Part I The Regulator

1 The Financial Services Authority.

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The Authority’s general duties

2 The Authority’s general duties.

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The regulatory objectives

3 Market confidence.

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3A Financial stability

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4 Public awareness.

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5 The protection of consumers.

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6 The reduction of financial crime.

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Enhancing public understanding of financial matters etc

6AEnhancing public understanding of financial matters etc

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Corporate governance

7 Duty of Authority to follow principles of good governance.

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Arrangements for consulting practitioners and consumers

8 The Authority’s general duty to consult.

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9 The Practitioner Panel.

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10 The Consumer Panel.

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11 Duty to consider representations by the Panels.

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Reviews

12 Reviews.

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13 Right to obtain documents and information.

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Inquiries

14 Cases in which the Treasury may arrange independent inquiries.

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15 Power to appoint person to hold an inquiry.

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16 Powers of appointed person and procedure.

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17 Conclusion of inquiry.

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18 Obstruction and contempt.

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PART 1AThe Regulators

CHAPTER 1The Financial Conduct Authority

The Financial Conduct Authority

1AThe Financial Conduct Authority

(1)The body corporate previously known as the Financial Services Authority is renamed as the Financial Conduct Authority.

(2)The Financial Conduct Authority is in this Act referred to as “the FCA”.

(3)The FCA is to have the functions conferred on it by or under this Act.

(4)The FCA must comply with the requirements as to its constitution set out in Schedule 1ZA.

(5)Schedule 1ZA also makes provision about the status of the FCA and the exercise of certain of its functions.

(6)References in this Act or any other enactment to functions conferred on the FCA by or under this Act include references to functions conferred on the FCA by or under—

(a)the Insolvency Act 1986,

(b)the Banking Act 2009,

(c)the Financial Services Act 2012, ...

(cza)the Financial Guidance and Claims Act 2018,

(czb)the Civil Liability Act 2018,

(czc)the Financial Services and Markets Act 2023,

(ca)the Alternative Investment Fund Managers Regulations 2013, ...

(d)a qualifying provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order.

(e)regulations made by the Treasury under section 8 of the European Union (Withdrawal) Act 2018.

The FCA's general duties

1BThe FCA's general duties

(1)In discharging its general functions the FCA must, so far as is reasonably possible, act in a way which—

(a)is compatible with its strategic objective, and

(b)advances one or more of its operational objectives.

(2)The FCA's strategic objective is: ensuring that the relevant markets (see section 1F) function well.

(3)The FCA's operational objectives are—

(a)the consumer protection objective (see section 1C);

(b)the integrity objective (see section 1D);

(c)the competition objective (see section 1E).

(4)The FCA must, so far as is compatible with acting in a way which advances the consumer protection objective or the integrity objective, discharge its general functions in a way which promotes effective competition in the interests of consumers.

(4A)When discharging its general functions in the way mentioned in subsection (1) the FCA must, so far as reasonably possible, act in a way which, as a secondary objective, advances the competitiveness and growth objective (see section 1EB).

(5)In discharging its general functions the FCA must have regard to—

(a)the regulatory principles in section 3B, and

(b)the importance of taking action intended to minimise the extent to which it is possible for a business carried on—

(i)by an authorised person or a recognised investment exchange, or

(ii)in contravention of the general prohibition,

to be used for a purpose connected with financial crime.

(6)For the purposes of this Chapter, the FCA's general functions are—

(a)its function of making rules under this Act (considered as a whole),

(aa)its function of making technical standards in accordance with Chapter 2A of Part 9A;

(b)its function of preparing and issuing codes under this Act (considered as a whole),

(c)its functions in relation to the giving of general guidance under this Act (considered as a whole), and

(d)its function of determining the general policy and principles by reference to which it performs particular functions under this Act.

(7)Except to the extent that an order under section 50 of the Financial Services Act 2012 (orders relating to mutual societies functions) so provides, the FCA's general functions do not include functions that are transferred functions within the meaning of section 52 of that Act.

(7A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)“General guidance” has the meaning given in section 139B(5).

1CThe consumer protection objective

(1)The consumer protection objective is: securing an appropriate degree of protection for consumers.

(2)In considering what degree of protection for consumers may be appropriate, the FCA must have regard to—

(a)the differing degrees of risk involved in different kinds of investment or other transaction;

(b)the differing degrees of experience and expertise that different consumers may have;

(c)the needs that consumers may have for the timely provision of information and advice that is accurate and fit for purpose;

(d)the general principle that consumers should take responsibility for their decisions;

(e)the general principle that those providing regulated financial services should be expected to provide consumers with a level of care that is appropriate having regard to the degree of risk involved in relation to the investment or other transaction and the capabilities of the consumers in question;

(f)the differing expectations that consumers may have in relation to different kinds of investment or other transaction;

(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h)any information which the scheme operator of the ombudsman scheme has provided to the FCA pursuant to section 232A.

1DThe integrity objective

(1)The integrity objective is: protecting and enhancing the integrity of the UK financial system.

(2)The “integrity” of the UK financial system includes—

(a)its soundness, stability and resilience,

(b)its not being used for a purpose connected with financial crime,

(c)its not being affected by contraventions by persons of Article 14 (prohibition of insider dealing and of unlawful disclosure of inside information) or Article 15 (prohibition of market manipulation) of the market abuse regulation,

(d)the orderly operation of the financial markets, and

(e)the transparency of the price formation process in those markets.

1EThe competition objective

(1)The competition objective is: promoting effective competition in the interests of consumers in the markets for—

(a)regulated financial services, or

(b)services provided by a recognised investment exchange in carrying on regulated activities in respect of which it is by virtue of section 285(2) exempt from the general prohibition.

(2)The matters to which the FCA may have regard in considering the effectiveness of competition in the market for any services mentioned in subsection (1) include—

(a)the needs of different consumers who use or may use those services, including their need for information that enables them to make informed choices,

(b)the ease with which consumers who may wish to use those services, including consumers in areas affected by social or economic deprivation, can access them,

(c)the ease with which consumers who obtain those services can change the person from whom they obtain them,

(d)the ease with which new entrants can enter the market, and

(e)how far competition is encouraging innovation.

1EBCompetitiveness and growth objective

The competitiveness and growth objective is: facilitating, subject to aligning with relevant international standards—

(a)the international competitiveness of the economy of the United Kingdom (including in particular the financial services sector), and

(b)its growth in the medium to long term.

Interpretation of terms used in relation to FCA's general duties

1FMeaning of “relevant markets” in strategic objective

In section 1B(2) “the relevant markets” means—

(a)the financial markets,

(b)the markets for regulated financial services (see section 1H(2)), and

(c)the markets for services that are provided by persons other than authorised persons in carrying on regulated activities but are provided without contravening the general prohibition.

1GMeaning of “consumer”

(1)In sections 1B to 1E “consumers” means persons who—

(a)who use, have used or may use—

(i)regulated financial services, or

(ii)services that are provided by persons other than authorised persons but are provided in carrying on regulated activities, who

(b)who have relevant rights or interests in relation to any of those services,

(c)who have invested, or may invest, in financial instruments, ...

(d)who have relevant rights or interests in relation to financial instruments , or

(e)who have rights, interests or obligations that are affected by the level of a regulated benchmark; or

(f)in respect of whom a person carries on an activity which is specified in article 89G of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (seeking out etc claims) whether that activity, as carried on by that person, is a regulated activity, or is, by reason of an exclusion provided for under the 2001 Order or the 2000 Act, not a regulated activity.

(2)A person (“P”) has a “relevant right or interest” in relation to any services within subsection (1)(a) if P has a right or interest—

(a)which is derived from, or is otherwise attributable to, the use of the services by others, or

(b)which may be adversely affected by the use of the services by persons acting on P's behalf or in a fiduciary capacity in relation to P.

(3)If a person is providing a service within subsection (1)(a) as trustee, the persons who are, have been or may be beneficiaries of the trust are to be treated as persons who use, have used or may use the service.

(4)A person who deals with another person (“B”) in the course of B providing a service within subsection (1)(a) is to be treated as using the service.

(5)A person (“P”) has a “relevant right or interest” in relation to any financial instrument if P has—

(a)a right or interest which is derived from, or is otherwise attributable to, investment in the instrument by others, or

(b)a right or interest which may be adversely affected by the investment in the instrument by persons acting on P's behalf or in a fiduciary capacity in relation to P.

1HFurther interpretative provisions for sections 1B to 1G

(1)The following provisions have effect for the interpretation of sections 1B to 1G.

(2)“Regulated financial services” means services provided—

(a)by authorised persons in carrying on regulated activities;

(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)by authorised persons in communicating, or approving the communication by others of, invitations or inducements to engage in investment activityor to engage in claims management activity;

(d)by authorised persons who are investment firms, or qualifying credit institutions, in providing relevant ancillary services;

(e)by persons acting as appointed representatives;

(f)by payment service providers in providing payment services;

(g)by electronic money issuers in issuing electronic money;

(h)by sponsors to issuers of securities;

(i)by primary information providers to persons who issue financial instruments.

(3)“Financial crime” includes any offence involving—

(a)fraud or dishonesty,

(b)misconduct in, or misuse of information relating to, a financial market,

(c)handling the proceeds of crime, or

(d)the financing of terrorism.

(4)“Offence” includes an act or omission which would be an offence if it had taken place in the United Kingdom.

(5)“Issuer”, except in the expression “electronic money issuer”, has the meaning given in section 102A(6).

(6)“Financial instrument” has the meaning given in section 102A(4).

(7)“Securities” has the meaning given in section 102A(2).

(7A)“Regulated benchmark” means a benchmark, as defined in section 22... (6A), in relation to which any provision made under section 22(1A)...(c) has effect.

(8)In this section—

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• ...

• ...

• “electronic money” has the same meaning as in the Electronic Money Regulations 2011;

• “electronic money issuer” means a person who is an electronic money issuer as defined in regulation 2(1) of the Electronic Money Regulations 2011 other than a person falling within paragraph (f), (g) or (j) of the definition;

• “engage in claims management activity” has the meaning given in section 21;

• “engage in investment activity” has the meaning given in section 21;

• “financial instrument” has the meaning given in section 102A(4);

• “payment services” has the same meaning as in the Payment Services Regulations 2017;

• “payment service provider” means a person who is a payment service provider as defined in regulation 2(1) of the Payment Services Regulations 2017 other than a person falling within paragraph (i) or (j) of the definition;

• “primary information provider” has the meaning given in section 89P(2);

• “relevant ancillary service” means any service of a kind mentioned in Part 3A of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 the provision of which does not involve the carrying on of a regulated activity;

• “sponsor” has the meaning given in section 88(2).

1IMeaning of “the UK financial system”

In this Act “the UK financial system” means the financial system operating in the United Kingdom and includes—

(a)financial markets and exchanges,

(b)regulated activities(including regulated claims management activities), and

(c)other activities connected with financial markets and exchanges.

Modifications applying if core activity not regulated by PRA

1IAModifications applying if core activity not regulated by PRA

(1)If and so long as any regulated activity is a core activity (see section 142B) without also being a PRA-regulated activity (see section 22A), the provisions of this Chapter are to have effect subject to the following modifications.

(2)Section 1B is to have effect as if—

(a)in subsection (3), after paragraph (c) there were inserted—

“(d)in relation to the matters mentioned in section 1EA(2), the continuity objective (see section 1EA).”, and

(b)in subsection (4), for “or the integrity objective,” there were substituted “, the integrity objective or (in relation to the matters mentioned in section 1EA(2)) the continuity objective,”.

(3)After section 1E there is to be taken to be inserted—

1EA“Continuity objective

(1)In relation to the matters mentioned in subsection (2), the continuity objective is: protecting the continuity of the provision in the United Kingdom of core services (see section 142C).

(2)Those matters are—

(a)Part 9B (ring-fencing);

(b)ring-fenced bodies (see section 142A);

(c)any body corporate incorporated in the United Kingdom that has a ring-fenced body as a member of its group;

(d)applications under Part 4A which, if granted, would result, or would be capable of resulting, in a person becoming a ring-fenced body.

(3)The FCA's continuity objective is to be advanced primarily by—

(a)seeking to ensure that the business of ring-fenced bodies is carried on in a way that avoids any adverse effect on the continuity of the provision in the United Kingdom of core services,

(b)seeking to ensure that the business of ring-fenced bodies is protected from risks (arising in the United Kingdom or elsewhere) that could adversely affect the continuity of the provision in the United Kingdom of core services, and

(c)seeking to minimise the risk that the failure of a ring-fenced body or of a member of a ring-fenced body's group could adversely affect the continuity of the provision in the United Kingdom of core services.

(4)In subsection (3)(c), “failure” is to be read in accordance with section 2J(3) to (4).”

Power to amend objectives

1JPower to amend objectives

The Treasury may by order amend any of the following provisions—

(a)in section 1E(1), paragraphs (a) and (b),

(b)section 1G, and

(c)section 1H(2) and (5) to (8).

Recommendations

1JARecommendations by Treasury in connection with general duties

(1)The Treasury may at any time by notice in writing to the FCA make recommendations to the FCA about aspects of the economic policy of Her Majesty's Government to which the FCA should have regard when considering—

(a)how to act in a way which is compatible with its strategic objective,

(b)how to advance one or more of its operational objectives,

(c)how to discharge the duty in section 1B(4) (duty to promote effective competition in the interests of consumers),

(ca)how to discharge the duty in section 1B(4A) (duty to advance competitiveness and growth objective),

(d)the application of the regulatory principles in section 3B, and

(e)the matter mentioned in section 1B(5)(b) (importance of taking action to minimise the extent to which it is possible for a business to be used for a purpose connected with financial crime).

(2)The Treasury must make recommendations under subsection (1) at least once in each Parliament.

(2A)The FCA must respond to each recommendation made to it under subsection (1) by notifying the Treasury in writing of—

(a)action that the FCA has taken or intends to take in accordance with the recommendation, or

(b)the reasons why the FCA has not acted or does not intend to act in accordance with the recommendation.

(2B)The notice under subsection (2A) must be given before the end of 12 months beginning with the date the notice containing the recommendation was given under subsection (1).

(2C)Where the FCA has given notice under subsection (2A) in relation to a recommendation, the FCA must by notice in writing update the Treasury on the matters mentioned in subsection (2A)(a) and (b) before the end of each subsequent period of 12 months.

(2D)Subsection (2C) does not apply if the Treasury have notified the FCA in writing that no update (or further update) is required.

(2E)The FCA is not required under subsection (2A) or (2C) to provide any information whose publication would in the opinion of the FCA be against the public interest.

(3)The Treasury must—

(a)publish in such manner as they think fit any notice given under subsection (1), (2A) or (2C), and

(b)lay a copy of it before Parliament.

Guidance about objectives

1KGuidance about objectives

(1)The general guidance given by the FCA under section 139A must include guidance about how it intends to advance its operational objectives in discharging its general functions in relation to different categories of authorised person or regulated activity.

(1A)The reference in subsection (1) to the FCA’s operational objectives includes, in its application as a secondary objective, the competitiveness and growth objective (see section 1EB).

(2)Before giving or altering any guidance complying with subsection (1), the FCA must consult the PRA.

Supervision, monitoring and enforcement

1LSupervision, monitoring and enforcement

(1)The FCA must maintain arrangements for supervising authorised persons.

(2)The FCA must maintain arrangements designed to enable it to determine whether persons other than authorised persons are complying—

(a)with requirements imposed on them by or under this Act, in cases where the FCA is the appropriate regulator for the purposes of Part 14 (disciplinary measures), ...

(aa)with requirements imposed on them by the Alternative Investment Fund Managers Regulations 2013, or

(b)with requirements imposed on them by any qualifying provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order.

(3)The FCA must also maintain arrangements for enforcing compliance by persons other than authorised persons with relevant requirements, within the meaning of Part 14, in cases where the FCA is the appropriate regulator for the purposes of any provision of that Part.

Arrangements for consulting practitioners and consumers

1MThe FCA's general duty to consult

The FCA must make and maintain effective arrangements for consulting practitioners and consumers on the extent to which its general policies and practices are consistent with its general duties under section 1B ....

1MAComposition of Panels

(1)A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under any of sections 1N to 1QA or 138IA.

(2)Subsection (1) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(3)Regulations under subsection (2) may make provision in respect of a panel—

(a)generally, or

(b)only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).

1NThe FCA Practitioner Panel

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the FCA Practitioner Panel”) to represent the interests of practitioners.

(2)The FCA must appoint one of the members of the FCA Practitioner Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The FCA must appoint to the FCA Practitioner Panel such—

(a)persons representing authorised persons, and

(b)persons representing recognised investment exchanges,

as it considers appropriate.

(5)The FCA may appoint to the FCA Practitioner Panel such other persons as it considers appropriate.

(6)Subsections (4) and (5) are subject to section 1MA.

1OThe Smaller Business Practitioner Panel

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Smaller Business Practitioner Panel”) to represent the interests of eligible practitioners.

(2)“Eligible practitioners” means authorised persons of a description specified in a statement maintained by the FCA.

(3)The FCA must appoint one of the members of the Smaller Business Practitioner Panel to be its chair.

(4)The Treasury's approval is required for the appointment or dismissal of the chair.

(5)The FCA must appoint to the Smaller Business Practitioner Panel such—

(a)individuals who are eligible practitioners, and

(b)persons representing eligible practitioners,

as it considers appropriate.

(6)The FCA may appoint to the Smaller Business Practitioner Panel such other persons as it considers appropriate.

(6A)Subsections (5) and (6) are subject to section 1MA.

(7)In making the appointments, the FCA must have regard to the desirability of ensuring the representation of eligible practitioners carrying on a range of regulated activities.

(8)The FCA may revise the statement maintained under subsection (2).

(9)The FCA must—

(a)give the Treasury a copy of the statement or revised statement without delay, and

(b)publish the statement as for the time being in force in such manner as it thinks fit.

1PThe Markets Practitioner Panel

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Markets Practitioner Panel”) to represent the interests of practitioners who are likely to be affected by the exercise by the FCA of its functions relating to markets, including its functions under Parts 6, 8A and 18.

(2)The FCA must appoint one of the members of the Markets Practitioner Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The FCA must appoint to the Markets Practitioner Panel such persons to represent the interests of persons within subsection (5) as it considers appropriate.

(5)The persons within this subsection are—

(a)authorised persons,

(b)persons who issue financial instruments,

(c)sponsors, as defined in section 88(2),

(d)recognised investment exchanges, and

(e)primary information providers, as defined in section 89P(2).

(6)The FCA may appoint to the Markets Practitioner Panel such other persons as it considers appropriate.

(7)Subsections (4) to (6) are subject to section 1MA.

1QThe Consumer Panel

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Consumer Panel”) to represent the interests of consumers.

(2)The FCA must appoint one of the members of the Consumer Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The FCA may appoint to the Consumer Panel such consumers, or persons representing the interests of consumers, as it considers appropriate.

(4A)Subsection (4) is subject to section 1MA.

(5)The FCA must secure that membership of the Consumer Panel is such as to give a fair degree of representation to those who are using, or are or may be contemplating using, services otherwise than in connection with businesses carried on by them.

(5A)If it appears to the Consumer Panel that any matter being considered by it is relevant to the extent to which the general policies and practices of the PRA are consistent with the PRA's general duties under sections 2B to 2H, it may communicate to the PRA any views relating to that matter.

(5B)The PRA may arrange to meet any of the FCA's expenditure on the Consumer Panel which is attributable to the Panel's functions under subsection (5A).

(6)Sections 425A and 425B (meaning of “consumers”) apply for the purposes of this section, but the references to consumers in this section do not include consumers who are authorised persons.

1QAThe Listing Authority Advisory Panel

(1)Arrangements under section 1M must include the establishment and maintenance of a panel of persons (to be known as “the Listing Authority Advisory Panel”) to represent the interests of practitioners who are likely to be affected by the exercise by the FCA of its relevant functions.

(2)The reference in subsection (1) to the FCA’s relevant functions is to its functions relating to the listing, issue or trading of products on recognised investment exchanges and other markets the operation of which is regulated by the FCA, including in particular—

(a)the issuing of transferable securities, and

(b)the trading of transferable securities on regulated markets and multilateral trading facilities.

(3)The FCA must appoint one of the members of the Listing Authority Advisory Panel to be the chair of the Panel.

(4)The Treasury’s approval is required for the appointment or dismissal of the chair.

(5)The FCA must appoint to the Listing Authority Advisory Panel such persons to represent the interests of issuers and investors as it considers appropriate.

(6)The FCA may appoint to the Listing Authority Advisory Panel such other persons as it considers appropriate.

(7)Subsections (5) and (6) are subject to section 1MA.

(8)In this section—

• “multilateral trading facility”, “recognised investment exchange” and “regulated markets” have the same meaning as in Part 18 (see section 313(1));

• “transferable securities” has the meaning given by section 102A(3).

1RDuty to consider representations made by the Panels

(1)The FCA must consider representations that are made to it in accordance with arrangements made under section 1M.

(2)The FCA must from time to time publish in such manner as it thinks fit responses to the representations.

1RAStatement of policy on panel appointments

(1)The FCA must prepare and publish a statement of policy in relation to the appointment of members of its statutory panels.

(2)The statement must provide information about—

(a)the process adopted for making appointments;

(b)matters considered in determining who is appointed.

(3)The statement may provide whatever other information in relation to the making of appointments that the FCA considers appropriate.

(4)The FCA may alter or replace a statement published under this section.

(5)The FCA must publish a statement as altered or replaced under subsection (4).

(6)Before publishing a statement under this section the FCA must—

(a)consult the Treasury about the proposed statement, and

(b)have regard to any representations the Treasury make in response to the consultation.

(7)Publication under this section is to be made in such manner as the FCA considers best designed to bring the statement to the attention of the public.

(8)In this section “statutory panel” means a panel established under section 1N, 1O, 1P, 1Q, 1QA or 138IA.

Requirements for public consultation

1RBRequirements in connection with public consultations

(1)This section applies where the FCA issues a public consultation.

(2)The FCA must include information in the consultation about any engagement by the FCA with the statutory panels of the FCA, the PRA or the Payment Systems Regulator in relation to the matters being consulted on.

(3)The FCA is not required under subsection (2) to include any information whose publication would in the opinion of the FCA be against the public interest.

(4)For the purposes of this section, the FCA issues a public consultation if it publishes the draft of any proposals for the purpose of bringing them to the attention of the public (whether or not under a duty to do so imposed by an enactment).

(5)In this section “statutory panel”—

(a)in relation to the FCA, has the meaning given by section 1RA(8),

(b)in relation to the PRA, has the meaning given by section 2NA(8), and

(c)in relation to the Payment Systems Regulator, means a panel established under section 103(3) of the Financial Services (Banking Reform) Act 2013.

Reviews

1SReviews

(1)The Treasury may appoint an independent person to conduct a review of the economy, efficiency and effectiveness with which the FCA has used its resources in discharging its functions.

(2)A review may be limited by the Treasury to such functions of the FCA (however described) as the Treasury may specify in appointing the person to conduct it.

(3)A review is not to be concerned with the merits of the FCA's general policy or principles in complying with its general duties under section 1B(1) and (4) ....

(4)On completion of a review, the person conducting it must make a written report to the Treasury—

(a)setting out the result of the review, and

(b)making such recommendations (if any) as the person considers appropriate.

(5)A copy of the report must be—

(a)laid before Parliament, and

(b)published in such manner as the Treasury consider appropriate.

(6)Any expenses reasonably incurred in the conduct of the review are to be met by the Treasury out of money provided by Parliament.

(7)“Independent” means appearing to the Treasury to be independent of the FCA.

1TRight to obtain documents and information

(1)A person conducting a review under section 1S—

(a)has a right of access at any reasonable time to all such documents as the person may reasonably require for the purposes of the review, and

(b)may require any person holding or accountable for any such document to provide such information and explanation as are reasonably necessary for that purpose.

(2)Subsection (1) applies only to documents in the custody of or under the control of the FCA.

(3)An obligation imposed on a person as a result of the exercise of the powers conferred by subsection (1) is enforceable by injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.

CHAPTER 2The Prudential Regulation Authority

The Prudential Regulation Authority

2AThe Prudential Regulation Authority

(1)The “Prudential Regulation Authority” is the Bank of England.

(2)The Bank's functions as the Prudential Regulation Authority—

(a)are to be exercised by the Bank acting through its Prudential Regulation Committee (see Part 3A of the Bank of England Act 1998), and

(b)are not exercisable by the Bank in any other way.

(3)References in this Act or any other enactment to the Prudential Regulation Authority do not include the Bank of England acting otherwise than in its capacity as the Prudential Regulation Authority.

(4)References in this Act to the Bank of England do not (unless otherwise provided) include the Bank acting in its capacity as the Prudential Regulation Authority.

(5)Subsections (3) and (4) do not apply to this section.

(6)Subsection (4) does not apply for the interpretation of references to the court of directors of the Bank of England, or to a Deputy Governor or committee of the Bank.

(7)The Prudential Regulation Authority is referred to in this Act as the PRA.

2ABFunctions of the PRA

(1)The PRA is to have the functions conferred on it by or under this Act.

(2)Schedule 1ZB makes provision about functions of the PRA.

(3)References in this Act or any other enactment to functions conferred on the PRA by or under this Act include references to functions conferred on the PRA by or under—

(a)the Insolvency Act 1986,

(b)the Banking Act 2009,

(c)the Financial Services Act 2012, ...

(ca)the Financial Services and Markets Act 2023,

(d)a qualifying provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order.or

(e)regulations made by the Treasury under section 8 of the European Union (Withdrawal) Act 2018.

The PRA's general duties

2BThe PRA's general objective

(1)In discharging its general functions the PRA must, so far as is reasonably possible, act in a way which advances its general objective.

(2)The PRA's general objective is: promoting the safety and soundness of PRA-authorised persons.

(3)That objective is to be advanced primarily by—

(a)seeking to ensure that the business of PRA-authorised persons is carried on in a way which avoids any adverse effect on the stability of the UK financial system, ...

(b)seeking to minimise the adverse effect that the failure of a PRA-authorised person could be expected to have on the stability of the UK financial system , and

(c)discharging its general functions in relation to the matters mentioned in subsection (4A) in a way that seeks to—

(i)ensure that the business of ring-fenced bodies is carried on in a way that avoids any adverse effect on the continuity of the provision in the United Kingdom of core services,

(ii)ensure that the business of ring-fenced bodies is protected from risks (arising in the United Kingdom or elsewhere) that could adversely affect the continuity of the provision in the United Kingdom of core services, and

(iii)minimise the risk that the failure of a ring-fenced body or of a member of a ring-fenced body's group could affect the continuity of the provision in the United Kingdom of core services.

(4)The adverse effects mentioned in subsection (3)(a) and (b) may, in particular, result from the disruption of the continuity of financial services.

(4A)The matters referred to in subsection (3)(c) are—

(a)Part 9B (ring-fencing);

(b)ring-fenced bodies (see section 142A);

(c)any body corporate incorporated in the United Kingdom that has a ring-fenced body as a member of its group;

(d)applications under Part 4A which, if granted, would result, or would be capable of resulting, in a person becoming a ring-fenced body.

(5)In this Act “PRA-authorised person” means an authorised person who has permission—

(a)given under Part 4A, or

(b)resulting from any other provision of this Act,

to carry on regulated activities that consist of or include one or more PRA-regulated activities (see section 22A).

(6)Subsection (1) is subject to sections 2C and 2D.

2CInsurance objective

(1)In discharging its general functions so far as relating to a PRA-regulated activity relating to the effecting or carrying out of contracts of insurance or PRA-authorised persons carrying on that activity, the PRA must, so far as is reasonably possible, act in a way—

(a)which is compatible with its general objective and its insurance objective, and

(b)which the PRA considers most appropriate for the purpose of advancing those objectives.

(2)The PRA's insurance objective is: contributing to the securing of an appropriate degree of protection for those who are or may become policyholders.

(3)This section applies only if the effecting or carrying out of contracts of insurance as principal is to any extent a PRA-regulated activity.

2DPower to provide for additional objectives

(1)Subsection (2) applies to an order under section 22A which—

(a)is made at any time after the coming into force of the first order under that section, and

(b)contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order is that an activity would become a PRA-regulated activity.

(2)An order to which this subsection applies may specify an additional objective (“the specified objective”) in relation to specified activities that become PRA-regulated activities by virtue of the order (“the additional activities”).

(3)In discharging its general functions so far as relating to the additional activities or PRA-authorised persons carrying on those activities, the PRA must, so far as is reasonably possible, act in a way—

(a)which is compatible with its general objective and the specified objective, and

(b)which the PRA considers most appropriate for the purpose of advancing those objectives.

2EStrategy

(1)The PRA must—

(a)determine its strategy in relation to its objectives, and

(b)from time to time review, and if necessary revise, the strategy.

(2)Before determining or revising its strategy, the PRA must consult the court of directors of the Bank of England about a draft of the strategy or of the revisions.

(3)The PRA must determine its strategy within 12 months of the coming into force of this section.

(4)The PRA must carry out and complete a review of its strategy before the end of each relevant period.

(5)The relevant period is 12 months beginning with the date on which the previous review was completed, except that in the case of the first review the relevant period is the period of 12 months beginning with the date on which the strategy was determined under subsection (3).

(6)The PRA must publish its strategy.

(7)If the strategy is revised the PRA must publish the revised strategy.

(8)Publication under subsection (6) or (7) is to be in such manner as the PRA thinks fit.

2FInterpretation of references to objectives

In this Act, a reference, in relation to any function of the PRA, to the objectives of the PRA is a reference to its general objective but—

(a)so far as the function is exercisable in relation to the activity of effecting or carrying out contracts of insurance, or PRA-authorised persons carrying on that activity, is a reference to its general objective and its insurance objective;

(b)so far as the function is exercisable in relation to an activity to which an objective specified by order by virtue of section 2D(2) relates, or PRA-authorised persons carrying on that activity, is a reference to its general objective and the objective specified by the order.

2GLimit on effect of sections 2B to 2D

Nothing in sections 2B to 2D is to be regarded as requiring the PRA to ensure that no PRA-authorised person fails.

2HSecondary objectives and duty to have regard to regulatory principles

(1)When discharging its general functions in a way that advances its objectives (see section 2F), the PRA must, so far as reasonably possible, act in a way that advances the following secondary objectives—

(a)the competition objective, and

(b)the competitiveness and growth objective.

(1A)The competition objective is: facilitating effective competition in the markets for services provided by PRA-authorised persons in carrying on regulated activities.

(1B)The competitiveness and growth objective is: facilitating, subject to aligning with relevant international standards—

(a)the international competitiveness of the economy of the United Kingdom (including in particular the financial services sector through the contribution of PRA-authorised persons), and

(b)its growth in the medium to long term.

(2)In discharging its general functions, the PRA must also have regard to the regulatory principles in section 3B.

2IGuidance about objectives

(1)The PRA must give, and from time to time review, guidance about how it intends to advance its objectives in discharging its general functions in relation to different categories of PRA-authorised person or PRA-regulated activity.

(1A)The reference in subsection (1) to the PRA’s objectives includes, in their application as secondary objectives, the competition objective and competitiveness and growth objective (see section 2H).

(2)Before giving or altering any guidance complying with subsection (1), the PRA must consult the FCA.

(3)The PRA must publish the guidance as for the time being in force.

2JInterpretation of Chapter 2

(1)For the purposes of this Chapter, the PRA's general functions are—

(a)its function of making rules under this Act (considered as a whole),

(aa)its function of making technical standards in accordance with Chapter 2A of Part 9A;

(b)its function of preparing and issuing codes under this Act (considered as a whole), and

(c)its function of determining the general policy and principles by reference to which it performs particular functions under this Act.

(2)Except to the extent that an order under section 50 of the Financial Services Act 2012 (orders relating to mutual societies functions) so provides, the PRA's general functions do not include functions that are transferred functions within the meaning of section 52 of that Act.

(3)For the purposes of this Chapter, the cases in which an authorised person (“P”) is to be regarded as failing include those where—

(a)P enters insolvency,

(b)any of the stabilisation options in Part 1 of the Banking Act 2009 is achieved in relation to P, or

(c)P falls to be taken for the purposes of the compensation scheme to be unable, or likely to be unable, to satisfy claims against P.

(3A)For the purposes of this Chapter, the cases in which a person (“P”) other than an authorised person is to be regarded as failing include any case where P enters insolvency.

(4)In subsections (3)(a) and (3A) “insolvency” includes—

(a)bankruptcy,

(b)liquidation,

(c)bank insolvency,

(d)administration,

(e)bank administration,

(f)receivership,

(g)a composition between P and P's creditors, and

(h)a scheme of arrangement of P's affairs.

Supervision

2KArrangements for supervision of PRA-authorised persons

The PRA must maintain arrangements for supervising PRA-authorised persons.

Arrangements for consulting practitioners

2LThe PRA's general duty to consult

The PRA must make and maintain effective arrangements for consulting PRA-authorised persons or, where appropriate, persons appearing to the PRA to represent the interests of such persons on the extent to which its general policies and practices are consistent with its general duties under sections 2B to 2H.

2LAComposition of Panels

(1)A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under any of sections 2M, 2MA or 138JA.

(2)Subsection (1) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(3)Regulations under subsection (2) may make provision in respect of a panel—

(a)generally, or

(b)only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).

2MThe PRA Practitioner Panel

(1)Arrangements under section 2L must include the establishment and maintenance of a panel of persons (to be known as “the PRA Practitioner Panel”) to represent the interests of practitioners.

(2)The PRA must appoint one of the members of the PRA Practitioner Panel to be its chair.

(3)The Treasury's approval is required for the appointment or dismissal of the chair.

(4)The PRA must appoint to the PRA Practitioner Panel such persons representing PRA-authorised persons as it considers appropriate.

(5)The PRA may appoint to the PRA Practitioner Panel such other persons as it considers appropriate.

(6)Subsections (4) and (5) are subject to section 2LA.

2MAThe Insurance Practitioner Panel

(1)Arrangements under section 2L must include the establishment and maintenance of a panel of persons (to be known as “the Insurance Practitioner Panel”) to represent the interests of practitioners involved in the carrying on of the activity of effecting or carrying out of contracts of insurance.

(2)The PRA must appoint one of the members of the Insurance Practitioner Panel to be the chair of the Panel.

(3)The Treasury’s approval is required for the appointment or dismissal of the chair.

(4)The PRA must appoint to the Insurance Practitioner Panel at least one person representing PRA-authorised persons engaged in the activity of effecting or carrying out of contracts of insurance.

(5)The PRA may appoint to the Insurance Practitioner Panel such other persons as it considers appropriate.

(6)Subsections (4) and (5) are subject to section 2LA.

2NDuty to consider representations

(1)The PRA must consider representations that are made to it in accordance with arrangements made under section 2L.

(2)The PRA must from time to time publish in such manner as it thinks fit responses to the representations.

2NAStatement of policy on panel appointments

(1)The PRA must prepare and publish a statement of policy in relation to the appointment of members of its statutory panels.

(2)The statement must provide information about—

(a)the process adopted for making appointments;

(b)matters considered in determining who is appointed.

(3)The statement may provide whatever other information in relation to the making of appointments that the PRA considers appropriate.

(4)The PRA may alter or replace a statement published under this section.

(5)The PRA must publish a statement as altered or replaced under subsection (4).

(6)Before publishing a statement under this section the PRA must—

(a)consult the Treasury about the proposed statement, and

(b)have regard to any representations the Treasury make in response to the consultation.

(7)Publication under this section is to be made in such manner as the PRA considers best designed to bring the statement to the attention of the public.

(8)In this section “statutory panel” means a panel established under section 2M, 2MA or 138JA.

Requirements for public consultation

2NBRequirements in connection with public consultations

(1)This section applies where the PRA issues a public consultation.

(2)The PRA must include information in the consultation about any engagement by the PRA with the statutory panels of the FCA, the PRA or the Payment Systems Regulator in relation to the matters being consulted on.

(3)The PRA is not required under subsection (2) to include any information whose publication would in the opinion of the PRA be against the public interest.

(4)For the purposes of this section, the PRA issues a public consultation if it publishes the draft of any proposals for the purpose of bringing them to the attention of the public (whether or not under a duty to do so imposed by an enactment).

(5)In this section “statutory panel” has the meaning given by section 1RB(5).

Reviews

2OReviews

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2PRight to obtain documents and information

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER 3Further provisions relating to FCA and PRA

Introductory

3AMeaning of “regulator”

(1)This section has effect for the interpretation of this Act.

(2)The FCA and the PRA are the “regulators”, and references to a regulator are to be read accordingly.

(3)Subsection (2) does not affect—

(a)the meaning of the following expressions—

• “home state regulator”;

• “host state regulator”;

• “overseas regulator”; ...

(b)the meaning of “the appropriate regulator” in Part 18 (recognised investment exchanges, clearing houses and CSDs) or

( c)the meaning of “regulator” in sections 410A and 410B (fees to meet certain expenses of Treasury).

Regulatory principles

3BRegulatory principles to be applied by both regulators

(1)In relation to the regulators, the regulatory principles referred to in section 1B(5)(a) and 2H(2) are as follows—

(a)the need to use the resources of each regulator in the most efficient and economic way;

(b)the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;

(c)the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term;

(c)the need to contribute towards achieving compliance by the Secretary of State with section 1 of the Climate Change Act 2008 (UK net zero emissions target) and section 5 of the Environment Act 2021 (environmental targets) where each regulator considers the exercise of its functions to be relevant to the making of such a contribution;

(d)the general principle that consumers should take responsibility for their decisions;

(e)the responsibilities of the senior management of persons subject to requirements imposed by or under this Act, including those affecting consumers, in relation to compliance with those requirements;

(f)the desirability where appropriate of each regulator exercising its functions in a way that recognises differences in the nature of, and objectives of, businesses carried on by different persons (including different kinds of person such as mutual societies and other kinds of business organisation) subject to requirements imposed by or under this Act;

(g)the desirability in appropriate cases of each regulator publishing information relating to persons on whom requirements are imposed by or under this Act, or requiring such persons to publish information, as a means of contributing to the advancement by each regulator of its objectives;

(h)the principle that the regulators should exercise their functions as transparently as possible.

(2)“Consumer” has the meaning given in section 1G.

(3)“Objectives”—

(a)in relation to the FCA means—

(i)operational objectives, and

(ii)in its application as a secondary objective, the competitiveness and growth objective (see section 1EB), and

(b)in relation to the PRA means—

(i)the PRA’s objectives, and

(ii)in their application as secondary objectives, the competition objective and competitiveness and growth objective (see section 2H).

(3A)“Mutual society” has the same meaning as in section 138K.

(4)The Treasury may by order amend subsection (2).

Corporate governance

3CDuty to follow principles of good governance

In managing its affairs, the FCA must have regard to such generally accepted principles of good corporate governance as it is reasonable to regard as applicable to it.

Relationship between FCA and PRA

3DDuty of FCA and PRA to ensure co-ordinated exercise of functions

(1)The regulators must co-ordinate the exercise of their respective functions conferred by or under this Act with a view to ensuring—

(a)that each regulator consults the other regulator (where not otherwise required to do so) in connection with any proposed exercise of a function in a way that may have a material adverse effect on the advancement by the other regulator of any of its objectives;

(b)that where appropriate each regulator obtains information and advice from the other regulator in connection with the exercise of its functions in relation to matters of common regulatory interest in cases where the other regulator may be expected to have relevant information or relevant expertise;

(c)that where either regulator exercises functions in relation to matters of common regulatory interest, both regulators comply with their respective duties under section 1B(5)(a) or 2H(1)(a), so far as relating to the regulatory principles in section 3B(1)(a) and (b).

(2)The duty in subsection (1) applies only to the extent that compliance with the duty—

(a)is compatible with the advancement by each regulator of any of its objectives, and

(b)does not impose a burden on the regulators that is disproportionate to the benefits of compliance.

(3)A function conferred on either regulator by or under this Act relates to matters of common regulatory interest if—

(a)the other regulator exercises similar or related functions in relation to the same persons,

(b)the other regulator exercises functions which relate to different persons but relate to similar subject-matter, or

(c)its exercise could affect the advancement by the other regulator of any of its objectives.

(4)In this section, “objectives”—

(a)in relation to the FCA means—

(i)operational objectives, or the purpose for which the FCA must exercise its functions under Part 8B (see section 131U(1)), and

(ii)in its application as a secondary objective, the competitiveness and growth objective (see section 1EB), and

(b)in relation to the PRA means—

(i)the PRA’s objectives, and

(ii)in their application as secondary objectives, the competition objective and competitiveness and growth objective (see section 2H).

(5)Where a regulator is proposing to exercise a function that is not one of its general functions, the reference to “objectives” in subsection (1)(a) does not include the secondary objectives mentioned in subsection (4)(a)(ii) and (b)(ii).

(6)In this section, “general functions”—

(a)in relation to the FCA, has the same meaning as in section 1B(6), and

(b)in relation to the PRA, has the same meaning as in section 2J(1).

3EMemorandum of understanding

(1)The regulators must prepare and maintain a memorandum which describes in general terms—

(a)the role of each regulator in relation to the exercise of functions conferred by or under this Act which relate to matters of common regulatory interest, and

(b)how the regulators intend to comply with section 3D in relation to the exercise of such functions.

(2)The memorandum may in particular contain provisions about how the regulators intend to comply with section 3D in relation to—

(a)applications for Part 4A permission;

(b)the variation of permission;

(c)the imposition of requirements;

(d)the obtaining and disclosure of information;

(e)cases where a PRA-authorised person is a member of a group whose other members include one or more other authorised persons (whether or not PRA-authorised persons);

(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(g)the making of rules;

(ga)directions under section 71O (designated activities: directions);

(h)directions under section 138A (modification or waiver of rules);

(i)powers to appoint competent persons under Part 11 (information gathering and investigations) to conduct investigations on their behalf;

(j)functions under Part 12 (control over authorised persons);

(k). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(l)functions under Part 19 (Lloyd's);

(m)functions under section 347 (record of authorised persons etc.);

(n)functions under Part 24 (insolvency);

(o)fees payable to either regulator.

(3)The memorandum must contain provision about the co-ordination by the regulators of—

(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)their relations with regulatory bodies outside the United Kingdom, and

(c)the exercise of their functions in relation to the compensation scheme.

(4)The regulators must review the memorandum at least once in each calendar year.

(5)The regulators must give the Treasury a copy of the memorandum and any revised memorandum.

(6)The Treasury must lay before Parliament a copy of any document received by them under this section.

(7)The regulators must ensure that the memorandum as currently in force is published in the way appearing to them to be best calculated to bring it to the attention of the public.

(8)The memorandum need not relate to any aspect of compliance with section 3D if the regulators consider—

(a)that publication of information about that aspect would be against the public interest, or

(b)that that aspect is a technical or operational matter not affecting the public.

(9)The reference in subsection (1)(a) to matters of common regulatory interest is to be read in accordance with section 3D(3).

3FWith-profits insurance policies

(1)The regulators must prepare and maintain a memorandum which describes in general terms—

(a)the role of each regulator in relation to the exercise of functions conferred by or under this Act so far as they relate to with-profits insurers, and

(b)how the regulators intend to comply with section 3D in relation to the exercise of those functions so far as they relate to the effecting or carrying out of with-profits policies by with-profits insurers.

(2)The memorandum required by this section may be combined with the memorandum required by section 3E.

(3)If the memorandum required by this section is contained in a separate document, the PRA and the FCA must publish the memorandum as currently in force in such manner as they think fit.

(4)Subsections (1) to (3) apply only if the effecting or carrying out of with-profits policies is a PRA-regulated activity.

(5)For the purposes of this section—

(a)a “with-profits policy” is a contract of insurance under which the policyholder is eligible to receive a financial benefit at the discretion of the insurer;

(b)a “with-profits insurer” is a PRA-authorised person who has a Part 4A permission, or permission resulting from any other provision of this Act, relating to the effecting or carrying out of with-profits policies (whether or not the permission also relates to contracts of insurance of other kinds).

(6)The Treasury may by order amend the definition of “with-profits policy” applying for the purposes of this section.

3GPower to establish boundary between FCA and PRA responsibilities

(1)The Treasury may by order specify matters that, in relation to the exercise by either regulator of its functions relating to PRA-authorised persons, are to be, or are to be primarily, the responsibility of one regulator rather than the other.

(2)The order may—

(a)provide that one regulator is or is not to have regard to specified matters when exercising specified functions;

(b)require one regulator to consult the other.

3HParliamentary control of orders under section 3G

(1)No order may be made under section 3G unless—

(a)a draft of the order has been laid before Parliament and approved by a resolution of each House, or

(b)subsection (3) applies.

(2)Subsection (3) applies if an order under section 3G contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without a draft being so laid and approved.

(3)Where this subsection applies the order—

(a)must be laid before Parliament after being made, and

(b)ceases to have effect at the end of the relevant period unless before the end of that period the order is approved by a resolution of each House of Parliament (but without that affecting anything done under the order or the power to make a new order).

(4)The “relevant period” is a period of 28 days beginning with the day on which the order is made.

(5)In calculating the relevant period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.

Power of PRA to restrain proposed action by FCA

3IPower of PRA to require FCA to refrain from specified action

(1)Where the first, second and third conditions are met, the PRA may give a direction under this section to the FCA.

(2)The first condition is that the FCA is proposing—

(a)to exercise any of its regulatory powers in relation to PRA-authorised persons generally, a class of PRA-authorised persons or a particular PRA-authorised person, or

(b)to exercise any of its insolvency powers in relation to—

(i)a PRA-authorised person,

(ii)an appointed representative whose principal, or one of whose principals, is a PRA-authorised person, or

(iii)a person who is carrying on a PRA-regulated activity in contravention of the general prohibition.

(3)In subsection (2)—

(a)“regulatory powers”, in relation to the FCA, means

(i)its powers in relation to the regulation of authorised persons, other than its powers in relation to consent for the purposes of section 55F or 55I , a power conferred on it by sections 234I to 234M or its powers under Part 24 , or

(ii)its powers in relation to designated activities under Part 5A;

(b)“insolvency powers”, in relation to the FCA, means its powers under Part 24.

(4)The second condition is that the PRA is of the opinion that the exercise of the power in the manner proposed may—

(a)threaten the stability of the UK financial system, ...

(b)result in the failure of a PRA-authorised person in a way that would adversely affect the UK financial system , or

(c)threaten the continuity of core services provided in the United Kingdom.

(5)The third condition is that the PRA is of the opinion that the giving of the direction is necessary in order to avoid the possible consequence falling within subsection (4).

(6)A direction under this section is a direction requiring the FCA not to exercise the power or not to exercise it in a specified manner.

(7)The direction may be expressed to have effect during a specified period or until revoked.

(8)The FCA is not required to comply with a direction under this section if or to the extent that in the opinion of the FCA compliance would be incompatible with any ... international obligation of the United Kingdom.

(9)The reference in subsection (4)(b) to the “failure” of a PRA-authorised person is to be read in accordance with section 2J(3) and (4).

3JPower of PRA in relation to with-profits policies

(1)Where the first, second and third conditions are met, the PRA may give a direction under this section to the FCA.

(2)The first condition is that the FCA is proposing to exercise any of its regulatory powers in relation to with-profits insurers, a class of with-profits insurers or a particular with-profits insurer.

(3)In subsection (2) “regulatory powers”, in relation to the FCA, means its powers in relation to the regulation of authorised persons, including its powers under Part 24 (insolvency) but not its powers in relation to consent for the purposes of section 55F or 55I.

(4)The second condition is that the proposed exercise of the power relates to the provision of financial benefits under with-profits policies at the discretion of the insurer, or affects or may affect the amount, timing or distribution of financial benefits that are so provided or the entitlement to future benefits that are so provided.

(5)The third condition is that the PRA is of the opinion that the giving of the direction is desirable in order to advance the PRA's general objective or its insurance objective.

(6)A direction under this section is a direction requiring the FCA not to exercise the power or not to exercise it in a specified manner.

(7)The direction may be expressed to have effect during a specified period or until revoked.

(8)The FCA is not required to comply with a direction under this section if or to the extent that in the opinion of the FCA compliance would be incompatible with any ... international obligation of the United Kingdom.

(9)Subsections (1) to (8) apply only if the effecting or carrying out of with-profits policies is a PRA-regulated activity.

(10)In this section “with-profits insurer” and “with-profits policy” have the same meaning as they have for the purposes of section 3F.

3KRevocation of directions under section 3I or 3J

(1)The PRA may at any time by notice to the FCA revoke a direction under section 3I or 3J.

(2)The revocation of a direction under section 3I or 3J does not affect the validity of anything previously done in accordance with it.

3LFurther provisions about directions under section 3I or 3J

(1)Before giving a direction under section 3I or 3J, the PRA must consult the FCA.

(2)A direction under section 3I or 3J must be given or confirmed in writing, and must be accompanied by a statement of the reasons for giving it.

(3)A notice revoking a direction under section 3I or 3J must be given or confirmed in writing.

(4)The PRA must—

(a)publish the direction and statement, or the notice, in such manner as it thinks fit, and

(b)where the direction or notice relates to a particular authorised person or a particular with-profits insurer, give a copy of the direction and statement, or the notice, to that person.

(5)The PRA must give the Treasury a copy of—

(a)a direction under section 3I;

(b)a statement relating to such a direction;

(c)a notice revoking such a direction.

(6)The Treasury must lay before Parliament any document received by them under subsection (5).

(7)Subsection (4) does not apply where the PRA, after consulting the Treasury, decides that compliance with that subsection would be against the public interest, and at any time when this subsection excludes the application of subsection (4) in relation to a direction under section 3I, subsection (6) also does not apply.

(8)Where the PRA decides that compliance with subsection (4) would be against the public interest, it must from time to time review that decision and if it subsequently decides that compliance is no longer against the public interest it must—

(a)comply with that subsection, and

(b)in the case of a direction under section 3I, notify the Treasury for the purposes of subsection (6).

Directions relating to consolidated supervision

3MDirections relating to consolidated supervision of groups

(1)This section applies where one of the regulators (“the supervising regulator”), but not the other, is the competent authority for the purpose of consolidated supervision that is required in relation to some or all of the members of a group (“the relevant group”) in pursuance of —

(a)any implementing provision contained in subordinate legislation (within the meaning of the Interpretation Act 1978) made otherwise than by any of the following—

(i)statutory instrument, and

(ii)statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)); ...

(b)any other implementing provision (as amended from time to time),

(c)Part 9C rules;

(d)CRR rules; or

(e)rules made under section 192XA.

(2)“Consolidated supervision” includes supplementary supervision.

(2A)“Implementing provision” means an enactment that immediately before IP completion day implemented provisions of any of the relevant directives.

(3)The “relevant directives” are—

(a)the capital requirements directive;

(b)Directive 2002/87/EC of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate;

(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)Directive 2009/138/EC of the European Parliament and the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).

(e)Directive 2014/59/EU of the European Parliament and of the Council of 15th May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms.

(4)The supervising regulator may, if it considers it necessary to do so for the effective consolidated supervision of the relevant group, give the other regulator a direction under this section.

(5)A direction under this section is a direction requiring the other regulator to exercise, or not to exercise, a relevant function in a specified manner in relation to authorised persons who are members of the relevant group.

(6)The direction may relate to members of the relevant group other than the members in respect of which consolidated supervision is required.

(7)A “relevant function”, in relation to either regulator, is a function conferred by or under this Act which relates to the regulation of authorised persons, but does not include—

(a)the regulator's function of making rules under this Act;

(b)its function of preparing and issuing codes under this Act;

(c)its function of determining the general policy and principles by reference to which it performs particular functions;

(d)the FCA's functions in relation to the giving of general guidance;

(e)the PRA's functions in relation to the giving of guidance under section 2I;

(f)the FCA's functions in relation to consent for the purposes of section 55F or 55I.

(8)The direction may not require the regulator to which it is given (“the directed regulator”) to do anything that it has no power to do, but the direction is relevant to the exercise of any discretion conferred on the directed regulator.

(9)The directed regulator must comply with the direction as soon as practicable, but this is subject to subsections (10) and (11).

(10)The directed regulator is not required to comply with a direction under this section if or to the extent that in its opinion compliance would be incompatible with any ... international obligation of the United Kingdom.

(11)Directions given by the FCA under this section are subject to any directions given to the FCA under section 3I or 3J.

3NRevocation of directions under section 3M

(1)The supervising regulator may at any time by notice to the other regulator revoke a direction under section 3M.

(2)The revocation of the direction does not affect the validity of anything previously done in accordance with it.

(3)Expressions defined for the purposes of section 3M have the same meaning in this section.

3OFurther provisions about directions under section 3M

(1)Before giving a direction under section 3M, the supervising regulator must consult the other regulator.

(2)A direction under section 3M must be given or confirmed in writing, and must be accompanied by a statement of the reasons for giving it.

(3)A notice revoking a direction under section 3M must be given or confirmed in writing.

(4)The regulator to which a direction under section 3M is given must give a copy of the direction and statement to each of the authorised persons to whom the direction relates.

(5)The supervising regulator must publish the direction and statement, or the notice, in such manner as it thinks fit.

(6)But subsection (4) or (5) does not apply in a case where the regulator on which the duty is imposed considers that compliance with that subsection would be against the public interest.

(7)In a case where a regulator decides that compliance with subsection (4) or (5) would be against the public interest, the regulator must from time to time review that decision and if it subsequently decides that compliance is no longer against the public interest it must comply with the subsection.

(8)Expressions defined for the purposes of section 3M have the same meaning in this section.

3PConsultation by regulator complying with direction

(1)If the directed regulator is required by this Act to consult any person other than the supervising regulator before exercising the relevant function to which the direction relates, the directed regulator must give the supervising regulator copies of any written representations received from the persons consulted.

(2)Expressions defined for the purposes of section 3M have the same meaning in this section.

Co-operation with Bank of England

3QCo-operation by FCA ... with Bank of England

(1)The FCA must take such steps as it considers appropriate to co-operate with the Bank of England in connection with—

(a)the pursuit by the Bank of its Financial Stability Objective, and

(b)the Bank's compliance with its duties under sections 58 and 59 of the Financial Services Act 2012 (duty to notify Treasury of possible need for public funds and of subsequent changes).

(2)Co-operation under subsection (1) may include the sharing of information that the FCA is not prevented from disclosing.

Arrangements for provision of services

3RArrangements for provision of services

(1)The regulators may enter into arrangements with each other for the provision of services by one of them to the other.

(2)The FCA may enter into arrangements with the Bank of England for the provision of services—

(a)by the Bank to the FCA, or

(b)by the FCA to the Bank.

(3)Either regulator may enter into arrangements with any of the bodies specified in subsection (4) for the provision of services by the regulator to that body.

(4)Those bodies are—

(a)the Money and Pensions Service (see Part 1 of the Financial Guidance and Claims Act 2018),

(b)the scheme manager (see section 212(1)), and

(c)the scheme operator (see section 225(2)).

(5)The FCA may enter into arrangements with—

(a)a local weights and measures authority in England, Wales or Scotland, or

(b)the Department of Enterprise, Trade and Investment in Northern Ireland,

for the provision by the authority or department to the FCA of services which relate to activities to which this subsection applies.

(6)Subsection (5) applies to activities that are regulated activities by virtue of—

(a)an order made under section 22(1) in relation to an investment of a kind falling within paragraph 23 or 23B of Schedule 2, or

(b)an order made under section 22(1A)(a).

(7)Arrangements under this section are to be on such terms as may be agreed by the parties.

Rules

3RADuty of FCA and PRA to review rules

(1)Each regulator must keep under review generally any rules made by the regulator under this Act or any other enactment (whenever passed or made).

(2)Subsection (1) does not apply to rules made for the purpose of complying with a direction or recommendation of the Financial Policy Committee of the Bank of England under—

(a)section 9H of the Bank of England Act 1998(directions to FCA or PRA requiring macro-prudential measures), or

(b)section 9Q of that Act (recommendations to FCA and PRA).

3RBStatement of policy relating to review of rules

(1)Each regulator must prepare and publish a statement of its policy with respect to its review of rules under section 3RA.

(2)The statement must provide information about—

(a)how representations (including by a statutory panel) can be made to each regulator with respect to its review of rules under section 3RA, and

(b)the arrangements to ensure that those representations are considered.

(3)In this section “statutory panel” has the meaning given by section 1RB(5).

(4)If a statement published under this section is altered or replaced by a regulator, the regulator must publish the altered or replaced statement.

(5)A statement prepared under this section must be published by the regulator in the way appearing to that regulator to be best designed to bring it to the attention of the public.

3RCRequirement to review specified rules

(1)The Treasury may by direction require a regulator to carry out a review of specifiedrules if—

(a)the rules have been in force for at least 12 months,

(b)the Treasury consider that it is in the public interest that the rules are reviewed, and

(c)it does not appear to the Treasury that—

(i)the regulator is carrying out, or proposes to carry out, a review of those rules, or

(ii)if the regulator proposes to carry out a review, the proposals are appropriate for the purposes of carrying out an effective review.

(2)Subsection (1) only applies to rules falling within section 3RA(1).

(3)The Treasury must consult the regulator concerned before giving a direction under subsection (1).

(4)In exercising the power under this section, the Treasury must have regard to the desirability of minimising any adverse effect that the carrying out of the review may have on the exercise by the regulator of any of its other functions.

(5)A direction under subsection (1) may—

(a)specify the period within which a review must be carried out;

(b)determine the scope and conduct of a review;

(c)require the provision of interim reports during the carrying out of a review.

(6)Provision made in a direction under subsection (5)(b) may include a requirement—

(a)for a review to be carried out by a person appointed by the regulator who is independent of the regulator;

(b)for any such appointment to be made only with the approval of the Treasury.

(7)As soon as practicable after giving a direction under subsection (1) the Treasury must—

(a)lay before Parliament a copy of the direction, and

(b)publish the direction in such manner as the Treasury think fit.

(8)Subsection (7) does not apply where the Treasury consider that publication of the direction would be against the public interest.

(9)A direction under subsection (1) may be varied or revoked by the giving of a further direction.

3RDReport on certain reviews

(1)This section applies where the Treasury have given a direction to a regulator under section 3RC(1) to carry out a review.

(2)The regulator must make a written report to the Treasury as to the opinion of the regulator in relation to the following matters—

(a)if the regulator is the FCA, whether the rules under review—

(i)are compatible with the FCA’s strategic objective,

(ii)advance one or more of the FCA’s operational objectives, and

(iii)advance the competitiveness and growth objective;

(b)if the regulator is the PRA, whether the rules under review—

(i)advance one or more of the PRA’s objectives, and

(ii)advance the PRA’s competition objective and the PRA’s competitiveness and growth objective;

(c)whether and to what extent the rules are functioning effectively and achieving their intended purpose;

(d)whether any amendments should be made to the rules and, if so, what those amendments should be;

(e)whether any rules should be revoked (with or without replacement);

(f)whether any other action should be taken and, if so, what that action should be.

(3)As soon as practicable after receiving the report the Treasury must—

(a)lay before Parliament a copy of the report, and

(b)publish the report in such manner as the Treasury think fit.

(4)When complying with subsection (3) the Treasury may withhold material from the report if the Treasury consider that publication of the material would be against the public interest.

3REPower of Treasury to require making of rules by regulations

(1)The Treasury may by regulations require a regulator to exercise a power under this Act to make rules in relation to a specified activity or a specified description of person.

(2)Regulations under this section may—

(a)specify matters that the rules must cover;

(b)specify a period within which the rules must be made.

(3)But except so far as permitted by subsection (2), regulations under this section may not require rules to be made—

(a)in a specified form or with specified content, or

(b)to achieve or advance a specified outcome.

(4)If no period is specified under subsection (2)(b) the rules must be made as soon as reasonably practicable after the coming into force of the regulations.

Enhancing public understanding of financial matters etc.

3SThe consumer financial education body

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation

3TInterpretation

In this Part “enactment” includes—

(a)an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978;

(b)an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament;

(c)an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales;

(d)an enactment contained in, or in an instrument made under, Northern Ireland legislation.

Part II Regulated And Prohibited Activities

The general prohibition

19 The general prohibition.

(1)No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is—

(a)an authorised person; or

(b)an exempt person.

(2)The prohibition is referred to in this Act as the general prohibition.

Requirement for permission

20 Authorised persons acting without permission.

(1)If an authorised personother than a PRA-authorised person carries on a regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission—

(a)given to that person under Part 4A, or

(b)resulting from any other provision of this Act,

he is to be taken to have contravened a requirement imposed on him by the FCA under this Act.

(1A)If a PRA-authorised person carries on a regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission given to the person under Part 4A or resulting from any other provision of this Act, the person is to be taken to have contravened—

(a)a requirement imposed by the FCA, and

(b)a requirement imposed by the PRA.

(2)A contravention within subsection (1) or (1A)—

(a)does not, except as provided by section 23(1A), make a person guilty of an offence,

(b)does not, except as provided by section 26A, make any transaction void or unenforceable, and

(c)does not, except as provided by subsection (3), give rise to any right of action for breach of statutory duty.

(3)In prescribed cases a contravention within subsection (1) or (1A) is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.

(4)Subsections (1) and (1A) are subject to section 39(1D).

(5)References in this Act to an authorised person acting in contravention of this section are references to the person acting in a way that results in a contravention within subsection (1) or (1A).

Financial promotion

21 Restrictions on financial promotion.

(1)A person (“A”) must not, in the course of business, communicate an invitation or inducement to

(a)engage in investment activity , or

(b)to engage in claims management activity.

(2)But subsection (1) does not apply if—

(a)A is an authorised person; or

(b)the content of the communication is approved for the purposes of this section by an authorised person.

(2A)The content of a communication may be approved for the purposes of this section by an authorised person only if the giving of the approval—

(a)is permitted under section 55NA (which enables approval to be given with FCA permission), or

(b)falls within an exemption conferred by regulations under section 55NB.

(3)In the case of a communication originating outside the United Kingdom, subsection (1) applies only if the communication is capable of having an effect in the United Kingdom.

(4)The Treasury may by order specify circumstances in which a person is to be regarded for the purposes of subsection (1) as—

(a)acting in the course of business;

(b)not acting in the course of business.

(5)The Treasury may by order specify circumstances (which may include compliance with financial promotion rules) in which subsection (1) does not apply.

(6)An order under subsection (5) may, in particular, provide that subsection (1) does not apply in relation to communications—

(a)of a specified description;

(b)originating in a specified country or territory outside the United Kingdom;

(c)originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or

(d)originating outside the United Kingdom.

(7)The Treasury may by order repeal subsection (3).

(8)“Engaging in investment activity” means—

(a)entering or offering to enter into an agreement the making or performance of which by either party constitutes a controlled activity; or

(b)exercising any rights conferred by a controlledinvestment to acquire, dispose of, underwrite or convert a controlledinvestment.

(9)An activity is a controlled activity if—

(a)it is an activity of a specified kind or one which falls within a specified class of activity; and

(b)it relates to an investment of a specified kind, or to one which falls within a specified class of investment.

(10)An investment is a controlledinvestment if it is an investment of a specified kind or one which falls within a specified class of investment.

(10A)“Engaging in claims management activity” means entering into or offering to enter into an agreement the making or performance of which by either party constitutes a controlled claims management activity.

(10B)An activity is a “controlled claims management activity” if—

(a)it is an activity of a specified kind,

(b)it is, or relates to, claims management services, and

(c)it is carried on in Great Britain.

(11)Schedule 2 (except paragraph 26) applies for the purposes of subsections (9) and (10) with references to section 22 being read as references to each of those subsections.

(12)Nothing in Schedule 2, as applied by subsection (11), limits the powers conferred by subsection (9) or (10).

(12A)Paragraph 25 of Schedule 2 applies for the purposes of subsection (10B) with the references to section 22 in sub-paragraph (3) of that paragraph being read as references to subsection (10B).

(13)“Communicate” includes causing a communication to be made.

(14)“Investment” includes any asset, right or interest (including where an asset, right or interest is, or comprises or represents, a cryptoasset) .

(15)“Specified” means specified in an order made by the Treasury.

Regulated activities

22Regulated activities

(1)An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and—

(a)relates to an investment of a specified kind; or

(b)in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind.

(1A)An activity is also a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and relates to—

(a)information about a person's financial standing, ... or

(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)administering a benchmark.

(1B)An activity is also a regulated activity for the purposes of this Act if it is an activity of a specified kind which—

(a)is carried on by way of business in Great Britain, and

(b)is, or relates to, claims management services.

(2)Schedule 2 makes provision supplementing this section.

(3)Nothing in Schedule 2 limits the powers conferred by subsection (1) or (1A)subsections (1) to (1B) .

(4)“Investment” includes any asset, right or interest (including where an asset, right or interest is, or comprises or represents, a cryptoasset) .

(5)“Specified” means specified in an order made by the Treasury.

(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6A)For the purposes of subsection (1A)(c), “benchmark” has the meaning given by Article 3 of the EU Benchmarks Regulation 2016, and “administering” a benchmark means acting as an administrator of that benchmark within the meaning of that Article.

22ADesignation of activities requiring prudential regulation by PRA

(1)The Treasury may by order specify the regulated activities that are “PRA-regulated activities” for the purposes of this Act.

(2)An order under subsection (1) may—

(a)provide for exceptions;

(b)confer powers on the Treasury or either regulator;

(c)authorise the making of rules or other instruments by either regulator for purposes of, or connected with, any relevant provision;

(d)make provision in respect of any information or document which in the opinion of the Treasury or either regulator is relevant for purposes of, or connected with, any relevant provision;

(e)make such consequential, transitional, or supplemental provision as the Treasury consider appropriate for purposes of, or connected with, any relevant provision.

(3)Provision made as a result of subsection (2)(e) may amend any primary or subordinate legislation, including any provision of, or made under, this Act.

(4)“Relevant provision” means this section or any provision made under this section.

22BParliamentary control in relation to certain orders under section 22A

(1)This section applies to the first order made under section 22A(1).

(2)This section also applies to any subsequent order made under section 22A(1) which—

(a)contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order would be—

(i)that an activity would become a PRA-regulated activity, or

(ii)that a PRA-regulated activity would become a regulated activity that is not a PRA-regulated activity, or

(b)amends primary legislation.

(3)No order to which this section applies may be made unless—

(a)a draft of the order has been laid before Parliament and approved by a resolution of each House, or

(b)subsection (5) applies.

(4)Subsection (5) applies if an order to which this section applies contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without a draft being so laid and approved.

(5)Where this subsection applies the order—

(a)must be laid before Parliament after being made, and

(b)ceases to have effect at the end of the relevant period unless before the end of that period the order is approved by a resolution of each House of Parliament (but without that affecting anything done under the order or the power to make a new order).

(6)The “relevant period” is a period of 28 days beginning with the day on which the order is made.

(7)In calculating the relevant period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.

Offences

23 Contravention of the general prohibition or section 20(1) or (1A) .

(1)A person who contravenes the general prohibition is guilty of an offence and liable—

(a)on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;

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

(1A)An authorised person (“A”) is guilty of an offence if A carries on a credit-related regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission—

(a)given to that person under Part 4A, or

(b)resulting from any other provision of this Act.

(1B)In this Act “credit-related regulated activity” means a regulated activity of a kind designated by the Treasury by order.

(1C)The Treasury may designate a regulated activity under subsection (1B) only if the activity involves a person—

(a)entering into or administering an agreement under which the person provides another person with credit,

(b)exercising or being able to exercise the rights of the lender under an agreement under which another person provides a third party with credit, or

(c)taking steps to procure payment of debts due under an agreement under which another person is provided with credit.

(1D)But a regulated activity may not be designated under subsection (1B) if the agreement in question is one under which the obligation of the borrower is secured on land.

(1E)“Credit” includes any cash loan or other financial accommodation.

(1F)A person guilty of an offence under subsection (1A) is liable—

(a)on summary conviction, to imprisonment for a term not exceeding the applicable maximum term or a fine not exceeding the statutory maximum, or both;

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

(1G)The “applicable maximum term” is—

(a)in England and Wales, the general limit in a magistrates’ court (or 6 months, if the offence was committed before the commencement of 2 May 2022);

(b)in Scotland, 12 months;

(c)in Northern Ireland, 6 months.

(2)In this Act “an authorisation offence” means an offence under this section.

(3)In proceedings for an authorisation offence it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(4)Subsection (1A) is subject to section 39(1D).

(5)No proceedings may be brought against a person in respect of an offence under subsection (1A) in a case where either regulator has taken action under section 205, 206 or 206A in relation to the alleged contravention within section 20(1) or (1A).

23AParliamentary control in relation to certain orders under section 23

(1)This section applies to the first order made under section 23(1B).

(2)This section also applies to any subsequent order made under section 23(1B) which contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order would be that an activity would become a credit-related regulated activity.

(3)An order to which this section applies may not be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House.

24 False claims to be authorised or exempt.

(1)A person who is neither an authorised person nor, in relation to the regulated activity in question, an exempt person is guilty of an offence if he—

(a)describes himself (in whatever terms) as an authorised person;

(b)describes himself (in whatever terms) as an exempt person in relation to the regulated activity; or

(c)behaves, or otherwise holds himself out, in a manner which indicates (or which is reasonably likely to be understood as indicating) that he is—

(i)an authorised person; or

(ii)an exempt person in relation to the regulated activity.

(2)In proceedings for an offence under this section it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(3)A person guilty of an offence under this section is liable on summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding level 5 on the standard scale, or both.

(4)But where the conduct constituting the offence involved or included the public display of any material, the maximum fine for the offence is level 5 on the standard scale multiplied by the number of days for which the display continued.

25 Contravention of section 21.

(1)A person who contravenes section 21(1) is guilty of an offence and liable—

(a)on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;

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

(2)In proceedings for an offence under this section it is a defence for the accused to show—

(a)that he believed on reasonable grounds that the content of the communication was prepared, or approved for the purposes of section 21 in accordance with subsection (2A) of that section , by an authorised person; or

(b)that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

Enforceability of agreements

26 Agreements made by unauthorised persons.

(1)An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.

(2)The other party is entitled to recover—

(a)any money or other property paid or transferred by him under the agreement; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(3)“Agreement” means an agreement—

(a)made after this section comes into force; and

(b)the making or performance of which constitutes, or is part of, the regulated activity in question.

(4)This section does not apply if the regulated activity is accepting deposits.

26AAgreements relating to credit

(1)An agreement that is made by an authorised person in contravention of section 20 is unenforceable against the other party if the agreement is entered into in the course of carrying on a credit-related regulated activity involving matters falling within section 23(1C)(a).

(2)The other party is entitled to recover—

(a)any money or other property paid or transferred by that party under the agreement, and

(b)compensation for any loss sustained by that party as a result of having parted with it.

(3)In subsections (1) and (2) “agreement” means an agreement—

(a)which is made after this section comes into force, and

(b)the making or performance of which constitutes, or is part of, the credit-related regulated activity.

(4)If the administration of an agreement involves the carrying on of a credit-related regulated activity, the agreement may not be enforced by a person for the time being exercising the rights of the lender under the agreement unless that person

(a)has permission, given under Part 4A or resulting from any other provision of this Act, in relation to that activity

(b)is an appointed representative in relation to that activity,

(c)is an exempt person in relation to that activity, or

(d)is a person to whom, as a result of Part 20, the general prohibition does not apply in relation to that activity.

(5)If the taking of steps to procure payment of debts due under an agreement involves the carrying on of a credit-related regulated activity, the agreement may not be enforced by a person for the time being exercising the rights of the lender under the agreement unless

(a)the agreement is enforced in accordance with permission—

(i)given under Part 4A to the person enforcing the agreement, or

(ii) resulting from any other provision of this Act.

(b)that person is an appointed representative in relation to that activity,

(c)that person is an exempt person in relation to that activity, or

(d)that person is a person to whom, as a result of Part 20, the general prohibition does not apply in relation to that activity.

27 Agreements made through unauthorised persons.

(1)This section applies to an agreement that—

(a)is made by an authorised person (“the provider”) in the course of carrying on a regulated activity,

(b)is not made in contravention of the general prohibition,

(c)if it relates to a credit-related regulated activity, is not made in contravention of section 20, and

(d)is made in consequence of something said or done by another person (“the third party”) in the course of—

(i)a regulated activity carried on by the third party in contravention of the general prohibition, or

(ii)a credit-related regulated activity carried on by the third party in contravention of section 20.

(1ZA)But this section does not apply to a regulated credit agreement or a regulated consumer hire agreement unless the provider knows before the agreement is made that the third party had some involvement in the making of the agreement or matters preparatory to its making.

(1A)An agreement to which this section applies is unenforceable against the other party.

(2)The other party is entitled to recover—

(a)any money or other property paid or transferred by him under the agreement; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(3)“Agreement” means an agreement—

(a)made after this section comes into force; and

(b)the making or performance of which constitutes, or is part of, the regulated activity in question carried on by the provider.

(4)This section does not apply if the regulated activity is accepting deposits.

(5)For the purposes of subsection (1ZA)—

• “regulated consumer hire agreement” has the meaning given by article 60N of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);

• “regulated credit agreement” has the meaning given by article 60B of that Order.

28 Agreements made unenforceable by section 26 or 27 : general cases .

(1)This section applies to an agreement which is unenforceable because of section 26 or 27 , other than an agreement entered into in the course of carrying on a credit-related regulated activity .

(2)The amount of compensation recoverable as a result of that section is—

(a)the amount agreed by the parties; or

(b)on the application of either party, the amount determined by the court.

(3)If the court is satisfied that it is just and equitable in the circumstances of the case, it may allow—

(a)the agreement to be enforced; or

(b)money and property paid or transferred under the agreement to be retained.

(4)In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must—

(a)if the case arises as a result of section 26, have regard to the issue mentioned in subsection (5); or

(b)if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6).

(5)The issue is whether the person carrying on the regulated activity concerned reasonably believed that he was not contravening the general prohibition by making the agreement.

(6)The issue is whether the provider knew that the third party was (in carrying on the regulated activity) contravening the general prohibition.

(7)If the person against whom the agreement is unenforceable—

(a)elects not to perform the agreement, or

(b)as a result of this section, recovers money paid or other property transferred by him under the agreement,

he must repay any money and return any other property received by him under the agreement.

(8)If property transferred under the agreement has passed to a third party, a reference in section 26 or 27 or this section to that property is to be read as a reference to its value at the time of its transfer under the agreement.

(9)The commission of an authorisation offence does not make the agreement concerned illegal or invalid to any greater extent than is provided by section 26 or 27.

28ACredit-related agreements made unenforceable by section 26, 26A or 27

(1)This section applies to an agreement that—

(a)is entered into in the course of carrying on a credit-related regulated activity, and

(b)is unenforceable because of section 26, 26A or 27.

(2)The amount of compensation recoverable as a result of that section is—

(a)the amount agreed by the parties, or

(b)on the application of either party, the amount specified in a written notice given by the FCA to the applicant.

(3)If on application by the relevant firm the FCA is satisfied that it is just and equitable in the circumstances of the case, it may by written notice to the applicant allow—

(a)the agreement to be enforced, or

(b)money paid or property transferred under the agreement to be retained.

(4)In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the FCA must—

(a)if the case arises as a result of section 26 or 26A, have regard to the issue mentioned in subsection (5), or

(b)if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6).

(5)The issue is whether the relevant firm reasonably believed that by making the agreement the relevant firm was neither contravening the general prohibition nor contravening section 20.

(6)The issue is whether the provider knew that the third party was (in carrying on the credit-related regulated activity) either contravening the general prohibition or contravening section 20.

(7)An application to the FCA under this section by the relevant firm may relate to specified agreements or to agreements of a specified description or made at a specified time.

(8)“The relevant firm” means—

(a)in a case falling within section 26, the person in breach of the general prohibition;

(b)in a case falling within section 26A or 27, the authorised person concerned.

(9)If the FCA thinks fit, it may when acting under subsection (2)(b) or (3)—

(a)limit the determination in its notice to specified agreements, or agreements of a specified description or made at a specified time;

(b)make the determination in its notice conditional on the doing of specified acts by the applicant.

28BDecisions under section 28A: procedure

(1)A notice under section 28A(2)(b) or (3) must—

(a)give the FCA's reasons for its determination, and

(b)give an indication of—

(i)the right to have the matter referred to the Tribunal that is conferred by subsection (3), and

(ii)the procedure on such a reference.

(2)The FCA must, so far as it is reasonably practicable to do so, give a copy of the notice to any other person who appears to it to be affected by the determination to which the notice relates.

(3)A person who is aggrieved by the determination of an application under section 28A(2)(b) or (3) may refer the matter to the Tribunal.

29 Accepting deposits in breach of general prohibition.

(1)This section applies to an agreement between a person (“the depositor”) and another person (“the deposit-taker”) made in the course of the carrying on by the deposit-taker of accepting deposits in contravention of the general prohibition.

(2)If the depositor is not entitled under the agreement to recover without delay any money deposited by him, he may apply to the court for an order directing the deposit-taker to return the money to him.

(3)The court need not make such an order if it is satisfied that it would not be just and equitable for the money deposited to be returned, having regard to the issue mentioned in subsection (4).

(4)The issue is whether the deposit-taker reasonably believed that he was not contravening the general prohibition by making the agreement.

(5)“Agreement” means an agreement—

(a)made after this section comes into force; and

(b)the making or performance of which constitutes, or is part of, accepting deposits.

30 Enforceability of agreements resulting from unlawful communications.

(1)In this section—

• “unlawful communication” means a communication in relation to which there has been a contravention of section 21(1);

• “controlled agreement” means an agreement the making or performance of which by either party constitutes a controlled activity for the purposes of that section; and

• “controlled investment” has the same meaning as in section 21.

(2)If in consequence of an unlawful communication a person enters as a customer into a controlled agreement, it is unenforceable against him and he is entitled to recover—

(a)any money or other property paid or transferred by him under the agreement; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(3)If in consequence of an unlawful communication a person exercises any rights conferred by a controlled investment, no obligation to which he is subject as a result of exercising them is enforceable against him and he is entitled to recover—

(a)any money or other property paid or transferred by him under the obligation; and

(b)compensation for any loss sustained by him as a result of having parted with it.

(4)But the court may allow—

(a)the agreement or obligation to be enforced, or

(b)money or property paid or transferred under the agreement or obligation to be retained,

if it is satisfied that it is just and equitable in the circumstances of the case.

(5)In considering whether to allow the agreement or obligation to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must have regard to the issues mentioned in subsections (6) and (7).

(6)If the applicant made the unlawful communication, the issue is whether he reasonably believed that he was not making such a communication.

(7)If the applicant did not make the unlawful communication, the issue is whether he knew that the agreement was entered into in consequence of such a communication.

(8)“Applicant” means the person seeking to enforce the agreement or obligation or retain the money or property paid or transferred.

(9)Any reference to making a communication includes causing a communication to be made.

(10)The amount of compensation recoverable as a result of subsection (2) or (3) is—

(a)the amount agreed between the parties; or

(b)on the application of either party, the amount determined by the court.

(11)If a person elects not to perform an agreement or an obligation which (by virtue of subsection (2) or (3)) is unenforceable against him, he must repay any money and return any other property received by him under the agreement.

(12)If (by virtue of subsection (2) or (3)) a person recovers money paid or property transferred by him under an agreement or obligation, he must repay any money and return any other property received by him as a result of exercising the rights in question.

(13)If any property required to be returned under this section has passed to a third party, references to that property are to be read as references to its value at the time of its receipt by the person required to return it.

Part III Authorisation and Exemption

Authorisation

31 Authorised persons.

(1)The following persons are authorised for the purposes of this Act—

(a)a person who has a Part 4A permission to carry on one or more regulated activities;

(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)a person who is otherwise authorised by a provision of, or made under, this Act.

(2)In this Act “authorised person” means a person who is authorised for the purposes of this Act.

32 Partnerships and unincorporated associations.

(1)If a firm is authorised—

(a)it is authorised to carry on the regulated activities concerned in the name of the firm; and

(b)its authorisation is not affected by any change in its membership.

(2)If an authorised firm is dissolved, its authorisation continues to have effect in relation to any individual orfirm which succeeds to the business of the dissolved firm.

(3)For the purposes of this section, an individual or firm is to be regarded as succeeding to the business of a dissolved firm only if succession is to the whole or substantially the whole of the business of the former firm.

(4)“Firm” means—

(a)a partnership; or

(b)an unincorporated association of persons.

(5)“Partnership” does not include a partnership which is constituted under the law of any place outside the United Kingdom and is a body corporate.

Ending of authorisation

33 Withdrawal of authorisation ....

(1)This section applies if—

(a)an authorised person’s Part 4A permission is cancelled; and

(b)as a result, there is no regulated activity for which he has permission.

(2)The appropriate regulator must give a direction withdrawing that person’s status as an authorised person.

(2A)In subsection (2) “the appropriate regulator” means—

(a)in the case of a PRA-authorised person, the PRA, and

(b)in any other case, the FCA.

34 EEA firms.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35 Treaty firms.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36Authorised open-ended investment companies

Schedule 5 makes provision about authorised open-ended investment companies.

Exercise of EEA rights by UK firms

37 Exercise of EEA rights by UK firms.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exemption

38 Exemption orders.

(1)The Treasury may by order (“an exemption order”) provide for—

(a)specified persons, or

(b)persons falling within a specified class,

to be exempt from the general prohibition.

(2)But a person cannot be an exempt person as a result of an exemption order if he has a Part 4A permission .

(3)An exemption order may provide for an exemption to have effect—

(a)in respect of all regulated activities;

(b)in respect of one or more specifiedregulated activities;

(c)only in specified circumstances;

(d)only in relation to specified functions;

(e)subject to conditions.

(4)“Specified” means specified by the exemption order.

39 Exemption of appointed representatives.

(1)If a person (other than an authorised person)—

(a)is a party to a contract with an authorised person (“his principal”) which—

(i)permits or requires him to carry on business of a prescribed description, and

(ii)complies with such requirements as may be prescribed, and

(b)is someone for whose activities in carrying on the whole or part of that business his principal has accepted responsibility in writing,

he is exempt from the general prohibition in relation to any regulated activity comprised in the carrying on of that business for which his principal has accepted responsibility.

(1ZA)But a person is not exempt as a result of subsection (1) if subsection (1A) , (1AA) or (1BA) applies to the person.

(1A)This subsection applies to a person —

(a)if his principal is an investment firm, a qualifying credit institution, or a firm which has a Part 4A permission to carry on regulated activities as an exempt investment firm within the meaning of regulation 8 of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), and

(b)so far as the business for which his principal has accepted responsibility is investment services business,

unless he is entered on the applicable register.

(1AA)This subsection applies to a person—

(a)if the person’s principal is an investment firm, a qualifying credit institution, or a person mentioned in Article 3.1 (optional exemptions) of the markets in financial instruments directive, and

(b)so far as the business for which the person’s principal has accepted responsibility is selling, or advising clients on, structured deposits...,

unless the person is entered on the applicable register.

(1B)In subsections (1A) and (1AA) The “applicable register” is the record maintained by the FCA by virtue of section 347(1)(ha).

(1BA)This subsection applies to a person (“A”)—

(a)if A’s principal is a mortgage intermediary, and

(b)so far as the business for which A’s principal has accepted responsibility is of a kind that—

(i)isspecified in article 25A (arranging regulated mortgage contracts), article 36A (credit broking), article 53A (advising on regulated mortgage contracts) or article 53DA (advising on regulated credit agreements the purpose of which is to acquire land) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; and

(ii)relates to mortgage agreements entered into on or after 21st March 2016,

unless A meets the requirements of subsection (1BB).

(1BB)The requirements of this subsection are—

(a)that A is entered on the record maintained by the FCA by virtue of section 347(1)(hb);

(b)that A’s principal is a person who has a Part 4A permission to carry on one or more of the regulated activities mentioned in subsection (1BA)(b)(i); and

(c)that A’s principal is not a tied mortgage intermediary.

(1C)Subsection (1D) applies where an authorised person (“A”)—

(a)has permission under Part 4A, or permission resulting from any other provision of this Act, only in relation to one or more qualifying activities,

(b)is a party to a contract with another authorised person (A's “principal”) which—

(i)permits or requires A to carry on business of a prescribed description (“the relevant business”), and

(ii)complies with such requirements as may be prescribed, and

(c)is someone for whose activities in carrying on the whole or part of the relevant business A's principal has accepted responsibility in writing.

(1D)Sections 20(1) and (1A) and 23(1A) do not apply in relation to the carrying on by A of a relevant additional activity.

(1E)In subsections (1C) and (1D)—

(a)“qualifying activity” means a regulated activity which is of a prescribed kind and relates—

(i)to rights under a contract of the kind mentioned in paragraph 23 of Schedule 2, other than one under which the obligation of the borrower to repay is secured on land, or

(ii)to rights under a contract of the kind mentioned in paragraph 23B of that Schedule;

(b)“relevant additional activity” means a regulated activity which—

(i)is not one to which A's permission relates, and

(ii)is comprised in the carrying on of the business for which A's principal has accepted responsibility.

(2)In this Act “appointed representative” means—

(a)a person who is exempt as a result of subsection (1), or

(b)a person carrying on a regulated activity in circumstances where, as a result of subsection (1D), sections 20(1) and (1A) and 23(1A) do not apply.

(3)The principal of an appointed representative is responsible, to the same extent as if he had expressly permitted it, for anything done or omitted by the representative in carrying on the business for which he has accepted responsibility.

(4)In determining whether an authorised person has complied with—

(a)a provision contained in or made under this Act, ...

(aa)a provision contained in or made under the Securitisation Regulations 2024, or

(b)a qualifying provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order,

anything which a relevant person has done or omitted as respects business for which the authorised person has accepted responsibility is to be treated as having been done or omitted by the authorised person.

(5)“Relevant person” means a person who at the material time is or was an appointed representative by virtue of being a party to a contract with the authorised person.

(6)Nothing in subsection (4) is to cause the knowledge or intentions of an appointed representative to be attributed to his principal for the purpose of determining whether the principal has committed an offence, unless in all the circumstances it is reasonable for them to be attributed to him.

(7)A person carries on “investment services business” if, under the full and unconditional responsibility of only one investment firm on whose behalf the person acts, the person—

(a)promotes investment services or ancillary services to the firm's clients or prospective clients,

(b)receives and transmits instructions or orders from clients in respect of investment services or financial instruments,

(c)places financial instruments, or

(d)provides advice to clients or prospective clients in respect of investment services or financial instruments.

(8)In this section—

• “ancillary services” means any of the services and activities listed in Part 3A of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);

• “financial instruments” means those instruments specified in Part 1 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

• “investment services” means any of the services and activities listed in Part 3 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, relating to any of the instruments listed in Part 1 of that Schedule;

• “structured deposit” has the meaning given by Article 2.1.23 of the markets in financial instruments regulation.