Section 1272 and Schedule 15: Transparency obligations and related matters: minor and consequential amendments
1657. Section 1272 introduces Schedule 15, which makes minor and consequential amendments to FSMA related to the provision in sections 1265 to 1271. The Schedule also makes amendments to the C(AICE)Act 2004.
Part 1: Amendments of the Financial Services and Markets Act 2000
1658. Part 1 of Schedule 15 makes minor and consequential amendments to FSMA.
1659. Paragraph 2 amends section 73 of FSMA to extend, for the purposes of the transparency rules (which can apply to non-regulated UK markets), the factors to which the Authority must have regard when making rules under Part 6 of FSMA, so that these extend to effects on markets other than regulated markets.
1660. Paragraph 3 amends section 73A of FSMA to provide that transparency rules and corporate governance rules are “Part 6 rules” for the purposes of Part 6 of FSMA. But paragraph 3 also makes clear that these rules are distinct and separate from other Part 6 rules, such as the listing rules, disclosure rules, and prospectus rules. These different kinds of rules impose different, and sometimes overlapping, obligations on different groups of issuers.
1661. Paragraph 6 amends the penalty regime for breaches of Part 6 rules in section 91 of FSMA, so that it applies also to non-compliance with transparency rules, provisions made under the Transparency Directive, and corporate governance rules.
1662. Paragraph 8 amends section 97 of FSMA to enable the Authority to appoint a person to carry out investigations into breaches of the transparency rules or related provisions or the corporate governance rules.
1663. Paragraph 9 amends section 99 of FSMA, which relates to fees, so as to enable the Authority to levy fees under the transparency rules.
1664. Paragraphs 10 and 11 amend two definitions in Part 6 of FSMA (“transferable securities” in section 102A and “regulated market” in section 103) to refer to the up–to-date Community legislation (i.e. the Markets in Financial Instruments Directive (2004/39)). These paragraphs also add definitions for the purposes of the provisions on transparency rules.
1665. Paragraph 12 adds regulations made under new section 90B of FSMA to the list of statutory instruments subject to the affirmative procedure in section 429(2) of FSMA.
Part 2: Amendments of Companies (Audit, Investigations and Community Enterprise) Act 2004
1666. Paragraphs 14 and 15 amend section 14 and 15 of the C(AICE) Act 2004. The amendments mean that periodic accounts and reports of issuers required under corporate governance rules or transparency rules may be examined by the FRRP.
Section 1273: Corporate governance regulations
1667. Section 1273 provides the Secretary of State with a regulation-making power similar to the power given to the Authority in new section 89O of FSMA inserted by section 1269.
1668. The Secretary of State may make regulations for the purposes of implementing, enabling the implementation of or dealing with matters arising out of Community obligations on corporate governance for UK companies whose securities are traded on a regulated market in the UK or elsewhere in the EEA.
1669. Subsection (3)(a) allows for regulations to be made by reference to any code regulating corporate governance. This could include, for example, the Combined Code on Corporate Governance (issued by the Financial Reporting Council).
1670. Subsection (4) specifies that any criminal offence created by the regulations may not impose a greater penalty than an unlimited fine.
1671. Subsection (5) provides for regulations to be made by way of negative resolution. However, by virtue of section 1292(4), it will also be possible to make regulations under this power by affirmative procedure.
Regulation of actuaries etc
1672. These provisions are the first step in implementing the central recommendation of the Morris Review of the Actuarial Profession: that the Financial Reporting Council (the “FRC”) take on a similar role in relation to the oversight of the actuarial profession to the one it currently exercises in relation to accountancy and the auditors’ profession.
1673. The Government announced in Budget 2005 its intention to legislate in due course to put the oversight regime onto a full statutory footing. It has not been possible to develop such a regime in time for inclusion in this Act. It was therefore agreed with the FRC and the Institute and Faculty of Actuaries that, pending the introduction of a full statutory regime, the FRC would begin voluntary oversight of the actuarial profession at the earliest possible opportunity. The FRC assumed this responsibility for actuarial standards and oversight of the profession in April 2006.
1674. The aim of these provisions is to provide the minimum necessary statutory underpinning for a voluntary regime. They amend the C(AICE) Act 2004 in two ways:
• they extend the statutory immunity conferred on the FRC and its companion bodies so that it covers acts or omissions relating to oversight of the actuarial profession;
• they allow the Secretary of State, if necessary, to make regulations to require beneficiaries of the actuarial oversight to contribute towards the funding costs of the proposed regime.
1675. This latter is a reserve power. It is proposed, as is currently the case with accountancy and the auditors’ professions, to fund this activity on a non-statutory basis by agreement with the insurance and pensions industries and the actuarial profession. The FRC published its final funding proposals in March 2006.
Section 1274: Grants to bodies concerned with actuarial standards etc
1676. This section amends section 16(2) of the C(AICE) Act 2004 so as to include in the list of matters carried on by bodies eligible for grants activities concerned with the setting of actuarial standards, compliance with those standards, oversight of the actuarial profession and related matters.
1677. A body to which a grant has been paid under section 16 is protected by section 18 of that Act from certain liabilities in connection with its section 16(2) activities.
Section 1275: Levy to pay expenses of bodies concerned with actuarial standards etc
1678. This section amends section 17 of the C(AICE) Act 2004 so as to include amongst those by whom a levy may be payable—
• the administrators of a public service pension scheme, and
• the trustees and managers of an occupational or personal pension scheme.
1679. The effect of the amendments is to enable the Secretary of State to make regulations specifying such persons as liable to pay a levy if he considers that the oversight activities of the FRC are relevant to them to a significant extent.
1680. Subsection (4) enables regulations under section 17 to make different provision for different cases so that, for example, they can provide for different rates of levy to be payable by different kinds of bodies or persons.
1681. Subsection (5) prevents the first regulations under section 17, and any other regulations under that section that would result in any change in the bodies or persons by whom the levy is payable, from being treated as hybrid instruments for the purposes of the standing orders of either House of Parliament. The effect is that such regulations are not subject to the special procedures in the House of Lords that apply to such instruments.
1682. Subsection (7) amends Schedule 3 to the Pensions Act 2004 to enable the Pensions Regulator to disclose restricted information to the Secretary of State to enable or assist him in the exercise of his functions under section 17 of the C(AICE) Act 2004.