objective specified in paragraph 4 of Schedule B1 to the 1989 Order.
Procedure
11 (1) An order under paragraph 10 may be made on the court’s own motion or on an application by—
(a) where the insurer is in financial difficulties by virtue of paragraph 2(1)(a) (write-down order), a person mentioned in paragraph 1(4) of Schedule 19B;
(b) where the insurer is in financial difficulties by virtue of paragraph 2(1)(b) (administration), a person mentioned in sub-paragraph (2);
(c) where the insurer is in financial difficulties by virtue of paragraph 2(1)(c) (winding up), a person entitled to petition for the winding up of the insurer;
(d) a provisional liquidator of the insurer;
(e) the FCA.
(2) For the purposes of sub-paragraph (1)(b), the persons are—
(a) where an administrator has been appointed, the administrator;
(b) where the insurer is in, or is awaiting, administration under Part 2 of the 1986 Act, a person mentioned in paragraph 12(1) of Schedule B1 to that Act;
(c) where the insurer is in, or is awaiting, administration under Part 3 of the 1989 Order, a person mentioned in paragraph 13(1) of Schedule B1 to that Order.
(3) Before making an application for an order under paragraph 10—
(a) a person other than a person mentioned in sub-paragraph (4) must obtain the consent of the PRA;
(b) a person mentioned in sub-paragraph (4) must consult the PRA.
(4) The persons mentioned in this sub-paragraph are—
(a) the FCA;
(b) an administrator of the insurer;
(c) a provisional liquidator of the insurer;
(d) a person appointed to act as the manager of the write-down order by virtue of which the insurer is in financial difficulties for the purposes of this Schedule.
(5) Consent under sub-paragraph (3)(a)—
(a) must be in writing, and
(b) must be filed with the court with the relevant application.
(6) The PRA must consult the FCA before giving or refusing consent under sub-paragraph (3)(a).
PART 5 Powers to amend this Schedule
12 The Treasury may by regulations amend this Schedule so as to—
(a) vary or omit any of paragraphs (a), (b) and (c) of paragraph 2(1);
(b) change the percentage figure specified in the definition of “surrender limit” in paragraph 3(2);
(c) amend paragraph 6 (meaning of “relevant contract”);
(d) amend paragraph 9 (exclusions from the operation of this Schedule).
Section 432(2).
Self-regulating organisations
1 (1) No new application under section 9 of the 1986 Act (application for recognition) may be entertained.
(2) No outstanding application made under that section before the passing of this Act may continue to be entertained.
(3) After the date which is the designated date for a recognised self-regulating organisation—
(a) the recognition order for that organisation may not be revoked under section 11 of the 1986 Act (revocation of recognition);
(b) no application may be made to the court under section 12 of the 1986 Act (compliance orders) with respect to that organisation.
(4) The powers conferred by section 13 of the 1986 Act (alteration of rules for protection of investors) may not be exercised.
(5) “Designated date” means such date as the Treasury may by order designate.
(6) Sub-paragraph (3) does not apply to a recognised self-regulating organisation in respect of which a notice of intention to revoke its recognition order was given under section 11(3) of the 1986 Act before the passing of this Act if that notice has not been withdrawn.
(7) Expenditure incurred by the Authority in connection with the winding up of any body which was, immediately before the passing of this Act, a recognised self-regulating organisation is to be treated as having been incurred in connection with the discharge by the Authority of functions under this Act.
(8) “Recognised self-regulating organisation” means an organisation which, immediately before the passing of this Act, was such an organisation for the purposes of the 1986 Act.
(9) “The 1986 Act” means the Financial Services Act 1986.
Self-regulating organisations for friendly societies
2 (1) No new application under paragraph 2 of Schedule 11 to the 1986 Act (application for recognition) may be entertained.
(2) No outstanding application made under that paragraph before the passing of this Act may continue to be entertained.
(3) After the date which is the designated date for a recognised self-regulating organisation for friendly societies—
(a) the recognition order for that organisation may not be revoked under paragraph 5 of Schedule 11 to the 1986 Act (revocation of recognition);
(b) no application may be made to the court under paragraph 6 of that Schedule (compliance orders) with respect to that organisation.
(4) “Designated date” means such date as the Treasury may by order designate.
(5) Sub-paragraph (3) does not apply to a recognised self-regulating organisation for friendly societies in respect of which a notice of intention to revoke its recognition order was given under section 11(3) of the 1986 Act (as applied by paragraph 5(2) of that Schedule) before the passing of this Act if that notice has not been withdrawn.
(6) Expenditure incurred by the Authority in connection with the winding up of any body which was, immediately before the passing of this Act, a recognised self-regulating organisation for friendly societies is to be treated as having been incurred in connection with the discharge by the Authority of functions under this Act.
(7) “Recognised self-regulating organisation for friendly societies” means an organisation which, immediately before the passing of this Act, was such an organisation for the purposes of the 1986 Act.
(8) “The 1986 Act” means the Financial Services Act 1986.
Section 432(3).
Chapter | Short title | Extent of repeal
1923 c. 8. | The Industrial Assurance Act 1923. | The whole Act.
1948 c. 39. | The Industrial Assurance and Friendly Societies Act 1948. | The whole Act.
1965 c. 12. | The Industrial and Provident Societies Act 1965. | Section 8.
Section 70.
1974 c. 46. | The Friendly Societies Act 1974. | Section 4.
Section 10.
In section 11, from “and where” to “that society”.
In section 99(4), “in the central registration area”.
1975 c. 24. | The House of Commons Disqualification Act 1975. | In Schedule 1, in Part III, “Any member of the Financial Services Tribunal in receipt of remuneration”.
1975 c. 25. | The Northern Ireland Assembly Dis-qualification Act 1975. | In Schedule 1, in Part III, “Any member of the Financial Services Tribunal in receipt of remuneration”.
1977 c. 46. | The Insurance Brokers (Registration) Act 1977. | The whole Act.
1979 c. 34. | The Credit Unions Act 1979. | Section 6(2) to (6).
Section 11(2) and (6).
Sections 11B, 11C and 11D.
Section 12(4) and (5).
In section 14, subsections (2), (3), (5) and (6).
Section 28(2).
1986 c. 53. | The Building Societies Act 1986. | Section 9.
Schedule 3.
1988 c. 1. | The Income and Corporation Taxes Act 1988. | In section 76, in subsection (8), the definitions of “the 1986 Act”, “authorised person”, “investment business”, “investor”, “investor protection scheme”, “prescribed” and “recognised self-regulating organisation”.
1991 c. 31. | The Finance Act 1991. | In section 47, subsections (1), (2) and (4).
1992 c. 40. | The Friendly Societies Act 1992. | In section 13, subsections (2) to (5), (8) and (11).
Sections 31 to 36.
In section 37, subsections (1), (1A) and (7A) to (9).
Sections 38 to 50.
In section 52, subsection (2)(d) and, in subsection (5), the words from “or where” to the end.
Schedule 7.
In Schedule 8, paragraph 3(2).
1993 c. 8. | The Judicial Pensions and Retirement Act 1993. | In Schedule 5, “Member of the Financial Services Tribunal appointed by the Lord Chancellor”.