Financial Services Act 2021

(144A) (1) In this Act, “CRR rules” means rules of a type described in subsection (2) to the extent that they make provision about a matter described in subsection (3). (2) The types of rules are— (a) general rules made, or to be made, by the PRA applying to CRR firms or a description of CRR firm; (b) rules made, or to be made, under section 192XA. (3) The matters are any matter that is the subject of— (a) a relevant provision of the capital requirements regulation, or (b) a CRR Basel standard. (4) For the purposes of subsection (3)(a), a provision is “relevant” if— (a) it has been or may be revoked by regulations made under section 3(1) of the Financial Services Act 2021, or (b) it has been revoked by regulations made under section 3(3) or (5) of that Act. (5) In subsection (3)— (a) the reference to a matter that is the subject of a provision of the capital requirements regulation includes a matter that is the subject of an instrument made under the provision, and (b) the reference to a matter that is the subject of a CRR Basel standard includes such a matter as it relates to any CRR firm (even where the standard in question does not apply to all CRR firms). (144B) (1) In this Part— - “CRR Basel standard” has the meaning given in section 4 of the Financial Services Act 2021; - “CRR firm” has the same meaning as in the capital requirements regulation; - “EU tertiary legislation” has the meaning given in section 20 of the European Union (Withdrawal) Act 2018. (2) In this Part, references to instruments made under the capital requirements regulation include EU tertiary legislation made under that regulation which forms part of retained EU law. (144C) (1) When making CRR rules, the PRA must, among other things, have regard to— (a) relevant standards recommended by the Basel Committee on Banking Supervision from time to time, (b) the likely effect of the rules on the relative standing of the United Kingdom as a place for internationally active credit institutions and investment firms to be based or to carry on activities, (c) the likely effect of the rules on the ability of CRR firms to continue to provide finance to businesses and consumers in the United Kingdom on a sustainable basis in the medium and long term, (d) the target in section 1 of the Climate Change Act 2008 (carbon target for 2050), and (e) any other matter specified by the Treasury by regulations. (2) For the purposes of subsection (1)(b), the PRA must consider the United Kingdom's standing in relation to the other countries and territories in which, in its opinion, internationally active credit institutions and investment firms are most likely to choose to be based or carry on activities. (3) When making CRR rules, the PRA must consider, and consult the Treasury about, the likely effect of the rules on relevant equivalence decisions. (4) For the purpose of this section, an equivalence decision is “relevant” if the Treasury have, by notice in writing, informed the PRA that it is relevant for that purpose. (5) In this section— - “consumer” means an individual who is acting for purposes outside those of any trade, business or profession carried on by the individual; - “equivalence decision” means a decision as to whether the law and practice of one country or territory is equivalent to the law and practice of another country or territory, either generally or as it relates to a particular matter; - “territory” includes the European Union and any other international organisation or authority comprising countries or territories. (6) This section is subject to section 144E. (144D) (1) A draft of proposed CRR rules published in accordance with section 138J(1)(b) must be accompanied by an explanation of the ways in which having regard to the matters specified in or under section 144C(1) has affected the proposed rules (as well as being accompanied by the information listed in section 138J(2)). (2) If the PRA makes the proposed CRR rules, it must publish— (a) a summary of the purpose of the proposed rules, and (b) an explanation complying with subsection (1), (as well as the information required by section 138J(4) and (5)). (3) This section is subject to section 144E. (144E) (1) Sections 144C and 144D do not apply where the PRA makes CRR rules— (a) in order to comply with a direction given by the Financial Policy Committee of the Bank of England under section 9H of the Bank of England Act 1998 (directions requiring macro-prudential measures), or (b) in order to act in accordance with a recommendation made by that Committee under section 9Q of that Act (recommendations about the exercise of the PRA's functions). (2) Section 144C does not apply where the PRA makes CRR rules to the extent that they make provision (“CRR restatement provision”) reproducing without any changes which, in the PRA's opinion, are material— (a) a provision of the capital requirements regulation as it had effect immediately before it was revoked by regulations made under section 3 of the Financial Services Act 2021, or (b) a provision of an instrument made under the capital requirements regulation as it had effect immediately before it was revoked by such regulations. (3) The following do not apply in relation to CRR rules to the extent that they make CRR restatement provision— (a) section 138J, other than subsection (1)(a), (b) section 138K, and (c) section 144D, but, if it makes rules making such provision, the PRA must publish a statement of which provisions of the capital requirements regulation, or of the instrument made under that regulation, are reproduced and what changes (if any) are made. (4) Section 144D does not apply in relation to CRR rules if the PRA considers that the delay involved in complying with that section would be prejudicial to the safety and soundness of PRA-authorised persons. (5) If the PRA proposes CRR rules that change existing CRR rules and the changes consist of or include changes which, in the PRA's opinion, are not material— (a) the explanation described in section 144D(1) is not required in relation to the rules to the extent that they make those changes, but (b) the draft of the rules must be accompanied by a statement of the PRA's opinion. (6) If the PRA makes CRR rules that change existing CRR rules and the changes consist of or include changes which, in the PRA's opinion, are not material— (a) the summary and explanation described in section 144D(2) are not required in relation to the rules to the extent that they make those changes, but (b) the PRA must publish a statement of its opinion. (7) For the purposes of this section, whether a change is material is to be determined by the PRA by reference to, among other things, the matters specified in or under section 144C(1). (144F) (1) The Treasury may by regulations make provision amending an enactment that is consequential on CRR rules. (2) In this section— - “enactment” includes— 1. retained direct EU legislation, 2. an enactment comprised in subordinate legislation, 3. an enactment comprised in, or in an instrument made under, a Measure or Act of Senedd Cymru, 4. an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament, and 5. an enactment comprised in, or in an instrument made under, Northern Ireland legislation; - “subordinate legislation” has the same meaning as in the Interpretation Act 1978 (see section 21 of that Act). (144G) (1) This section applies to a CRR rule if, or to the extent that, CRR rules provide for it to apply to the rule. (2) The PRA may, on the application of or with the consent of a person who is subject to CRR rules, give the person a permission that enables the person— (a) not to apply the CRR rule, or (b) to apply the CRR rule with the modifications specified in the permission. (3) The PRA may— (a) give permission under this section subject to conditions, and (b) revoke or vary permission under this section. (144H) (1) CRR rules may make provision by reference to the capital requirements regulation, to an instrument made under the capital requirements regulation or to Directive 2013/36/EU UK law, as amended from time to time. (2) CRR rules may, despite section 137G(6), include provision that modifies the capital requirements regulation or an instrument made under that regulation (but may not amend or revoke a provision of that regulation or such an instrument). (3) In this section, “Directive 2013/36/EU UK law” means the law of the United Kingdom which was relied on immediately before IP completion day to implement the capital requirements directive and its implementing measures as it has effect— (a) on IP completion day, in the case of rules made by the PRA or the FCA under this Act, and (b) as amended from time to time, in all other cases.

PART 2 — PRA's powers in relation to certain holding companies

2

Part 12B of the Financial Services and Markets Act 2000 (approval of certain holding companies by the PRA) is amended as follows.

3

Before section 192O insert— “ Interpretation ”.

4

• (1) Section 192O(1) (interpretation) is amended as follows.

• (2) Omit the definition of “section 192V rules”.

• (3) After that definition insert—

• “section 192XA rules” means rules made under section 192XA;

.

5

Before section 192P insert— “ Approval ”.

6

Omit section 192V (rules imposing consolidated or sub-consolidated requirements).

7

After section 192X insert—

(192XA) (1) The PRA may make rules described in subsection (2) applying to financial holding companies and mixed financial holding companies that are— (a) approved under section 192R, or (b) designated under section 192T(2)(c), where it appears to the PRA to be necessary or expedient to make the rules for the purpose of advancing any of its objectives. (2) Those rules are— (a) rules imposing requirements to be complied with by holding companies on a consolidated or sub-consolidated basis; (b) rules imposing requirements which, in the PRA's opinion, are likely to mitigate group risk; (c) rules imposing reporting requirements related to requirements described in paragraph (a) or (b); (d) rules imposing public disclosure requirements related to requirements described in paragraph (a) or (b); (e) rules imposing requirements in respect of governance arrangements; (f) rules imposing requirements in respect of remuneration policies and practices. (3) Subject to subsection (4), rules made under this section may not modify, amend or revoke any retained direct EU legislation, except retained direct EU legislation which takes the form of PRA rules. (4) Rules made under this section may include provision that modifies the capital requirements regulation or an instrument made under that regulation (but may not amend or revoke provisions of that regulation or such an instrument). (5) Rules made under this section may make provision by reference to the capital requirements regulation, to instruments made under that regulation or to Directive 2013/36/EU UK law, as amended from time to time. (6) Section 137H (rules about remuneration) applies where the PRA makes rules under this section prohibiting persons, or persons of a specified description, from being remunerated in a specified way as it applies where the PRA makes general rules imposing such a prohibition. (7) Section 137I (Treasury direction to consider compliance with remuneration policies) applies where the PRA makes rules under this section requiring financial holding companies or mixed financial holding companies, or a specified description of such companies, to act in accordance with a remuneration policy as it applies where the PRA makes general rules imposing such requirements on authorised persons, but as if— (a) the references in that section to authorised persons were references to financial holding companies or mixed financial holding companies, and (b) subsection (7) of that section were omitted. (8) Section 141A (power to make consequential amendments of references to rules etc) applies to the exercise by the PRA of its power to make, alter or revoke rules under this section as it applies in relation to the exercise by the PRA of its power to make, alter or revoke rules under Part 9A. (9) In this section— - “governance arrangements” includes organisational structure, lines of responsibility and internal control mechanisms; - “group risk” means the risk that the financial position of a financial holding company or mixed financial holding company or of a member of its group may be adversely affected— 1. by its relationships, whether financial or non-financial, with other members of the group, or 2. by matters which affect the financial position of the group, or of a group which forms part of that group, taken as a whole (including, for example, reputational contagion). (192XB) (1) For provision about the making of section 192XA rules that are CRR rules, see Part 9D. (2) The following provisions of Part 9D apply in relation to section 192XA rules that are not CRR rules as if they were CRR rules— (a) section 144C (matters to consider when making rules); (b) section 144D (explanation to accompany consultation on rules); (c) section 144E(1) and (4) to (7) (exceptions from sections 144C and 144D). (192XC) (1) This section applies to a section 192XA rule if, or to the extent that, section 192XA rules provide for it to apply to the rule. (2) The PRA may, on the application of or with the consent of a person who is subject to section 192XA rules, give the person a permission that enables the person— (a) not to apply the section 192XA rule, or (b) to apply the section 192XA rule with the modifications specified in the permission. (3) The PRA may— (a) give permission under this section subject to conditions, and (b) revoke or vary permission under this section. Disciplinary measures

.

8

In section 192Y(1) (power to impose penalty or issue censure), for paragraph (d) substitute—

(d) the capital requirements regulation or an instrument made under that regulation.”

PART 3 — Minor and consequential amendments

Bank of England Act 1998 (c. 11)

9

• (1) Section 9H of the Bank of England Act 1998 (directions to FCA or PRA requiring macro-prudential measures) is amended as follows.

• (2) In subsection (2) (definition of “regulated person”), for paragraph (b) substitute—

(b) in relation to the PRA— (i) a PRA-authorised person within the meaning of that Act, or (ii) a financial holding company or mixed financial holding company that is approved under section 192R of that Act or designated under section 192T(2)(c) of that Act.

• (3) At the end insert—

(12) In this section— - “the Capital Requirements Regulation” means Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms; - “financial holding company” has the meaning given in Article 4(1)(20) of the Capital Requirements Regulation; - “mixed financial holding company” has the meaning given in Article 4(1)(21) of the Capital Requirements Regulation.

Financial Services and Markets Act 2000 (c. 8)

10

The Financial Services and Markets Act 2000 is amended as follows.

11

In section 137G (the PRA's general rules), at the end insert—

(7) Subsection (6) is subject to section 144H(2).

12

In section 138J(10) (consultation by the PRA), for “section 138L” substitute “ sections 138L and 144E(3). ”

13

In section 138K (consultation: mutual societies), at the end insert—

(7) This section is subject to section 144E(3).

14

• (1) Section 192O (interpretation of Part 12B) is amended as follows.

• (2) In subsection (1)—

• (a) in the definition of “Directive 2013/36/EU UK law”, omit the words following paragraph (b), and

• (b) after that definition insert—

• “EU tertiary legislation” has the meaning given in section 20 of the European Union (Withdrawal) Act 2018;

.

• (3) At the end insert—

(3) In this Part, references to instruments made under the capital requirements regulation include EU tertiary legislation made under that regulation which forms part of retained EU law.

15

In section 192R(3) (grant of approval)—

• (a) in paragraph (a) omit “, section 192V rules” and the “and” at the end, and

• (b) after that paragraph insert—

(aa) adequate for the purpose of complying with section 192XA rules, and

.

16

• (1) Section 192T (measures) is amended as follows.

• (2) In subsection (1)—

• (a) omit the “and” at the end of paragraph (a),

• (b) in paragraph (b) omit “, section 192V rules”, and

• (c) at the end of paragraph (b) insert

, and (c) to ensure that the relevant group complies with section 192XA rules.

• (3) In subsection (2)(c)—

• (a) omit “, section 192V rules”, and

• (b) at the end insert “ and with section 192XA rules ”.

17

In section 192Y(1) (power to impose penalty or issue censure)—

• (a) omit paragraph (c) (including the “or” at the end), and

• (b) after that paragraph insert—

(ca) section 192XA rules; or

.

18

In section 417(1) (definitions), at the appropriate place, insert—

“CRR rules” has the meaning given in section 144A;

.

19

In section 429(2) (parliamentary control of statutory instruments: affirmative procedure), before “214A” insert “ 144C(1), 144F, ”.

Capital Requirements Regulations 2013 (S.I. 2013/3115)

20

The Capital Requirements Regulations 2013 (meaning of “permission” etc) is amended as follows.

21

In regulation 2(1), in the definition of “appropriate regulator”, at the end insert “ , subject to regulation 39(2) ”.

22

• (1) Regulation 39 (meaning of “permission” etc) is amended as follows.

• (2) The existing text becomes paragraph (1).

• (3) In that paragraph, in the definition of “permission”, after paragraph (a) insert—

(aa) section 144G of FSMA and CRR rules (as defined in Part 9D of FSMA); (ab) section 192XC of FSMA and section 192XA rules (as defined in Part 12B of FSMA);

.

• (4) After that paragraph insert—

(2) In this Part, in relation to— (a) a decision made under a power conferred by section 144G of FSMA and CRR rules (as defined in Part 9D of FSMA) that are section 192XA rules (as defined in Part 12B of FSMA), or (b) a decision made under a power conferred by section 192XC of FSMA and section 192XA rules (as defined in Part 12B of FSMA), “appropriate regulator” means the PRA.

PART 4 — Transitional provision

Pre-commencement consultation etc

23

• (1) In relation to general rules that are CRR rules, the requirements of the provisions listed in sub-paragraph (3) may be satisfied by things done before Part 1 of this Schedule comes into force (as well as by things done after that time).

• (2) In relation to section 192XA rules, the requirements of the provisions listed in sub-paragraph (3) may be satisfied by things done before Part 2 of this Schedule comes into force (as well as by things done after that time).

• (3) Those provisions are—

• (a) sections 138J and 138K of the Financial Services and Markets Act 2000 (consultation);

• (b) sections 144C to 144E of that Act (inserted by Part 1 of this Schedule).

Relevant equivalence decisions

24

For the purposes of section 144C of the Financial Services and Markets Act 2000 (inserted by Part 1 of this Schedule), an equivalence decision may be a relevant equivalence decision by virtue of a notice in writing given by the Treasury before Part 1 of this Schedule comes into force (as well as by a notice given after that time).

Carbon target

25

In relation to the making of CRR rules or section 192XA rules that are made on or before 1 January 2022—

• (a) paragraph (d) of section 144C(1) of the Financial Services and Markets Act 2000 (duty to have regard to carbon target for 2050) does not apply, and

• (b) section 144D(1) of that Act does not require an explanation in respect of matters specified in that paragraph.

Section 192V rules

26

• (1) Rules made by the Prudential Regulation Authority under section 192V of the Financial Services and Markets Act 2000 and in force immediately before the day on which the repeal of that section by Part 2 of this Schedule comes into force (“the repeal day”) are to be treated, on and after that day—

• (a) as validly made section 192XA rules, and

• (b) to the extent that they make provision about a matter described in section 144A(3) of the Financial Services and Markets Act 2000 (inserted by Part 1 of this Schedule), as validly made CRR rules.

• (2) Sections 192Y, 192Z and 192Z1 of the Financial Services and Markets Act 2000 (disciplinary measures) continue to have effect in relation to a contravention, before the repeal day, of a rule made under section 192V of that Act, despite the repeal of section 192Y(1)(c) of that Act.

Interpretation

27

In this Part of this Schedule—

• “CRR rules” has the same meaning as in the Financial Services and Markets Act 2000 (see section 144A of that Act, inserted by Part 1 of this Schedule);

• “general rules” has the meaning given in section 137G(2) of that Act;

• “section 192XA rules” has the same meaning as in Part 12B of that Act (see section 192O of that Act, as amended by Part 3 of this Schedule).

SCHEDULE 4

1

The Capital Requirements Regulation is amended as follows.

2

In Article 4A(1)(a) (definitions: references to PRA rulebook), for “as the rulebook has effect on IP completion day” substitute “ as amended from time to time ”.

3

In Article 92(3) (own funds requirements), for points (b) and (c) substitute—

(b) the own funds requirements for the trading-book business of an institution for the following— (i) market risk as determined in accordance with Title IV of this Part, excluding the approaches set out in Chapters 1a and 1b of that Title; (ii) large exposures exceeding the limits specified in Articles 395 to 401, to the extent that an institution is permitted to exceed those limits, as determined in accordance with Part Four; (c) the own funds requirements for market risk as determined in accordance with Title IV of this Part, excluding the approaches set out in Chapters 1a and 1b of that Title, for all business activities that are subject to foreign exchange risk or commodity risk; (ca) the own funds requirements for settlement risk calculated in accordance with Title V of this Part, with the exception of Article 379;

.

4

In Article 107(3) (approaches to credit risk), for “third-country investment firms and exposures to third country credit institutions and exposures to third country clearing houses and exchanges” substitute “ a third-country investment firm, a third-country credit institution and a third-country exchange ”.

5

In Article 144(1)(g) (competent authorities' assessment of an application to use an IRB Approach), for “Article 99” substitute “ Article 430 ”.

6

In Article 201(1) (eligibility of protection providers under all approaches), for point (h) substitute—

(h) qualifying central counterparties.

7

• (1) Article 223 (Financial Collateral Comprehensive Method) is amended as follows.

• (2) In paragraph 3, in the second subparagraph, for “institutions” substitute “ , institutions using the method laid down in Section 6 of Chapter 6 ”.

• (3) After paragraph 5 insert—

(5A) For the purposes of the calculation under paragraph 5, in the case of OTC derivative transactions, institutions using the methods laid down in Sections 3, 4 and 5 of Chapter 6 shall take into account the risk-mitigating effects of collateral in accordance with the provisions laid down in Sections 3, 4 and 5 of Chapter 6, as applicable.

8

In Article 283 (permission to use the Internal Model Method), for paragraph 4 substitute—

(4) For all OTC derivative transactions, and for long settlement transactions for which an institution has not received permission under paragraph 1 to use the IMM, the institution shall use the methods set out in Section 3. Those methods may be used in combination on a permanent basis within a group.

9

For Article 298 substitute—

Netting for the purposes of Sections 3 to 6 shall be recognised as set out in those Sections.

10

In Article 299(2) (items in the trading book), omit point (a).

11

In Article 384(1) (standardised method), in the definition of “EADitotal”—

• (a) for “Title II, Chapter 6” (in the first place those words occur) substitute “ Chapter 6 of Title II ”, and

• (b) omit the words from “An institution using” to the end of the definition.

12

• (1) Article 500d (temporary calculation of exposure value of regular-way purchases and sales awaiting settlement in view of COVID-19 pandemic) is amended as follows.

• (2) In the heading, omit “Temporary”.

• (3) In paragraph 1, omit “until 27 June 2021,”.

13

• (1) Annex 2 (types of derivatives) is amended as follows.

• (2) In point 1, for point (e) substitute—

(e) interest-rate options;

.

• (3) In point 2, for point (d) substitute—

(d) currency options;

.

• (4) For point 3 substitute—

(3) Contracts of a nature similar to those in points 1(a) to (e) and 2(a) to (d) of this Annex concerning other reference items or indices. This includes as a minimum all instruments specified in paragraphs 4 to 7, 9, 10 and 11 of Part 1 of Schedule 2 to the Regulated Activities Order not otherwise included in point 1 or 2 of this Annex.

SCHEDULE 5

1

The Benchmarks Regulation is amended as follows.

2

• (1) Article 3(1) (definitions) is amended as follows.

• (2) In point (6) (administrator)—

• (a) after “means” insert—

(a)

, and

• (b) at the end insert

, or (b) in the case of an Article 23A benchmark, a natural or legal person that would have control over the provision of the benchmark but for Article 23D;

.

• (3) After point (25) insert—

(25A) ‘Article 23A benchmark’ has the meaning given in Article 23A(14);

.

• (4) After point (36) insert—

(37) ‘working day’ means a day other than— (a) Saturday or Sunday, (b) Christmas Day or Good Friday, or (c) a day which is a bank holiday under the Banking and Financial Dealings Act 1971 in England and Wales.

3

In Article 3, after paragraph 1 insert—

(1A) References in this Regulation to the capability of a benchmark to measure the underlying market or economic reality are references to both its current capability to do so and its capability to do so in the future.

4

In Article 11 (input data), after paragraph 4 insert—

(4A) In the case of a critical benchmark, paragraph 4 does not require the administrator to cease providing the benchmark before the end of a period during which the administrator is required to continue publishing the benchmark by Article 21(1) or (2) or by a decision of the FCA under Article 21(3). (4B) In the case of a critical benchmark in respect of which measures adopted under Article 23(6) have effect— (a) paragraph 4 does not require the administrator to cease providing the benchmark while those measures have effect, and (b) the administrator's duty under paragraph 4 to make changes is a duty to make changes so far as compatible with those measures.

5

In Article A20(5)(b) (review of critical benchmarks), for “determines” substitute “ determine ”.

6

• (1) Article 20 (critical benchmarks: conditions and other matters) is amended as follows.

• (2) In paragraph 5(b), for “determines” substitute “ determine ”.

• (3) In paragraph 5A(a)—

• (a) for “the values in points (a) and (c)(i) of paragraph 1 (the “thresholds”)” substitute “ the value in point (a) of paragraph 1 (“the paragraph 1(a) value”) ”, and

• (b) for “to the thresholds” substitute “ to the paragraph 1(a) value ”.

• (4) In paragraph 5A(b), for “the thresholds” substitute “ the paragraph 1(a) value ”.

• (5) In paragraph 6(a), for “thresholds” substitute “ values ”.

• (6) In paragraph 6(b), for “the thresholds in points (a) and (c)(i)” substitute “ the value in point (a) ”.

7

In Article 21(3) (mandatory administration of a critical benchmark), in the first subparagraph, in point (b), at the end insert “ (whether by the exercise of the FCA's powers under Article 23D or otherwise) ”.

8

After Article 26 insert—

Supervised entities and supervised third country entities must comply with prohibitions and other requirements imposed on them by the FCA under this Regulation.

9

In Article 29 (use of a benchmark), after paragraph 1 insert—

(1A) Paragraph 1 does not enable a supervised entity to use a benchmark in the United Kingdom in breach of a prohibition under Article 21A or 23B. (1B) The use of a benchmark by a supervised entity for a financial contract, financial instrument or investment fund in breach of a prohibition under Article 21A or 23B does not affect the validity or enforceability of a contract or other arrangement.

10

In Article 36(1) (register of administrators and benchmarks), after point (d) insert—

(e) any prohibitions under Article 21A or 23B on the use of benchmarks by supervised entities that are in force; (f) any benchmarks that are Article 23A benchmarks.

11

After Article 48 insert—

(1) The Treasury may by regulations make provision about the procedure to be followed, or rules to be applied, when a provision of or made under this Regulation— (a) requires information or a document of any kind to be given, or (b) authorises the imposition of a requirement. (2) The regulations may, among other things, make provision— (a) requiring information to be given in writing; (b) requiring, or allowing, information or a document to be sent electronically; (c) requiring, or allowing, information or a document to be given in another manner; (d) as to the address to which information or a document must or may be sent; (e) requiring a person to provide an address to which information or a document must or may be sent; (f) for treating information or a document as having been given, or as having been received, on a date or at a time determined in accordance with the regulations; (g) as to what must, or may, be done if the person to whom information or a document is required to be given is not an individual; (h) as to what must, or may, be done if the intended recipient of information or a document is outside the United Kingdom. (3) Paragraph 1 applies however the obligation to give information or a document is expressed (and so, among other things, includes a provision which requires a person to be notified of something and a provision which requires a document to be submitted). (4) Section 7 of the Interpretation Act 1978 (service of notice by post) has effect in relation to provisions made by or under this Regulation subject to any provision made by regulations under this Article. The following provisions of Regulation (EEC, Euratom) No. 1182/71 of the Council of 3 June 1971 determining the rules applicable to periods, dates and time limits do not apply to a reference in this Regulation to a period of time— (a) Article 3(2)(c) (periods expressed in weeks, months or years); (b) Article 3(4) (periods ending with a weekend or public holiday).

SCHEDULE 6

After Schedule 2 to the Financial Services and Markets Act 2000 insert—

SCHEDULE 7

After Schedule 2A to the Financial Services and Markets Act 2000 (inserted by Schedule 6 to this Act) insert—

SCHEDULE 8

Financial Services and Markets Act 2000 (c. 8)

1

The Financial Services and Markets Act 2000 is amended as follows.

2

In section 3A(3)(a) (expressions in which general definition of “regulator” does not apply), at the end insert—

“Gibraltar regulator”;

.

3

In section 33(1)(a) (withdrawal of authorisation), after “permission” insert “ or Schedule 2A permission ”.

4

In Part 5 (performance of regulated activities), after section 71I insert—

(71J) (1) This section applies to an authorised person that— (a) has a Schedule 2A permission, but (b) does not have a Part 4A permission. (2) The person is only required to comply with the provisions listed in subsection (3) if the person has a branch in the United Kingdom. (3) Those provisions are— (a) section 59(1) or (2) (approval for particular arrangements), or (b) section 63E(1) (certification of employees). (4) In this section, “branch” has the same meaning as in Schedule 2A (see paragraph 3 of that Schedule).

5

After section 137A insert—

(137AA) (1) The FCA's general rules may not make provision prohibiting a Gibraltar-based person from carrying on, or holding itself out as carrying on, an activity which it has a Schedule 2A permission to carry on in the United Kingdom. (2) Subsection (1) does not apply to rules described in section 137C, 137D or 137FD. (3) The Treasury may by regulations impose other limitations on what provision applying to Gibraltar-based persons with a Schedule 2A permission to carry on a regulated activity may be made in the FCA's general rules, but may not impose limitations relating to rules described in section 137C, 137D or 137FD. (4) Before making regulations under subsection (3), the Treasury must consult the FCA.

6

After section 137G insert—

(137GA) (1) The PRA's general rules may not make provision prohibiting a Gibraltar-based person from carrying on, or holding itself out as carrying on, an activity which it has a Schedule 2A permission to carry on in the United Kingdom. (2) The Treasury may by regulations impose other limitations on what provision applying to Gibraltar-based persons with a Schedule 2A permission to carry on a regulated activity may be made in the PRA's general rules. (3) Before making regulations under subsection (2), the Treasury must consult the PRA.

7

In section 213 (the compensation scheme), after subsection (9) insert—

(10A) But a person is not to be regarded as a relevant person in relation to a regulated activity if, at that time, the person— (a) was a Gibraltar-based person with a Schedule 2A permission to carry on the activity, and (b) fell within a prescribed category, either generally or in relation to the activity. (10B) Regulations prescribing a category of person for the purposes of subsection (10A) may, among other things, make provision by reference to— (a) whether the activity is carried on through a branch in the United Kingdom; (b) the level of protection provided by the compensation scheme and by any comparable scheme operating in Gibraltar.

8

In section 214 (provisions of the compensation scheme: general), before subsection (6) insert—

(5A) The scheme may make different provision according to whether or not a relevant person is a member of both the compensation scheme and another comparable scheme.

9

In section 224 (scheme manager's power to inspect documents held by Official Receiver etc), before subsection (4A) insert—

(4ZA) But a person is not to be regarded as a relevant person in relation to a regulated activity if, at that time, the person— (a) was a Gibraltar-based person with a Schedule 2A permission to carry on the activity, and (b) fell within a prescribed category, either generally or in relation to the activity. (4ZB) Regulations prescribing a category of person for the purposes of subsection (4ZA) may, among other things, make provision by reference to— (a) whether the activity is carried on through a branch in the United Kingdom; (b) the level of protection provided by the compensation scheme and by any comparable scheme operating in Gibraltar.

10

After section 367 insert—

(367A) (1) A regulator may not present a petition to the court under section 367 for the winding up of a Gibraltar-based person who has a Schedule 2A permission unless either regulator has been asked to do so by the Gibraltar regulator. (2) If a regulator receives a request from the Gibraltar regulator to present a petition to the court under section 367 for the winding up of a Gibraltar-based person who has a Schedule 2A permission, it must— (a) notify the other regulator of the request, and (b) provide the other regulator with such information relating to the request as it thinks fit. (3) In this section, “the Gibraltar regulator” has the meaning given in Schedule 2A (see paragraph 2 of that Schedule).

11

• (1) Section 392 (application of sections 393 and 394: warning notices and decision notices) is amended as follows.

• (2) In paragraph (a), after “412B(4) or (8)” insert “ or paragraph 38, 42 or 69 of Schedule 2A or paragraph 11, 16 or 20 of Schedule 2B ”.

• (3) In paragraph (b), after “412B(5) or (9)” insert “ or paragraph 38, 42 or 69 of Schedule 2A or paragraph 11, 16 or 20 of Schedule 2B ”.

12

• (1) Section 395 (the FCA's and PRA's procedures) is amended as follows.

• (2) In subsection (13) (meaning of “supervisory notice”)—

• (a) for “section” (in the first place it occurs) substitute “ any of the following ”,

• (b) at the beginning of each of paragraphs (za) to (g), other than paragraphs (bzb), (bzc), (bbzb) and (bba), paragraph (bbb) (inserted by Schedule 2 to this Act) and paragraph (ea) (inserted by Schedule 9 to this Act), insert “ section ”, and

• (c) at the end insert—

(h) a provision of Schedule 2A listed in subsection (14); (i) paragraph 18(3), (6) or (8)(b) of Schedule 2B.

• (3) After subsection (13) insert—

(14) The provisions of Schedule 2A mentioned in subsection (13)(h) are— (a) paragraph 29(3), (6) or (8)(b); (b) paragraph 50(3), (6) or (8)(b); (c) paragraph 60(3) or (6).

13

Omit section 409 (Gibraltar).

14

In section 417(1) (definitions), at the appropriate places insert—

“Gibraltar-based person” has the meaning given in paragraph 1 of Schedule 2A (read with Part 14 of that Schedule);

,

“Schedule 2A permission” has the meaning given in paragraph 12(4) of Schedule 2A;

, and

“Schedule 2B permission” has the meaning given in paragraph 7(6) of Schedule 2B;

.

15

In section 418 (carrying on regulated activities in the United Kingdom), after subsection (5B) insert—

(5C) The eighth case is where— (a) the person's head office or registered office is in the United Kingdom, and (b) the person is carrying on a restricted activity (as defined in paragraph 3 of Schedule 2B) in Gibraltar.

16

• (1) Section 429 (parliamentary control of statutory instruments) is amended as follows.

• (2) In subsection (2) (affirmative procedure)—

• (a) after “90B” insert “ , 137AA(3), 137GA(2) ”, and

• (b) after “333T” insert “ or paragraph 5, 6, 58(3)(a), 59(3)(a) or 60(8) of Schedule 2A ”.

• (3) At the end insert—

(9) Any provision that may be made in a statutory instrument under this Act subject to annulment in pursuance of a resolution of either House of Parliament may be made in a statutory instrument which includes regulations under Schedule 2A a draft of which has been laid before Parliament and approved by a resolution of each House.

17

In paragraph 24 of Schedule 1ZA (services for which the FCA may not charge fees), after paragraph (b) insert

, or (c) a fee to be charged in respect of the discharge of the FCA's functions under paragraph 16 of Schedule 2A or paragraph 10 or 11 of Schedule 2B.

18

In paragraph 32 of Schedule 1ZB (services for which the PRA may not charge fees), after paragraph (b) insert

, or (c) a fee to be charged in respect of the discharge of any of the PRA's functions under paragraph 16 of Schedule 2A or paragraph 10 or 11 of Schedule 2B.

Financial Services and Markets Act 2000 (Gibraltar) Order 2001 (S.I. 2001/3084)

19

The Financial Services and Markets Act 2000 (Gibraltar) Order 2001 is revoked.

SCHEDULE 9

PART 1 — Provisions to be inserted in Chapter 5 of Part 17 of the Financial Services and Markets Act 2000

1

In Chapter 5 of Part 17 of the Financial Services and Markets Act 2000 (recognised overseas schemes), before section 272 (and the italic heading before that section) insert—

(271A) (1) A collective investment scheme which is authorised under the law of a country or territory outside the United Kingdom is a recognised scheme if— (a) regulations made by the Treasury approving the country or territory for the purposes of this section are in force, (b) the scheme is of a description specified in the regulations in relation to which the country or territory is approved, (c) the operator of the scheme has applied to the FCA for recognition of the scheme, (d) the FCA has made (and has not revoked) an order granting the application, and (e) no direction under section 271L (suspension of recognition) has effect in relation to the scheme. (2) In making regulations under this section, the Treasury may have regard to any matter that they consider relevant (and see the restrictions in sections 271B and 271C). (271B) (1) The Treasury may not make regulations under section 271A approving a country or territory and specifying a description of collective investment scheme unless satisfied that the equivalent protection test is met. (2) The equivalent protection test is met if the protection afforded to participants or potential participants in the schemes by the law and practice of the country or territory is at least equivalent to that afforded to participants or potential participants in comparable authorised schemes by the law and practice of the United Kingdom under which such schemes are authorised and supervised. (3) In this section— - “comparable authorised schemes” means whichever of the following the Treasury consider to be the most appropriate— 1. authorised unit trust schemes; 2. authorised contractual schemes which are co-ownership schemes; 3. authorised contractual schemes which are partnership schemes; 4. authorised open-ended investment companies; 5. any two or more of the kinds of collective investment scheme mentioned in paragraphs (a) to (d); - “participants” means participants in the United Kingdom. (271C) (1) The Treasury may not make regulations under section 271A approving a country or territory and specifying a description of collective investment scheme unless satisfied that adequate arrangements exist, or will exist, for co-operation between the FCA and the overseas regulator. (2) In this section, “the overseas regulator” means the authority responsible for the authorisation and supervision of schemes of that description in the country or territory. (271D) (1) When considering whether to make, vary or revoke regulations under section 271A approving a country or territory and specifying a description of collective investment scheme, the Treasury may ask the FCA to prepare a report on— (a) the law and practice of the country or territory under which such schemes are authorised and supervised, or particular aspects of such law and practice, and (b) any existing or proposed arrangements for co-operation between the FCA and the overseas regulator. (2) A request for a report under subsection (1) must be made in writing. (3) If the Treasury ask for a report under subsection (1), the FCA must provide the Treasury with the report. (4) In this section, “the overseas regulator” has the same meaning as in section 271C. (271E) (1) The Treasury may by regulations— (a) provide that a section 271A scheme of a description specified in the regulations must comply with requirements specified in the regulations, and (b) impose requirements on the operator of such a scheme. (2) In making regulations under this section in relation to a description of section 271A scheme, the Treasury must have regard to any requirements imposed in relation to comparable authorised schemes by or under this Act. (3) Regulations under this section may describe requirements by reference to— (a) rules made or to be made by the FCA, or (b) other enactments. (4) The power under subsection (3) includes power to make provision by reference to rules or other enactments as amended from time to time. (5) The FCA may make, amend or revoke a rule if it considers it necessary or appropriate to do so for the purposes of a requirement imposed (or varied or withdrawn) by regulations under this section which is described by reference to a rule made or to be made by the FCA. (6) If, for the purposes of a requirement imposed (or varied or withdrawn) by regulations under this section which is described by reference to a rule made or to be made by the FCA, the Treasury consider that it is necessary or appropriate for the FCA to make, amend or revoke a rule, they may direct the FCA to do so. (7) If the Treasury give a direction under subsection (6), the FCA must comply with the direction within such time as the Treasury may specify in the direction. (8) The references in paragraphs (5) and (6) to the amendment or revocation of rules are to the amendment or revocation of rules made by the FCA. (9) Section 141A (power to make consequential amendments of references to rules) applies in relation to the FCA's power to make, amend or revoke rules under this section as it applies in relation to its power to make, amend or revoke rules under Part 9A. (10) In this section— - “comparable authorised schemes” has the same meaning as in section 271B; - “enactment” includes— 1. retained direct EU legislation, 2. an enactment comprised in subordinate legislation, 3. an enactment comprised in, or in an instrument made under, a Measure or Act of Senedd Cymru, 4. an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament, and 5. an enactment comprised in, or in an instrument made under, Northern Ireland legislation; - “subordinate legislation” has the same meaning as in the Interpretation Act 1978 (see section 21 of that Act). (271F) (1) An application for recognition of a collective investment scheme under section 271A— (a) must be made in such manner as the FCA may direct, (b) must contain the address of a place in the United Kingdom for service of notices, or other documents, required or authorised to be served on the operator under this Act, and (c) must contain or be accompanied by such information as the FCA may reasonably require for the purpose of determining the application. (2) Where requirements imposed by regulations under section 271E would apply to the scheme or its operator if the application were granted, the application must contain an explanation of how each requirement would be satisfied. (3) At any time after the application is received and before it is determined, the FCA may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application. (4) The FCA may require the applicant to present information provided under this section in such form, or to verify the information in such a way, as the FCA may direct. (5) Different directions may be given, and different requirements imposed, in relation to different applications. (271G) (1) The FCA— (a) may only make an order under section 271A granting an application under that section if it is satisfied that the conditions in subsection (2) are met, and (b) if it is so satisfied, must make such an order unless it is permitted to refuse the application under subsection (3) or required to do so under subsection (4). (2) Those conditions are— (a) that the scheme is authorised in a country or territory which is approved by the Treasury in regulations under section 271A, (b) that the scheme is of a description of scheme specified in the regulations, (c) that adequate arrangements exist for co-operation between the FCA and the overseas regulator, and (d) that, where requirements imposed by regulations under section 271E would apply to the scheme or its operator if the application were granted, each such requirement would be satisfied. (3) The FCA may refuse an application under section 271A if it appears to the FCA that the operator of the scheme— (a) has contravened a requirement imposed on them by or under this Act, or would contravene such a requirement if the application were granted, or (b) has, in purported compliance with such a requirement, knowingly or recklessly given the FCA information which is false or misleading in a material particular. (4) The FCA must refuse an application under section 271A if it considers it desirable to do so in order to protect the interests of participants or potential participants in the scheme in the United Kingdom. (5) Where the FCA receives an application under section 271A which is complete, it must give the applicant a notice under section 271H(1) or (2) before the end of the period of two months beginning with the day on which the FCA receives the application. (6) An application under section 271A is complete if the FCA considers that the application satisfies section 271F(1) and (2). (7) Where the FCA receives an application under section 271A which is not complete, it must— (a) notify the operator of the scheme that it does not consider that the application satisfies section 271F(1) or (2) (as applicable), and (b) identify the information needed to complete the application. (8) In this section, “the overseas regulator” has the same meaning as in section 271C. (271H) (1) If the FCA decides to make an order under section 271A granting an application under that section, it must give written notice of its decision to the applicant. (2) If the FCA proposes to refuse an application under section 271A, it must give the applicant a warning notice. (3) If the FCA decides to refuse the application, it must give the applicant a decision notice. (4) If the FCA gives the applicant a decision notice under subsection (3), the applicant may refer the matter to the Tribunal, except where the FCA refuses the application on the ground that it is not satisfied that a condition in section 271G(2)(a) or (c) is met. (271I) (1) The operator of a section 271A scheme must notify the FCA if the operator becomes aware that it has contravened, or expects to contravene, a requirement imposed on it by or under this Act. (2) The operator of a section 271A scheme must notify the FCA of any change to— (a) the name or address of the operator of the scheme, (b) the name or address of any trustee or depositary of the scheme, (c) the name or address of any representative of the operator in the United Kingdom, and (d) the address of the place in the United Kingdom for service of notices, or other documents, required or authorised to be served on the operator under this Act. (3) A notification under subsection (1) or (2) must be made in writing as soon as reasonably practicable. (271J) (1) The operator of a section 271A scheme must provide to the FCA such information as the FCA may direct, at such times as the FCA may direct, for the purpose of determining whether— (a) the conditions set out in section 271G(2)(a) to (c) are met, and (b) any requirements relating to the scheme or its operator imposed by or under this Act are satisfied. (2) The FCA may require the operator to present information provided under this section in such form, or to verify the information in such a way, as the FCA may direct. (3) Different directions may be given in relation to different schemes or different descriptions of scheme. (271K) (1) The FCA may make rules in relation to section 271A schemes for purposes corresponding to those for which rules may be made under section 248 in relation to authorised unit trust schemes. (2) For the purposes of subsection (1), a reference in section 248 to the manager of an authorised unit trust scheme is to be read as a reference to the operator of a section 271A scheme. (3) Rules made under this section do not affect any liability which a person may incur apart from the rules. (271L) (1) The FCA may direct that a section 271A scheme is not to be a recognised scheme— (a) for a specified period, (b) until the occurrence of a specified event, or (c) until specified conditions are complied with. (2) The FCA may give a direction under subsection (1) only if— (a) the FCA is no longer satisfied that the conditions set out in section 271G(2)(a) to (c) are met, (b) it appears to the FCA that a requirement relating to the scheme or its operator imposed by or under this Act has not been satisfied, or is likely not to be satisfied, (c) it appears to the FCA that the operator of the scheme has, in purported compliance with any such requirement, knowingly or recklessly given the FCA information which is false or misleading in a material particular, or (d) although none of paragraphs (a) to (c) applies, the FCA considers it desirable to do so in order to protect the interests of participants or potential participants in the United Kingdom. (271M) (1) A direction under section 271L takes effect— (a) immediately, if the notice given under subsection (3) states that to be the case, (b) on a day specified in the notice, or (c) if no day is specified in the notice, when the matter to which it relates is no longer open to review. (2) A direction under section 271L may be expressed to take effect immediately or on a specified day only if the FCA, having regard to its reason for giving the direction, reasonably considers that it is necessary for the direction to take effect immediately or on that day (as appropriate). (3) If the FCA proposes to give a direction under section 271L, or gives such a direction with immediate effect, it must give written notice to— (a) the operator of the scheme, and (b) the trustee or depositary of the scheme (if any). (4) The notice must— (a) set out details of the direction, (b) set out when the direction takes effect, (c) state the FCA's reasons for giving the direction and for its determination as to when the direction takes effect, (d) state that the recipient of the notice may make representations to the FCA within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), and (e) set out the recipient's right to refer the matter to the Tribunal. (5) The FCA may extend the period allowed under the notice for making representations. (6) The FCA must give written notice to the operator and (if any) the trustee or depositary of the scheme concerned if, having considered any representations made, the FCA decides— (a) to give the direction in the way proposed, or (b) if it has been given, not to revoke the direction. (7) The FCA must give written notice to the operator and (if any) the trustee or depositary of the scheme concerned if, having considered any representations made, the FCA decides— (a) not to give the direction in the way proposed, (b) to give the direction in a way other than that proposed, or (c) where the direction has been given, to revoke it. (8) A notice under subsection (6) must set out the recipient's right to refer the matter to the Tribunal. (9) A notice under subsection (7)(b) must comply with subsection (4). (10) Where a notice sets out the right of the recipient to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference. (11) This section applies to the variation of a direction as it applies to the giving of a direction. (12) For the purposes of subsection (1)(c), whether a matter is open to review is to be determined in accordance with section 391(8). (271N) (1) The FCA may revoke an order made under section 271A in relation to a collective investment scheme if— (a) the FCA is no longer satisfied that the conditions set out in section 271G(2)(a) to (c) are met, (b) it appears to the FCA that a requirement relating to the scheme or its operator imposed by or under this Act has not been satisfied, (c) it appears to the FCA that the operator of the scheme has, in purported compliance with any such requirement, knowingly or recklessly given the FCA information which is false or misleading in a material particular, or (d) although none of paragraphs (a) to (c) applies, the FCA considers it desirable to revoke the order to protect the interests of participants or potential participants in the United Kingdom. (2) If the FCA proposes to revoke an order made under section 271A, it must give a warning notice to— (a) the operator of the scheme, and (b) the trustee or depositary of the scheme (if any). (3) If the FCA decides to revoke the order— (a) it must without delay give a decision notice to the operator and (if any) the trustee or depositary of the scheme, and (b) the operator, trustee or depository may refer the matter to the Tribunal. (271O) (1) The FCA may revoke an order made under section 271A in relation to a collective investment scheme at the request of the scheme's operator. (2) If the FCA decides to do so, it must give written notice to the operator and (if any) the trustee or depositary of the scheme. (3) The FCA may refuse a request under this section if it considers that— (a) the public interest requires that any matter concerning the scheme should be investigated before a decision is taken as to whether the order should be revoked, or (b) revocation would not be in the interests of participants in the scheme. (4) If the FCA proposes to refuse a request under this section, it must give a warning notice to the operator and (if any) the trustee or depositary of the scheme. (5) If the FCA decides to refuse the request— (a) it must without delay give a decision notice to the operator and (if any) the trustee or depositary of the scheme, and (b) the operator, trustee or depositary may refer the matter to the Tribunal. (271P) (1) This section applies where— (a) the FCA gives a decision notice under section 271N(3), or a written notice under section 271O(2), in relation to a section 271A scheme, or (b) a direction given by the FCA under section 271L(1) in relation to a section 271A scheme takes effect. (2) The operator of the scheme must notify such persons as the FCA may direct that the FCA has revoked an order under section 271A for recognition of the scheme or given a direction under section 271L in relation to the scheme (as applicable). (3) A notification under subsection (2) that relates to a direction under section 271L must set out the terms of the direction. (4) A notification under subsection (2) must— (a) contain such information as the FCA may direct, and (b) be made in such form and manner as the FCA may direct. (5) Different directions may be given under subsection (2) or (4) in relation to— (a) different schemes or different descriptions of scheme; (b) different persons or descriptions of persons to whom a notification under subsection (2) must be given. (271Q) (1) This section applies, in relation to a section 271A scheme, where the Treasury vary or revoke regulations under section 271A and, as a result, the scheme ceases to be a recognised scheme because— (a) the country or territory in which the scheme is authorised is no longer approved for the purposes of that section, or (b) the scheme is no longer of a description of scheme specified in regulations under that section. (2) Where this section applies, the order given by the FCA under section 271A in relation to the scheme is revoked. (3) The Treasury may by regulations make provision, in relation to a scheme which has ceased to be recognised under section 271A by virtue of this section— (a) requiring an application under section 272 by such a scheme to be made during a period specified in the regulations or in a direction given by the FCA, and (b) modifying or disapplying section 275(1) and (2) (time limits for determining applications under section 272) for the purposes of an application under section 272 relating to such a scheme. (271R) (1) This section applies where the FCA considers that— (a) a requirement imposed by regulations under section 271E has been contravened, (b) rules made under section 271K have been contravened, (c) the operator of a section 271A scheme has contravened section 271I, 271J or 271P, or (d) the operator of a section 271A scheme has contravened a rule made, or a requirement imposed, under section 283. (2) The FCA may publish a statement to that effect. (3) Where the FCA proposes to publish a statement under subsection (2) relating to a scheme or the operator of a scheme, it must give the operator a warning notice setting out the terms of the statement. (4) If the FCA decides to publish the statement— (a) it must give the operator, without delay, a decision notice setting out the terms of the statement, and (b) the operator may refer the matter to the Tribunal. (5) After a statement under subsection (2) is published, the FCA must send a copy of it to the operator and to any person to whom a copy of the decision notice was given under section 393(4). (271S) (1) Section 271A(1) applies in relation to a part of a collective investment scheme as it applies in relation to such a scheme. (2) Accordingly, the following include a part of a scheme recognised under section 271A— (a) the reference to a scheme recognised under section 271A in the definition of “section 271A scheme” in section 237(3), and (b) other references to such a scheme (however expressed) in or in provision made under this Part of this Act (unless the contrary intention appears). (3) Provisions of or made under this Part of this Act have effect in relation to parts of schemes recognised, or seeking recognition, under section 271A with appropriate modifications. (4) The Treasury may by regulations— (a) make provision about what are, or are not, appropriate modifications for the purposes of subsection (3); (b) make provision so that a relevant enactment has effect in relation to parts of schemes recognised, or seeking recognition, under section 271A with such modifications as the Treasury consider appropriate; (c) make provision so that a relevant enactment does not have effect in relation to such parts of schemes. (5) Regulations under subsection (4)(b) or (c) may amend, repeal or revoke an enactment. (6) In this section— - “enactment” has the same meaning as in section 271E; - “relevant enactment” means an enactment passed or made before the day on which subsection (1) comes into force that makes provision in relation to collective investment schemes recognised, or seeking recognition, under section 271A.

PART 2 — Minor and consequential amendments

Financial Services and Markets Act 2000 (c. 8)

2

The Financial Services and Markets Act 2000 is amended as follows.

3

In section 138I (consultation by the FCA), after subsection (9) insert—

(9A) This section does not apply to rules made by the FCA under section 271E.

4

• (1) Section 165 (regulators' powers to require information) is amended as follows.

• (2) In subsection (7)(b), after “section” insert “ 271A or ”.

• (3) At the end insert—

(12) In subsection (7)(b), the reference to a scheme that is recognised includes a scheme a part of which is recognised.

5

In section 237(2) (Part 17 definitions), in the definition of “the operator”—

• (a) in paragraph (ab) omit “and”, and

• (b) after paragraph (b) insert

, and (ba) in relation to a recognised scheme, means the legal entity with overall responsibility for the management and performance of the functions of the scheme.

6

In section 392 (application of third party rights to notices)—

• (a) in paragraph (a), before “280(1)” insert “ 271N(2), 271R(3), ”, and

• (b) in paragraph (b), before “280(2)” insert “ 271N(3), 271R(4), ”.

7

In section 395(13) (meaning of supervisory notice), before paragraph (f) insert—

(ea) section 271M(3), (6) or (7)(b);

.

8

In section 429(2) (regulations subject to affirmative procedure), after “262,” insert “ 271S, ”.

The Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773)

9

Part 6 of the Alternative Investment Fund Managers Regulations 2013 (marketing of alternative investment funds) is amended as follows.

10

In regulation 57 (marketing of third country AIFs by full-scope UK AIFMs), after paragraph (1) insert—

(1A) An AIF does not fall within paragraph (1) if it is recognised under section 271A of the Act.

11

In regulation 58(1) (marketing of AIFs managed by small third country AIFMs), at the end insert “ , except where the AIF is recognised under section 271A of the Act ”.

12

In regulation 59 (marketing of AIFs managed by other third country AIFMs)—

• (a) in paragraph (1), at the end insert “ , except where the AIF is recognised under section 271A of the Act ”, and

• (b) in paragraph (4A), for “collective investment scheme” substitute “ AIF ”.

The Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/325)

13

Part 6 of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019 (temporary recognition of collective investment schemes) is amended as follows.

14

In regulation 62(3) (end of temporary recognition)—

• (a) in sub-paragraph (a)(i)—

• (i) before “275(3)” insert “ 271H(1) or ”, and

• (ii) for “section 272 of that Act” substitute “ section 271A or 272 of that Act (as applicable) ”,

• (b) in sub-paragraph (a)(ii)—

• (i) before “276(2)(a)” insert “ 271H(3) or ”, and

• (ii) for “section 272 of that Act” substitute “ section 271A or 272 of that Act (as applicable) ”,

• (c) in sub-paragraph (b)(ii), after “section” insert “ 271A or ”,

• (d) in sub-paragraph (c)(i), after “section” insert “ 271A or ”,

• (e) in sub-paragraph (c)(ii), for “that section” substitute “ either of those sections ”, and

• (f) in sub-paragraph (d), for “3” substitute “ 5 ”.

15

In regulation 67 (power to extend the period for temporary recognition), omit paragraph (2).

16

After regulation 67 insert—

(67A) (1) In relation to— (a) an application under section 271A of the 2000 Act relating to a stand-alone scheme that is a recognised scheme by virtue of regulation 62, or (b) an application under that section relating to the umbrella scheme of one or more sub-funds that are recognised schemes by virtue of that regulation, whether or not relating to those sub-funds, sections 271F and 271G of the 2000 Act are subject to paragraphs (2) and (3). (2) The FCA may direct that the application must be made during a period specified in the direction. (3) Section 271G(5) of the 2000 Act does not apply in relation to the application, but the application must be determined by the FCA before the end of the period for the time being specified in regulation 62(3)(d).

SCHEDULE 10

Introduction

1

The Markets in Financial Instruments Regulation is amended as follows.

Scope

2

In Article 1 (subject matter and scope), after paragraph 4 insert—

(4A) Chapter 1 of Title 7 of this Regulation also applies to third-country firms providing investment services or performing investment activities in the United Kingdom.

Definitions

3

In Article 2(1) (definitions), after point (61) insert—

(61A) “Directive 2013/36/EU” means Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms;

.

Provision of services by third-country firms following equivalence determination

4

In the heading of Title 8, for “DECISION” substitute “ DETERMINATION ”.

5

• (1) Article 46 (general provision about provision of services etc by third-country firms following an equivalence decision) is amended as follows.

• (2) In paragraph 1, for “Article 47” substitute “ Article 48 ”.

• (3) In paragraph 2—

• (a) for point (a) substitute—

(a) the Treasury has made a determination under Article 47(1) in respect of the third country; (aa) the firm, and the services or activities, fall within the scope of the determination;

, and

• (b) after point (c) insert—

(d) the firm has established the necessary arrangements and procedures to provide the information required by rules made under paragraph 6B of this Article; (e) the firm has established the necessary arrangements and procedures to comply with requirements imposed under Article 48A.

• (4) Omit paragraph 2A.

• (5) In paragraph 4—

• (a) in the first subparagraph, for the words from “adoption” to the end substitute “ making of a determination by the Treasury under Article 47(1) that the legal and supervisory arrangements of the third country in which the third-country firm is authorised satisfy the requirements described in Article 47(1). ”,

• (b) after the first subparagraph insert—

An application for registration must— (a) be made in such form and manner as the FCA may direct, and (b) contain, or be accompanied by, such information as the FCA may direct.

, and

• (c) in the following subparagraph, after “all” insert “ further ”.

• (6) In paragraph 5, in the second subparagraph, for “in writing and in a prominent way” substitute “ in writing, in a prominent way and in such form as the FCA may direct ”.

• (7) After paragraph 5 insert—

(5A) For the purposes of paragraph 5, where a third-country firm or a person acting on behalf of a third-country firm solicits a person, the provision of an investment service or activity by the third-country firm to the person is not initiated at the person's own exclusive initiative.

• (8) After paragraph 6 insert—

(6A) Third-country firms providing services or performing activities in accordance with this Article must— (a) keep the data relating to all orders and transactions in the United Kingdom in financial instruments which they have carried out, whether on own account or on behalf of a client, for a period of five years, and (b) make that data available to the FCA on request. (6B) The FCA may make rules requiring third-country firms providing services or performing activities in accordance with this Article to provide information specified in the rules to the FCA at intervals specified in the rules.

• (9) Omit paragraph 7.

Equivalence determination

6

• (1) Article 47 (equivalence determination) is amended as follows.

• (2) For paragraph 1 substitute—

(1) The Treasury may by regulations determine that the legal and supervisory arrangements of a third country ensure all of the following— (a) that firms authorised in that third country to provide investment services or perform investment activities comply with legally binding prudential, organisational and business conduct requirements which have equivalent effect to the relevant UK requirements, (b) that such firms are subject to effective supervision and enforcement ensuring compliance with the applicable legally binding prudential, organisational and business conduct requirements, and (c) that the legal framework of that third country provides for an effective equivalent system for the recognition of investment firms authorised under third country legal regimes. (1A) For the purposes of paragraph 1(a), the relevant UK requirements are the following, as they apply on the day on which the Treasury makes the regulations— (a) the requirements set out in this Regulation; (b) the requirements set out in Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms; (c) the requirements set out in CRR rules (as defined in section 144A of FSMA); (d) the requirements set out in Part 9C rules (as defined in section 143F of FSMA); (e) the requirements set out in Directive 2013/36/EU UK law and Directive 2014/65/EU UK law. (1B) The prudential, organisational and business conduct framework of a third country may be considered to have equivalent effect where that framework fulfils all of the following conditions— (a) firms providing investment services or performing investment activities in that third country are subject to authorisation and to effective supervision and enforcement on an on-going basis; (b) such firms are subject to sufficient capital requirements and, in particular, where they provide services or carry out the activities referred to in paragraph 3 or 6 of Part 3 of Schedule 2 to the Regulated Activities Order they are subject to comparable capital requirements to those that would apply if they were established in the United Kingdom; (c) such firms are subject to appropriate requirements applicable to shareholders and members of their management body; (d) such firms are subject to adequate business conduct and organisational requirements; (e) market transparency and integrity is ensured by preventing market abuse in the form of insider dealing and market manipulation. (1C) When making regulations under paragraph 1, the Treasury must take into account whether the third country is a high-risk third country within the meaning of regulation 33 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692).

• (3) In paragraph 2—

• (a) omit point (c), and

• (b) at the end insert—

(d) the procedures concerning the coordination of investigations and on-site inspections that the FCA considers necessary for the purposes of carrying out its functions under this Regulation, which must include a requirement for the FCA to give prior notice to the competent authority of the third country; (e) the procedures concerning the coordination of other supervisory activities; (f) the procedures concerning a request for data by the FCA under Article 46(6A)(b); (g) the mechanism for the FCA to obtain from a third-country firm providing services or performing activities in accordance with Article 46 further information in respect of the firm's operations by making a request to the competent authority of the third country concerned.

• (4) At the end insert—

(5) The FCA must— (a) monitor the regulatory and supervisory developments, the enforcement practices and other relevant market developments in third countries for which determinations made by the Treasury in accordance with paragraph 1 are in force in order to verify that the conditions on the basis of which those determinations were made are still fulfilled, and (b) provide a report of its findings to the Treasury on request. (6) In this Article, “Directive 2013/36/EU UK law” and “Directive 2014/65/EU UK law” mean the law of the United Kingdom which was relied on by the United Kingdom before IP completion day to implement Directive 2013/36/EU or Directive 2014/65/EU (as appropriate), as amended from time to time.

Requirements

7

After Article 48 insert—

(1) The Treasury may by regulations impose requirements on third-country firms providing investment services, or performing investment activities, in accordance with Article 46 or on a description of such firms specified in the regulations. (2) In making regulations under this Article, the Treasury must have regard to the requirements imposed on UK firms by or under this Regulation. (3) Regulations under this Article may describe requirements by reference to— (a) rules made or to be made by the FCA, or (b) other enactments. (4) The power under paragraph 3 includes power to make provision by reference to rules or other enactments as amended from time to time. (5) The FCA may make, amend or revoke a rule if it considers it necessary or appropriate to do so for the purposes of a requirement imposed (or varied or withdrawn) by regulations under this Article which is described by reference to a rule made or to be made by the FCA. (6) If, for the purposes of a requirement imposed (or varied or withdrawn) by regulations under this Article which is described by reference to a rule made or to be made by the FCA, the Treasury consider that it is necessary or appropriate for the FCA to make, amend or revoke a rule, they may direct the FCA to do so. (7) If the Treasury give a direction under paragraph 6, the FCA must comply with the direction within such time as the Treasury may specify in the direction. (8) The references in paragraphs 5 and 6 to the amendment or revocation of rules are to the amendment or revocation of rules made by the FCA. (9) In this Article— - “enactment” includes— 1. retained direct EU legislation, 2. an enactment comprised in subordinate legislation, 3. an enactment comprised in, or in an instrument made under, a Measure or Act of Senedd Cymru, 4. an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament, and 5. an enactment comprised in, or in an instrument made under, Northern Ireland legislation; - “subordinate legislation” has the same meaning as in the Interpretation Act 1978 (see section 21 of that Act); - “UK firm” means— 1. a credit institution providing investment services or performing investment activities, or 2. an investment firm,

Temporary prohibitions and restrictions and withdrawal of registration

8

• (1) Article 49 (withdrawal of registration) is amended as follows.

• (2) For the heading substitute— “ Temporary prohibitions and restrictions and withdrawal of registration ”.

• (3) Before paragraph 1 insert—

(A1) The FCA may temporarily prohibit a third-country firm from providing investment services, or performing investment activities, in the United Kingdom, or place temporary restrictions on a third-country firm's provision of such services or performance of such activities in the United Kingdom, where the third-country firm— (a) has failed to comply with a prohibition or restriction imposed on it by the FCA under Article 42, (b) has failed to comply with a request for data made by the FCA under Article 46(6A)(b) in accordance with the cooperation arrangements established under Article 47(2), (c) has failed to provide information in accordance with rules made under Article 46(6B), (d) has failed to provide information requested by the FCA in accordance with the cooperation arrangements established under Article 47(2), (e) has failed to cooperate with an investigation or on-site inspection carried out in accordance with the cooperation arrangements established under Article 47(2), or (f) has failed to comply with a requirement imposed by regulations under Article 48A. (A2) The FCA may impose more than one temporary prohibition or restriction under paragraph A1 in respect of the same failure.

• (4) In paragraph 1—

• (a) in the opening words, for “shall” substitute “ may ”,

• (b) for points (a) and (b) substitute—

(a) the FCA has well-founded reasons based on documented evidence to believe that— (i) in the provision of investment services and the performance of investment activities in the United Kingdom, the third-country firm is acting in a manner which is clearly prejudicial to the interests of investors or the orderly functioning of markets, (ii) in the provision of such services and activities in the United Kingdom, the third-country firm has seriously infringed a provision applicable to it in the third country and on the basis of which the Treasury made regulations under Article 47(1), (iii) in the provision of such services and activities in the United Kingdom, the third-country firm has seriously infringed a requirement imposed under Article 48A, or (iv) the third-country firm is not maintaining the necessary arrangements and procedures to provide the information required by rules made under Article 46(6B) or to comply with requirements under Article 48A, and

, and

• (c) omit point (d) (and the “and” before it).

• (5) After paragraph 1 insert—

(1A) In deciding the appropriate action to take under this Article, the FCA must, among other things, take into account the nature and seriousness of the risk posed to the interests of investors and the orderly functioning of markets in the United Kingdom, having regard to— (a) the duration and frequency of the risk arising, (b) whether the risk has revealed serious or systemic weaknesses in the third-country firm's procedures, (c) whether financial crime has been occasioned or facilitated by, or is otherwise attributable to, the risk, and (d) whether the risk has arisen intentionally or negligently. (1B) The FCA must inform the competent authority of the third country in due course of its intention to take action in accordance with paragraph A1 or 1.

• (6) At the end insert—

(4) In this Article, “documented evidence” includes, but is not limited to, information provided in accordance with rules made under Article 46(6B).

Temporary prohibitions and restrictions and withdrawal of registration: procedure

9

After Article 49 insert—

(1) A temporary prohibition or restriction under Article 49(A1) takes effect— (a) immediately, if the notice given under paragraph 3 states that that is the case, (b) on such date as may be specified in the notice, or (c) if no date is specified in the notice, when the matter to which it relates is no longer open to review. (2) A temporary prohibition or restriction under Article 49(A1) may be expressed to take effect immediately, or on a specified date, only if the FCA, having regard to the ground on which it is taking that action, reasonably considers that it is necessary for it to take effect immediately or (as appropriate) on that date. (3) The FCA must give written notice to a third-country firm if— (a) it proposes to take action in relation to the firm under Article 49(A1), or (b) it takes action in relation to the firm under Article 49(A1) with immediate effect. (4) The notice must— (a) give details of the temporary prohibition or restriction, (b) inform the firm when the prohibition or restriction takes effect, (c) state the FCA's reasons for taking the action and for its determination of when the prohibition or restriction takes effect, (d) inform the firm that it may make representations to the FCA within such period as may be specified in the notice (whether or not the firm has referred the matter to the Upper Tribunal), and (e) inform the firm of its right to refer the matter to the Upper Tribunal. (5) The FCA may extend the period allowed under the notice for making representations. (6) The FCA must give the third-country firm written notice if, having considered any representations made by the firm, the FCA decides— (a) to impose the proposed prohibition or restriction, or (b) if the prohibition or restriction has been imposed, not to rescind it. (7) The FCA must give the third-country firm written notice if, having considered any representations made by the firm, the FCA decides— (a) not to impose the proposed prohibition or restriction, (b) to impose a different prohibition or restriction, or (c) to rescind a prohibition or restriction that has been imposed. (8) A notice under paragraph 6 must inform the third-country firm of its right to refer the matter to the Upper Tribunal. (9) A notice under paragraph 7(b) must comply with paragraph 4. (10) If a notice informs a third-country firm of its right to refer a matter to the Upper Tribunal, it must give an indication of the procedure on such a reference. (11) A third-country firm that is aggrieved by action taken by the FCA under Article 49(A1) may refer the matter to the Upper Tribunal. (12) Part 9 of FSMA (hearings and appeals) applies in relation to references to the Upper Tribunal made under this Article as it applies in relation to references made to that Tribunal under that Act. (13) For the purposes of paragraph 1(c), section 391(8) of FSMA (matters open to review) applies as if the notice under paragraph 3 were a supervisory notice (as defined in section 395 of that Act). (1) If the FCA proposes to withdraw the registration of a third-country firm in the register established in accordance with Article 48, it must give the firm a warning notice. (2) If the FCA decides to withdraw the registration of a third-country firm in that register, it must give the firm a decision notice. (3) If the FCA gives a third-country firm a decision notice under paragraph 2, the firm may refer the matter to the Upper Tribunal. (4) Part 9 of FSMA (hearings and appeals) applies in relation to references to the Upper Tribunal made under this Article as it applies in relation to references made to that Tribunal under that Act. (5) Section 387 of FSMA (warning notices) applies in relation to a warning notice given under this Article as it applies to a warning notice given by the FCA under that Act. (6) Section 388 of FSMA (decision notices) applies in relation to a decision notice given under this Article as it applies to a decision notice given by the FCA under that Act, but as if— (a) in subsection (1)(e)(i), for “this Act” there were substituted “ Article 49B of the markets in financial instruments regulation ”, and (b) subsection (2) were omitted. (7) Section 389 of FSMA (notices of discontinuance) applies in relation to a warning notice or decision notice given under this Article as it applies in relation to a warning notice or decision notice given by the FCA under that Act, but as if subsection (2) were omitted. (8) Section 390 of FSMA (final notices) applies in relation to a decision notice given under this Article as it applies in relation to a decision notice given by the FCA under that Act. (9) Sections 393 and 394 of FSMA (third party rights and access to FCA material) apply in relation to a warning notice or decision notice given under this Article as they apply in relation to a warning notice or decision notice given by the FCA under a provision listed in section 392 of that Act. (1) The Treasury may by regulations make provision about the procedure to be followed, or rules to be applied, in connection with the giving of notices by the FCA under Article 49A or 49B. (2) The regulations may, among other things, make provision— (a) requiring, or allowing, a notice to be sent electronically; (b) requiring, or allowing, a notice to be given in another manner; (c) as to the address to which a notice must or may be sent; (d) requiring a person to provide an address to which a notice must or may be sent; (e) for treating a notice as having been given, or as having been received, on a date or at a time determined in accordance with the regulations; (f) as to what must, or may, be done if the person to whom a notice is required to be given is not an individual; (g) as to what must, or may, be done if the intended recipient of a notice is outside the United Kingdom. (3) Section 7 of the Interpretation Act 1978 (service of notice by post) has effect in relation to notices under Article 49A or 49B subject to any provision made by regulations under this Article.

FCA directions and rules

10

In the heading of Title 9, after “DIRECTIONS” insert “ , RULES ”.

11

In the heading of Article 50B (FCA Directions), at the end insert “ identifying relevant area of the UK ”.

12

After that Article insert—

(1) A direction by the FCA under Article 46(4) may make different provision in relation to different applications or categories of application. (2) A direction by the FCA under Article 46(5) may make different provision for different cases or categories of case. (3) A direction by the FCA under Article 46 may be varied or revoked by a further direction under that provision. (4) A direction by the FCA under Article 46 must— (a) be in writing, and (b) be published by the FCA in a manner suitable to bring it to the attention of persons likely to be affected by it. (1) The provisions of Part 9A of FSMA (rules and guidance) listed in paragraph 2 apply in relation to rules made by the FCA under Article 46(6B) or 48A as they apply in relation to rules made by the FCA under that Part of that Act, subject to the modification in paragraph 3. (2) The provisions are— (a) section 137T (general supplementary powers); (b) Chapter 2 (modification, waiver, contravention and procedural provisions), with the exception of section 138D (actions for damages); (c) section 141A (power to make consequential amendments of references to rules etc). (3) Section 137T applies as if the reference to authorised persons were a reference to third-country firms providing services or performing activities in accordance with Article 46.

13

The requirements of section 138I of the Financial Services and Markets Act 2000, in so far as they apply in connection with rules made under Article 46(6B) or 48A of the Markets in Financial Instruments Regulation, may be satisfied by things done before paragraph 12 of this Schedule comes into force (as well as by things done after that time).

Transitional provisions

14

Omit Article 54 (transitional provisions).

SCHEDULE 11

1

The Financial Services and Markets Act 2000 is amended as follows.

2

After section 55J insert—

(55JA) (1) Schedule 6A confers an additional power on the FCA to vary or cancel an FCA-authorised person's Part 4A permission. (2) In this section and that Schedule “FCA-authorised person” means an authorised person who is not a PRA-authorised person.

3

After Schedule 6 insert—