Financial Services and Markets Bill - continued        House of Lords

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  PART X
  RULES AND GUIDANCE
  CHAPTER I
  RULE-MAKING POWERS
General rule-making power.     135. - (1) The Authority may make such rules applying to authorised persons-
 
 
    (a) with respect to the carrying on by them of regulated activities, or
 
    (b) with respect to the carrying on by them of activities which are not regulated activities,
  as appear to it to be necessary or expedient for the purpose of protecting the interests of consumers.
 
      (2) Rules made under this section are referred to in this Act as the Authority's general rules.
 
      (3) The Authority's power to make general rules is not limited by any other power which it has to make regulating provisions.
 
      (4) The Authority's general rules may make provision applying to authorised persons even though there is no relationship between the authorised persons to whom the rules will apply and the persons whose interests will be protected by the rules.
 
      (5) General rules may contain requirements which take into account, in the case of an authorised person who is a member of a group, any activity of another member of the group.
 
      (6) General rules may not-
 
 
    (a) make provision prohibiting an EEA firm from carrying on, or holding itself out as carrying on, any activity which it has permission conferred by Part II of Schedule 3 to carry on in the United Kingdom;
 
    (b) make provision, as respects an EEA firm, about any matter responsibility for which is, under any of the single market directives, reserved to the firm's home state regulator.
      (7) "Consumers" means persons-
 
 
    (a) who use, have used, or are or may be contemplating using, any of the services provided by-
 
      (i) authorised persons in carrying on regulated activities; or
 
      (ii) persons acting as appointed representatives; or
 
    (b) who have rights or interests which-
 
      (i) are derived from, or are otherwise attributable to, or
 
      (ii) may be adversely affected by,
 
    the use of any such services by other persons.
      (8) If an authorised person is carrying on a regulated activity in his capacity as a 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 are or may be contemplating using services provided by the authorised person in his carrying on of that activity.
 
      (9) For the purposes of subsection (7) a person who deals with an authorised person in the course of the authorised person's carrying on of a regulated activity is to be treated as using services provided by the authorised person in carrying on those activities.
 
Miscellaneous ancillary matters.     136. - (1) Rules relating to the handling of money held by an authorised person in specified circumstances ("clients' money") may-
 
 
    (a) make provision which results in that clients' money being held on trust in accordance with the rules;
 
    (b) treat two or more accounts as a single account for specified purposes (which may include the distribution of money held in the accounts);
 
    (c) authorise the retention by the authorised person of interest accruing on the clients' money; and
 
    (d) make provision as to the distribution of such interest which is not to be retained by him.
      (2) An institution with which an account is kept in pursuance of rules relating to the handling of clients' money does not incur any liability as constructive trustee if money is wrongfully paid from the account, unless the institution permits the payment-
 
 
    (a) with knowledge that it is wrongful; or
 
    (b) having deliberately failed to make enquiries in circumstances in which a reasonable and honest person would have done so.
      (3) In the application of subsection (1) to Scotland, the reference to money being held on trust is to be read as a reference to its being held as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him.
 
      (4) Rules may-
 
 
    (a) confer rights on persons to rescind agreements with, or withdraw offers to, authorised persons within a specified period; and
 
    (b) make provision, in respect of authorised persons and persons exercising those rights, for the restitution of property and the making or recovery of payments where those rights are exercised.
      (5) "Rules" means general rules.
 
      (6) "Specified" means specified in the rules.
 
Restriction on managers of authorised unit trust schemes.     137. - (1) The Authority may make rules prohibiting an authorised person who has permission to act as the manager of an authorised unit trust scheme from carrying on a specified activity.
 
      (2) Such rules may specify an activity which is not a regulated activity.
 
Insurance business rules.     138. - (1) The Authority may make rules prohibiting an authorised person who has permission to deal in contracts of insurance from carrying on a specified activity.
 
      (2) Such rules may specify an activity which is not a regulated activity.
 
      (3) The Authority may make rules in relation to contracts entered into by an authorised person in the course of carrying on long-term insurance business.
 
      (4) Such rules may, in particular-
 
 
    (a) restrict the descriptions of property or indices of the value of property by reference to which the benefits under such contracts may be determined;
 
    (b) make provision, in the interests of the protection of policyholders, for the substitution of one description of property, or index of value, by reference to which the benefits under a contract are to be determined for another such description of property or index.
      (5) Rules made under this section are referred to in this Act as insurance business rules.
 
Insurance business: regulations supplementing Authority's rules.     139. - (1) The Treasury may make regulations for the purpose of preventing a person who is not an authorised person but who-
 
 
    (a) is a parent undertaking of an authorised person who has permission to deal in contracts of insurance, and
 
    (b) falls within a prescribed class,
  from doing anything to lessen the effectiveness of asset identification rules.
 
      (2) "Asset identification rules" means rules made by the Authority which require an authorised person who has permission to deal in contracts of insurance to identify assets which belong to him and which are maintained in respect of a particular aspect of his business.
 
      (3) The regulations may, in particular, include provision-
 
 
    (a) prohibiting the payment of dividends;
 
    (b) prohibiting the creation of mortgages or charges (or in Scotland securities over property);
 
    (c) making mortgages or charges (or in Scotland securities over property) created in contravention of the regulations void.
      (4) The Treasury may by regulations provide that, in prescribed circumstances, mortgages or charges (or in Scotland securities over property) created in contravention of asset identification rules are void.
 
      (5) A person who contravenes regulations under subsection (1) is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.
 
Endorsement of codes etc. issued by other bodies.     140. - (1) The Authority may make rules ("endorsing rules")-
 
 
    (a) endorsing the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers;
 
    (b) endorsing the Rules Governing Substantial Acquisitions of Shares issued by the Panel.
      (2) Endorsement may be-
 
 
    (a) as respects all authorised persons; or
 
    (b) only as respects a specified kind of authorised person.
      (3) At any time when endorsing rules are in force, and if asked to do so by the Panel, the Authority may exercise its powers under Part IV or section 65 as if failure to comply with an endorsed provision was a ground entitling the Authority to exercise those powers.
 
      (4) At any time when endorsing rules are in force and if asked to do so by the Panel, the Authority may exercise its powers under Part XIII, XIV or XXV as if the endorsed provisions were rules applying to the persons in respect of whom they are endorsed.
 
      (5) For the purposes of subsections (3) and (4), a failure to comply with a requirement imposed, or ruling given, under an endorsed provision is to be treated as a failure to comply with the endorsed provision under which that requirement was imposed or ruling was given.
 
      (6) If endorsed provisions are altered, subsection (4) applies to them as altered, but only if before the alteration the Authority has notified the Panel (and has not withdrawn its notification) that it is satisfied with the Panel's consultation procedures.
 
      (7) "Consultation procedures" means procedures designed to provide an opportunity for persons likely to be affected by alterations to those provisions to make representations about proposed alterations to any of those provisions.
 
      (8) Subsections (1), (2)(d), (4), (5), (6)(a) and (12) of section 151 apply (with the necessary modifications) to a proposal to give notification of the kind mentioned in subsection (6) as they apply to a proposal to make endorsing rules.
 
      (9) This section applies in relation to particular provisions of the code or rules mentioned in subsection (1) as it applies to the code or the rules.
 
 
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