Excerpts from;
The Financial Services and Markets Act 2000
and the FSA 'Lloyd's Sourcebook'
Financial Services and Markets Act 2000
2000 Chapter c.8
PART XIX LLOYD'S
General
Authority's general duty.
314. –
(1) The Authority must keep itself informed about-
(a) the way in which the Council supervises and regulates the market at Lloyd's; and
(b) the way in which regulated activities are being carried on in that market.
(2) The Authority must keep under review the desirability of exercising-
(a) any of its powers under this Part;
(b) any powers which it has in relation to the Society as a result of section 315.
Excerpts from Lloyd's Sourcebook
5 Guidance on the conduct of the Society’s regulatory functions
(page 15)
5.1 In the June 1999 response paper we discussed the FSA’s future relationship with Lloyd’s and said that, in some areas of the new regime, we intended to pursue our objectives by requiring the Society to exercise its powers under the Lloyd’s Acts under our direction. Many of these powers relate to the Society’s role as a regulator of the Lloyd’s market, its members and the firms that the Council permits to act as underwriting agents.
5.2 Because of the reliance that the FSA expects to place on the Society’s regulatory functions, we said in paragraph 16 of the response paper that we would give guidance to the Society on two aspects of how it should carry out its regulatory functions. We would expect the Council to maintain appropriate internal governance of its regulatory functions and to ensure that the FSA had direct access to those charged with responsibility for them.
5.3 The guidance in chapter 1 of the draft LLD seeks to implement this policy and to give certain other guidance to the Society on the carrying out of its regulatory functions. This guidance will be given under clause 153 of the Bill.
5.4 Section 1.3 of chapter 1 of the LLD includes guidance to the Society on delegation by the Council of authority to carry out regulatory functions, both to individuals and committees. All delegation of such functions should be clear, appropriate and adequately monitored (1.3.1G and 1.3.3G). Any committee to which authority is delegated should be composed of an appropriate number of fit and proper individuals and it should make and retain proper records (1.3.4G). The Society should also deal with the FSA in an open and co-operative way with respect to its regulatory functions, and the FSA should have direct access to those with delegated responsibilities for these (1.3.6G, 1.3.7G and 1.3.8G).
5.5 The Society’s disciplinary procedures should ensure a prompt, fair and impartial hearing for any person accused of a breach of its byelaws. Here, as elsewhere in the draft LLD, ‘byelaws’ include all instruments made using the powers of the Council under section 6 of the Lloyd’s Act 1982.
page 42 (Annex C p. 6)
2. Provision of information
2.1 APPLICATION
2.1.1 D This Chapter applies to the Society and the Directions in it are given to the Council and to the Society acting through the Council.
2.2 ENABLING PROVISION
2.2.1 G The Directions in this Chapter are given under section 314 of the Act.
2.3 PURPOSE
2.3.1 D The Directions and guidance in this Chapter are given in relation to the exercise of the powers of the Society and of the Council generally, with a view to achieving the objective of enabling the FSA to:
(1) comply with its general duty under section 310 of the Act;
(2) determine whether underwriting agents or approved persons acting for or on behalf of such agents are complying with the requirements imposed on them by or under the Act;
(3) enforce the provisions of the Act, or requirements made under the Act, by enabling the FSA to consider, where appropriate, whether it should use its powers to, among other things:
(a) vary or cancel the permission of an underwriting agent, under section 43 of the Act;
(b) withdraw approval from an approved person acting for or on behalf of an underwriting agent, under section 62 of the Act (see ENF8);
(c) prohibit an individual acting for or on behalf of an underwriting agent from involvement in regulated activities, under section 55 of the Act (see ENF9);
(d) require an underwriting agent to make restitution, under section 378 of the Act (see ENF10);
(e) discipline an underwriting agent, or an approved person acting for or on behalf of it, for a breach of a requirement made under the Act, including the Principles, Principles for Approved Persons and FSA rules (see ENF12, 13 and 14);
(f) apply to court for an injunction, restitution order or insolvency order (see ENF7, 10 and 11); and
page 42 (Annex C p. 6)
(g) prosecute any criminal offence that the FSA has power to prosecute under the Act (see ENF16).
2.3.2 G Information provided to the FSA by the Society to comply with the Act, requirements under the Act or rules may also be used by the FSA for the purposes stated in 2.3.1D.
2.4 INFORMATION ON MATTERS OF MATERIAL CONCERN TO THE FSA
2.4.1 D The Society must immediately inform the FSA in writing if it becomes aware that any matter likely to be of material concern to the FSA may have arisen in relation to:
(1) the regulated activities for which the Society has permission;
(2) underwriting agents; or
(3) approved persons or individuals acting for or on behalf of underwriting agents.
2.4.2 G 2.4.1D is designed to enable the FSA to fulfil its monitoring and enforcement obligations under paragraph 6 of Schedule 1 to the Act, whilst at the same time recognising the Society’s powers and responsibilities to supervise and regulate the market.
2.4.3 G In view of the Society’s regulatory functions, the FSA’s monitoring of underwriting agents, and approved persons acting for or on behalf of such agents, may be less intensive than its monitoring of firms and approved persons outside the Lloyd’s market. The FSA therefore directs the Society in 2.4.1D to inform the FSA when it becomes aware, as a result of carrying out its regulatory functions, of matters of material concern to the FSA.
2.4.4 G Matters of material concern to the FSA include but are not limited to:
(1) facts suggesting that an underwriting agent may no longer satisfy the threshold conditions in relation to a regulated activity for which it has a Part IV permission;
(2) facts suggesting that an underwriting agent may have contravened, is contravening, or is likely to contravene a requirement imposed on it by or under the Act;
(3) facts suggesting that the interests of consumers are or may be at risk;
(4) facts suggesting that an approved person acting for or on behalf of an underwriting agent may not be fit and proper to carry out the functions to which the approval relates;
(5) facts suggesting that an approved person acting for or on behalf of an underwriting agent may not be fit and proper to perform controlled functions in relation to a regulated activity carried on by a firm or exempt person;
(6) facts suggesting that an approved person acting for or on behalf of an underwriting agent may have failed to comply with a Principle for Approved Persons, or may have been concerned in the contravention by an underwriting agent of a requirement imposed on it by or under the Act; and
page 43 (Annex C p. 7)
(7) facts suggesting that a person may have committed a criminal offence that the FSA has power to prosecute under the Act.
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