Financial Services and Markets Bill - continued        House of Lords
PART XII, CONTROL OVER AUTHORISED PERSONS - continued

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Improperly acquired shares
Improperly acquired shares.     180. - (1) The powers conferred by this section are exercisable if a person has acquired, or has continued to hold, any shares in contravention of-
 
 
    (a) a notice of objection; or
 
    (b) a condition imposed on the Authority's approval.
      (2) The Authority may by notice in writing served on the person concerned ("a restriction notice") direct that any such shares which are specified in the notice are, until further notice, subject to one or more of the following restrictions-
 
 
    (a) a transfer of (or agreement to transfer) those shares, or in the case of unissued shares any transfer of (or agreement to transfer) the right to be issued with them, is void;
 
    (b) no voting rights are to be exercisable in respect of the shares;
 
    (c) no further shares are to be issued in right of them or in pursuance of any offer made to their holder;
 
    (d) except in a liquidation, no payment is to be made of any sums due from the body corporate on the shares, whether in respect of capital or otherwise.
      (3) The court may, on the application of the Authority, order the sale of any shares to which this section applies and, if they are for the time being subject to any restriction under subsection (2), that they are to cease to be subject to that restriction.
 
      (4) No order may be made under subsection (3)-
 
 
    (a) until the end of the period within which a reference may be made to the Tribunal in respect of the notice of objection; and
 
    (b) if a reference is made, until the matter has been determined or the reference withdrawn.
      (5) If an order has been made under subsection (3), the court may, on the application of the Authority, make such further order relating to the sale or transfer of the shares as it thinks fit.
 
      (6) If shares are sold in pursuance of an order under this section, the proceeds of sale, less the costs of the sale, must be paid into court for the benefit of the persons beneficially interested in them; and any such person may apply to the court for the whole or part of the proceeds to be paid to him.
 
      (7) This section applies-
 
 
    (a) in the case of an acquirer falling within section 169(1), to all the shares-
 
      (i) in the authorised person which the acquirer has acquired;
 
      (ii) which are held by him or an associate of his; and
 
      (iii) which were not so held immediately before he became a person with control over the authorised person;
 
    (b) in the case of an acquirer falling within section 169(2), to all the shares held by him or an associate of his at the time when he first became aware that he had acquired control over the authorised person; and
 
    (c) to all the shares in an undertaking ("C")-
 
      (i) which are held by the acquirer or an associate of his, and
 
      (ii) which were not so held before he became a person with control in relation to the authorised person,
 
    where C is the undertaking in which shares were acquired by the acquirer (or an associate of his) and, as a result, he became a person with control in relation to that authorised person.
      (8) A copy of the restriction notice must be served on-
 
 
    (a) the authorised person to whose shares it relates; and
 
    (b) if it relates to shares held by an associate of that authorised person, on that associate.
      (9) The jurisdiction conferred by this section may be exercised by the High Court and the Court of Session.
 
 
Reducing control: procedure
Notification.     181. - (1) If a step which a controller of a UK authorised person proposes to take would result in his-
 
 
    (a) ceasing to have control of a relevant kind over the authorised person, or
 
    (b) reducing a relevant kind of control over that person,
  he must notify the Authority of his proposal.
 
      (2) A controller of a UK authorised person who, without himself taking any such step, ceases to have that control or reduces that control must notify the Authority before the end of the period of fourteen days beginning with the day on which he first becomes aware that-
 
 
    (a) he has ceased to have the control in question; or
 
    (b) he has reduced that control.
      (3) A person who is under the duty to notify the Authority imposed by subsection (1) must also give a notice to the Authority-
 
 
    (a) on ceasing to have the control in question; or
 
    (b) on reducing that control.
      (4) A notice under this section must-
 
 
    (a) be given to the Authority in writing; and
 
    (b) include details of the extent of the control (if any) which the person concerned will retain (or still retains) over the authorised person concerned.
 
Offences
Offences under this Part.     182. - (1) A person who fails to comply with the duty to notify the Authority imposed on him by section 169(1) or 181(1) is guilty of an offence.
 
      (2) A person who fails to comply with the duty to notify the Authority imposed on him by section 169(2) or 181(2) is guilty of an offence.
 
      (3) If a person who has given a notice of control to the Authority carries out the proposal to which the notice relates, he is guilty of an offence if-
 
 
    (a) the period of three months beginning with the date on which the Authority received the notice is still running; and
 
    (b) the Authority has not responded to the notice by either giving its approval or giving him a warning notice under section 174(3) or 176(3).
      (4) A person to whom the Authority has given a warning notice under section 174(3) is guilty of an offence if he carries out the proposal to which the notice relates before the Authority has decided whether to give him a notice of objection.
 
      (5) A person to whom a notice of objection has been given is guilty of an offence if he acquires the control to which the notice applies at a time when the notice is still in force.
 
      (6) A person guilty of an offence under subsection (1), (2), (3) or (4) is liable on summary conviction to a fine not exceeding level 5 on the standard scale.
 
      (7) A person guilty of an offence under subsection (5) is liable-
 
 
    (a) on summary conviction, to a fine not exceeding the statutory maximum; and
 
    (b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both.
      (8) A person guilty of an offence under subsection (5) is also liable on summary conviction to a fine not exceeding one tenth of the statutory maximum for each day on which the offence has continued.
 
      (9) It is a defence for a person charged with an offence under subsection (1) to show that he had, at the time of the alleged offence, no knowledge of the act or circumstances by virtue of which the duty to notify the Authority arose.
 
      (10) If a person-
 
 
    (a) was under the duty to notify the Authority imposed by section 169(1) or 181(1) but had no knowledge of the act or circumstances by virtue of which that duty arose, but
 
    (b) subsequently becomes aware of that act or those circumstances,
  he must notify the Authority before the end of the period of 14 days beginning with the day on which he first became so aware.
 
      (11) A person who fails to comply with the duty to notify the Authority imposed by subsection (10) is guilty of an offence and liable, on summary conviction, to a fine not exceeding level 5 on the standard scale.
 
 
Miscellaneous
Power to change definitions of control etc.     183. The Treasury may by order-
 
 
    (a) amend section 170 by varying, or removing, any of the cases in which a person is treated as having control over a UK authorised person or by adding a case;
 
    (b) amend section 171 by varying, or removing, any of the cases in which a person is treated as increasing control over a UK authorised person or by adding a case;
 
    (c) amend section 172 by varying, or removing, any of the cases in which a person is treated as reducing his control over a UK authorised person or by adding a case;
 
    (d) amend section 397 by varying, or removing, any of the cases in which a person is treated as being a controller of a person or by adding a case.
 
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Prepared 11 February 2000