The Treasury publishes the Financial Services Bill (12/06)

2 February 2012

Introduction

Brought before the House of Commons in late January 2012 the Financial Services Bill seeks to consolidate the changes to legislation (mainly the Financial Services and Markets Act 2000 (FSMA)) necessary to

Create the new regulatory structure for UK regulation of financial services
Introduce new obligations on regulators and
Bring more credit and hire activities within the scope of the FSMA

The Government anticipates implementing this bill early in 2013. CPA produced a Regulatory Bulletin on the changes in July 2011 and this document is an update on the final legislation. The Bill contains nine parts.

1. The Bank of England:

a. Changes to the composition of the Court;

b. Creation of the post of Deputy Governor for prudential regulation;

c. Changes to the Bank's financial stability strategy and to the objectives and role of the Financial Policy Committee; and

d. Sets out the line of control between the FPC and the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) the two new bodies replacing the FSA.

2. The Financial Services and Markets Act 2000 – Amendments:

a. Creation of the Financial Conduct Authority (FCA);

b. Inclusion of some consumer credit business, approval of financial promotions, ancillary services, appointed representatives, payment services and e –money businesses;

c. Rules for the FCA in its supervisory role of monitoring and enforcement;

d. A duty to consult and the role of Practitioner and Consumer Panels;

e. Treasury to have the power to appoint an independent reviewer of FCA;

f. Sets out the functions of the Prudential Regulation Authority (PRA);

g. Sets out PRA's duty to consult and the Treasury's right to commission any independent review of the PRA;

h. Sets out regulatory principles for both FCA and PRA and a general requirement to pursue good governance principles;

i. Sets out the Treasury's powers to set the boundaries between PRA and FCA;

j. Sets out the function of the consumer financial education body;

k. Amends the rules on prohibition orders to set out the respective roles of FCA and PRA;

l. Confirms that FCA is the competent authority for listing and setting out the rules on its disciplinary powers;

m. Replaces the current sections on rule-making powers with new ones with specific parts referring to FCA rules on client money, rights to rescind, product intervention, price stabilisation and financial promotion and to PRA rules on remuneration and recovery and resolution plans. New sections also apply to modification, waiver and contravention of rules, including the duties of FCA and PRA to consult each other;

n. Makes changes to rules relating to hearings and appeals;

o. Sets out the power of FCA to give guidance;

p. Amends the rules on control of authorized persons;

q. Introduces a new section of FSMA on powers exercisable in relation to parent undertaking of authorized firms;

r. Confirms FCA's position as the regulator of regulated investment exchanges; and

s. Confirms that FCA will take over FSA's powers on short selling.

The above are the key issues of the Bill, which also deals with:

Mutual Societies and Building Societies
Collaboration between Regulators
Amendments to the Banking Act 2009
Inquiries and Investigations

The Bill is accompanied by a Treasury Command Paper

This paper sets out the Treasury’s objectives for financial reform including:

The creation of an independent Commission on Banking
Proactive and constructive diplomacy in Europe
The bank levy
Credit easing and returning public sector stakes in Banks to the private sector

What next

This a complex Bill that will now wind its way through the parliamentary process. We will continue to update you throughout and if there are specific issues that you feel you need further advice on then we suggest that in the first instance you refer these tour CPA account manager. Keep an eye on our website Hot Topics and Publications pages.

The Full document can be viewed here

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