Legalize / United Kingdom / Public General Act

Financial Services Act 1986 (repealed)

Type Public General Act

Publication 1986-11-07

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(b) through an office outside the United Kingdom, maintained by a party to the transaction, and with or through a person whose head office is situated outside the United Kingdom and whose ordinary business is such as is mentioned in sub-paragraph (2){e) above.

Groups and joint enterprises

18

(1) Paragraph 12 above does not apply to any transaction which is or is to be entered into by a person as principal with another person if—

(a) they are bodies corporate in the same group ; or

(b) they are, or propose to become, participators in a joint enterprise and the transaction is or is to be entered into for the purposes of, or in connection with, that enterprise.

(2) Paragraph 12 above does not apply to any transaction which is or is to be entered into by any person as agent for another person in the circumstances mentioned in sub-paragraph (1)(a) or (b) above if—

(a) where the investment falls within any of paragraphs 1 to 6 above or, so far as relevant to any of those paragraphs, paragraph 11 above, the agent does not—

(i) hold himself out (otherwise than to other bodies corporate in the same group or persons who are or propose to become participators with him in a joint enterprise) as engaging in the business of buying investments with a view to selling them and those investments are or include investments of the kind to which the transaction relates; or

(ii) regularly solicit members of the public for the purpose of inducing them to enter as principals or agents into transactions to which paragraph 12 above applies ; and the transaction is not or is not to be entered into as a result of his having solicited members of the public in that manner;

(b) where the investment is not as mentioned in paragraph (a) above—

(i) the agent enters into the transaction with or through an authorised person, an exempted person or a person holding a permission under paragraph 23 below; or

(ii) the transaction is effected through an office outside the United Kingdom, maintained by a party to the transaction, and with or through a person whose head office is situated outside the United Kingdom and whose ordinary business involves him in engaging in activities which fall within Part II of this Schedule or would do so apart from this Part or Part IV.

(3) Paragraph 13 above does not apply to arrangements which a person makes or offers or agrees to make if—

(a) that person is a body corporate and the arrangements are with a view to another body corporate in the same group entering into a transaction of the kind mentioned in that paragraph ; or

(b) that person is or proposes to become a participator in a joint enterprise and the arrangements are with a view to another person who is or proposes to become a participator in the enterprise entering into such a transaction for the purposes of or in connection with that enterprise.

(4) Paragraph 14 above does not apply to a person by reason of his managing or offering or agreeing to manage the investments of another person if—

(a) they are bodies corporate in the same group ; or

(b) they are, or propose to become, participators in a joint enterprise and the investments are or are to be managed for the purposes of, or in connection with, that enterprise.

(5) Paragraph 15 above does not apply to advice given by a person to another person if—

(a) they are bodies corporate in the same group ; or

(b) they are, or propose to become, participators in a joint enterprise and the advice is given for the purposes of, or in connection with, that enterprise.

(6) The definitions in paragraph 17(2) above shall apply also for the purposes of sub-paragraph (2)(a) above except that the relevant person referred to in paragraph 17(2)(d) shall be the person for whom the agent is acting.

Sale of goods and supply of services

19

(1) This paragraph has effect where a person (" the supplier ") sells or offers or agrees to sell goods to another person (" the customer ") or supplies or offers or agrees to supply him with services and the supplier's main business is to supply goods or services and not to engage in activities falling within Part II of this Schedule.

(2) Paragraph 12 above does not apply to any transaction which is or is to be entered into by the supplier as principal if it is or is to be entered into by him with the customer for the purposes of or in connection with the sale or supply or a related sale or supply (that is to say, a sale or supply to the customer otherwise than by the supplier but for or in connection with the same purpose as the first-mentioned sale or supply).

(3) Paragraph 12 above does not apply to any transaction which is or is to be entered into by the supplier as agent for the customer if it is or is to be entered into for the purposes of or in connection with the sale or supply or a related sale or supply and—

(a) where the investment falls within any of paragraphs 1 to 6 above or, so far as relevant to any of those paragraphs, paragraph 11 above, the supplier does not—

(i) hold himself out (otherwise than to the customer) as engaging in the business of buying investments with a view to selling them and those investments are or include investments of the kind to which the transaction relates ; or

(ii) regularly solicit members of the public for the purpose of inducing them to enter as principals or agents into transactions to which paragraph 12 above applies ; and the transaction is not or is not to be entered into as a result of his having solicited members of the public in that manner;

(b) where the investment is not as mentioned in paragraph (a) above, the supplier enters into the transaction—

(i) with or through an authorised person, an exempted person or a person holding a permission under paragraph 23 below ; or

(ii) through an office outside the United Kingdom, maintained by a party to the transaction, and with or through a person whose head office is situated outside the United Kingdom and whose ordinary business involves him in engaging in activities which fall within Part II of this Schedule or would do so apart from this Part or Part IV.

(4) Paragraph 13 above does not apply to arrangements which the supplier makes or offers or agrees to make with a view to the customer entering into a transaction for the purposes of or in connection with the sale or supply or a related sale or supply.

(5) Paragraph 14 above does not apply to the supplier by reason of his managing or offering or agreeing to manage the investments of the customer if they are or are to be managed for the purposes of or in connection with the sale or supply or a related sale or supply.

(6) Paragraph 15 above does not apply to advice given by the supplier to the customer for the purposes of or in connection with the sale or supply or a related sale or supply or to a person with whom the customer proposes to enter into a transaction for the purposes of or in connection with the sale or supply or a related sale or supply.

(7) Where the supplier is a body corporate and a member of a group sub-paragraphs (2) to (6) above shall apply to any other member of the group as they apply to the supplier; and where the customer is a body corporate and a member of a group references in those sub-paragraphs to the customer include references to any other member of the group.

(8) The definitions in paragraph 17(2) above shall apply also for the purposes of sub-paragraph (3%a) above.

20

(1) Paragraphs 12 and 13 above do not apply to anything done by a body corporate, a body corporate connected with it or a relevant trustee for the purpose of enabling or facilitating transactions in shares in or debentures of the first-mentioned body between or for the benefit of any of the persons mentioned in sub-paragraph (2) below or the holding of such shares or debentures by or for the benefit of any such persons.

(2) The persons referred to in sub-paragraph (1) above are—

(a) the bona fide employees or former employees of the body corporate or of another body corporate in the same group; or

(b) the wives, husbands, widows, widowers, or children or stepchildren under the age of eighteen of such employees or former employees.

(3) In this paragraph " a relevant trustee " means a person holding shares in or debentures of a body corporate as trustee in pursuance of arrangements made for the purpose mentioned in subparagraph (1) above by, or by a body corporate connected with, that body corporate.

(4) In this paragraph " shares" and " debentures" include any investment falling within paragraph 1 or 2 above and also include any investment falling within paragraph 4 or S above so far as relating to those paragraphs or any investment falling within paragraph 11 above so far as relating to paragraph 1, 2, 4 or 5.

(5) For the purposes of this paragraph a body corporate is connected with another body corporate if—

(a) they are in the same group; or

(b) one is entitled, either alone or with any other body corporate in the same group, to exercise or control the exercise of a majority of the voting rights attributable to the share capital which are exercisable in all circumstances at any general meeting of the other body corporate or of its holding company.

Sale of private company

21

(1) Paragraphs 12 and 13 above do not apply to the acquisition or disposal of, or to anything done for the purposes of the acquisition or disposal of, shares in a private company, and paragraph 15 above does not apply to advice given in connection with the acquisition or disposal of such shares, if—

(a) the shares consist of or include shares carrying 75 per cent. or more of the voting rights attributable to share capital which are exercisable in all circumstances at any general meeting of the company ; or

(b) the shares, together with any already held by the person acquiring them, carry not less than that percentage of those voting rights ; and

(c) in either case, the acquisition and disposal is, or is to be, between parties each of whom is a body corporate, a partnership, a single individual or a group of connected individuals.

(2) For the purposes of subsection (l)(c) above " a group of connected individuals", in relation to the party disposing of the shares, means persons each of whom is, or is a close relative of, a director or manager of the company and, in relation to the party acquiring the shares, means persons each of whom is, or is a close relative of, a person who is to be a director or manager of the company.

(3) In this paragraph " private company " means a private company within the meaning of section 1(3) of the Companies Act 1985 or the corresponding Northern Ireland provision and " close relative" means a person's spouse, his children and step-children, his parents and step-parents, his brothers and sisters and his step-brothers and step-sisters.

Trustees and personal representatives

22

(1) Paragraph 12 above does not apply to a person by reason of his buying, selling or subscribing for an investment or offering or agreeing to do so if—

(a) the investment is or, as the case may be, is to be held by him as bare trustee or, in Scotland, as nominee for another person ;

(b) he is acting on that person's instructions; and

(2) Paragraph 13 above does not apply to anything done by a person as trustee or personal representative with a view to—

(a) a fellow trustee or personal representative and himself engaging in their capacity as such in an activity falling within paragraph 12 above ; or

(b) a beneficiary under the trust, will or intestacy engaging in any such activity,

unless that person is remunerated for what he does in addition to any remuneration he receives for discharging his duties as trustee or personal representative.

(3) Paragraph 14 above does not apply to anything done by a person as trustee or personal representative unless he holds himself out as offering investment management services or is remunerated for providing such services in addition to any remuneration he receives for discharging his duties as trustee or personal representative.

(4) Paragraph 15 above does not apply to advice given by a person as trustee or personal representative to—

(a) a fellow trustee or personal representative for the purposes of the trust or estate ; or

(b) a beneficiary under the trust, will or intestacy concerning his interest in the trust fund or estate,

unless that person is remunerated for doing so in addition to any remuneration he receives for discharging his duties as trustee or personal representative.

(5) Sub-paragraph (1) above has effect to the exclusion of paragraph 17 above as respects any transaction in respect of which the conditions in sub-paragraph (1)(a) and (b) are satisfied.

Dealings in course of non-investment business

23

(1) Paragraph 12 above does not apply to anything done by a person—

(a) as principal;

(b) if that person is a body corporate in a group, as agent for another member of the group ; or

(c) as agent for a person who is or proposes to become a participator with him in a joint enterprise and for the purposes of or in connection with that enterprise,

if it is done in accordance with the terms and conditions of a permission granted to him by the Secretary of State under this paragraph.

(2) Any application for permission under this paragraph shall be accompanied or supported by such information as the Secretary of State may require and shall not be regarded as duly made unless accompanied by the prescribed fee.

(3) The Secretary of State may grant a permission under this paragraph if it appears to him—

(a) that the applicant's main business, or if he is a member of a group the main business of the group, does not consist of activities for which a person is required to be authorised under this Act;

(b) that the applicant's business is likely to involve such activities which fall within paragraph 12 above; and

(c) that, having regard to the nature of the applicant's main business and, if he is a member of a group, the main business of the group taken as a whole, the manner in which, the persons with whom and the purposes for which the applicant proposes to engage in activities that would require him to be be an authorised person and to any other relevant matters, it is inappropriate to require him to be subject to regulation as an authorised person.

(4) Any permission under this paragraph shall be granted by a notice in writing ; and the Secretary of State may by a further notice in writing withdraw any such permission if for any reason it appears to him that it is not appropriate for it to continue in force.

(5) The Secretary of State may make regulations requiring persons holding permissions under this paragraph to furnish him with information for the purpose of enabling him to determine whether those permissions should continue in force ; and such regulations may, in particular, require such persons—

(a) to give him notice forthwith of the occurrence of such events as are specified in the regulations and such information in respect of those events as is so specified ;

(b) to furnish him at such times or in respect of such periods as are specified in the regulations with such information as is so specified

(6) Section 61 of this Act shall have effect in relation to a contravention of any condition imposed by a permission under this paragraph as it has effect in relation to any such contravention as is mentioned in subsection (l)(a) of that section.

(7) Section 104 of this Act shall apply to a person holding a permission under this paragraph as if he were authorised to carry on investment business as there mentioned ; and sections 105 and 106 of this Act shall have effect as if anything done by him in accordance with such permission constituted the carrying on of investment business.

Advice given in course of profession or non-investment business

24

(1) Paragraph 15 above does not apply to advice—

(a) which is given in the course of the carrying on of any profession or of a business not otherwise constituting investment business ; and

(b) the giving of which is a necessary part of other advice or services given in the course of carrying on that profession or business.

(2) Advice shall not be regarded as falling within sub-paragraph (1)(b) above if it is remunerated separately from the other advice or services.

Newspapers

25

(1) Paragraph 15 above does not apply to advice given in a newspaper, journal, magazine or other periodical publication if the principal purpose of the publication, taken as a whole and including any advertisements contained in it, is not to lead persons to invest in any particular investment.

(2) The Secretary of State may, on the application of the proprietor of any periodical publication, certify that it is of the nature described in sub-paragraph (1) above and revoke any such certificate if he considers that it is no longer justified.

(3) A certificate given under sub-paragraph (2) above and not revoked shall be conclusive evidence of the matters certified.

PART IV — Additional Exclusions for Persons Without Permanent Place of Business in United Kingdom

Transactions with or through authorised or exempted persons

26

(1) Paragraph 12 above does not apply to any transaction by a person not falling within section 1(3)(a) of this Act (" an overseas person ") with or through—

(a) an authorised person ; or

(b) an exempted person acting in the course of business in respect of which he is exempt.

(2) Paragraph 13 above does not apply if—

(a) the arrangements are made by an overseas person with, or the offer or agreement to make them is made by him to or with, an authorised person or an exempted person and, in the case of an exempted person, the arrangements are with a view to his entering into a transaction in respect of which he is exempt; or

(b) the transactions with a view to which the arrangements are made are, as respects transactions in the United Kingdom, confined to transactions by authorised persons and transactions by exempted persons in respect of which they are exempt.

Unsolicited or legitimately solicited transactions etc. with or for other persons

27

(1) Paragraph 12 above does not apply to any transaction entered into by an overseas person as principal with, or as agent for, a person in the United Kingdom, paragraphs 13, 14 and 15 above do not apply to any offer made by an overseas person to or agreement made by him with a person in the United Kingdom and paragraph 15 above does not apply to any advice given by an overseas person to a person in the United Kingdom if the transaction, offer, agreement or advice is the result of—

(a) an approach made to the overseas person by or on behalf of the person in the United Kingdom which either has not been in any way solicited by the overseas person or has been solicited by him in a way which has not contravened section 56 or 57 of this Act; or

(b) an approach made by the overseas person which has not contravened either of those sections.

(2) Where the transaction is entered into by the overseas person as agent for a person in the United Kingdom, sub-paragraph (1) above applies only if—

(a) the other party is outside the United Kingdom ; or

(b) the other party is in the United Kingdom and the transaction is the result of such an approach by the other party as is mentioned in sub-paragraph (l)(a) above or of such an approach as is mentioned in sub-paragraph (1)(b) above.

PART V — Interpretation

28

(1) In this Schedule—

(a) " property" includes currency of the United Kingdom or any other country or territory ;

(b) references to an instrument include references to any record whether or not in the form of a document;

(d) references to buying and selling include references to any acquisition or disposal for valuable consideration.

(2) In sub-paragraph (1)(d) above " disposal " includes—

(a) in the case of an investment consisting of rights under a contract or other arrangements, assuming the corresponding liabilities under the contract or arrangements ;

(b) in the case of any other investment, issuing or creating the investment or granting the rights or interests of which it consists;

(c) in the case of an investment consisting of rights under a contract, surrendering, assigning or converting those rights.

(3) A company shall not by reason of issuing its own shares or share warrants, and a person shall not by reason of issuing his own debentures or debenture warrants, be regarded for the purposes of this Schedule as disposing of them or, by reason of anything done for the purpose of issuing them, be regarded as making arrangements with a view to a person subscribing for or otherwise acquiring them or underwriting them.

(4) In sub-paragraph (3) above " company " has the same meaning as in paragraph 1 above, " shares " and " debentures " include any investments falling within paragraph 1 or 2 above and " share warrants " and " debenture warrants " means any investment which falls within paragraph 4 above and relates to shares in the company concerned or, as the case may be, to debentures issued by the person concerned.

29

For the purposes of this Schedule a transaction is entered into through a person if he enters into it as agent or arranges for it to be entered into by another person as principal or agent.

30

For the purposes of this Schedule a group shall be treated as including any body corporate which is a related company within the meaning of paragraph 92 of Schedule 4 to the Companies Act 1985 of any member of the group or would be such a related company if the member of the group were a company within the meaning of that Act.

31

In this Schedule "a joint enterprise" means an enterprise into which two or more persons (" the participators ") enter for commercial reasons related to a business or businesses (other than investment business) carried on by them ; and where a participator is a body corporate and a member of a group each other member of the group shall also be regarded as a participator in the enterprise.

32

Where a person is an exempted person as respects only part of the investment business carried on by him anything done by him in carrying on that part shall be disregarded in determining whether any paragraph of Part III or IV of this Schedule applies to anything done by him in the course of business in respect of which he is not exempt.

33

In determining for the purposes of this Schedule whether anything constitutes an investment or the carrying on of investment business section 18 of the Gaming Act 1845, section 1 of the Gaming Act 1892, any corresponding provision in force in Northern Ireland and any rule of the law of Scotland whereby a contract by way of gaming or wagering is not legally enforceable shall be disregarded.

SCHEDULE 2

Members to be fit and proper persons

1

(1) The rules and practices of the organisation must be such as to secure that its members are fit and proper persons to carry on investment business of the kind with which the organisation is concerned.

(2) Where the organisation is concerned with investment business of different kinds its rules and practices must be such as to secure that a member carrying on investment business of any of those kinds is a fit and proper person to carry on investment business of that kind.

(3) The matters which may be taken into account under the rules in determining whether a person is a fit and proper person must include those that the Secretary of State may take into account under section 27 above.

(4) This paragraph does not apply to a person who is not an authorised person by virtue of being a member of the organisation.

Admission, expulsion and discipline

2

The rules and practices of the organisation relating to—

(a) the admission and expulsion of members; and

(b) the discipline it exercises over its members,

must be fair and reasonable and include adequate provision for appeals.

Safeguards for investors

3

(1) The rules of the organisation governing the carrying on of investment business of any kind by its members must afford investors protection at least equivalent to that afforded in respect of investment business of that kind by the rules and regulations for the time being in force under Chapter V of Part I of this Act.

(2) The rules under that Chapter to be taken into account for the purposes of sub-paragraph (1) above include the rules made under section 49 and under sections 53 and 54 so far as not themselves applying to the members of the organisation.

(3) The organisation must, so far as practicable, have powers for purposes corresponding to those of Chapter VI of Part I of this Act

(4) The rules of the organisation must enable it to prevent a member resigning from the organisation if the organisation considers that any matter affecting him should be investigated as a preliminary to a decision on the question whether he should be expelled or otherwise disciplined or if it considers that it is desirable that a prohibition or requirement should be imposed on him under the powers mentioned in sub-paragraph (3) above or that any prohibition or requirement imposed on him under those powers should continue in force.

Monitoring and enforcement

4

(1) The organisation must have adequate arrangements and resources for the effective monitoring and enforcement of compliance with its rules and with any rules or regulations to which its members are subject under Chapter V of Part I of this Act in respect of investment business of a kind regulated by the organisation.

(2) The arrangements for monitoring may make provision for that function to be performed on behalf of the organisation (and without affecting its responsibility) by any other body or person who is able and willing to perform it.

The governing body

5

(1) The arrangements of the organisation with respect to the appointment, removal from office and functions of the persons responsible for making or enforcing the rules of the organisation must be such as to secure a proper balance—

(a) between the interests of the different members of the organisation ; and

(b) between the interests of the organisation or its members and the interests of the public.

(2) The arrangements shall not be regarded as satisfying the requirements of this paragraph unless the persons responsible for those matters include a number of persons independent of the organisation and its members sufficient to secure the balance referred to in subparagraph (1)(b) above.

Investigation of complaints

6

(1) The organisation must have effective arrangements for the investigation of complaints against the organisation or its members.

(2) The arrangements may make provision for the whole or part of that function to be performed by and to be the responsibility of a body or person independent of the organisation.

Promotion and maintenance of standards

7

The organisation must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of investment business and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility for the supervision or regulation of investment business or other financial services.

SCHEDULE 3

Statutory status

1

The body must—

(a) regulate the practice of a profession in the exercise of statutory powers ; or

(b) be recognised (otherwise than under this Act) for a statutory purpose by a Minister of the Crown or by, or by the head of, a Northern Ireland department; or

(c) be specified in a provision contained in or made under an enactment as a body whose members are qualified to exercise functions or hold offices specified in that provision.

Certification

2

(1) The body must have rules, practices and arrangements for securing that no person can be certified by the body for the purposes of Part I of this Act unless the following conditions are satisfied.

(2) The certified person must be either—

(a) an individual who is a member of the body ; or

(b) a person managed and controlled by one or more individuals each of whom is a member of a recognised professional body and at least one of whom is a member of the certifying body.

(3) Where the certified person is an individual his main business must be the practice of the profession regulated by the certifying body and he must be practising that profession otherwise than in partnership; and where the certified person is not an individual that person's main business must be the practice of the profession or professions regulated by the recognised professional body or bodies of which the individual or individuals mentioned in sub-paragraph (2)(b) above are members.

(4) In the application of sub-paragraphs (2) and (3) above to a certificate which is to be or has been issued to a partnership constituted under the law of England and Wales or Northern Ireland or the law of any other country or territory under which a partnership is not a legal person, references to the certified person shall be construed as references to the partnership.

Safeguards for investors

3

(1) The body must have rules regulating the carrying on of investment business by persons certified by it; and those rules must in respect of investment business of any kind regulated by them afford to investors protection at least equivalent to that afforded in respect of investment business of that kind by the rules and regulations for the time being in force under Chapter V of Part I of this Act.

(2) The rules under that Chapter to be taken into account for the purposes of this paragraph include the rules made under section 49 and under sections 53 and 54 so far as not themselves applying to persons certified by the body

Monitoring and enforcement

4

(1) The body must have adequate arrangements and resources for the effective monitoring of the continued compliance by persons certified by it with the conditions mentioned in paragraph 2 above and rules, practices and arrangements for the withdrawal or suspension of certification (subject to appropriate transitional provisions) in the event of any of those conditions ceasing to be satisfied.

(2) The body must have adequate arrangements and resources for the effective monitoring and enforcement of compliance by persons certified by it with the rules of the body relating to the carrying on of investment business and with any rules or regulations to which those persons are subject under Chapter V of Part I of this Act in respect of business of a kind regulated by the body.

(3) The arrangements for enforcement must include provision for the withdrawal or suspension of certification and may include provision for disciplining members of the body who manage or control a certified person.

(4) The arrangements for enforcement may make provision for the whole or part of that function to be performed by and to be the responsibility of a body or person independent of the professional body.

(5) The arrangements for enforcement must be such as to secure a proper balance between the interests of persons certified by the body and the interests of the public ; and the arrangements shall not be regarded as satisfying that requirement unless the persons responsible for enforcement include a sufficient number of persons who are independent of the body and its members and of persons certified by it

(6) The arrangements for monitoring may make provision for that function to be performed on behalf of the body (and without affecting its responsibility) by any other body or person who is able and willing to perform it.

Investigation of complaints

5

(1) The body must have effective arrangements for the investigation of complaints relating to—

(a) the carrying on by persons certified by it of investment business in respect of which they are subject to its rules; and

(b) its regulation of investment business.

(2) Paragraph 4(4) above applies also to arrangements made pursuant to this paragraph.

Promotion and maintenance of standards

6

The body must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of investment business and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility for the supervision or regulation of investment business or other financial services.

SCHEDULE 4

Financial resources

1

The exchange must have financial resources sufficient for the proper performance of its functions.

Safeguards for investors

2

(1) The rules and practices of the exchange must ensure that business conducted by means of its faculties is conducted in an orderly manner and so as to afford proper protection to investors.

(2) The exchange must—

(a) limit dealings on the exchange to investments in which there is a proper market; and

(b) where relevant, require issuers of investments dealt in on the exchange to comply with such obligations as will, so far as possible, afford to persons dealing in the investments proper information for determining their current value.

(3) In the case of securities to which Part IV of this Act applies compliance by The Stock Exchange with the provisions of that Part shall be treated as compliance by it with sub-paragraph (2) above.

(4) The exchange must either have its own arrangements for ensuring the performance of transactions effected on the exchange or ensure their performance by means of services provided under clearing arrangements made by it with a recognised clearing house.

(5) The exchange must either itself have or secure the provision on its behalf of satisfactory arrangements for recording the transactions effected on the exchange.

(6) Sub-paragraphs (2), (4) and (5) above are without prejudice to the generality of sub-paragraph (1) above.

Monitoring and enforcement

3

(1) The exchange must have adequate arrangements and resources for the effective monitoring and enforcement of compliance with its rules and any clearing arrangements made by it.

(2) The arrangements for monitoring may make provision for that function to be performed on behalf of the exchange (and without affecting its responsibility) by any other body or person who is able and willing to perform it.

Investigation of complaints

4

The exchange must have effective arrangements for the investigation of complaints in respect of business transacted by means of its facilities.

Promotion and maintenance of standards

5

The exchange must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of investment business and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility for the supervision or regulation of investment business or other financial services.

SCHEDULE 5

PART I — Transactions not Subject to Monetary Limit

1

This Part of this Schedule applies to any transaction entered into by the listed institution as principal (or as agent for another listed institution) with another listed institution or the Bank of England (whether acting as principal or agent) if the transaction falls within paragraph 2 or 3 below.

2

(1) A transaction falls within this paragraph if it is in respect of an investment specified in sub-paragraph (2) below and—

(a) in the case of an investment within any of paragraphs (a) to (d) of that sub-paragraph, the transaction is not regulated by the rules of a recognised investment exchange ; and

(b) in the case of any other investment specified in that subparagraph, the transaction is not made on such an exchange or expressed to be as so made.

(2) The investments referred to above are—

(a) a debenture or other instrument falling within paragraph 2 of Schedule 1 to this Act which is issued—

(i) by a recognised bank or licensed institution within the meaning of the Banking Act 1979 or a building society incorporated in, or in any part of, the United Kingdom ; and

(ii) on terms requiring repayment not later than five years from the date of issue ;

(b) any other debenture or instrument falling within paragraph 2 of Schedule 1 to this Act which is issued on terms requiring repayment not later than one year from the date of issue;

(c) loan stock, or any other instrument, falling within paragraph 3 of Schedule 1 to this Act which is issued on terms requiring repayment not later than one year or, if issued by a local authority in the United Kingdom, five years from the date of issue ;

(d) a warrant or other instrument falling within paragraph 4 of Schedule 1 to this Act which entitles the holder to subscribe for an investment within paragraph (a), (b) or (c) above;

(e) any certificate or other instrument falling within paragraph 5 or 11 of Schedule 1 to this Act and relating to an investment within paragraph (a), (b) or (c) above :

(f) an option falling within paragraph 7 of Schedule 1 to this Act and relating to—

(i) an investment within paragraph (a), (b) or (c) above;

(ii) currency of the United Kingdom or of any other country or territory ; or

(iii) gold or silver ;

(g) rights under a contract falling within paragraph 8 of Schedule 1 to this Act for the sale of—

(i) an investment within paragraph (a), (b) or (c) above ;

(ii) currency of the United Kingdom or of any other country or territory ; or

(iii) gold or silver;

(h) rights under a contract falling within paragraph 9 of Schedule 1 to this Act by reference to fluctuations in—

(i) the value or price of any investment failing within any of the foregoing paragraphs; or

(ii) currency of the United Kingdom or of any other country or territory ; or

(iii) the rate of interest on loans in any such currency or any index of such rates ;

(i) an option to acquire or dispose of an investment within paragraph (f), (g) or (h) above.

3

(1) A transaction falls within this paragraph if it is a transaction by which one of the parties agrees to sell or transfer an investment falling within paragraph 2 or 3 of Schedule 1 to this Act and by the same or a collateral agreement that party agrees, or acquires an option, to buy back or re-acquire that investment or an equivalent amount of a similar investment within twelve months of the sale or transfer.

(2) For the purposes of this paragraph investments shall be regarded as similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights.

PART II — Transactions Subject to Monetary Limit

4

(1) This Part of this Schedule applies to any transaction entered into by the listed institution—

(a) as principal (or as agent for another listed institution) with an unlisted person (whether acting as principal or agent);

(b) as agent for an unlisted person with a listed institution or the Bank of England (whether acting as principal or agent); or

if the transaction falls within paragraph 2 or 3 above and the conditions in paragraph 5 or, as the case may be, paragraph 7 below are satisfied.

(2) In this Part of this Schedule and in Part III below " unlisted person " means a person who is neither a listed institution nor the Bank of England.

5

(1) In the case of a transaction falling within paragraph 2 above the conditions referred to above are as follows but subject to paragraph 6 below.

(2) The consideration for a transaction in respect of an investment falling within paragraph 2(2)(a), (b), (c) or (e) above must be not less than £100,000.

(3) The consideration payable on subscription in the case of an investment falling within paragraph 2{2)(d) must not be less than £500,000.

(4) The value or price of the property in respect of which an option within paragraph 2(2)(f) above is granted must not be less than £500,000.

(5) The price payable under a contract within paragraph 2(2)(#) above must be not less than £500,000.

(6) The value or price the fluctuation in which, or the amount the fluctuation in the interest on which, is relevant for the purposes of a contract within paragraph 2(2)(h) above must not be less than £500,000.

(7) In the case of an option falling within paragraph 2(2)(i) above the condition in sub-paragraph (4), (5) or (6) above, as the case may be, must be satisfied in respect of the investment to which the option relates.

6

The conditions in paragraph 5 above do not apply to a transaction entered into by the listed institution as mentioned in paragraph (a), (b) or (c) of paragraph 4(1) above if—

(a) the unlisted person mentioned in paragraph (a) or (b) or, as the case may be, each of the unlisted persons mentioned in paragraph (c) has in the previous eighteen months entered into another transaction in respect of an investment specified in paragraph 2(2) above ;

(b) those conditions were satisfied in the case of that other transaction ; and

(c) that other transaction was entered into by that person (whether acting as principal or agent) with the listed institution (whether acting as principal or agent) or was entered into by that person through the agency of that institution or was entered into by him (whether acting as principal or agent) as a result of arrangements made by that institution.

7

In the case of a transaction falling within paragraph 3 above the condition referred to in paragraph 4 above is that the consideration for the sale or transfer must be not less than £100,000.

8

The monetary limits mentioned in this Part of this Schedule refer to the time when the transaction is entered into ; and where the consideration, value, price or amount referred to above is not in sterling it shall be converted at the rate of exchange prevailing at that time.

PART III — Transactions arranged by Listed Institutions

9

Subject to paragraphs 10 and 11 below, this Part of this Schedule applies to any transaction arranged by the listed institution which—

(a) is entered into by another listed institution as principal (or as agent for another listed institution) with another listed institution or the Bank of England (whether acting as principal or agent);

(b) is entered into by another listed institution (whether acting as principal or agent) with an unlisted person (whether acting as principal or agent); or

if the transaction falls within paragraph 2 or 3 above.

10

In the case of a transaction falling within paragraph 2 above paragraph 9(b) and (c) above do not apply unless either the conditions in paragraph 5 above are satisfied or—

(a) the unlisted person mentioned in paragraph (b) or, as the case may be, each of the unlisted persons mentioned in paragraph (c) has in the previous eighteen months entered into another transaction in respect of an investment specified in paragraph 2(2) above ;

(b) those conditions were satisfied in the case of that other transaction ; and

(c) that other transaction was entered into by that person (whether acting as principal or agent) with the listed institution making the arrangements (whether acting as principal or agent) or through the agency of that institution or was entered into by that person (whether acting as principal or agent) as a result of arrangements made by that institution.

11

In the case of a transaction falling within paragraph 3 above paragraph 9(b) and (c) above do not apply unless the condition in paragraph 7 above is satisfied.

SCHEDULE 6

Term of office of members

1

(1) A person appointed to the panel mentioned in section 96(25) of this Act shall hold and vacate his office in accordance with the terms of his appointment and on ceasing to hold office shall be eligible for re-appointment.

(2) A member of the panel appointed by the Lord Chancellor may resign his office by notice in writing to the Lord Chancellor; and a member of the panel appointed by the Secretary of State may resign his office by notice in writing to the Secretary of State.

Expenses

2

The Secretary of State shall pay to the persons serving as members of the Tribunal such remuneration and allowances as he may determine and shall defray such other expenses of the Tribunal as he may approve.

Staff

3

The Secretary of State may provide the Tribunal with such officers and servants as he thinks necessary for the proper discharge of its functions.

Procedure

4

(1) The Secretary of State may make rules for regulating the procedure of the Tribunal, including provision for the holding of any proceedings in private, for the awarding of costs (or, in Scotland, expenses) and for the payment of expenses to persons required to attend before the Tribunal.

(2) The Tribunal may appoint counsel or a solicitor to assist it in proceedings before the Tribunal.

Evidence

5

(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 take evidence on oath and for that purpose administer oaths or may, 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) Any person who without reasonable excuse—

(a) refuses or fails to attend in obedience to a summons issued by the Tribunal or 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,

shall be guilty of an offence.

(4) A person guilty of an offence under paragraph (a) of subparagraph (3) above shall be liable on summary conviction to . fine not exceeding the fifth level on the standard scale; and a person guilty of an offence under paragraph (b) of that sub-paragraph shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both ;

(b) on summary conviction, to a fine not exceeding the statutory maximum.

(5) A person shall not under this paragraph be required to disclose any information or produce any document which he would be entitled to refuse to disclose or produce on grounds of legal professional privilege in proceedings in the High Court or on grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session except that a lawyer may be required to furnish the name and address of his client.

(6) Any reference in this paragraph to the production of a document includes a reference to the production of a legible copy of information recorded otherwise than in legible form; and the reference to suppressing a document includes a reference to destroying the means of reproducing information recorded otherwise than in legible form.

Appeals and supervision by Council on Tribunals

6

The Tribunals and Inquiries Act 1971 shall be amended as follows—

(a) in section 8(2) after " 6A " there shall be inserted " 6B" ;

(b) in section 13(1) after " 6 " there shall be inserted " 6B " ;

Financial services.	6B. The Financial Services Tribunal established by section 96 of the Financial Services Act 1986.

Parliamentary disqualification

7

(1) In Part III of Schedule 1 to the House of Commons Disqualification Act 1975 (disqualifying offices) there shall be inserted at the appropriate place " Any member of the Financial Services Tribunal in receipt of remuneration ".

(2) A corresponding amendment shall be made in Part III of Schedule 1 to the Northern Ireland Assembly Disqualification Act 1975.

SCHEDULE 7

Constitution

1

(1) The constitution of the agency must provide for it to have—

(a) a chairman; and

(b) a governing body consisting of the chairman and other members ;

and the provisions of the constitution relating to the chairman and the other members of the governing body must comply with the following provisions of this paragraph.

(2) The chairman and other members of the governing body must be persons appointed and liable to removal from office by the Secretary of State and the Governor of the Bank of England acting jointly.

(3) The members of the governing body must include—

(a) persons with experience of investment business of a kind relevant to the functions or proposed functions of the agency; and

(b) other persons, including regular users on their own account or on behalf of others of services provided by persons carrying on investment business of any such kind ;

and the composition of that body must be such as to secure a proper balance between the interests of persons carrying on investment business and the interests of the public.

Arrangements for discharge of functions

2

(1) The agency's arrangements for the discharge of its functions must comply with the following provisions of this paragraph.

(2) Any rules or regulations must be made by the governing body of the agency.

(3) Any decision taken in the exercise of other functions must be taken at a level appropriate to the importance of the decision.

(4) In the case of functions to be discharged by the governing body, the members falling respectively within paragraphs (a) and (b) of paragraph 1(3) above must, so far as practicable, have an opportunity to express their opinions.

(5) Subject to sub-paragraphs (2) to (4) above, the arrangements may enable any functions to be discharged by a committee, subcommittee, officer or servant of the agency.

Monitoring and enforcement

3

(1) The agency must have a satisfactory system—

(a) for enabling it to determine whether persons regulated by it are complying with the obligations which it is the responsibility of the agency to enforce; and

(b) for the discharge of the agency's responsibility for the enforcement of those obligations.

(2) The system may provide for the functions mentioned in subparagraph (l)(a) to be performed on its behalf (and without affecting its responsibility) by any other body or person who is able and willing to perform them.

Investigation of complaints

4

(1) The agency must have effective arrangements for the investigation of complaints arising out of the conduct of investment business by authorised persons or against any recognised self-regulating organisation, professional body, investment exchange or clearing house.

(2) The arrangements must make provision for the investigation of complaints in respect of authorised persons to be carried out in appropriate cases independently of the agency and those persons.

Promotion and maintenance of standards

5

The agency must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of investment business and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility for the supervision or regulation of investment business or other financial services.

Records

6

The agency must have satisfactory arrangements for recording decisions made in the exercise of its functions and for the safekeeping of those records which ought to be preserved.

SCHEDULE 8

Standards

1

The rules made under section 48 of this Act (in this Schedule referred to as " conduct of business rules ") and the other rules and regulations made under Part I of this Act must promote high standards of integrity and fair dealing in the conduct of investment business.

2

The conduct of business rules must make proper provision for requiring an authorised person to act with due skill, care and diligence in providing any service which he provides or holds himself out as willing to provide.

3

The conduct of business rules must make proper provision for requiring an authorised person to subordinate his own interests to those of his clients and to act fairly between his clients.

4

The conduct of business rules must make proper provision for requiring an authorised person to ensure that, in anything done by him for the persons with whom he deals, due regard is had to their circumstances.

Disclosure

5

The conduct of business rules must make proper provision for the disclosure by an authorised person of interests in, and facts material to, transactions which are entered into by him in the course of carrying on investment business or in respect of which he gives advice in the course of carrying on such business, including information as to any commissions or other inducements received or receivable from a third party in connection with any such transaction.

6

The conduct of business rules must make proper provision for the disclosure by an authorised person of the capacity in which and the terms on which he enters into any such transaction.

7

The conduct of business rules, or those rules and rules under section 51 of this Act, must make proper provision for requiring an authorised person who in the course of carrying on investment business enters or offers to enter into a transaction in respect of an investment with any person, or gives any person advice about such a transaction, to give that person such information as to the nature of the investment and the financial implications of the transaction as will enable him to make an informed decision.

8

Rules made under section 48 of this Act regulating action for the purpose of stabilising the price of investments must make proper provision for ensuring that where action is or is to be taken in conformity with the rules adequate arrangements exist for making known that the price of the investments in respect of which the action is or is to be taken (and, where relevant, of any other investments) may be affected by that action and the period during which it may be affected; and where a transaction is or is to be entered into during a period when it is known that the price of the investment to which it relates may be affected by any such action the information referred to in paragraph 7 above includes information to that effect.

Protection

9

The conduct of business rules and any regulations made under section 55 of this Act must make proper provision for the protection of property for which an authorised person is liable to account to another person.

10

Rules made under sections S3 and 54 of this Act must make the best provision that can reasonably be made under those sections.

Records

11

The conduct of business rules must require the keeping of proper records and make provision for their inspection in appropriate oases.

Classes of investors

12

The conduct of business rules and the other rules and regulations made under Chapter V of Part I of this Act must take proper account of the fact that provisions that are appropriate for regulating the conduct of business in relation to some classes of investors may not (by reason of their knowledge, experience or otherwise) be appropriate in relation to others.

SCHEDULE 9

Status

1

(1) A designated agency shall not be regarded as acting on behalf of the Crown and its members, officers and servants shall not be regarded as Crown servants.

(2) In Part III of Schedule 1 to the House of Commons Disqualification Act 1975 (disqualifying offices) there shall be inserted at the appropriate place—

Chairman of a designated agency within the meaning of the Financial Services Act 1986 if he is in receipt of remuneration

(3) An amendment corresponding to that in sub-paragraph (2) above shall be made in Part III of Schedule 1 to the Northern Ireland Assembly Disqualification Act 1975.

Exemption from requirement of " limited" in name of designated agency

2

(1) A company is exempt from the requirements of the Companies Act 1985 relating to the use of " limited " as part of the company name if—

(a) it is a designated agency ; and

(b) its memorandum or articles comply with the requirements specified in paragraph (b) of subsection (3) of section 30 of that Act.

(2) In subsection (4) of that section (statutory declaration of compliance with requirements entitling company to exemption) the reference to the requirements of subsection (3) of that section shall include a reference to the requirements of sub-paragraph (1) above.

(3) In section 31 of that Act (provisions applicable to exempted companies) the reference to a company which is exempt under section 30 of that Act shall include a reference to a company that is exempt under this paragraph and, in relation to such a company, the power conferred by subsection (2) of that section (direction to include " limited " in company name) shall be exercisable on the ground that the company has ceased to be a designated agency instead of the ground mentioned in paragraph (a) of that subsection.

(4) In this paragraph references to the said Act of 198S and sections 30 and 31 of that Act include references to the corresponding provisions in force in Northern Ireland.

The Tribunal

3

(1) Where a case is referred to the Tribunal by a designated agency die Tribunal shall send the Secretary of State a copy of any report made by it to the agency in respect of that case.

(2) Where the powers which the Tribunal could, apart from any delegation order, require the Secretary of State to exercise are, by virtue of such an order or of an order resuming any function transferred by it, exercisable partly by the Secretary of State and partly by a designated agency or designated agencies the Tribunal may require any of them to exercise such of those powers as are exercisable by them respectively.

Legislative functions

4

(1) A designated agency shall send the Secretary of State a copy of any rules or regulations made by it by virtue of functions transferred to it by a delegation order and give him written notice of any amendment or revocation of or addition to any such rules or regulations.

(2) A designated agency shall—

(a) send the Secretary of State a copy of any guidance issued by the agency which is intended to have continuing effect and is issued in writing or other legible form ; and

(b) give him written notice of any amendment, revocation of or addition to guidance issued by it ;

but notice need not be given of the revocation of guidance other than such as is mentioned in paragraph (a) above or of any amendment or addition which does not result in or consist of such guidance as is there mentioned.

5

Paragraphs 6 to 9 below shall have effect instead of section 205 (2) and (4) of this Act in relation to rules and regulations made by a designated agency in the exercise of functions transferred to it by a delegation order.

6

The rules and regulations shall be made by an instrument in writing.

7

The instrument shall specify the provision of this Act under which it is made.

8

(1) Immediately after an instrument is made it shall be printed and made available to the public with or without payment

(2) A person shall not be taken to have contravened any rule or regulation if he shows that at the time of the alleged contravention the instrument containing the rule or regulation had not been made available as required by this paragraph.

9

(1) The production of a printed copy of an instrument purporting to be made by the agency on which is endorsed a certificate signed by an officer of the agency authorised by it for that purpose and stating—

(a) that the instrument was made by the agency ;

(b) that the copy is a true copy of the instrument; and

shall be prima facie evidence or, in Scotland, sufficient evidence of the facts stated in the certificate.

(2) Any certificate purporting to be signed as mentioned in subparagraph (1) above shall be deemed to have been duly signed unless the contrary is shown.

(3) Any person wishing in any legal proceedings to cite an instrument made by the agency may require the agency to cause a copy of it to be endorsed with such a certificate as is mentioned in this paragraph.

Fees

10

(1) A designated agency may retain any fees payable to it by virtue of the delegation order.

(2) Any such fees shall be applicable for meeting the expenses of the agency in discharging its functions under the order and for any purposes incidental thereto.

(3) Any fees payable to a designated agency by virtue of a delegation order made before the coming into force of section 3 of this Act may also be applied for repaying the principal of, and paying interest on, any money borrowed by the agency (or by any other person whose liabilities in respect of the money are assumed by the agency) which has been used for the purpose of defraying expenses incurred before the making of the order (whether before or after the passing of this Act) in making preparations for the agency becoming a designated agency.

11

If the function of prescribing the amount of any fee, or of making a scheme under section 112 above, is exercisable by a designated agency it may prescribe or make provision for such fees as will enable it to defray any such expenses as are mentioned in paragraph 10 above.

Consultation

12

(1) Before making any rules or regulations by virtue of functions transferred to it by a delegation order a designated agency shall, subject to sub-paragraphs (2) and (3) below, publish the proposed rules and regulations in such manner as appears to the agency to be best calculated to bring them to the attention of the public, together with a statement that representations in respect of the proposals can be made to the agency within a specified period; and before making the rules or regulations the agency shall have regard to any representations duly made in accordance with that statement

(2) Sub-paragraph (1) above does not apply in any case in which the agency considers that the delay involved in complying with that sub-paragraph would be prejudicial to the interests of investors.

(3) Sub-paragraph (1) above does not apply to the making of any rule or regulation if it is in the same terms (or substantially the same terms) as a proposed rule or regulation which was furnished by the agency to the Secretary of State for the purposes of section 114(9) of this Act.

Exchange of information

13

(1) The Secretary of State may communicate to a designated agency any information in his possession of which he could have availed himself for the purpose of exercising any function which by virtue of a delegation order is for the time being exercisable by the agency.

(2) A designated agency may in the exercise of any function which by virtue of a delegation order is for the time being exercisable by it communicate to any other person any information which has been communicated to the agency by the Secretary of State and which the Secretary of State could have communicated to that person in the exercise of that function.

(3) No communication of information under sub-paragraph (1) above shall constitute publication for the purposes of the law of defamation.

SCHEDULE 10

Preliminary

1

In this Part of this Schedule " a regulated insurance company " means any such company as is mentioned in section 129 of this Act.

Authorisations for investment business and insurance business

2

(1) An insurance company to which section 22 of this Act applies shall not be an authorised person except by virtue of that section.

(2) If an insurance company to which Part II of the Insurance Companies Act 1982 applies but to which section 22 of this Act does not apply becomes an authorised person by virtue of any other provision of this Act it shall be an authorised person only as respects the management of the investments of any pension fund which is established solely for the benefit of the officers or employees and their dependants of that company or of any other body corporate in the same group as that company.

(3) An insurance company to which section 31 of this Act applies shall not, so long as it is an authorised person by virtue of that section, be an authorised person by virtue of any other provision of this Act.

(4) None of the provisions of Part I of this Act shall be construed as authorising any person to carry on insurance business in any case in which he could not lawfully do so apart from those provisions.

Recognition of self-regulating organisation with insurance company members

3

(1) In the case of a self-regulating organisation whose members include or may include regulated insurance companies the requirements of Schedule 2 to this Act shall include a requirement that the rules of the organisation must take proper account of Part II of the Insurance Companies Act 1982 or, as the case may be, of the provisions for corresponding purposes in the law of any member State in which such companies are established.

(2) Where the function of making or revoking a recognition order in respect of such a self-regulating organisation is exercisable by a designated agency it shall not regard that requirement as satisfied unless the Secretary of State has certified that he also regards it as satisfied.

(3) A delegation order—

(a) may reserve to the Secretary of State the function of revoking a recognition order in respect of such a self-regulating organisation as is mentioned in sub-paragraph (1) above on the ground that the requirement there mentioned is not satisfied ; and

(b) shall not transfer to a designated agency the function of revoking any such recognition order on the ground that the organisation has contravened sub-paragraphs (3) or (4) of paragraph 6 below as applied by sub-paragraph (5) of that paragraph.

(4) In the case of such a self-regulating organisation as is mentioned in sub-paragraph (1) above the requirements of Schedule 2 to this Act referred to in section 187(2)(a) of this Act shall include the requirement mentioned in that sub-paragraph.

Modification of provisions as to conduct of investment business

4

(1) The rules under section 48 of this Act shall not apply to a regulated insurance company except so far as they make provision as respects the matters mentioned in sub-paragraph (2) below.

(2) The matters referred to in sub-paragraph (1) above are—

(a) procuring proposals for policies the rights under which constitute an investment for the purposes of this Act and advising persons on such policies and the exercise of the rights conferred by them ;

(b) managing the investments of pension funds, procuring persons to enter into contracts for the management of such investments and advising persons on such contracts and the exercise of the rights conferred by them ;

(3) The rules under section 49 of this Act shall not apply to an insurance company which is an authorised person by virtue of section 31 of this Act.

(4) The rules under sections 53 and 54 of this Act shall not apply to loss arising as a result of a regulated insurance company being unable to meet its liabilities under a contract of insurance.

(5) A direction under section 59 of this Act shall not prohibit the employment of a person by a regulated insurance company except in connection with—

(a) the matters mentioned in sub-paragraph (2) above ; or

(b) investment business carried on in connection with or for the purposes of those matters.

(6) The Secretary of State shall not make a delegation order transferring any functions of making rules or regulations under Chapter V of Part I of this Act in relation to a regulated insurance company unless he is satisfied that those rules and regulations will take proper account of Part II of the Insurance Companies Act 1982 or, as the case may be, of the provisions for corresponding purposes in the law of the member State in which the company is established; and in section 115(5) of this Act the reference to the requirements of section 114(9)(b) shall include a reference to the requirements of this subparagraph.

Restriction of provisions as to conduct of insurance business

5

(1) Regulations under section 72 of the Insurance Companies Act 1982 (insurance advertisements) shall not apply to so much of any advertisement issued by an authorised person as relates to a contract of insurance the rights under which constitute an investment for the purposes of this Act.

(2) No requirement imposed under section 74 of that Act (intermediaries in insurance transactions) shall apply in respect of an invitation issued by, or by an appointed representative of, an authorised person in relation to a contract of insurance the rights under which constitute an investment for the purposes of this Act.

(3) Subject to sub-paragraph (4) below, sections 75 to 77 of that Act (right to withdraw from long-term policies) shall not apply to a regulated insurance company in respect of a contract of insurance the rights under which constitute an investment for the purposes of this Act.

(4) Sub-paragraph (3) above does not affect the operation of the said sections 75 to 77 in a case in which the statutory notice required by those sections has been or ought to have been served before the coming into force of that sub-paragraph.

Exercise of powers of intervention etc.

6

(1) The powers conferred by Chapter VI of Part I of this Act shall not be exercisable in relation to a regulated insurance company on the ground specified in section 64(l)(a) of this Act for reasons relating to the ability of the company to meet its liabilities to policy holders or potential policy holders.

(2) The powers conferred by sections 66 and 68 of this Act, and those conferred by section 67 of this Act so far as applicable to assets belonging to the authorised person, shall not be exercisable in relation to a regulated insurance company.

(3) A designated agency shall not in the case of a regulated insurance company impose any prohibition or requirement under section 65 or 67 of mis Act, or vary any such prohibition or requirement, unless it has given reasonable notice of its intention to do so to the Secretary of State and informed him—

(a) of the manner in which and the date on or after which it intends to exercise that power ; and

(b) in the case of a proposal to impose a prohibition or requirement, on which of the grounds specified in section 64(1) of this Act it proposes to act and its reasons for considering that the ground in question exists and that it is necessary to impose the prohibition or requirement

(4) A designated agency shall not exercise any power to which sub-paragraph (3) above applies if the Secretary of State has before the date specified in accordance with sub-paragraph (3), above served on it a notice in writing directing it not to do so ; and the Secretary of State may serve such a notice if he considers it desirable for protecting policy holders or potential policy holders of the company against the risk that it may be unable to meet its liabilities or to fulfil the reasonable expectations of its policy holders or potential policy holders.

(5) Sub-paragraphs (3) and (4) above shall, with the necessary modifications, apply also where a recognised self-regulating organisation proposes to exercise, in the case of a member who is a regulated insurance company, any powers of the organisation for purposes corresponding to those of Chapter VI of Part I of this Act

(6) The powers conferred by sections 72 and 73 of this Act shall not be exercisable in relation to a regulated insurance company.

Withdrawal of insurance business authorisation

7

(1) At the end of section 11(2)(a) of the Insurance Companies Act 1982 (withdrawal of authorisation in respect of new business where insurance company has failed to satisfy an obligation to which it is subject by virtue of that Act) there shall be inserted the words " or the Financial Services Act 1986 or, if it is a member of a recognised self-regulating organisation within the meaning of that Act, an obligation to which it is subject by virtue of the rules of that organisation ".

(2) After subsection (2) of section 13 of that Act (final withdrawal of authorisation) there shall be inserted—

(2A) The Secretary of State may direct that an insurance company shall cease to be authorised to carry on business which is insurance business by virtue of section 95(c)(ii) of this Act if it appears to him that the company has failed to satisfy an obligation to which it is subject by virtue of the Financial Services Act 1986 or, if it is a member of a recognised self-regulating organisation within the meaning of that Act, an obligation to which it is subject by virtue of the rules of that organisation. (2B) Subsections (3), (5) and (6) of section 11 and subsections (1) and (5) to (8) of section 12 above shall apply to a direction under subsection (2A) above as they apply to a direction under section 11.

Termination of investment business authorisation of insurer established in other member State

8

(1) Sections 33(1)(b) and 34 of this Act shall not apply to a regulated insurance company.

(2) A direction under section 33(1)(a) of this Act in respect of such an insurance company may provide that the company shall cease to be an authorised person except as respects investment business of a kind specified in the direction and shall not make it unlawful for the company to effect a contract of insurance in pursuance of a subsisting contract of insurance.

(3) Where the Secretary of State proposes to give a direction under section 33(1)(a) of this Act in respect of such an insurance company he shall give it written notice of his intention to do so, giving particulars of the grounds on which he proposes to act and of the rights exercisable under sub-paragraph (4) below.

(4) An insurance company on which a notice is served under sub-paragraph (3) above may within fourteen days after the date of service make written representations to the Secretary of State and, if desired, oral representations to a person appointed for that purpose by the Secretary of State; and the Secretary of State shall have regard to any representations made in accordance with this sub-paragraph in determining whether to give the direction.

(5) After giving a direction under section 33(1)(a) of this Act in respect of a regulated insurance company the Secretary of State shall inform the company in writing of the reasons for giving the direction.

(6) A delegation order shall not transfer to a designated agency the function of giving a direction under section 33(1)(a) of this Act in respect of a regulated insurance company.

Powers of Tribunal

9

In the case of a regulated insurance company the provisions mentioned in section 98(4) of this Act shall include sections 11 and 13(2A) of the Insurance Companies Act 1982 but where the Tribunal reports that the appropriate decision would be to take action under either of those sections or under section 33((1)(a)) of this Act the Secretary of State shall take the report into consideration but shall not be bound to act upon it

Consultation with designated agencies

10

(1) Where any functions under this Act are for the tune being exercisable by a designated agency in relation to regulated insurance companies the Secretary of State shall, before issuing an authorisation under section 3 of the Insurance Companies Act 1982 to an applicant who proposes to carry on in the United Kingdom insurance business which is investment business—

(a) seek the advice of the designated agency with respect to any matters which are relevant to those functions of the agency and relate to the applicant, his proposed business or persons who will be associated with him in, or in connection with, that business; and

(b) take into account any advice on those matters given to him by the agency before the end of the period within which the application is required to be decided.

(2) The Secretary of State may for the purpose of obtaining the advice of a designated agency under sub-paragraph (1) above furnish it with any information obtained by him in connection with the application.

(3) If a designated agency by which any functions under this Act are for the time being exercisable in relation to regulated insurance companies has reasonable grounds for believing mat any such insurance company has failed to comply with an obligation to which it is subject by virtue of this Act it shall forthwith give notice of that fact to the Secretary of State so that he can take it into consideration in deciding whether to give a direction in respect of the company under section 11 or 13(2A) of the said Act of 1982 or section 33 of this Act.

(4) A notice under sub-paragraph (3) above shall contain particulars of the obligation in question and of the agency's reasons for considering that the company has failed to satisfy that obligation.

(5) A designated agency need not give a notice under subparagraph (3) above in respect of any matter unless it considers that that matter (either alone or in conjunction with other matters) would justify the withdrawal of authorisation under section 28 of this Act in the case of a person to whom that section applies.

SCHEDULE 11

PART I — Preliminary

1

In this Schedule—

"a regulated friendly society" means a society which is an authorised person by virtue of section 23 of this Act as respects such investment business as is mentioned in that section;

" regulated business ", in relation to a regulated friendly society, means investment business as respects which the society is authorised by virtue of that section;

" a self-regulating organisation for friendly societies" means a self-regulating organisation which is permitted under its rules to admit regulated friendly societies as members and to regulate the carrying on by such societies of regulated business;

" a recognised self-regulating organisation for friendly societies " means a body declared by an order of the Registrar for the time being in force to be a recognised self-regulating organisation for friendly societies for the purposes of this Schedule ;

"a member society" means a regulated friendly society which is a member of an appropriate recognised self-regulating organisation for friendly societies and is subject to its rules in carrying on all its regulated business and, for the purposes of this definition, " an appropriate recognised self-regulating organisation for friendly societies " means— in the case of any such society as is mentioned in section 23(1) of this Act, an organisation declared by an order of the Chief Registrar of friendly societies for the time being in force to be a recognised self-regulating organisation for friendly societies for the purposes of this Schedule; and in the case of any such society as is mentioned in section 23(2) of this Act, an organisation declared by an order of the Registrar of Friendly Societies for Northern Ireland for the time being in force to be such an organisation ;

" the Registrar " means— in relation to any such society as is mentioned in section 23(1) of this Act, or to any self-regulating organisation for friendly societies which has applied for or been granted a recognition order made by him, the Chief Registrar of friendly societies ; and in relation to any such society as is mentioned in section 23(2) of this Act, or to any self-regulating organisation for friendly societies which has applied for or been granted a recognition order made by him, the Registrar of Friendly Societies for Northern Ireland.

PART II — Self-Regulating Organisations for Friendly Societies

Recognition

2

(1) A self-regulating organisation for friendly societies may apply to the Chief Registrar of friendly societies or the Registrar of Friendly Societies for Northern Ireland for an order declaring it to be a recognised self-regulating organisation for friendly societies for the purposes of this Schedule.

(2) An application under sub-paragraph (1) above—

(a) shall be made in such manner as the Registrar may direct; and

(b) shall be accompanied by such information as the Registrar may reasonably require for the purpose of determining the application.

(3) At any time after receiving an application and before determining it the Registrar may require the applicant to furnish additional information.

(4) The directions and requirements given or imposed under subparagraphs (2) and (3) above may differ as between different applications.

(5) Any information to be furnished to the Registrar under this paragraph shall, if he so requires, be in such form or verified in such manner as he may specify.

(6) Every application shall be accompanied by a copy of the applicant's rules and of any guidance issued by the applicant which is intended to have continuing effect and is issued in writing or other legible form.

3

(1) If, on an application duly made in accordance with paragraph 2 above and after being furnished with all such information as he may require under that paragraph, it appears to the Registrar from that information and having regard to any other information in his possession that the requirements mentioned in paragraph 4 below are satisfied as respects that organisation, he may, with the consent of the Secretary of State and subject to sub-paragraph (2) below, make an order ("a recognition order") declaring the applicant to be a recognised self-regulating organisation for friendly societies.

(2) Where the Registrar proposes to grant an application for a recognition order he shall send to the Secretary of State a copy of the application together with a copy of the rules and any guidance accompanying the application and the Secretary of State shall not consent to the making of the recognition order unless he is satisfied that the rules and guidance of which copies have been sent to him under this sub-paragraph do not have, and are not intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition or, if they have or are intended or likely to have that effect to any significant extent, that the effect is not greater than is necessary for the protection of investors.

(3) Section 122 of this Act shall apply in relation to the decision whether to consent to the making of a recognition order under this paragraph as it applies to the decisions mentioned in subsection (1) of that section.

(4) Subsections (1) and (2) of section 128 of this Act shall apply for the purposes of this paragraph as if the powers there mentioned included the power of refusing consent to the making of a recognition order under this paragraph and subsection (5) of that section shall apply for that purpose as if the reference to Chapter XIV of Part I included a reference to this paragraph.

(5) The Registrar may refuse to make a recognition order in respect of an organisation if he considers that its recognition is unnecessary having regard to the existence of one or more other organisations which are concerned with such investment business as is mentioned in section 23 of this Act and which have been or are likely to be recognised under this paragraph.

(6) Where the Registrar refuses an application for a recognition order he shall give the applicant a written notice to that effect specifying a requirement which in the opinion of the Registrar is not satisfied, stating that the application is refused on the ground mentioned in sub-paragraph (5) above or stating that the Secretary of State has refused to consent to the making of the order.

(7) A recognition order shall state the date on which it takes effect.

4

(1) The requirements referred to in paragraph 3 above are that mentioned in sub-paragraph (2) below and those set out in paragraphs 2 to 7 of Schedule 2 to this Act as modified in sub-paragraphs (3) to (5) below.

(2) The rules of the organisation must take proper account of the Friendly Societies Act 1974, or as the case may be, the Friendly Societies Act (Northern Ireland) 1970.

(3) References in paragraphs 2, 3, 4 and 6 of Schedule 2 to members are to members who are regulated friendly societies.

(4) In paragraph 3 of that Schedule—

(a) in sub-paragraph (1) for the reference to Chapter V of Part I of this Act there shall be substituted a reference to paragraphs 14 to 22 below ; and

(b) in sub-paragraph (2) the reference to section 49 of this Act shall be omitted and for the reference to sections S3 and 54 there shall be substituted a reference to paragraphs 17 and 18 below ; and

(c) in sub-paragraph (3) for the reference to Chapter VI of that Part there shall be substituted a reference to the powers exercisable by the Registrar by virtue of paragraph 23 below. ,

(5) In paragraph 4 of that Schedule for the reference to Chapter V of Part I of this Act there shall be substituted references to paragraphs 14 to 22 below.

Revocation of recognition

5

(1) A recognition order may be revoked by a further order made by the Registrar if at any time it appears to him—

(a) that any requirement mentioned in paragraph 4(1) above is not satisfied in the case of the organisation to which the recognition order relates (" the recognised organisation ");

(b) that the recognised organisation has failed to comply with any obligation to which it is subject by virtue of this Act; or

(c) that the continued recognition of the organisation is undesirable having regard to the existence of one or more other organisations which have been or are to be recognised under paragraph 3 above.

(2) Subsections (2) to (9) of section 11 of this Act shall have effect in relation to the revocation of a recognition order under this paragraph as they have effect in relation to the revocation of a recognition order under subsection (1) of that section but with the substitution—

(a) for references to the Secretary of State of references to the Registrar;

(b) for the reference in subsection (3) to members of a reference to members of the organisation which are member societies in relation to it; and

(c) for the reference in subsection (6) to investors of a reference to members of the societies which are member societies in relation to the organisation.

Compliance orders

6

(1) If at any time it appears to the Registrar—

(a) that any requirement mentioned in paragraph 3 above is not satisfied in the case of a recognised self-regulating organisation for friendly societies; or

(b) that such an organisation has failed to comply with any obligation to which it is subject by virtue of this Act,

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Financial Services Act 1986 (repealed)

Groups and joint enterprises

18

Sale of goods and supply of services

19

Employees' share schemes

20

Sale of private company

21

Trustees and personal representatives

22

Dealings in course of non-investment business

23

Advice given in course of profession or non-investment business

24

Newspapers

25

PART IV — Additional Exclusions for Persons Without Permanent Place of Business in United Kingdom

Transactions with or through authorised or exempted persons

26

Unsolicited or legitimately solicited transactions etc. with or for other persons

27

PART V — Interpretation

28

29

30

31

32

33

SCHEDULE 2

Members to be fit and proper persons

1

Admission, expulsion and discipline

2

Safeguards for investors

3

Monitoring and enforcement

4

The governing body

5

Investigation of complaints

6

Promotion and maintenance of standards

7

SCHEDULE 3

Statutory status

1

Certification

2

Safeguards for investors

3

Monitoring and enforcement

4

Investigation of complaints

5

Promotion and maintenance of standards

6

SCHEDULE 4

Financial resources

1

Safeguards for investors

2

Monitoring and enforcement

3

Investigation of complaints

4

Promotion and maintenance of standards

5

SCHEDULE 5

PART I — Transactions not Subject to Monetary Limit

1

2

3

PART II — Transactions Subject to Monetary Limit

4

5

6

7

8

PART III — Transactions arranged by Listed Institutions